As filed with the Securities and Exchange Commission on August 16, 1996
FORM N-1A
File No. 33-2430
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. -----
Post-Effective Amendment No. 16
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 18
THE ROCKWOOD GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
11 HANOVER SQUARE, NEW YORK, NEW YORK, 10005
(Address of Principal Executive Offices) (Zip Code)
(212) 785-0900
(Registrant's Telephone Number, including Area Code)
WILLIAM J. MAYNARD
11 HANOVER SQUARE, NEW YORK, NEW YORK, 10005
(Name and Address of Agent for Service)
Copy to:
R. Darrell Mounts, Esq.
Kirkpatrick & Lockhart
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of rule 485
X on August 19, 1996 pursuant to paragraph (b) of rule 485
60 days after filing pursuant to paragraph (a) of
rule 485 on (specify date) pursuant to paragraph (a)
of rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Registrant has elected to maintain registration of an indefinite number of
shares of common stock, $.10 par value, under the Securities Act of 1933,
pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
registrant's most recent Rule 24f-2 Notice was filed on December 29, 1995.
<PAGE>
THE ROCKWOOD GROWTH FUND, INC.
TABLE OF CONTENTS
CROSS REFERENCE SHEET
PART A
PROSPECTUS
PART B
STATEMENT OF ADDITIONAL INFORMATION
PART C
OTHER INFORMATION
ITEM 24 FINANCIAL STATEMENTS
ITEM 25 PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH REGISTRANT
ITEM 26 NUMBER OF SECURITIES HOLDERS
ITEM 27 INDEMNIFICATION
ITEM 28 BUSINESS OR OTHER CONNECTIONS OF
INVESTMENT ADVISER
ITEM 29 PRINCIPAL UNDERWRITERS
ITEM 30 LOCATION OF ACCOUNTS AND RECORDS
ITEM 31 MANAGEMENT SERVICES
ITEM 32 UNDERTAKINGS
SIGNATURE PAGE
EXHIBITS
RKWD485B.PEA
<PAGE>
THE ROCKWOOD GROWTH FUND, INC.
CROSS REFERENCE SHEET FOR ITEMS REQUIRED BY FORM N-1A
Item No.
of Form N-lA Caption in Prospectus
1 Cover Page
2 "Expense Tables"
3 "Financial Highlights"; "Performance Information"
4 "The Fund's Investment Program"
5 "The Investment Manager and Subadviser"; "Custodian and
Transfer Agent"
5A "Performance Information"
6 Cover Page; "The Investment Manager and Subadviser";
"Distributions and Taxes"; "Determination of Net Asset Value";
"Shareholder Services"; "Capital Stock"
7 "How to Purchase Shares"; "Shareholder Services";
"Determination of Net Asset Value"; "Distribution of Shares"
8 "How to Redeem Shares"; "Determination of Net Asset Value"
9 Not Applicable
Caption in Statement of Additional Information
10 Cover Page
11 "Table of Contents"
12 Not Applicable
13 "The Fund's Investment Program"; "Investment Restrictions";
"Allocation of Brokerage"
14 "Officers and Directors"
15 "Officers and Directors"; "Investment Manager"
16 "Officers and Directors"; "Investment Manager"; "Subadviser and
Subadvisory Agreement"; "Distribution of Shares"; "Custodian,
Transfer and Dividend Disbursing Agent"; "Auditors"
17 "Allocation of Brokerage"
18 Not Applicable
19 "Purchase of Shares"
20 "Distributions and Taxes"
21 "Distribution of Shares"
22 "Calculation of Performance Data"
23 "Financial Statements"
<PAGE>
The objective of The Rockwood Growth Fund, Inc. (the "Fund") is long term
capital appreciation. This objective will be pursued through investment in
common stocks, securities convertible into common stocks, and preferred stocks.
There is no assurance that the Fund will achieve its objective.
This prospectus contains information you should know about the Fund before
you invest. Please keep it for future reference. The Fund's Statement of
Additional Information, dated August 19, 1996, has been filed with the
Securities and Exchange Commission and is incorporated by reference in this
prospectus. It is available at no charge by calling toll-free at 1-
888-ROCKWOOD. The Fund is an open end non-diversified no-load management
investment company. Shares of the Fund are not bank deposits or obligations of,
or guaranteed or endorsed by any bank or any affiliate of any bank, and are not
Federally insured by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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EXPENSE TABLES. The tables and example below are designed to help you understand
the various costs and expenses that you will bear directly or indirectly as an
investor in the Fund.
<TABLE>
SHAREHOLDER TRANSACTION EXPENSES ANNUAL FUND OPERATING EXPENSES
<S> <C> <C> <C>
Sales Load Imposed on Purchases............ NONE (as a percentage of average net assets)
Sales Load Imposed on Reinvested Dividends. NONE Management Fees (after reimbursement)......... 0.20%
Deferred Sales Load........................ NONE 12b-1 Fees.................................... 0.25%
Redemption Fee within 30 days of purchase..1.00% Other Expenses ............................... 2.30%
-------
Redemption Fee after 30 days of purchase... NONE Total Fund Operating Expenses (after 2.75%
reimbursement)................................
Exchange Fees.............................. NONE
</TABLE>
EXAMPLE 1 year 3 years 5 years 10 years
------ ------- ------- --------
$28 $85 $145 $308
You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return and a redemption at the end of each time
period..................................................................
The example set forth above assumes (i) reinvestment of all dividends and other
distributions and (ii) a 5% annual rate of return as required by the Securities
and Exchange Commission ("SEC"). THE EXAMPLE IS AN ILLUSTRATION ONLY AND SHOULD
NOT BE CONSIDERED AN INDICATION OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL
RETURNS AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The percentages
given for Annual Fund Operating Expenses are based on an assumed level of
average net assets of $1 million to $2 million, and have been restated to
reflect current management and 12b-1 fees. Without the reimbursement of
management fees, investment management fees, other expenses, and total operating
expenses would have been 1.00%, 2.30%, and 3.55%, respectively of average net
assets, respectively. Long term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc.'s ("NASD") rules regarding investment
companies. "Other Expenses" includes amounts payable to the Fund's Custodian and
Transfer Agent and reimbursable to the Investment Manager and the Distributor
for certain administrative and shareholder services, and does not include
interest expense from bank borrowing.
FINANCIAL HIGHLIGHTS are presented below for a share of capital stock
outstanding throughout each period. The following information is supplemental to
the Fund's financial statements and report thereon of Coopers & Lybrand LLP,
independent accountants, appearing in the October 31, 1995 Annual Report to
Shareholders and incorporated by reference in the Statement of Additional
Information; provided, however, that the information set forth for the six
months ended April 30, 1996 and the footnotes to the following table and the
Portfolio Turnover Rate ratios have not been so audited. This table should be
read in conjunction with the Fund's financial statements and the notes thereto.
2
<PAGE>
<TABLE>
6 MONTHS
ENDED APRIL 30 YEARS ENDED OCTOBER 31,
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986*
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -----
Net asset value at
beginning of period $18.73 $16.61 $16.32 $12.42 $11.32 $ 9.56 $14.96 $13.05 $ 9.93 $11.25 $10.22
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) (.35) (.31) (.22) (.26) (.12) (.01) .03 (.01) .01 .12 .37
Net realized and
unrealized gain (loss) 10.35 2.43 .51 4.16 1.22 1.83 (4.93) 2.06 3.30 (.69) .66
----- - --- ------ ---- ---- ---- ------ ---- ---- ------ ----
on investments..........
Total from investment
operations 10.00 2.12 .29 3.90 .10 1.82 (4.90) 2.05 3.31 (.57) 1.03
---- ------ ---- --- ----- ------ ---- ---- ----- ----
Less distributions:
Distributions from net
interest income. .00 .00 .00 .00 .00 (.06) .00 .00 (.19) (.37) .00
. . . .
Distributions from net
realized gains .00 .00 .00 .00 .00 . 00 (50) (.14) .00 (.38) .00
---- ----- ---- ----- ------ ---- ------ ---- ------ ----
Total distributions..... .00 .00 .00 .00 .00 (.06) (.50) (.14) (.19) (.75) .00
--- ---- ----- ------ ------ ------ ------ ------------- ------ -----
Net asset value at end of
period $28.73 18.73 16.61 $16.32 $12.42 $11.32 $9.56 $ 14.96 $13.05 $9.93 $11.25
===== ===== ===== ====== ====== ====== ===== ======= ====== ====== ======
TOTAL RETURN**............... 53.39% 12.76% 1.78% 31.40% 9.72% 19.04% (32.75) 15.71 33.33% (5.07) 10.08%
====== ====== ====== ====== ===== ====== ======= ===== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period.. 773,871 714,155 737,96 599,58 876,78 865,459 1,544,82 722,17 410,461 127,534
$1,227,128
Ratio of expenses to average net as 2.30% 2.00% 2.81% 2.46% 2.15% 1.83 1.81% 2.01% 1.17% .87%
===== ===== ===== ===== ===== ==== ===== ===== ===== ====
sets(a) ..................... 3.32%+
======
Ratio of net investment income to
average net assets (b) (1.77)% 1.38)% 1.67)% 1.09)% (.15)% .25% (.09)% .07% 1.53% 3.30%
======= ====== ====== ====== ====== ===== ====== ===== ===== =====
(2.98%)+
========
Portfolio turnover rate**.... 13.69% 30.04% 18.26% 19.28% 13.28% 14.35% 37.51% 55.83% 42.00% 30.00% 31.00%
====== ====== ====== ===== ===== ====== ====== ====== ====== ====== ======
</TABLE>
*From commencement of operations on March 7, 1985.
** Total returns and portfolio turnover rates for periods of less than one year
are not annualized.
+ Annualized.
(a) Ratio prior to reimbursement by the Investment Manager was 3.00%, 2.82%,
2.98%, 2.49%, 2.15%, 1.83%,1.81%, 2.01%, 1.17% and 6.76% for the periods ended
October 31, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988, 1987 and 1986,
respectively.
(b) Ratio prior to reimbursement by the Investment Manager was (2.47)%, (2.20)%,
(1.76)%, (1.12)%, (.15)%, .25%, (.09)%, .07%, 1.53% and (2.59)% for the periods
ended October 31, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988, 1987 and 1986,
respectively.
3
<PAGE>
TABLE OF CONTENTS
Expense Tables..................... Distributions and Taxes.....................
Financial Highlights............... Determination of Net Asset Value............
The Fund's Investment Program...... Investment Manager and Subadviser...........
How to Purchase Shares............. Distribution of Shares......................
Shareholder Services............... Performance Information.....................
How to Redeem Shares............... Capital Stock...............................
Custodian and Transfer Agent................
THE FUND'S INVESTMENT PROGRAM
The Fund's investment objective is long term capital appreciation. The Fund
seeks to achieve this objective by investing primarily in equity securities
that, in the opinion of the Investment Manager, are available at prices less
than their intrinsic value. Intrinsic value is a term reflecting an analyst's
subjective view of a company's worth. It may be based on such things as book
value, "hidden assets" (assets carried on the books of a corporation below
market value), the discounted present value of a natural resource (oil, gas,
timber, silver, etc.), or an earnings history/projection. The Investment Manager
believes that investing in such undervalued securities provides a greater
potential for overall investment return. Any income which the Fund earns is
incidental to its objective of capital appreciation. The risks associated with
an investment in the Fund are those related to fluctuations in the market value
of the Fund's portfolio. Also, at any time, the value of the Fund's shares may
be more or less than the investor's cost. The Fund is not intended for investors
who have as their primary objective conservation of capital.
The Fund will purchase common stocks, securities convertible into common
stocks and preferred stocks that are traded on domestic stock exchanges or in
the over-the-counter market. Common stocks, securities convertible into common
stocks, and preferred stocks are purchased primarily for their potential for
long term capital appreciation and not dividend yield or interest payments. The
Fund may also invest up to 5% of its net assets in shares of closed end
investment companies. In addition to the Fund's expenses, as a shareholder in
another investment company, the Fund would bear its pro rata portion of the
other investment company's expenses.
The Fund retains the flexibility to respond promptly to changes in market
and economic conditions and the Investment Manager may employ a temporary
defensive investment strategy if it determines such a strategy to be warranted.
Under a defensive strategy, the Fund may hold cash and/or invest any portion or
all of its assets in high quality money market instruments of U.S. or foreign
government or corporate issuers. To the extent the Fund adopts a temporary
4
<PAGE>
defensive posture, it will not be invested so as to directly achieve its
investment objectives. In addition, pending investment of proceeds from new
sales of Fund shares or in order to meet ordinary daily cash needs, the Fund may
hold cash and may invest in foreign or domestic high quality money market
instruments. Money market instruments in which the Fund may invest include U.S.
or foreign government securities, high grade commercial paper, bank certificates
of deposit, bankers' acceptances, and repurchase agreements relating to any of
the foregoing.
SMALL CAPITALIZATION COMPANIES. The Fund may invest in companies that are small
or thinly capitalized, and may have a limited operating history. As a result,
investment in these securities involves greater risks and may be considered
speculative. For example, such companies may have more limited product lines,
markets or financial resources than companies with larger capitalizations, and
may be more dependent on a small management group. In addition, the securities
of such companies may trade less frequently and in smaller volume, and may be
subject to more abrupt or erratic price movements, than securities of large
companies. The Fund's positions in securities of such companies may be
substantial in relation to the market of such securities. Accordingly, it may be
difficult for the Fund to dispose of securities of these companies at prevailing
market prices. Full development of these companies takes time, and for this
reason the Fund should be considered a long term investment and not a vehicle
for seeking short term profit. The securities of small or thinly capitalized
companies may also be more sensitive to market changes than the securities of
large companies. Such companies may not be well known to the investing public
and may not have institutional ownership. Such companies may also be more
vulnerable than larger companies to adverse business or economic developments.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the Fund
purchases securities from a bank or securities dealer and simultaneously commits
to resell the securities to the bank or dealer at an agreed-upon date and price
reflecting a market rate of interest unrelated to the coupon rate or maturity of
the purchased securities. The Fund maintains custody of the underlying
securities prior to their repurchase; thus, the obligation of the bank or dealer
to pay the repurchase price on the date agreed to is, in effect, secured by such
securities. If the value of these securities is less than the repurchase price,
plus any agreed-upon additional amount, the other party to the agreement must
provide additional collateral so that at all times the collateral is at least
equal to the repurchase price, plus any agreed-upon additional amount. The
difference between the total amount to be received upon repurchase of the
securities and the price that was paid by the Fund upon their acquisition is
accrued as interest and included in the Fund's net investment income. Repurchase
agreements carry certain risks not associated with direct investments in
securities, including possible declines in the market value of the underlying
securities and delays and costs to the Fund if the other party to a repurchase
agreement becomes insolvent. The Fund intends to enter into repurchase
agreements only with banks and dealers in transactions believed by the
Investment Manager to present minimum credit risks in accordance with guidelines
established by the Fund's board of directors. The Investment Manager reviews and
monitors the creditworthiness
5
<PAGE>
of those institutions under the board's general supervision.
OTHER INFORMATION. The Fund is "non-diversified," as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), but intends to continue to
qualify as a regulated investment company for Federal income tax purposes. This
means, in general, that more than 5% of the Fund's total assets may be invested
in the securities of one issuer (including a foreign government), but only if at
the close of each quarter of the Fund's taxable year, the aggregate amount of
such holdings is less than 50% of the value of its total assets and no more than
25% of the value of its total assets is invested in the securities of a single
issuer. To the extent that the Fund's portfolio at times may include the
securities of a smaller number of issuers than if it were "diversified," as
defined in the 1940 Act, the Fund will at such times be subject to greater risk
with respect to its portfolio securities than an investment company that invests
in a broader range of securities, in that changes in the financial condition or
market assessment of a single issuer may cause greater fluctuation in the Fund's
total return. The Fund may invest (i) up to 15% of its net assets in illiquid
securities, including repurchase agreements with a maturity of more than seven
days, and (ii) up to 10% of its total assets in restricted securities. Illiquid
securities may be more difficult to value than more widely traded securities and
the prices realized from the sales of illiquid securities may be less than if
such securities were more widely traded. The Fund may borrow money from banks
for temporary or emergency purposes (not for leveraging or investment) and
engage in reverse repurchase agreements, but not in excess of an amount equal to
one third of the Fund's total net assets. The Fund may not purchase securities
for investment while any bank borrowing equaling more than 5% of its total
assets is outstanding.
In addition to the Fund's investment objective, the Fund has adopted certain
investment restrictions set forth in the Statement of Additional Information
that are fundamental and may not be changed without shareholder approval. The
Fund's other investment policies are not fundamental and may be changed by the
Board of Directors without shareholder approval.
HOW TO PURCHASE SHARES
The Fund's shares are sold on a continuing basis at the net asset value per
share next determined after receipt and acceptance of the order by Investor
Service Center (see "Determination of Net Asset Value"). The minimum initial
investment is $500 for regular and Uniform Gifts/Transfers to Minors Act custody
accounts, and $100 for retirement plans established with the Fund, which include
individual retirement accounts ("IRAs"), simplified employee pension plan IRAs
("SEP-IRAs"), rollover IRAs, profit sharing and money purchase plans, and 403(b)
plan accounts. The minimum subsequent investment is $50. The initial investment
minimums are waived if you elect to invest $50 or more each month in the Fund
through the Rockwood Automatic Investment Program (see "Additional Investments"
below).
INITIAL INVESTMENT. The Account Application that accompanies this prospectus
should be completed, signed and, with a check or other negotiable bank draft
payable to The Rockwood Growth Fund, mailed to Investor Service Center, Box
419789, Kansas City, MO 64141-6789.
6
<PAGE>
Initial investments also may be made by having your bank wire money, as set
forth below, in order to avoid mail delays.
ADDITIONAL INVESTMENTS. Additional investments may be made conveniently at any
time by any one or more of the following methods:
o ROCKWOOD AUTOMATIC INVESTMENT PROGRAM. With the Rockwood Automatic
Investment Program, you can establish a convenient and affordable long term
investment program through one or more of the Plans explained below. Each
Plan is designed to facilitate an automatic monthly investment of $50 or
more into your Fund account.
The ROCKWOOD BANK TRANSFER PLAN lets you purchase Fund shares on a
certain day each month by transferring electronically a specified
dollar amount from your regular checking account, NOW account, or bank
money market deposit account.
In the ROCKWOOD SALARY INVESTING PLAN, part or all of your salary may
be invested electronically in shares of the Fund on each pay date,
depending upon your employer's direct deposit program.
The ROCKWOOD GOVERNMENT DIRECT DEPOSIT PLAN allows you to deposit
automatically part or all of certain U.S. Government payments into your
Fund account. Eligible U.S. Government payments include Social
Security, pension benefits, military or retirement benefits, salary,
veteran's benefits and most other recurring payments.
For more information concerning these Plans, or to request the necessary
authorization form(s), please call Investor Service Center toll-free at
1-888-ROCKWOOD. You may modify or terminate the Bank Transfer Plan at any
time by written notice received at least 10 days prior to the scheduled
investment date. To modify or terminate the Salary Investing Plan or
Government Direct Deposit Plan, you should contact, respectively, your
employer or the appropriate U.S. government agency. The Fund reserves the
right to redeem any account if participation in the Program is terminated
and the account's value is less than $500. The Program and the Plans do not
assure a profit or protect against loss in a declining market, and you
should consider your ability to make purchases when prices are low.
o CHECK. Mail a check or other negotiable bank draft ($50 minimum), made
payable to The Rockwood Growth Fund, together with a Rockwood FastDeposit
form to Investor Service Center, Box 419789, Kansas City, MO 64141-6789. If
you do not use that form, please send a letter indicating the account number
to which the subsequent investment is to be credited, and name(s) of the
registered owner(s).
o ELECTRONIC FUNDS TRANSFER (EFT). With EFT, you may purchase additional
shares of the Fund quickly and simply, just by calling Investor Service
Center toll-free at 1-888- ROCKWOOD. The bank you designate on your Account
Application or Authorization Form will be contacted to arrange for the EFT,
which is done through the Automated Clearing
7
<PAGE>
House system, to your Fund account. For requests received by 4 p.m., eastern
time, the investment will be credited to your Fund account ordinarily within
two business days. There is a $50 minimum for each EFT investment. Your
designated bank must be an Automated Clearing House member and any
subsequent changes in bank account information must be submitted in writing
with a voided check.
o FEDERAL FUNDS WIRE. You may wire money, by following the procedures set forth
below, to receive that day's net asset value per share.
INVESTING BY WIRE. For an initial investment by wire, you must first telephone
Investor Service Center toll-free at 1-888-ROCKWOOD, to give the name(s) under
which the account is to be registered, tax identification number, the name of
the bank sending the wire, and to be assigned a Rockwood Growth Fund account
number. You may then purchase shares by requesting your bank to transmit
immediately available funds ("Federal funds") by wire to: United Missouri Bank
NA, ABA #10-10-00695; for Account 98-7052-724-3; The Rockwood Growth Fund. Your
account number and name(s) must be specified in the wire as they are to appear
on the account registration. You should then enter your account number on your
completed Account Application and promptly forward it to Investor Service
Center, Box 419789, Kansas City, MO 64141-6789. This service is not available on
days when the Federal Reserve wire system is closed. Subsequent investments by
wire may be made at any time without having to call Investor Service Center by
simply following the same wiring procedures.
SHAREHOLDER ACCOUNTS. When you invest in the Fund, your account will be credited
with all full and fractional shares (to three decimal places), together with any
dividends and other distributions that are paid in additional shares (see
"Distributions and Taxes"). The Fund no longer issues stock certificates. For
joint tenant accounts, any account owner has the authority to act on the account
without notice to the other account owners. Investor Service Center in its sole
discretion and for its protection may, but is not obligated to, require the
written consent of all account owners of a joint tenant account prior to acting
upon the instructions of any account owner. You will receive transaction
confirmations upon purchasing or selling shares.
WHEN ORDERS ARE EFFECTIVE. The purchase price for Fund shares is the net asset
value of such shares next determined after receipt and acceptance by Investor
Service Center of a purchase order in proper form. All purchases are accepted
subject to collection at full face value in Federal funds. Checks must be made
payable to The Rockwood Growth Fund and drawn in U.S. dollars on a U.S. bank. No
third party checks will be accepted and the Fund reserves the right to reject
any order for any reason. Accounts are charged $30 by the Transfer Agent for
submitting checks for investment which are not honored by the investor's bank.
The Fund may in its discretion waive or lower the investment minimums.
SHAREHOLDER SERVICES
You may modify or terminate your participation in any of the Fund's special
plans or services at any time. Shares or cash should not be withdrawn from any
tax-advantaged
8
<PAGE>
retirement plan described below, however, without consulting a tax adviser
concerning possible adverse tax consequences. Additional information regarding
any of the following services is available from Investor Service Center by
calling toll-free at 1-888-ROCKWOOD.
ELECTRONIC FUNDS TRANSFER (EFT). You automatically have the privilege of linking
your bank account designated on your Account Application or Authorization Form
and your Fund account with Rockwood's EFT service. With EFT, you use the
Automated Clearing House system to electronically transfer money quickly and
safely between your bank and Fund accounts. EFT may be used for purchasing and
redeeming Fund shares, direct deposit of dividends into your bank account, the
Automatic Investment Program, the Systematic Withdrawal Plan, and systematic IRA
distributions. You may decline this privilege by checking the indicated blank on
the Account Application. Any subsequent changes in bank account information must
be submitted in writing (and the Fund may require the signature to be
guaranteed), with a voided check.
SYSTEMATIC WITHDRAWAL PLAN. If you own Fund shares with a value of at least
$20,000 you may elect an automatic monthly or quarterly withdrawal of cash from
your Fund account in fixed dollar, share, or percentage amounts, subject to a
minimum amount of $100. Under the Systematic Withdrawal Plan, all dividends and
other distributions, if any, are reinvested in the Fund.
ASSIGNMENT. Fund shares may be transferred to another owner. Instructions are
available from Investor Service Center by calling toll-free at 1-888-ROCKWOOD.
TAX-ADVANTAGED RETIREMENT PLANS. These plans provide an opportunity to set aside
money for retirement in a tax-advantaged account in which earnings can be
compounded without incurring a tax liability until the money and earnings are
withdrawn. Contributions may be fully or partially deductible (or
non-deductible) for Federal income tax purposes as noted below. Information on
any of the plans described below is available from Investor Service Center by
calling toll-free at 1-888-ROCKWOOD.
The minimum investment to establish a Rockwood IRA or other retirement plan
is $100. Minimum subsequent investments are $50. The initial investment minimums
are waived if you elect to invest $50 or more each month in the Fund through the
Rockwood Automatic Investment Program. There are no set-up fees for any Rockwood
Retirement Plan. Subject to change on 30 days' notice, the plan custodian
charges Rockwood IRAs a $10 annual fiduciary fee, $10 for each distribution
prior to age 59 1/2, and a $20 plan termination fee; however, the annual
fiduciary fee is waived if your IRA has assets of $10,000 or more or if you
invest regularly through the Rockwood Automatic Investment Program.
|X| IRA AND SEP-IRA ACCOUNTS. Anyone with earned income who is less than
age 70 1/2 at the end of the tax year, even if also participating in
another type of retirement plan, may establish an IRA and contribute
each year up to $2,000 or 100% of earned income, whichever is less, and
an aggregate of up to $2,250 when a non-working spouse is also
9
<PAGE>
covered in a separate spousal account. If each spouse has at least
$2,000 of earned income each year, they may contribute up to $4,000
annually. Employers may also make contributions to an IRA on behalf of
an individual under a SEP-IRA in any amount up to 15% of up to $150,000
of compensation. Generally, taxpayers may contribute to an IRA during
the tax year and through the next year until the income tax return for
that year is due, without regard to extensions. Thus, most individuals
may contribute for the 1996 tax year from January 1, 1996 through April
15, 1997.
DEDUCTIBILITY. IRA contributions are fully deductible for many taxpayers.
For a taxpayer who is an active participant in an employer-maintained
retirement plan (or whose spouse is), a portion of IRA contributions is
deductible if adjusted gross income (before the IRA deductions) is
$40,000-$50,000 (if married) and $25,000-$35,000 (if single). Only IRA
contributions by a taxpayer who is an active participant in an
employer-maintained retirement plan (or whose spouse is) and has adjusted
gross income of more than $50,000 (if married) and $35,000 (if single) will
not be deductible. An eligible individual may establish a Rockwood IRA under
the prototype plan available through the Fund, even though such individual
or spouse actively participates in an employer-maintained retirement plan.
o IRA TRANSFER AND ROLLOVER ACCOUNTS. Special forms are available from Investor
Service Center by calling toll-free at 1-888-ROCKWOOD, which make it easy to
transfer or roll over IRA assets to a Rockwood IRA. An IRA may be transferred
from one financial institution to another without adverse tax consequences.
Similarly, no taxes need be paid on a lump-sum distribution that you may receive
as a payment from a qualified pension or profit sharing plan due to retirement,
job termination, or termination of the plan, so long as the assets are put into
an IRA Rollover account within 60 days of the payment. Withholding for Federal
income tax purposes is required at the rate of 20% for "eligible rollover
distributions" made from any retirement plan (other than an IRA) that are not
directly transferred to an "eligible retirement plan," such as a Rockwood
Rollover Account.
o PROFIT SHARING AND MONEY PURCHASE PLANS. These provide an opportunity to
accumulate earnings on a tax-deferred basis by permitting corporations,
self-employed individuals (including partners) and their employees generally to
contribute (and deduct) up to $30,000 annually or, if less, 25% (15% for profit
sharing plans) of compensation or self-employment earnings of up to $150,000.
Corporations and partnerships, as well as all self-employed persons, are
eligible to establish these plans. In addition, a person who is both salaried
and self-employed, such as a college professor who serves as a consultant, may
adopt these retirement plans based on self-employment earnings.
|X| SECTION 403(B) ACCOUNTS. Section 403(b)(7) of the Internal Revenue Code
of 1986, as amended ("Code"), permits the establishment of custodial
accounts on behalf of employees of public school systems and certain
tax-exempt organizations. A participant in such a plan does not pay
taxes on any contributions made by the participant's employer to the
participant's account pursuant to a salary reduction agreement, up to a
maximum amount,
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or "exclusion allowance." The exclusion allowance is generally computed
by multiplying the participant's years of service times 20% of the
participant's compensation included in gross income received from the
employer (reduced by any amount previously contributed by the employer
to any 403(b) account for the benefit of the participant and excluded
from the participant's gross income). However, the exclusion allowance
may not exceed the lesser of 25% of the participant's compensation
(limited as above) or $30,000. Contributions and subsequent earnings
thereon are not taxable until withdrawn, when they are received as
ordinary income.
HOW TO REDEEM SHARES
Generally, you may redeem by any of the methods explained below. Requests
for redemption should include the following information: your account
registration information including address, account number and taxpayer
identification number; dollar value, number or percentage of shares to be
redeemed; how and to where the proceeds are to be sent; if applicable, the
bank's name, address, ABA routing number, bank account registration and account
number, and a contact person's name and telephone number; and your daytime
telephone number.
BY MAIL. You may request that the Fund redeem any amount by submitting a written
request to Investor Service Center, Box 419789, Kansas City, MO 64141-6789,
signed by the record owner(s). If the written request is sent to the Fund, it
will be forwarded to the above address.
BY TELEPHONE. You may telephone Investor Service Center toll-free at
1-888-ROCKWOOD, to expedite redemption of Fund shares.
You may redeem as little as $250 worth of shares by requesting Electronic
Funds Transfer (EFT) service. With EFT, you can redeem Fund shares quickly
and conveniently because Investor Service Center will contact the bank
designated on your Account Application or Authorization Form to arrange for
the electronic transfer of your redemption proceeds (through the Automated
Clearing House system) to your bank account. EFT proceeds are ordinarily
available in your bank account within two business days.
If you are redeeming $1,000 or more worth of shares, you may request that
the proceeds be mailed to your address of record or mailed or wired to your
authorized bank.
Telephone requests received on Fund business days by 4 p.m. eastern time
will be redeemed from your account that day, and if received after 4 p.m.
eastern time, on the next Fund business day. Any subsequent changes in bank
account information must be submitted in writing, signature guaranteed, with a
voided check. Redemptions by telephone may be difficult or impossible to
implement during periods of rapid changes in economic or market conditions.
REDEMPTION PRICE AND FEES. The redemption price is the net asset value per share
next determined after receipt of the redemption request in proper form. The Fund
is designed as a long term investment, and short term trading is discouraged.
Accordingly, if shares of the Fund
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held for 30 days or less are redeemed or exchanged, the Fund will deduct a
redemption fee equal to one percent of the net asset value of shares redeemed or
exchanged. The fee will be retained by the Fund and used to offset the
transaction costs that short term trading imposes on the Fund and its
shareholders. If an account contains shares with different holding periods (i.e.
some shares held 30 days or less, some shares held 31 days or more), the shares
with the longest holding period will be redeemed first to determine if the
Fund's redemption fee applies. Shares acquired through the reinvestment of
dividends and other distributions or redeemed under the Systematic Withdrawal
Plan are exempt from the redemption fee. Registered broker/dealers, investment
advisers, banks, and insurance companies may open accounts and redeem shares by
telephone or wire and may impose a charge for handling purchases and redemptions
when acting on behalf of others.
REDEMPTION PAYMENT. Payment for shares redeemed will be made as soon as
possible, ordinarily within seven days after receipt of the redemption request
in proper form. The right of redemption may not be suspended, or date of payment
delayed more than seven days, except for any period (i) when the New York Stock
Exchange is closed or trading thereon is restricted as determined by the SEC;
(ii) under emergency circumstances as determined by the SEC that make it not
reasonably practicable for the Fund to dispose of securities owned by it or
fairly to determine the value of its assets; or (iii) as the SEC may otherwise
permit. The mailing of proceeds on redemption requests involving any shares
purchased by personal, corporate, or government check or EFT transfer is
generally subject to a fifteen day delay to allow the check or transfer to
clear. The fifteen day clearing period does not affect the trade date on which a
purchase or redemption order is priced, or any dividends and other distributions
to which you may be entitled through the date of redemption. The clearing period
does not apply to purchases made by wire.
TELEPHONE PRIVILEGES. You automatically have all telephone privileges to, among
other things, authorize purchases and redemptions with EFT or by other means,
unless declined on the Account Application or otherwise in writing. Neither the
Fund nor Investor Service Center shall be liable for any loss or damage for
acting in good faith upon instructions received by telephone and believed to be
genuine. The Fund employs reasonable procedures to confirm that instructions
communicated by telephone are genuine and if it does not, it may be liable for
losses due to unauthorized or fraudulent transactions. These procedures include
requiring personal identification prior to acting upon telephone instructions,
providing written confirmation of such transactions, and recording telephone
conversations. The Fund may modify or terminate any telephone privileges or
shareholder services (except as noted) at any time without notice.
SIGNATURE GUARANTEES. No signature guarantees are required when payment is to be
made to you at your address of record. If the redemption proceeds are to be paid
to a non-shareholder of record, or to an address other than your address of
record, or the shares are to be assigned, the Transfer Agent may require that
your signature be guaranteed by an entity acceptable to the Transfer Agent, such
as a commercial bank or trust company or member firm of a national
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securities exchange or of the NASD. A notary public may not guarantee
signatures. The Transfer Agent may require further documentation, and may
restrict the mailing of redemption proceeds to your address of record within 60
days of such address being changed unless you provide a signature guarantee as
described above.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. The Fund pays dividends annually to its shareholders from its net
investment income, if any. The Fund also makes an annual distribution to its
shareholders out of any net realized capital gains, after offsetting any capital
loss carryover, and any net realized gains from foreign currency transactions.
Dividends and other distributions, if any, are declared, and payable to
shareholders of record, on a date in December of each year. Such distributions
may be paid in January of the following year, in which event they will be deemed
received by the shareholders on the preceding December 31 for tax purposes. The
Fund may also make an additional distribution following the end of its fiscal
year out of any undistributed income and capital gains. Dividends and other
distributions are made in additional Fund shares, unless you elect to receive
cash on the Account Application or so elect subsequently by calling Investor
Service Center toll-free at 1-888-ROCKWOOD. For Federal income tax purposes,
dividends and other distributions are treated in the same manner whether
received in additional Fund shares or in cash. Any election will remain in
effect until you notify Investor Service Center to the contrary. Any dividend or
other distribution will have the effect of reducing the net asset value of the
Fund's shares on the payment date by the amount thereof. Furthermore, any such
dividend or other distribution, although similar in effect to a return of
capital, will be subject to taxes.
TAXES. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Code ("RIC") so that it will be relieved of Federal
income tax on that part of its investment company taxable income (generally
consisting of net investment income, net short term capital gains, and net gains
from certain foreign currency transactions) and net capital gain (the excess of
net long term capital gain over net short term capital loss) that is distributed
to its shareholders. Dividends paid by the Fund from its investment company
taxable income (whether paid in cash or in additional Fund shares) generally are
taxable to its shareholders, other than shareholders that are not subject to tax
on their income, as ordinary income to the extent of the Fund's earnings and
profits; a portion of those dividends may be eligible for the corporate
dividends-received deduction. Distributions by the Fund of its net capital gain
(whether paid in cash or in additional Fund shares), when designated as such by
the Fund, are taxable to the shareholders as long term capital gains, regardless
of how long they have held their Fund shares. The Fund notifies its shareholders
following the end of each calendar year of the amounts of dividends and capital
gain distributions paid (or deemed paid) that year and of any portion of those
dividends that qualifies for the corporate dividends-received deduction. Any
dividend or other distribution paid by the Fund will reduce the net asset value
of Fund shares by the amount of the distribution. Furthermore, such
distribution, although similar in effect to a return of capital, will be subject
to taxes.
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The Fund is required to withhold 31% of all dividends, capital gain
distributions, and redemption proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Withholding at that rate also is required from
dividends and capital gain distributions payable to such shareholders who are
otherwise subject to backup withholding.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. Since other tax
considerations may apply, you should consult your tax adviser.
DETERMINATION OF NET ASSET VALUE
The value of a share of the Fund is based on the value of its net assets.
The Fund's net assets are the total of its investments and all other assets
minus any liabilities. The value of one share is determined by dividing the net
assets by the total number of shares outstanding. This is referred to as "net
asset value per share," and is determined as of the close of regular trading on
the New York Stock Exchange (currently, 4 p.m. eastern time, unless weather,
equipment failure or other factors contribute to an earlier closing) each
business day of the Fund. A business day of the Fund is any day on which the New
York Stock Exchange is open for trading. The following are not business days of
the Fund: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities and other assets of the Fund are valued primarily on
the basis of market quotations, if readily available. Securities and other
assets for which quotations are not readily available will be valued at fair
value as determined in good faith by or under the direction of the Board of
Directors.
INVESTMENT MANAGER AND SUBADVISER
Rockwood Advisers, Inc. (the "Investment Manager") acts as general manager
of the Fund, being responsible for the various functions assumed by it,
including regularly furnishing advice with respect to portfolio transactions.
The Investment Manager also furnishes or obtains on behalf of the Fund all
services necessary for the proper conduct of the Fund's business and
administration. The Investment Manager retains final discretion in the
investment and reinvestment of the Fund's assets, subject to the control and
oversight of the Board of Directors. The Investment Manager is authorized to
place portfolio transactions with an affiliated broker/dealer, and may allocate
brokerage transactions by taking into account the sales of shares of the Fund
and other affiliated investment companies. The Investment Manager may allocate
transactions to broker/dealers that remit a portion of their commissions as a
credit against the Fund's expenses.
For its services, the Investment Manager receives a fee based on the average
daily net
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assets of the Fund, at the annual rate of 1% on the first $200 million and
declining thereafter as a percentage of average daily net assets. This fee is
higher than fees paid by most other investment companies. During the fiscal year
ended October 31, 1995, investment management fees paid by the Fund after
reimbursement represented less than 0.01% of average daily net assets. The
Investment Manager provides certain administrative services to the Fund at cost.
Bassett S. Winmill may be deemed a controlling person of the Investment Manager.
The Investment Manager has entered into a subadvisory agreement with Aspen
Securities and Advisory, Inc., an Idaho corporation (the "Subadviser"), for
certain subadvisory services. The Subadviser advises and consults with the
Investment Manager regarding the selection, clearing and safekeeping of the
Fund's portfolio investments and assists in pricing and generally monitoring
such investments. The principal business address of the Subadviser is 545 Shoup
Avenue, No. 303, Idaho Falls, Idaho 83402. The Subadviser is controlled by Ross
H. Farmer, its principal stockholder, who owns 79% of the outstanding stock of
the Subadviser and is a controlling person of the Subadviser as the term is
defined in the Investment Company Act of 1940. The Investment Manager, not the
Fund, pays the Subadviser monthly a percentage of the Investment Manager's net
fees based upon the Fund's performance and its total net assets ranging from ten
to fifty percent of the Investment Manager's net fees. The Subadviser had served
as the investment adviser to the Fund until August 19, 1996. Mr. Ross Farmer,
the Subadviser's President, has been the Fund's portfolio manager since April
1986 and currently serves as the Fund's portfolio manager together with the
Investment Manager's Investment Policy Committee. Mr. Farmer has been President
of the Subadviser since 1986.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement, Investor Service Center, Inc. (the
"Distributor"), 11 Hanover Square, New York, NY 10005, acts as the Fund's
principal agent for the sale of its shares. The Investment Manager is an
affiliate of the Distributor. The Fund has also adopted a plan of distribution
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the Plan,
the Fund pays the Distributor a fee in an amount of 0.25% per annum of the
Fund's average daily net assets for distribution and service activities. This
fee may be retained by the Distributor or passed through to brokers, banks and
others who provide services to their customers who are Fund shareholders or to
the Distributor. The Fund will pay the fee to the Distributor until either the
Plan is terminated or not renewed. In that event, the Distributor's expenses in
excess of fees received or accrued through the termination day will be the
Distributor's sole responsibility and not obligations of the Fund. During the
period they are in effect, the Distribution Agreement and Plan obligate the Fund
to pay a fee to the Distributor as compensation for its distribution and service
activities. If the Distributor's expenses exceeds the fee, the Fund will not be
obligated to pay any additional amount to the Distributor. If the Distributor's
expenses are less than the fee, it may realize a profit.
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PERFORMANCE INFORMATION
Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." All such
quotations are based upon historical earnings and are not intended to indicate
future performance. The investment return on and principal value of an
investment in the Fund will fluctuate, so that an investor's shares when
redeemed may be worth more or less than their original cost. In addition to
advertising average annual total return and cumulative total return, comparative
performance information may be used from time to time in advertising the Fund's
shares, including data from Morningstar, Inc., Lipper Analytical Services, Inc.
and other sources. "Average annual total return" is the average annual
compounded rate of return on a hypothetical $1,000 investment made at the
beginning of the advertised period. In calculating average annual total return,
all dividends and other distributions are assumed to be reinvested. "Cumulative
total return" is calculated by subtracting a hypothetical $1,000 payment to the
Fund from the ending redeemable value of such payment (at the end of the
relevant advertised period), dividing such difference by $1,000 and multiplying
the quotient by 100. In calculating ending redeemable value, all dividends and
other distributions are assumed to be reinvested in additional Fund shares.
Although the Fund imposes a 1% redemption fee on the redemption of shares held
for 30 days or less, all of the periods for which performance is quoted are
longer than 30 days, and therefore the 1% fee is not reflected in the
performance calculations. In addition, there is no sales charge upon
reinvestment of dividends or other distributions. For more information regarding
how the Fund's average annual total return and cumulative total return is
calculated, see "Calculation of Performance Data" in the Statement of Additional
Information. The Fund's annual report to shareholders contains further
information about the Fund's performance, and is available free of charge upon
request.
The accompanying total return performance graph compares results of a
$10,000 investment in the Fund and in the Valueline Arithmetic ("Valueline").
The Valueline is unmanaged and fully invested in common stocks. The Fund's
inception was April 30, 1986. Performance Graphs are from April 30, 1986 to
October 31, 1995, and results in each case reflect reinvestment of dividends and
distributions.
Plot Points:
Fund: $10,220, $11,250, $10,632, $14,240, $16,499, $10,897, $12,978, $14,239,
$18,710, $19,042, $21,484
Valueline: $10,000, $10,030, $9,556, $11,987, $13,982, $10,611, $15,765,
$17,442, $21,932, $22,781, $26,475
Average annual returns for the one, three, and five year periods, and since
inception are as follows:
Fund: 12.76%, 14.70%, 14.59%, and 8.13%
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Valueline: 16.21%, 14.92%, 20.06%, and 10.79%
For the fiscal year ending October 31, 1995, the Fund appreciated 12.76%.
This gain is attributable to the general appreciation of the Fund's holdings,
not any particular company or industry group.
CAPITAL STOCK
The Fund is a non-diversified open-end management investment company
organized as an Idaho corporation on March 7, 1985. The Fund is authorized to
issue up to 100,000,000 shares ($.10 par value). The Fund's stock is freely
assignable by way of pledge (as, for example, for collateral purposes), gift,
settlement of an estate and also by an investor to another investor. Each share
has equal dividend, voting, liquidation, and redemption rights with every other
share. The shares are non-assessable and have no preemptive or conversion
rights.
The Fund is currently required to hold an annual meeting of shareholders to
elect directors and to transact such other business as may properly be brought
before the meeting. In addition, the holders of 10% of the Fund's shares may
call a meeting at any time.
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111, acts as
custodian of the Fund's assets, performs certain accounting services for the
Fund, and may appoint one or more subcustodians provided such subcustodianship
is in compliance with the rules and regulations promulgated under the 1940 Act.
The Fund's transfer and dividend disbursing agent ("Transfer Agent") is DST
Systems, Inc., Box 419789, Kansas City, MO 64141-6789. The Distributor provides
certain shareholder administration services to the Fund and is reimbursed its
cost by the Fund. The Fund may also enter into agreements with brokers, banks
and others who would perform, on behalf of its customers, certain shareholder
services not otherwise provided by the Transfer Agent or the Distributor.
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Statement of Additional Information August 19, 1996
THE ROCKWOOD GROWTH FUND, INC.
11 Hanover Square
New York, NY 10005
Toll-free: 1-888-ROCKWOOD
This Statement of Additional Information regarding The Rockwood Growth Fund,
Inc. ("Fund") is not a prospectus and should be read in conjunction with the
Fund's prospectus dated August 19, 1996. The prospectus is available to
prospective investors without charge upon request to Investor Service Center,
Inc., the Fund's distributor, by calling toll-free at 1-888- ROCKWOOD.
TABLE OF CONTENTS
THE FUND'S INVESTMENT PROGRAM..............................3
INVESTMENT RESTRICTIONS....................................6
OFFICERS AND DIRECTORS.....................................9
INVESTMENT MANAGER........................................12
SUBADVISER AND SUBADVISORY AGREEMENT......................14
CALCULATION OF PERFORMANCE DATA...........................16
DISTRIBUTION OF SHARES....................................21
DETERMINATION OF NET ASSET VALUE..........................23
PURCHASE OF SHARES........................................24
ALLOCATION OF BROKERAGE...................................24
DISTRIBUTIONS AND TAXES...................................28
REPORTS TO SHAREHOLDERS...................................30
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT.........31
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AUDITORS..........................................31
FINANCIAL STATEMENTS..............................31
2
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THE FUND'S INVESTMENT PROGRAM
The following information supplements the information concerning the
investment objective, policies and limitations of the Fund found in the
Prospectus. The Fund's investment objective of capital appreciation is
non-fundamental and may be changed by the Fund's Board of Directors without
shareholder approval. Fund shareholders will be notified at least thirty days in
advance of a change in the Fund's investment objective, and shareholders will
not be charged an exchange fee or redemption fee if they redeem after such
notice and prior to the change of investment objective.
U.S. GOVERNMENT SECURITIES. The U.S. government securities in which the
Fund may invest include direct obligations of the U.S. government (such as
Treasury bills, notes and bonds) and obligations issued by U.S. government
agencies and instrumentalities backed by the full faith and credit of the U.S.
government, such as those issued by the Government National Mortgage
Association. In addition, the U.S. government securities in which the Fund may
invest include securities supported primarily or solely by the creditworthiness
of the issuer, such as securities issued by the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation and the Tennessee Valley
Authority. In the case of obligations not backed by the full faith and credit of
the U.S. government, the Fund must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment
and may not be able to assert a claim against the U.S. government itself in the
event the agency or instrumentality does not meet its commitments. Accordingly,
these securities may involve more risk than securities backed by the U.S.
government's full faith and credit.
BORROWING. The Fund may incur overdrafts at its custodian bank from time to
time in connection with redemptions and/or the purchase of portfolio securities.
In lieu of paying interest to the custodian bank, the Fund may maintain
equivalent cash balances prior or subsequent to incurring such overdrafts. If
cash balances exceed such overdrafts, the custodian bank may credit interest
thereon against fees.
ILLIQUID ASSETS. The Fund may not purchase or otherwise acquire any security
or invest in a repurchase agreement if, as a result, (a) more than 15% of the
Fund's net assets would be invested in illiquid assets, including repurchase
agreements not entitling the holder to payment of principal within seven days,
or (b) more than 10% of the Fund's total assets would be invested in securities
that are illiquid by virtue of restrictions on the sale of such securities to
the public without registration under the Securities Act of 1933, as amended
("1933 Act"). The term "illiquid assets" for this purpose includes securities
that cannot be disposed of within seven days in the ordinary course of business
at approximately the amount at which the Fund has valued the securities.
Illiquid restricted securities may be sold by the Fund only in privately
negotiated transactions or in a public offering with respect to which a
registration statement is in effect under the 1933
3
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Act. Where registration is required, the Fund may be obligated to pay all or
part of the registration expenses and a considerable period may elapse between
the time of the decision to sell and the time the Fund may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
In recent years a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. These instruments are often
restricted securities because the securities are either themselves exempt from
registration or sold in transactions not requiring registration. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend either on an efficient institutional
market in which such unregistered securities can be readily resold or on an
issuer's ability to honor a demand for repayment. Therefore, the fact that there
are contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional restricted securities markets may
provide both readily ascertainable values for restricted securities and the
ability to liquidate an investment in order to satisfy share redemption orders
on a timely basis. Such markets might include automated systems for the trading,
clearance and settlement of unregistered securities, such as the PORTAL System
sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified buyers interested in purchasing certain
restricted securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities, and the Fund might be unable to
dispose of such securities promptly or at favorable prices.
The Board of Directors of the Fund has delegated the function of making
day-to-day determinations of liquidity to Rockwood Advisers, Inc. (the
"Investment Manager") pursuant to guidelines approved by the Board. The
Investment Manager takes into account a number of factors in reaching liquidity
decisions, including (1) the frequency of trades and quotes for the security,
(2) the number of dealers willing to purchase or sell the security and the
number of other potential purchasers, (3) dealer undertakings to make a market
in the security, and (4) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). The Investment Manager
monitors the liquidity of restricted securities in the Fund's portfolio and
reports periodically on such decisions to the Board of Directors.
LENDING. The Fund may lend up to one-third of its total assets to other
parties, although it has no current intention of doing so. If the Fund engages
in lending transactions, it will enter into lending agreements that require that
the loans be continuously secured by cash, securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, or any
4
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combination of cash and such securities, as collateral equal at all times to at
least the market value of the assets lent. To the extent of such activities, the
custodian will apply credits against its custodial charges. There are risks to
the Fund of delay in receiving additional collateral and risks of delay in
recovery of, and failure to recover, the assets lent should the borrower fail
financially or otherwise violate the terms of the lending agreement. Loans will
be made only to borrowers deemed by the Investment Manager to be of good
standing and when, in the Investment Manager's judgment, the consideration which
can be earned currently from such lending transactions justifies the attendant
risk. Any loan made by the Fund will provide that it may be terminated by either
party upon reasonable notice to the other party.
CONVERTIBLE SECURITIES. The Fund may invest up to 5% of its net assets in
convertible securities which are bonds, debentures, notes, preferred stocks or
other securities that may be converted into or exchanged for a specified amount
of common stock of the same or a different issuer within a particular period of
time at a specified price or formula. A convertible security entitles the holder
to receive interest generally paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed, converted
or exchanged. Convertible securities have unique investment characteristics in
that they generally (i) have higher yields than common stocks, but lower yields
than comparable non-convertible securities, (ii) are less subject to fluctuation
in value than the underlying stock since they have fixed income characteristics
and (iii) provide the potential for capital appreciation if the market price of
the underlying common stock increases.
The value of a convertible security is a function of its "investment value"
(determined by its yield comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value and
generally the conversion value decreases as the convertible security approaches
maturity. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. In addition, a
convertible security will sell at a premium over its conversion value determined
by the extent to which investors place value on the right to acquire the
underlying common stock while holding a fixed income security.
The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock when, in the Investment
Manager's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objective. Otherwise,
the Fund may hold or trade convertible securities. In selecting convertible
5
<PAGE>
securities for the Fund, the Investment Manager evaluates the investment
characteristics of the convertible security as a fixed income instrument and the
investment potential of the underlying equity security for capital appreciation.
In evaluating these matters with respect to a particular convertible security,
the Investment Manager considers numerous factors, including the economic and
political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.
Equity securities involve greater risk of loss of income than debt
securities because issuers are not obligated to pay dividends. In addition,
equity securities are subordinate to debt securities, and are more subject to
changes in economic and industry conditions and in the financial condition of
the issuers of such securities.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions that
may not be changed without the approval of the lesser of (a) 67% or more of the
voting securities of the Fund present at a meeting if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy or (b) more than 50% of the outstanding voting securities of the Fund.
Any investment restriction which involves a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowing by, the Fund. The Fund may not:
1. Borrow money, except to the extent permitted by the Investment Company Act of
1940, as amended ("1940 Act");
2. Engage in the business of underwriting the securities of other issuers,
except to the extent that the Fund may be deemed to be an underwriter under
the Federal securities laws in connection with the disposition of the Fund's
authorized investments;
3. Purchase or sell real estate, provided that the Fund may invest in
securities (excluding limited partnership interests) secured by real estate
or interests therein or issued by companies which invest in real estate or
interests therein;
4. Purchase or sell physical commodities, although it may enter into (a)
commodity and other futures contracts and options thereon, (b) options on
commodities, including foreign currencies, (c) forward contracts on
commodities, including foreign currencies, and (d) other financial contracts
or derivative instruments;
5. Lend its assets, provided however, that the following are not prohibited:
(a) the making of time or demand deposits with banks, (b) the purchase of
debt securities such as bonds, debentures, commercial paper, repurchase
agreements and short term obligations in accordance with the Fund's
investment objectives and policies, and (c) engaging in securities and other
asset loan transactions to the extent permitted by the 1940 Act;
6
<PAGE>
6. Issue senior securities, except to the extent permitted by the 1940 Act; or
7. Purchase a security if, as a result, 25% or more of the value of the Fund's
total assets would be invested in the securities of issuers in a single
industry, except that this limitation does not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
The Fund's Board of Directors has established the following non-fundamental
investment limitations that may be changed by the Board without shareholder
approval:
(i) The Fund's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets, which amount
may include warrants which are not listed on the New York or American
Stock Exchange provided that such warrants, valued at the lower of cost
or market, do not exceed 2% of the Fund's net assets, and further
provided that this restriction does not apply to warrants attached to,
or sold as a unit with, other securities;
(ii) The Fund may not invest in interests in oil, gas or other mineral
exploration or development programs or leases, although it may invest
in the securities of issuers which invest in or sponsor such programs
or such leases;
(iii) The Fund may not invest more than 5% of its net assets in
securities of companies having a record of less than three
years continuous operations (including operations of
predecessors);
(iv) The Fund may not purchase or otherwise acquire any security or invest
in a repurchase agreement if, as a result, (a) more than 15% of the
Fund's net assets (taken at current value) would be invested in
illiquid assets, including repurchase agreements not entitling the
holder to payment of principal within seven days, or (b) more than 10%
of the Fund's total assets would be invested in securities that are
illiquid by virtue of restrictions on the sale of such securities to
the public without registration under the 1933 Act;
(v) The Fund may not make short sales of securities or maintain a short
position, except (a) the Fund may buy and sell options, futures
contracts, options on futures contracts, and forward contracts, and (b)
the Fund may sell "short against the box" where the Fund
contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short;
(vi) The Fund may not purchase securities on margin, except that the Fund
may obtain such short term credits as are necessary for the clearance
of transactions, and provided that margin payments and other deposits
made in connection with transactions in options, futures contracts,
forward contracts and other derivative instruments shall not be deemed
to constitute purchasing securities on margin;
(vii) The Fund may not purchase or retain securities of any issuer if those
officers or
7
<PAGE>
Directors of the Fund, its Investment Manager or its subadviser who
each own beneficially more than 1/2 of 1% of the securities of an
issuer own beneficially together more than 5% of the securities of that
issuer;
(viii)The Fund may not purchase the securities of any investment company except
(a) by purchase in the open market where no commission or profit to a sponsor or
dealer results from such purchase, provided that immediately after such purchase
no more than: 10% of the Fund's total assets are invested in securities issued
by investment companies, 5% of the Fund's total assets are invested in
securities issued by any one investment company, or 3% of the voting securities
of any one such investment company are owned by the Fund, and (b) when such
purchase is part of a plan of merger, consolidation, reorganization or
acquisition of assets;
(ix) The Fund may not borrow money, except (a) from a bank for temporary or
emergency purposes (not for leveraging or investment) or (b) by engaging in
reverse repurchase agreements, provided however, that borrowings pursuant to (a)
and (b) do not exceed an amount equal to one third of the total value of the
Fund's assets taken at market value, less liabilities other than borrowings. The
Fund may not purchase securities for investment while any bank borrowing
equaling 5% or more of its total assets is outstanding. If at any time the
Fund's borrowings come to exceed the limitation set forth in (1) above, such
borrowing will be promptly (within three days, not including Sundays and
holidays) reduced to the extent necessary to comply with this limitation;
(x) The aggregate value of securities underlying put options on securities
written by the Fund, determined as of the date the put options are written, will
not exceed 25% of the Fund's net assets, and the aggregate value of securities
underlying call options on securities written by the Fund, determined as of the
date the call options are written, will not exceed 25% of the Fund's net assets;
(xi) The Fund may purchase a put or call option on a security or a security
index, including any straddles or spreads, only if the value of its premium,
when aggregated with the premiums on all other such instruments held by the
Fund, does not exceed 5% of the Fund's total assets;
(xii) To the extent that the Fund enters into futures contracts, options on
futures contracts and options on foreign currencies traded on a CFTC-regulated
exchange, in each case that are not for bona fide hedging purposes (as defined
by the Commodity Futures Trading Commission ("CFTC")), the aggregate initial
margin and premiums required to establish these positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the liquidation value
of the Fund's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Fund has entered into; and
(xiii) The Fund may not mortgage, pledge or hypothecate any assets in excess of
one-third of the Fund's total assets.
8
<PAGE>
OFFICERS AND DIRECTORS
The officers and Directors of the Fund, their respective offices and
principal occupations during the last five years are set forth below. Unless
otherwise noted, the address of each is 11 Hanover Square, New York, NY 10005.
BASSETT S. WINMILL* -- Chairman of the Board. He is Chairman of the Board of
five other investment companies in the investment company complex (the
"Complex") and of Bull & Bear Group, Inc. ("Group"), the parent of the
Investment Manager. He was born February 10, 1930. He is a member of the New
York Society of Security Analysts, the Association for Investment Management and
Research and the International Society of Financial Analysts. He is the father
of Mark C. Winmill and Thomas B. Winmill.
ROBERT D. ANDERSON* -- Vice Chairman and Director. He is Vice Chairman and a
Director of five other investment companies in the Complex and of the Investment
Manager and its affiliates. He was born December 7, 1929. He is a member of the
Board of Governors of the Mutual Fund Education Alliance, and of its
predecessor, the No-Load Mutual Fund Association. He has also been a member of
the District #12, District Business Conduct and Investment Companies Committees
of the NASD.
RUSSELL E. BURKE III -- Director. 900 Park Avenue, New York, NY 10021. He was
born August 23, 1946. He is President of Russell E. Burke III, Inc. Fine Art,
New York, New York. From 1988 to 1991, he was President of Altman Burke Fine
Arts, Inc. From 1983 to 1988, he was Senior Vice President of Kennedy Galleries.
He is also a Director of three other investment companies in the Complex.
BRUCE B. HUBER, CLU, ChFC, MSFS -- Director. 3443 Highway 66, Neptune, NJ 07753.
He is Senior Consultant with The Berger Financial Group, LLC specializing in
financial, estate and insurance matters. From March 1995 to December 31, 1995,
he was President of Huber Hogan Knotts Consulting, Inc. From 1990 to March 1995,
he was President of Huber-Hogan Associates. From 1988 to 1990, he was Chairman
of Bruce Huber Associates. He was born February 7, 1930. He is also a Director
of six other investment companies in the Complex.
JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY 10017. He is
a principal of Kenny, Kindler, Hunt & Howe, Inc., executive recruiting
consultants. He was born December 14, 1930. From 1976 until 1983 he was Vice
President of Russell Reynolds Associates, Inc., also executive recruiting
consultants. He is also a Director of six other investment companies in the
Complex.
FREDERICK A. PARKER, JR. -- Director. 219 East 69th Street, New York, NY 10021.
He is President and Chief Executive Officer of American Pure Water Corporation,
a manufacturer of water purifying equipment. He was born November 14, 1926. He
is also a Director of six other investment companies in the Complex.
9
<PAGE>
JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill, NC 27514.
He was Executive Vice President and a Director of Dan River, Inc., a diversified
textile company, from 1969 until he retired in 1981. He was born February 9,
1923. He is a Director of Wheelock, Inc., a manufacturer of signal products, and
a consultant for the National Executive Service Corps in the health care
industry. He is also a Director of six other investment companies in the
Complex.
MARK C. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
Chief Financial Officer. He is Chief Financial Officer of the Investment Manager
and certain of its affiliates. He is also a Director of two of the investment
companies in the Complex. He received his M.B.A. from the Fuqua School of
Business at Duke University in 1987. From 1983 to 1985 he was Assistant Vice
President and Director of Marketing of E.P. Wilbur & Co., Inc., a real estate
development and syndication firm and Vice President of E.P.W. Securities, its
broker/dealer subsidiary. He is the brother of Thomas B. Winmill. He was born
November 26, 1957.
THOMAS B. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
General Counsel. He is President of the Investment Manager and the Distributor,
and of their affiliates. He is also a Director of three of the investment
companies in the Complex. He was associated with the law firm of Harris, Mericle
& Orr from 1984 to 1987. He is a member of the New York State Bar and the SEC
Rules Committee of the Investment Company Institute. He is a brother of Mark C.
Winmill. He was born June 25, 1959.
The executive officers of the Fund, each of whom serves at the pleasure of
the Board of Directors, are as follows:
MARK C. WINMILL -- Co-President, Co-Chief Executive Officer, and Chief Financial
Officer. (see biographical information above).
THOMAS B. WINMILL -- Co-President, Co-Chief Executive Officer, and General
Counsel (see biographical information above).
ROBERT D. ANDERSON -- Vice Chairman (see biographical information above).
STEVEN A. LANDIS -- Senior Vice President. He is Senior Vice President of the
Investment Manager and certain of its affiliates. From 1993 to 1995, he was
Associate Director -- Proprietary Trading at Barclays De Zoete Wedd Securities
Inc., from 1992 to 1993 he was Director, Bond Arbitrage at WG Trading Company,
and from 1989 to 1992 he was Vice President of Wilkinson Boyd Capital Markets.
He was born March 1, 1955.
BRETT B. SNEED, CFA -- Senior Vice President. He is Senior Vice President of the
Investment Manager and certain of its affiliates. He is a Chartered Financial
Analyst, a member of the Association for Investment Management and Research, and
a member of the New York Society of Security Analysts. From 1986 to 1988, he
managed private accounts, from 1981 to 1986, he was Vice President of Morgan
Stanley Asset Management, Inc. and prior thereto was a portfolio manager and
member of the Finance and Investment Committees of American
10
<PAGE>
International Group, Inc., an insurance holding company. He was born June 11,
1941.
JOSEPH LEUNG, CPA -- Treasurer and Chief Accounting Officer. He is Treasurer and
Chief Accounting Officer of the Investment Manager and its affiliates. From 1992
to 1995 he held various positions with Coopers & Lybrand L.L.P., a public
accounting firm. From 1991 to 1992, he was the accounting supervisor at
Retirement Systems Group, a mutual fund company. From 1987 to 1991, he held
various positions with Ernst & Young LLP, a public accounting firm. He is a
member of the American Institute of Certified Public Accountants. He was born
September 15, 1965.
WILLIAM J. MAYNARD -- Vice President and Secretary. He is Vice President and
Secretary of the Investment Manager and its affiliates. From 1991 to 1994 he was
associated with the law firm of Skadden, Arps, Slate, Meagher & Flom. He is a
member of the New York State Bar. He was born September 13, 1964.
* Bassett S. Winmill, Robert D. Anderson, Mark C. Winmill and Thomas B. Winmill
are "interested persons" of the Fund as defined by the 1940 Act, because of
their positions with the Investment Manager.
COMPENSATION TABLE
NAME OF Aggregate Pension or Estimated Total Com
PERSON, Compensa- Retirement Annual pensation
POSITION tion From Benefits Benefits Upon From
Registrant Accrued as Retirement Registrant and
Part of Fund Fund Complex
Expenses Paid to
Directors
Russell E. Burke None None None $9,000 from
III, Director 4 Investment
Companies
Bruce B. Huber, None None None $12,500 from 7
Director Investment
Companies
James E. Hunt, None None None $12,500 from 7
Director Investment
Companies
Frederick A. None None None $12,500 from 7
Parker, Director Investment
Companies
11
<PAGE>
John B. Russell, None None None $12,500 from 7
Director Investment
Companies
Information in the above table is based on fees paid during the year ended
October 31, 1995.
No officer, Director or employee of the Fund's Investment Manager receives
any compensation from the Fund for acting as an officer, Director or employee of
the Fund.
As of June 17, 1996 no person beneficially owned either directly or through
one or more controlled companies, more than 25% of the voting securities of the
Fund. As of the same date, the following persons owned of record and
beneficially, in amounts stated after their names, 5% or more of the Fund's
outstanding securities:
Name and Address Number of Shares Percentage
Ronald W. Kiehn 5,172.101 11.2%
P.O. Box 4152
Jackson, WY 83001
Pfendler Family 3411.585 7.39%
Revocable Living Trust
2507 Harsh Avenue, S.E.
Massillon, OH 44646
As of June 17, 1996, the officers and directors of the Fund owned, as a
group, 21% of the outstanding voting securities of the Fund.
INVESTMENT MANAGER
The Investment Manager acts as general manager of the Fund, being
responsible for the various functions assumed by it, including the regular
furnishing of advice with respect to portfolio transactions. The Investment
Manager also furnishes or obtains on behalf of the Fund all services necessary
for the proper conduct of the Fund's business and administration. As
compensation for its services to the Fund, the Investment Manager is entitled to
a fee, payable monthly, based upon the Fund's average daily net assets. Under
the Fund's Investment Management Agreement dated August 16, 1996, the Investment
Manager receives a fee at the annual rate of:
1.00% of the first $200 million of the Fund's average daily net assets
.95% of average daily net assets over $200 million up to $400 million
.90% of average daily net assets over $400 million up to $600 million
.85% of average daily net assets over $600 million up to $800 million
.80% of average daily net assets over $800 million up to $1 billion
.75% of average daily net assets over $1 billion.
12
<PAGE>
The percentage fee is calculated on the daily value of the Fund's net assets at
the close of each business day. The foregoing fees are higher than fees paid by
most other investment companies.
Under the Investment Management Agreement, the Fund assumes and shall pay
all the expenses required for the conduct of its business including, but not
limited to, (a) salaries of administrative and clerical personnel; (b) brokerage
commissions; (c) taxes and governmental fees; (d) costs of insurance and
fidelity bonds; (e) fees of the transfer agent, custodian, legal counsel and
auditors; (f) association fees; (g) costs of preparing, printing and mailing
proxy materials, reports and notices to shareholders; (h) costs of preparing,
printing and mailing the prospectus and statement of additional information and
supplements thereto; (i) payment of dividends and other distributions; (j) costs
of Board and shareholders meetings; (k) fees of the independent directors; (l)
necessary office space rental; (m) all fees and expenses (including expenses of
counsel) relating to the registration and qualification of shares of the Fund
under applicable federal and state securities laws and maintaining such
registrations and qualifications; and (n) such non-recurring expenses as may
arise, including, without limitation, actions, suits or proceedings affecting
the Fund and the legal obligation which the Fund may have to indemnify its
officers and directors with respect thereto.
If requested by the Fund's Board of Directors, the Investment Manager may
provide other services to the Fund such as, without limitation, the functions of
billing, accounting, certain shareholder communications and services,
administering state and Federal registrations, filings and controls and other
administrative services. Any services so requested and performed will be for the
account of the Fund and the costs of the Investment Manager in rendering such
services shall be reimbursed by the Fund, subject to examination by those
directors of the Fund who are not interested persons of the Investment Manager
or any affiliate thereof.
The Fund's Investment Management Agreement continues from year to year only
if a majority of the Fund's directors (including a majority of disinterested
directors) approve. The Fund's Investment Management Agreement may be terminated
by either the Fund or the Investment Manager on 60 days' written notice to the
other, and terminates automatically in the event of its assignment.
The Investment Management Agreement provides that the Investment Manager
shall waive all or part of its fee or reimburse the Fund monthly if and to the
extent the aggregate operating expenses of the Fund exceed the most restrictive
limit imposed by any state in which shares of the Fund are qualified for sale or
such lesser amount as may be agreed to by the Fund's Board of Directors and the
Investment Manager. Currently, the most restrictive state imposed limit
applicable to the Fund is 2.5% of the first $30 million of the Fund's average
daily net assets, 2.0% of the next $70 million of its average daily net assets
and 1.5% of its average daily net assets in excess of $100 million. Certain
expenses, such as brokerage commissions, taxes, interest, distribution fees,
certain expenses attributable to investing outside the United States and
extraordinary items, are excluded from this limitation.
13
<PAGE>
For the years ended 1993, 1994, and 1995 Aspen Securities and Advisory,
Inc., the current Subadviser and the Fund's previous investment adviser, earned,
before reimbursement of certain expenses, $4,911, $4,896, and $5,112,
respectively, in fees from the Fund. These fees were calculated pursuant to a
different fee schedule under which the Investment Manager's fee is currently
calculated. For the years ended October 31, 1993, 1994, and 1995 the Subadviser
reimbursed $4,153, $5,759, and $5,103, respectively, to the Fund for expenses in
excess of expense limitations.
The Investment Manager, a registered investment adviser, is a wholly-owned
subsidiary of Bull & Bear Group, Inc. ("Group"). The other principal
subsidiaries of Group include Investor Service Center, Inc., a registered
broker-dealer, Bull & Bear Advisers, Inc. and Midas Management Corporation,
registered investment advisers, and Bull & Bear Securities, Inc., a registered
broker-dealer providing discount brokerage services.
Group is a publicly-owned company whose securities are listed on the Nasdaq
and traded in the over-the-counter market. Bassett S. Winmill may be deemed a
controlling person of Group on the basis of his ownership of 100% of Group's
voting stock and, therefore, of the Investment Manager. The investment companies
in the Complex, each of which is managed by an affiliate of the Investment
Manager, had net assets in excess of $425,000,000 as of June 4, 1996.
SUBADVISER AND SUBADVISORY AGREEMENT
The Investment Manager has entered into a subadvisory agreement with the
Subadviser for certain subadvisory services. The Subadviser advises and consults
with the Investment Manager regarding the selection, clearing and safekeeping of
the Fund's portfolio investments and assists in pricing and generally monitoring
such investments.
In consideration of the Subadviser's services, the Investment Manager, and
not the Fund, pays to the Subadviser a percentage of the Investment Manager's
Net Fees. "Net Fees" are defined as the actual amounts received by the
Investment Manager as compensation less reimbursements, if any, pursuant to the
guaranty of the Investment Management Agreement and waivers of such compensation
by the Investment Manager. The amount of the percentage is determined by the
grid and accompanying definitions set forth as follows:
SUBADVISER'S FEE AS A PERCENTAGE OF INVESTMENT MANAGER'S NET FEES
<TABLE>
RELATIVE PERFORMANCEA
TOTAL NET ASSETSB More than 50 basis Within 50 basis More than 50
points better than ATR points of ATR basis points
below ATR
<S> <C> <C> <C> <C>
Less then or equal to $15,000,000 30% 20% 10%
Greater $15,000,000 and 40% 30% 20%
Less then $50,000,000
Greater $50,000,000 50% 40% 30%
- ---------------------------------- ------------------------------- ------------------------- --------------------------
</TABLE>
A. "Relative Performance" shall be determined from comparing the Fund's total
return with the average total return ("ATR") of funds with the investment
objective of "growth" as compiled by Morningstar, Inc., or, if unavailable,
other similar service acceptable to the parties and the Fund. The Relative
Performance shall be determined as of the last calendar day of each month
("Performance Determination Date") and shall measure the Relative Performance
for the most recent 3 year period ("Measurement Period"), except that (A) for
the first 12 months of this Subadvisory Agreement, Relative Performance shall be
based upon annualized returns, the first three Performance Determination Dates
shall be the next three calendar quarter ends after the effective date of this
Subadvisory Agreement, and the Measurement Periods shall be the most recent
three months and the fourth Performance Determination Date shall be the next
calendar quarter end and the Measurement Period shall be the most recent 1 year
period, and (B) for the 13th through the 24th month of this Subadvisory
Agreement, Relative Performance shall be determined as of the last calendar day
of each month and shall measure the Relative Performance for the most recent 1
year period.
B. "Total Net Assets" shall be the total net assets of the Fund as of the
Performance Determination Date.
Under the Subadvisory Agreement's fee structure, the Investment Manager
retains more of its fee (and therefore passes on a lower portion of its fee to
the Subadviser) when the Fund underperforms the ATR by more than 50 basis points
than when the Fund outperforms the ATR by more than 50 basis points.
The Subadvisory Agreement is not assignable and automatically terminates in
the event of its assignment, or in the event of the termination of the
Investment Management Agreement. The Subadvisory Agreement may also be
terminated without penalty on 60 days' written notice at the option of either
party thereto or by the Fund, by the Board of Directors or by a vote of Fund
shareholders. The Subadvisory Agreement provides that the Subadviser shall not
be liable to the Fund for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with the matters to which the
Subadvisory Agreement relates. Nothing contained in the Subadvisory Agreement,
however, shall be construed to protect the Subadviser against liability to the
Fund by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of obligations
and duties under the Subadvisory Agreement.
15
<PAGE>
CALCULATION OF PERFORMANCE DATA
Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." All such
quotations are based upon historical earnings and are not intended to indicate
future performance. The investment return on and principal value of an
investment in the Fund will fluctuate, so that the investor's shares when
redeemed may be worth more or less than their original cost.
The Fund's performance prior to August 18, 1996 was achieved during a period
when the Fund's asset size was small relative to its asset size as of the date
of this Statement of Additional Information. No assurances can be given that the
Fund will achieve similar performance in the future.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return is computed by finding the average annual
compounded rates of return over the periods indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period.
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and other distributions are reinvested
at net asset value on the appropriate reinvestment dates as described in the
Prospectus, and includes all recurring fees, such as investment advisory and
management fees, charged to all shareholder accounts.
CUMULATIVE TOTAL RETURN
Cumulative total return is calculated by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
16
<PAGE>
CTR=( ERV-P )100
P
CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a hypothetical $1,000
payment made at the beginning of such period
P = initial payment of $1,000
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and other distributions are reinvested
at net asset value on the appropriate reinvestment dates as described in the
Prospectus, and includes all recurring fees, such as investment advisory and
management fees, charged to all shareholder accounts.
The cumulative return for the Fund for the periods ending October 31, 1995
and beginning at the inception of the Fund (April 30, 1986), and for the five
year and one year periods is 160.37%, 108.82%, and 36.73%, respectively.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED OCTOBER 31, 1995
Since inception 8.13%
Five Years 14.59%
One Year 12.76%
SOURCE MATERIAL From time to time, in marketing pieces and other Fund
literature, the Fund's performance may be compared to the performance of broad
groups of comparable mutual funds or unmanaged indexes of comparable securities.
Evaluations of Fund performance made by independent sources may also be used in
advertisements concerning the Fund. Sources for Fund performance information may
include, but are not limited to, the following:
Bank Rate Monitor, a weekly publication which reports yields on various bank
money market accounts and certificates of deposit.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance and other data.
Bloomberg, a computerized market data source and portfolio analysis system.
Bond Buyer Municipal Bond Index (20 year), an index of municipal bonds provided
by a national periodical reporting on municipal securities.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds.
17
<PAGE>
CDA/Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records, and price ranges.
Consumer's Digest, a bimonthly magazine that periodically features the
performance of a variety of investments, including mutual funds.
Financial Times, Europe's business newspaper, which from time to time reports
the performance of specific investment companies in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
Goldman Sachs Convertible Bond Index -- currently includes 67 bonds and 33
preferred shares. The original list of names was generated by screening for
convertible issues of 100 million or greater in market capitalization. The index
is priced monthly.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds.
Growth Fund Guide, a newsletter providing a mutual fund rating service published
for over 25 years.
IBC's Money Fund Report, a weekly publication of money market fund total net
assets, yield, and portfolio composition.
Individual Investor, a newspaper that periodically reviews mutual fund
performance and other data.
Investment Advisor, a monthly publication reviewing performance of mutual funds.
Investor's Business Daily, a nationally distributed newspaper which regularly
covers financial news.
Kiplinger's Personal Finance Magazine, a monthly publication periodically
reviewing mutual fund performance.
Lehman Brothers, Inc. "The Bond Market Report" reports on various Lehman
Brothers bond indices.
Lehman Government/Corporate Bond Index -- is a widely used index composed of
government, corporate, and mortgage backed securities.
Lehman Long Term Treasury Bond -- is composed of all bonds covered by the Lehman
Treasury Bond Index with maturities of 10 years or greater.
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Lipper Analytical Services, Inc., a publication periodically reviewing mutual
funds industry-wide by means of various methods of analysis.
Merrill Lynch Pierce Fenner & Smith Taxable Bond Indices reports on a variety of
bond indices.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley Capital International EAFE Index, is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.
Morningstar, Mutual Fund Values, publications of Morningstar, Inc., periodically
reviewing mutual funds industry-wide by means of various methods of analysis and
textual commentary.
Mutual Fund Forecaster, a newsletter providing a mutual fund rating service.
Nasdaq Industrial Index -- is composed of more than 3,000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.
New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter that reports on mutual fund
performance, rates funds, and discusses investment strategies for mutual fund
investors.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
special section reporting on mutual fund performance, yields, indexes, and
portfolio holdings.
Russell 3000 Index -- consists of the 3,000 largest stocks of U.S. domiciled
companies commonly traded on the New York and American Stock Exchanges or the
Nasdaq over-the-counter market, accounting for over 90% of the market value of
publicly traded stocks in the U.S.
Russell 2000 Small Company Stock Index -- consists of the smallest 2,000 stocks
within the Russell 3000; a widely used benchmark for small capitalization common
stocks.
Salomon Brothers GNMA Index -- includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.
Salomon Brothers High-Grade Corporate Bond Index -- consists of publicly issued,
non-convertible corporate bonds rated AA or AAA. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.
Salomon Brothers Broad Investment-Grade Bond Index -- is a market-weighted index
that contains approximately 4,700 individually priced investment-grade corporate
bonds rated BBB or better, U.S.
Treasury/agency issues and mortgage pass-through securities.
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Salomon Brothers Market Performance tracks the Salomon Brothers bond index.
Standard & Poor's 500 Composite Stock Price Index -- is an index of 500
companies representing the U.S. stock market.
Standard & Poor's 100 Composite Stock Price Index -- is an index of 100
companies representing the U.S. stock market.
Standard & Poor's Preferred Index is an index of preferred securities.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
businesses, often featuring mutual fund performance data.
USA Today, a national newspaper that periodically reports mutual fund
performance data.
U.S. News and World Report, a national weekly that periodically reports mutual
fund performance data.
Wall Street Journal, a nationally distributed newspaper which regularly covers
financial news.
Wilshire 5000 Equity Indexes -- consists of nearly 5,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.
Wilshire 4500 Equity Index -- consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the Standard & Poor's 500 Index.
Indices prepared by the research departments of such financial organizations
as Salomon Brothers, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., Bear
Stearns & Co., Inc., and Ibbotson Associates may be used, as well as information
provided by the Federal Reserve Board.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement, Investor Service Center, Inc.
("Distributor") acts as distributor of the Fund's shares. Under the Distribution
Agreement, the Distributor shall use its best efforts, consistent with its other
businesses, to sell shares of the Fund. Fund shares are sold continuously.
Pursuant to a Plan of Distribution ("Plan") adopted pursuant to Rule 12b-1 under
the 1940 Act, the Fund pays the Distributor monthly a fee in the amount of
one-quarter of one percent per annum of the Fund's average daily net assets as
compensation for its distribution and service activities.
In performing distribution and service activities pursuant to the Plan, the
Distributor may spend such amounts as it deems appropriate on any activities or
expenses primarily intended to result in the sale of the Fund's shares or the
servicing and maintenance of shareholder accounts, including, but not limited
to: advertising, direct mail, and promotional expenses; compensation to the
Distributor and its employees; compensation to and expenses, including overhead
and telephone and other communication expenses, of the Distributor, the
Investment Manager, the Fund, and selected dealers and their affiliates who
engage in or support the distribution of shares or who
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service shareholder accounts; fulfillment expenses, including the costs of
printing and distributing prospectuses, statements of additional information,
and reports for other than existing shareholders; the costs of preparing,
printing and distributing sales literature and advertising materials; and
internal costs incurred by the Distributor and allocated by the Distributor to
its efforts to distribute shares of the Fund or service shareholder accounts
such as office rent and equipment, employee salaries, employee bonuses and other
overhead expenses.
Among other things, the Plan provides that (1) the Distributor will submit
to the Fund's Board of Directors at least quarterly, and the Directors will
review, reports regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, (2) the Plan will continue in effect only
so long as it is approved at least annually, and any material amendment or
agreement related thereto is approved, by the Fund's Board of Directors,
including those Directors who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related to the Plan ("Plan Directors"), acting in person at a
meeting called for that purpose, unless terminated by vote of a majority of the
Plan Directors, or by vote of a majority of the outstanding voting securities of
the Fund, (3) payments by the Fund under the Plan shall not be materially
increased without the affirmative vote of the holders of a majority of the
outstanding voting securities of the Fund and (4) while the Plan remains in
effect, the selection and nomination of Directors who are not "interested
persons" of the Fund shall be committed to the discretion of the Directors who
are not interested persons of the Fund.
With the approval of the vote of a majority of the entire Board of Directors
and of the Plan Directors of the Fund, the Distributor has entered into a
related agreement with Hanover Direct Advertising Company, Inc. ("Hanover
Direct"), a wholly-owned subsidiary of Group, in an attempt to obtain cost
savings on the marketing of the Fund's shares. Hanover Direct will provide
services to the Distributor on behalf of the Fund at standard industry rates,
which includes commissions. The amount of Hanover Direct's commissions over its
cost of providing Fund marketing will be credited to the Fund's distribution
expenses and represent a saving on marketing, to the benefit of the Fund. To the
extent Hanover Direct's costs exceed such commissions, Hanover Direct will
absorb any of such costs.
It is the opinion of the Board of Directors that the Plan is necessary to
maintain a flow of subscriptions to offset redemptions. Redemptions of mutual
fund shares are inevitable. If redemptions are not offset by subscriptions, a
fund shrinks in size and its ability to maintain quality shareholder services
declines. Eventually, redemptions could cause a fund to become uneconomic.
Furthermore, an extended period of significant net redemptions may be
detrimental to orderly management of the portfolio. The offsetting of
redemptions through sales efforts benefits shareholders by maintaining the
viability of a fund. In periods where net sales are achieved, additional
benefits may accrue relative to portfolio management and increased shareholder
servicing capability. Increased assets enable the Fund to further diversify its
portfolio, which spreads and reduces investment risk while increasing
opportunity. In addition, increased assets enable the establishment and
maintenance of a better shareholder servicing staff which can respond more
effectively and promptly to shareholder inquiries and needs. While net increases
in
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total assets are desirable, the primary goal of the Plan is to prevent a decline
in assets serious enough to cause disruption of portfolio management and to
impair the Fund's ability to maintain a high level of quality shareholder
services.
The Plan increases the overall expense ratio of the Fund; however, a
substantial decline in Fund assets is likely to increase the portion of the
Fund's expense ratio comprised of management fees and fixed costs (i.e., costs
other than the Plan), while a substantial increase in Fund assets would be
expected to reduce the portion of the expense ratio comprised of management fees
(reflecting a larger portion of the assets falling within fee scale-down
levels), as well as of fixed costs. Nevertheless, the net effect of the Plan is
to increase overall expenses. To the extent the Plan maintains a flow of
subscriptions to the Fund, there results an immediate and direct benefit to the
Investment Manager by maintaining or increasing its fee revenue base,
diminishing the obligation, if any, of the Investment Manager to make an expense
reimbursement to the Fund, and eliminating or reducing any contribution made by
the Investment Manager to marketing expenses. Other than as described herein, no
Director or interested person of the Fund has any direct or indirect financial
interest in the operation of the Plan or any related agreement.
The Glass-Steagall Act prohibits certain banks from engaging in the business
of underwriting, selling, or distributing securities such as shares of a mutual
fund. Although the scope of this prohibition under the Glass-Steagall Act has
not been fully defined, in the Distributor's opinion it should not prohibit
banks from being paid for administrative and accounting services under the Plan.
If, because of changes in law or regulation, or because of new interpretations
of existing law, a bank or the Fund were prevented from continuing these
arrangements, it is expected that other arrangements for these services will be
made. In addition, state securities laws on this issue may differ from the
interpretations of Federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
regular trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m.
eastern time) each business day of the Fund. The following are not business days
of the Fund: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Securities owned by the Fund are valued by various methods depending on the
market or exchange on which they trade. Securities traded on the NYSE, the
American Stock Exchange and the Nasdaq National Market System are valued at the
last sales price, or if no sale has occurred, at the mean between the current
bid and asked prices. Securities traded on other exchanges are valued as nearly
as possible in the same manner. Securities traded only OTC are valued at the
mean between the last available bid and ask quotations, if available, or at
their fair value as determined in good faith by or under the general supervision
of the Board of Directors. Short term securities are valued either at amortized
cost or at original cost plus accrued interest, both of which approximate
current value.
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Foreign securities, if any, are valued at the price in a principal market
where they are traded, or, if last sale prices are unavailable, at the mean
between the last available bid and ask quotations. Foreign security prices are
expressed in their local currency and translated into U.S. dollars at current
exchange rates. Any changes in the value of forward contracts due to exchange
rate fluctuations are included in the determination of the net asset value.
Foreign currency exchange rates are generally determined prior to the close of
trading on the NYSE. Occasionally, events affecting the value of foreign
securities and such exchange rates occur between the time at which they are
determined and the close of trading on the NYSE, which events will not be
reflected in a computation of the Fund's net asset value on that day. If events
materially affecting the value of such securities or exchange rates occur during
such time period, the securities will be valued at their fair value as
determined in good faith under the direction of the Fund's Board of Directors.
Price quotations generally are furnished by pricing services, which may also
use a matrix system to determine valuations. This system considers such factors
as security prices, yields, maturities, call features, ratings, and developments
relating to specific securities in arriving at valuations.
PURCHASE OF SHARES
The Fund will only issue shares upon payment of the purchase price by check
made payable to the Fund and drawn in U.S. dollars on a U.S. bank, or by Federal
Reserve wire transfer. Third party checks, credit cards, and cash will not be
accepted. The Fund reserves the right to reject any order, to cancel any order
due to nonpayment, to accept initial orders by telephone or telegram, and to
waive the limit on subsequent orders by telephone, with respect to any person or
class of persons. Orders to purchase shares are not binding on the Fund until
they are confirmed by the Transfer Agent. In order to permit the Fund's
shareholder base to expand, to avoid certain shareholder hardships, to correct
transactional errors, and to address similar exceptional situations, the Fund
may waive or lower the investment minimums with respect to any person or class
of persons.
ALLOCATION OF BROKERAGE
The Fund seeks to obtain prompt execution of orders at the most favorable
net prices. The Fund is not currently obligated to deal with any particular
broker, dealer or group thereof. Fund transactions in debt and OTC securities
generally are with dealers acting as principals at net prices with little or no
brokerage costs. In certain circumstances, however, the Fund may engage a broker
as agent for a commission to effect transactions for such securities. Purchases
of securities from underwriters include a commission or concession paid to the
underwriter, and purchases from dealers include a spread between the bid and
asked price. While the Investment Manager generally seeks reasonably competitive
spreads or commissions, payment of the lowest spread or commission is not
necessarily consistent with obtaining the best net results. Accordingly, the
Fund will not necessarily be paying the lowest spread or commission available.
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<PAGE>
The Investment Manager directs portfolio transactions to broker/dealers for
execution on terms and at rates which it believes, in good faith, to be
reasonable in view of the overall nature and quality of services provided by a
particular broker/dealer, including brokerage and research services, sales of
Fund shares, and allocation of commissions to the Fund's Custodian. With respect
to brokerage and research services, consideration may be given in the selection
of broker/dealers to brokerage or research provided and payment may be made for
a fee higher than that charged by another broker/dealer which does not furnish
brokerage or research services or which furnishes brokerage or research services
deemed to be of lesser value, so long as the criteria of Section 28(e) of the
Securities Exchange Act of 1934, as amended, or other applicable law are met.
Section 28(e) of the 1934 Act specifies that a person with investment discretion
shall not be "deemed to have acted unlawfully or to have breached a fiduciary
duty" solely because such person has caused the account to pay a higher
commission than the lowest available under certain circumstances. To obtain the
benefit of Section 28(e), the person so exercising investment discretion must
make a good faith determination that the commissions paid are "reasonable in
relation to the value of the brokerage and research services provided ... viewed
in terms of either that particular transaction or his overall responsibilities
with respect to the accounts as to which he exercises investment discretion."
Thus, although the Investment Manager may direct portfolio transactions without
necessarily obtaining the lowest price at which such broker/dealer, or another,
may be willing to do business, the Investment Manager seeks the best value to
the Fund on each trade that circumstances in the market place permit, including
the value inherent in on-going relationships with quality brokers.
Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for brokerage or research services might exceed
commissions that would be payable for execution alone, nor generally can the
value of such services to the Fund be measured, except to the extent such
services have a readily ascertainable market value. There is no certainty that
services so purchased, or the sale of Fund shares, if any, will be beneficial to
the Fund. Such services being largely intangible, no dollar amount can be
attributed to benefits realized by the Fund or to collateral benefits, if any,
conferred on affiliated entities. These services may include (1) furnishing
advice as to the value of securities, the advisability of investing in,
purchasing or selling securities and the availability of securities or
purchasers or sellers of securities, (2) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts, and (3) effecting
securities transactions and performing functions incidental thereto (such as
clearance, settlement, and custody). Pursuant to arrangements with certain
broker/dealers, such broker/dealers provide and pay for various computer
hardware, software and services, market pricing information, investment
subscriptions and memberships, and other third party and internal research of
assistance to the Investment Manager in the performance of its investment
decision-making responsibilities for transactions effected by such
broker/dealers for the Fund. Commission "soft dollars" may be used only for
"brokerage and research services" provided directly or indirectly by the
broker/dealer and under no circumstances will cash payments be made by such
broker/dealers to the Investment Manager. To the extent that commission "soft
dollars" do not result in the provision of any "brokerage and
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<PAGE>
research services" by a broker/dealer to whom such commissions are paid, the
commissions, nevertheless, are the property of such broker/dealer. To the extent
any such services are utilized by the Investment Manager for other than the
performance of its investment decision-making responsibilities, the Investment
Manager makes an appropriate allocation of the cost of such services according
to their use.
Bull & Bear Securities, Inc. ("BBSI"), a wholly owned subsidiary of Group
and the Investment Manager's affiliate, provides discount brokerage services to
the public as an introducing broker clearing through unaffiliated firms on a
fully disclosed basis. The Investment Manager is authorized to place Fund
brokerage through BBSI at its posted discount rates and indirectly through a
BBSI clearing firm. The Fund will not deal with BBSI in any transaction in which
BBSI acts as principal. The clearing firm will execute trades in accordance with
the fully disclosed clearing agreement between BBSI and the clearing firm. BBSI
will be financially responsible to the clearing firm for all trades of the Fund
until complete payment has been received by the Fund or the clearing firm. BBSI
will provide order entry services or order entry facilities to the Investment
Manager, arrange for execution and clearing of portfolio transactions through
executing and clearing brokers, monitor trades and settlements and perform
limited back-office functions including the maintenance of all records required
of it by the National Association of Securities Dealers, Inc.
In order for BBSI to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by BBSI must be reasonable and
fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time. The Fund's Board of Directors has adopted procedures in conformity with
Rule 17e- 1 under the 1940 Act to ensure that all brokerage commissions paid to
BBSI are reasonable and fair. Although BBSI's posted discount rates may be lower
than those charged by full cost brokers, such rates may be higher than some
other discount brokers and certain brokers may be willing to do business at a
lower commission rate on certain trades. The Board has determined that portfolio
transactions may be executed through BBSI if, in the judgment of the Investment
Manager, the use of BBSI is likely to result in price and execution at least as
favorable as those of other qualified broker/dealers and if, in particular
transactions, BBSI charges the Fund a rate consistent with that charged to
comparable unaffiliated customers in similar transactions. Brokerage
transactions with BBSI are also subject to such fiduciary standards as may be
imposed by applicable law. The Investment Manager's fees under its agreement
with the Fund are not reduced by reason of any brokerage commissions paid to
BBSI.
Brokerage commissions paid in fiscal years ended October 31, 1993, 1994 and
1995 were $2,010.07, $2,902.15, and $7,349.79 respectively, all of which
(representing approximately $1,315,000 in portfolio transactions) was allocated
to broker/dealers that provided research services. No transactions were directed
to broker/dealers during such periods for selling shares of the Fund or any
affiliated funds. During the Fund's fiscal years ended October 31, 1993, 1994,
and 1995, the Fund paid no brokerage commissions to BBSI.
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Investment decisions for the Fund and for the other Funds managed by the
Investment Manager or its affiliates are made independently based on each Fund's
investment objectives and policies. The same investment decision, however, may
occasionally be made for two or more Funds. In such a case, the Investment
Manager may combine orders for two or more Funds for a particular security if it
appears that a combined order would reduce brokerage commissions and/or result
in a more favorable transaction price. Combined purchase or sale orders are then
averaged as to price and allocated as to amount according to a formula deemed
equitable to each Fund. While in some cases this practice could have a
detrimental effect upon the price or quantity available of the security with
respect to the Fund, the Investment Manager believes that the larger volume of
combined orders can generally result in better execution and prices.
The Fund is not obligated to deal with any particular broker, dealer or
group thereof. Certain broker/dealers that the Fund does business with may, from
time to time, own more than 5% of the publicly traded Class A non-voting Common
Stock of Group, the parent of the Investment Manager, and may provide clearing
services to BBSI.
The Fund's portfolio turnover rate may vary from year to year and will not
be a limiting factor when the Investment Manager deems portfolio changes
appropriate. The portfolio turnover rate is calculated by dividing the lesser of
the Fund's annual sales or purchases of portfolio securities (exclusive of
purchases or sales of securities whose maturities at the time of acquisition
were one year or less) by the monthly average value of securities in the
portfolio during the year. For the fiscal years ended October 31, 1995 and 1994,
the Fund's portfolio turnover rate was 30.04% and 18.26%, respectively. A higher
portfolio turnover rate involves correspondingly greater transaction costs and
increases the potential for short-term capital gains and taxes.
From time to time, certain brokers may be paid a fee for record keeping,
shareholder communications and other services provided by them to investors
purchasing shares of the Fund through the "no transaction fee" programs offered
by such brokers. This fee is based on the average daily value of the investments
in the Fund made by such brokers on behalf of investors participating in their
"no transaction fee" programs. The Fund's Directors have further authorized the
Investment Manager to place a portion of the Fund's brokerage transactions with
any such brokers, if the Investment Manager reasonably believes that, in
effecting the Fund's transactions in portfolio securities, such broker or
brokers are able to provide the best execution of orders at the most favorable
prices. Commissions earned by such brokers from executing portfolio transactions
on behalf of the Fund may be credited by them against the fee they charge the
Fund, on a basis which has resulted from negotiations between the Investment
Manager and such brokers.
DISTRIBUTIONS AND TAXES
If the U.S. Postal Service cannot deliver a shareholder's check, or if a
shareholder's check remains uncashed for six months, the Fund reserves the right
to credit the shareholder's account with additional Fund shares at the then
current net asset value in lieu of the cash payment and to thereafter issue such
shareholder's distributions in additional Fund shares.
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The Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"). To qualify for this treatment, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short term
capital gain and net gains from certain foreign currency transactions
("Distribution Requirement")) and must meet several additional requirements.
Among these requirements are the following: (1) at least 90% of the Fund's gross
income each taxable year must be derived from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures, or forward contracts) derived with respect to its business of investing
in securities or those currencies ("Income Requirement"); (2) the Fund must
derive less than 30% of its gross income each taxable year from the sale or
other disposition of securities, or any of the following, that were held for
less than three months - options, futures, or forward contracts (other than
those on foreign currencies), or foreign currencies (or options, futures, or
forward contracts thereon) that are not directly related to the Fund's principal
business of investing in securities (or options and futures with respect
thereto) ("Short-Short Limitation"); and (3) the Fund's investments must satisfy
certain diversification requirements. In any year during which the applicable
provisions of the Code are satisfied, the Fund will not be liable for Federal
income tax on net income and gains that are distributed to its shareholders. If
for any taxable year the Fund does not qualify for treatment as a RIC, all of
its taxable income will be taxed at corporate rates.
A portion of the dividends from the Fund's investment company taxable income
(whether paid in cash or in additional Fund shares) may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion may
not exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
alternative minimum tax.
A loss on the redemption of Fund shares that were held for six months or
less will be treated as a long term (rather than a short term) capital loss to
the extent the shareholder received any capital gain distributions attributable
to those shares.
Dividends and other distributions may also be subject to state and local
taxes.
The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to
the extent it fails to distribute by the end of any calendar year an amount
equal to the sum of (1) 98% of its ordinary income, (2) 98% of its capital gain
net income (determined on an October 31 fiscal year basis), plus (3) generally,
all income and gain not distributed or subject to corporate tax in the prior
calendar year. The Fund intends to avoid imposition of this excise tax by making
adequate distributions.
Dividends and interest received by the Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's
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total assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible to, and may, file an election with the
Internal Revenue Service that would enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions' income taxes paid by it. Pursuant to the election, the Fund
would treat those taxes as dividends paid to its shareholders and each
shareholder would be required to (1) include in gross income, and treat as paid
by the shareholder, the shareholder's proportionate share of those taxes, (2)
treat the shareholder's share of those taxes and of any dividend paid by the
Fund that represents income from foreign or U.S. possessions sources as the
shareholder's own income from those sources, and (3) either deduct the taxes
deemed paid by the shareholder in computing the shareholder's taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against the shareholder's Federal income tax. The Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
Federal income tax on a portion of any "excess distribution" received on the
stock of a PFIC or of any gain from disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's taxable income and, accordingly, will not be taxable to
it to the extent that income is distributed to its shareholders. If the Fund
invests in a PFIC and elects to treat the PFIC as a "qualified electing fund,"
then in lieu of the foregoing tax and interest obligation, the Fund would be
required to include in income each year its pro rata share of the qualified
electing fund's annual ordinary earnings and net capital gain (the excess of net
long term capital gain over net short term capital loss), even if they were not
received by the Fund; those earnings and gain probably would have to be
distributed to satisfy the Distribution Requirement and avoid imposition of the
Excise Tax. In most instances it will be very difficult, if not impossible, to
make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
The Fund's use of hedging strategies, such as selling (writing) and purchasing
options and futures contracts and entering into forward currency contracts,
involves complex rules that will determine for income tax purposes the timing of
recognition and character of the gains and losses the Fund realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
options, futures, and forward currency contracts derived by the Fund with
respect to its business of investing in securities or
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foreign currencies, will qualify as permissible income under the Income
Requirement. However, income from the disposition of options and futures other
than those on foreign currencies will be subject to the Short-Short Limitation
if they are held for less than three months. Income from the disposition of
foreign currencies, and options, futures, and forward contracts on foreign
currencies, also will be subject to the Short-Short Limitation if they are held
for less than three months and are not directly related to the Fund's principal
business of investing in securities (or options and futures with respect
thereto).
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of the that limitation. The
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Fund does not so qualify, it may be
forced to defer the closing out of certain options, futures, and forward
currency contracts beyond the time when it otherwise would be advantageous to do
so, in order for the Fund to continue to qualify as a RIC.
The foregoing discussion of Federal tax consequences is based on the tax law
in effect on the date of this Statement of Additional Information, which is
subject to change by legislative, judicial, or administrative action. The Fund
may be subject to state or local tax in jurisdictions in which it may be deemed
to be doing business.
REPORTS TO SHAREHOLDERS
The Fund issues, at least semi-annually, reports to its shareholders
including a list of investments held and statements of assets and liabilities,
income and expense, and changes in net assets of the Fund. The Fund's fiscal
year ends on October 31.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company, Box 2197, Boston, MA 02111 ("Custodian") has
been retained by the Fund to act as Custodian of the Fund's investments and may
appoint one or more subcustodians. The Custodian also performs certain
accounting services for the Fund. As part of its agreement with the Fund, the
Custodian may apply credits or charges for its services to the Fund for,
respectively, positive or deficit cash balances maintained by the Fund with the
Custodian. DST Systems, Inc., Box 419789, Kansas City, Missouri 64141-6789, is
the Fund's Transfer and Dividend Disbursing Agent.
AUDITORS
Tait, Weller & Baker, Two Penn Center, Suite 700, Philadelphia, PA
19102-1707, are the independent accountants for the Fund. Financial statements
of the Fund are audited annually.
29
<PAGE>
FINANCIAL STATEMENTS
The Fund's Financial Statements for the fiscal year ended October 31, 1995,
together with the Report of the Fund's independent accountants thereon, appear
in the Fund's Annual Report to Shareholders and are incorporated herein by
reference.
Unaudited financial statements for the six month period ended April 30, 1996
appear in the Fund's Semi-Annual Report to Shareholders and are incorporated
herein by reference.
30
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Financial statements of the Registrant are included in the Registrant's
Statement of Additional Information filed as part of this Registration
Statement.
(b) Exhibits:
(1) Charter as now in effect: The Articles of Incorporation are contained
in the Fund's registration statement dated April 30, 1986 and
incorporated herein by reference.
(2) Copy of Existing By-Laws: The By-Laws are contained in the Fund's
registration statement dated April 30, 1986 and incorporated herein by
reference.
(3) Copy of Voting Trust Agreement: Not Applicable.
(4) Specimens or copies of each security of the Registrant, including
copies of all constituent instruments, defining the rights of the
holders of such securities, and copies of each security being
registered: A specimen security is contained in the Fund's registration
statement dated April 30, 1986 and incorporated herein by reference.
(5)(a)Investment Management Agreement, filed with the Securities and Exchange
Commission on August 16, 1996.
(b)Subadvisory Agreement, filed with the Securities and Exchange Commission on
August 16, 1996.
(6) Distribution Agreement, filed with the Securities and Exchange
Commission on August 16, 1996.
(7) Not applicable.
(8) (a)Custodian Agreement, filed with the Securities and Exchange Commission on
August 16, 1996.
(b) Service and Agency Agreement, filed with the Securities and Exchange
Commission on August 16, 1996.
(c) Custodial Account and IRA Disclosure Statement, filed
with the Securities and Exchange Commission on August
16, 1996.
(d) IRA Agreement, filed with the Securities and Exchange Commission on
August 16, 1996.
Part C, P. 1
<PAGE>
(9) (a) A copy of the Registrant's Agency Agreement is contained
in the Fund's registration statement dated April 30, 1986 and
incorporated herein by reference.
(b)A facsimile of the Registrant's Share Purchase Application is contained in
Post-Effective Amendment No. 15 and incorporated herein by reference.
(c)A copy of the Registrant's Pre-Authorized Check Plan is contained in
Post-Effective Amendment No. 7 and incorporated herein by reference.
(d)Form of Transfer Agency Agreement, filed with the Securities and Exchange
Commission on August 16, 1996.
(e)Form of Agency Agreement, filed with the Securities and Exchange Commission
on August 16, 1996.
(f)Form of Shareholder Administration Agreement, filed with the Securities and
Exchange Commission on August 16, 1996.
(g)Form of Credit Agreement, filed with the Securities and Exchange Commission
on August 16, 1996.
(10) Opinion and Consent of Counsel as to Legality of Securities: A
copy of the opinion and consent of the Fund's Counsel is
contained in the Fund's registration statement dated April 30,
1986 and incorporated herein by reference.
(12) Not Applicable.
(13) Not Applicable.
(14)(a)Standardized Profit Sharing Adoption Agreement, filed with the Securities
and Exchange Commission on August 16, 1996.
(b)Defined Contribution Basic Plan Document, filed with the Securities and
Exchange Commission on August 16, 1996.
(c)Standardized Money Purchase Adoption Agreement, filed with the Securities and
Exchange Commission on August 16, 1996.
(d)Simplified Profit Sharing Adoption Agreement, filed with the Securities and
Exchange Commission on August 16, 1996.
(e)Simplified Money Purchase Adoption Agreement, filed with the Securities and
Exchange Commission on August 16, 1996.
(15)(a)Plan of Distribution, filed with the Securities and Exchange Commission
on August 16, 1996.
(b)Related Agreement to Plan of Distribution between Investor Service Center,
Inc.
Part C, P. 2
<PAGE>
and Hanover Direct Advertising Company, Inc., filed with the Securities and
Exchange Commission on August 16, 1996.
(16) Schedule for Computation of Performance Quotations, filed with
the Securities and Exchange Commission on August 16, 1996.
(17) Financial Data Schedule (filed herewith)
(18) Not applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
Not Applicable.
ITEM 26. NUMBER OF RECORD HOLDERS OF SECURITIES AS OF JUNE 17, 1996.
TITLE OF CLASS NUMBER OF RECORD HOLDERS
$.10 par value 163
common stock
ITEM 27. INDEMNIFICATION
Registrant's Investment Management Agreement between the Registrant and
Rockwood Advisers, Inc. (the "Investment Manager") provides that the Investment
Manager shall not be liable to the Registrant or any shareholder of the
Registrant for any error of judgment or mistake of law or for any loss suffered
by the Registrant in connection with the matters to which the Investment
Management Agreement relates. However, the Investment Manager is not protected
against any liability to the Registrant by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under the Investment Management
Agreement.
Section 9 of the Distribution Agreement between the Registrant and Investor
Service Center, Inc. ("Service Center") provides that the Registrant will
indemnify Service Center and its officers, directors and controlling persons
against all liabilities arising from any alleged untrue statement of material
fact in the Registration Statement or from any alleged omission to state in the
Registration Statement a material fact required to be stated in it or necessary
to make the statements in it, in light of the circumstances under which they
were made, not misleading, except insofar as liability arises from untrue
statements or omissions made in reliance upon and in conformity with information
furnished by Service Center to the Registrant for use in the Registration
Statement; and provided that this indemnity agreement shall not protect any such
persons against liabilities arising by reason of their bad faith, gross
negligence or willful misfeasance; and shall not inure to the benefit of any
such persons unless a court of competent jurisdiction or controlling precedent
determines that such result is not against public policy as expressed in the
Securities Act of 1933.
Part C, P. 3
<PAGE>
Section 9 of the Distribution Agreement also provides that Service Center agrees
to indemnify, defend and hold the Registrant, its officers and Directors free
and harmless of any claims arising out of any alleged untrue statement or any
alleged omission of material fact contained in information furnished by Service
Center for use in the Registration Statement or arising out of any agreement
between Service Center and any retail dealer, or arising out of supplementary
literature or advertising used by Service Center in connection with the
Distribution Agreement.
The Registrant undertakes to carry out all indemnification provisions of its
Articles of Incorporation and By-Laws and the above-described contract in
accordance with Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be provided to directors, officers and controlling
persons of the Registrant, pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant with the successful defense of any action, suit or
proceeding or payment pursuant to any insurance policy) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information on the business of the Registrant's investment adviser is
described in the section of the Statement of Additional Information entitled
"Investment Manager" filed as part of this Registration Statement.
The directors and officers of the Investment Manager are also directors and
officers of other Funds managed by Bull & Bear Advisers, Inc. and Midas
Management Corporation, both of which are wholly-owned subsidiaries of Bull &
Bear Group, Inc. (the "Funds"). In addition, such officers are officers and
directors of Bull & Bear Group, Inc. and its other subsidiaries; Service Center,
the distributor of the Registrant and the Funds and a registered broker/dealer,
and Bull & Bear Securities, Inc., a discount brokerage firm. Bull & Bear Group,
Inc.'s predecessor was organized in 1976. In 1978, it acquired control of and
subsequently merged with Investors Counsel, Inc., a registered investment
adviser organized in 1959. The principal business of both companies since their
founding has been to serve as investment manager to registered investment
companies. Bull & Bear Advisers, Inc. serves as investment manager of Bull &
Bear Dollar Reserves, Bull & Bear Global Income Fund, and Bull & Bear U.S.
Government Securities Fund, each a series of shares issued by Bull & Bear Funds
II, Inc.; Bull & Bear Municipal Income Fund, a series of shares issued
Part C, P. 4
<PAGE>
by Bull & Bear Municipal Securities, Inc.; Bull & Bear Gold Investors Ltd.; Bull
& Bear U.S. and Overseas Fund, a series of Bull & Bear Funds I, Inc.; and Bull &
Bear Special Equities Fund, Inc. Midas Management Corporation serves as
investment manager of Midas Fund, Inc.
Item 29. Principal Underwriters
a) In addition to the Registrant, Service Center serves as principal
underwriter of Bull & Bear Funds II, Inc., Bull & Bear Special Equities Fund,
Inc., Bull & Bear Funds I, Inc., Bull & Bear Gold Investors Ltd., Bull & Bear
Municipal Securities, Inc. and Midas Fund, Inc.
b) Service Center serves as the Registrant's principal underwriter. The
directors and officers of Service Center, their principal business addresses,
their positions and offices with Service Center and their positions and offices
with the Registrant (if any) are set forth below.
Name and Principal Position and Offices
Business Address Position and Offices with with Registrant
Service Center
- --------------------- ------------------------------ ---------------------------
Robert D. Anderson Vice Chairman and Director N/A
11 Hanover Square
New York, NY 10005
Steven A. Landis Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Brett B. Sneed Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Mark C. Winmill Chairman, Director and Chief Co-President and Co-Chief
11 Hanover Square Financial Officer Executive Officer
New York, NY 10005
Thomas B. Winmill President, Director, General Co-President, Director, and
11 Hanover Square Counsel Co-Chief Executive Officer
New York, NY 10005
Kathleen B. Fliegauf Vice President and Assistant None
11 Hanover Square Treasurer
New York, NY 10005
William J. Maynard Vice President, Secretary, Vice President, Secretary,
11 Hanover Square Chief Compliance Officer Chief Compliance Officer
New York, NY 10005
Irene K. Kawczynski Vice President None
11 Hanover Square
New York, NY 10005
Part C, P. 5
<PAGE>
Joseph Leung Treasurer, Chief Accounting Treasurer, Chief Accounting
11 Hanover Square Officer Officer
New York, NY 10005
Michael J. McManus Vice President None
11 Hanover Square
New York, NY 10005
H. Matthew Kelly Vice President None
11 Hanover Square
New York, NY 10005
Item 30. Location of Accounts and Records
The minute books of Registrant and copies of its filings with the Commission
are located at 11 Hanover Square, New York, NY 10005 (the offices of Registrant
and its Investment Manager). All other records required by Section 31(a) of the
Investment Company Act of 1940 are located at Investors Bank & Trust Company, 89
South Street, Boston, MA 02111 (the offices of Registrant's custodian) and DST
Systems, Inc., 1055 Broadway, Kansas City, MO 64105-1594 (the offices of the
Registrant's Transfer and Dividend Disbursing Agent). Copies of certain of the
records located at Investors Bank & Trust Company & DST Systems, Inc. are kept
at 11 Hanover Square, New York, NY 10005 (the offices of Registrant and the
Investment Manager).
ITEM 31. MANAGEMENT SERVICES
There are no management related service contracts not discussed in Part A
or Part B of this Registration Statement.
ITEM 32. UNDERTAKINGS
Not Applicable.
Part C, P. 6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485 (b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City, County and State of New York on this 16th day of August
1996.
THE ROCKWOOD GROWTH FUND, INC.
By: THOMAS B. WINMILL
-----------------------------------
Thomas B. Winmill, President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment has been signed below by the following persons in the capacities and
on the date indicated.
Mark C. Winmill Director, Co-President and Co-Chief August 16, 1996
- ---------------
Mark C. Winmill Executive Officer
Thomas B. Winmill Director, Co-President and Co-Chief August 16, 1996
- -----------------
Thomas B. Winmill Executive Officer
Bassett S. Winmill Director, Chairman of the August 16, 1996
- ------------------
Bassett S. Winmill Board of Directors
Joseph Leung Treasurer, Principal August 16, 1996
- ------------
Joseph Leung Accounting Officer
Robert D. Anderson Director, Vice Chairman August 16, 1996
- ------------------
Robert D. Anderson
Bruce B. Huber Director August 16, 1996
- -----------------
Bruce B. Huber
James E. Hunt Director August 16, 1996
- ---------------
James E. Hunt
Frederick A. Parker, Jr. Director August 16, 1996
- ------------------------
Frederick A. Parker, Jr.
John B. Russell Director August 16, 1996
- -----------------
John B. Russell
Russell E. Burke III Director August 16, 1996
- --------------------
Russell E. Burke III
Part C, P. 7
<PAGE>
Exhibit Index
Exhibit
5(a) Investment Management Agreement
5(b) Subadvisory Agreement
6 Distribution Agreement
8(a) Custodian Agreement
8(b) Service and Agency Agreement
8(c) Custodial Account and IRA Disclosure Statement
8(d) IRA Agreement
9(d) Transfer Agency Agreement
9(e) Agency Agreement
9(f) Shareholder Administration Agreement
9(g) Credit Agreement
14(a) Standardized Profit Sharing Adoption Agreement
14(b) Defined Contribution Basic Plan Document
14(c) Standardized Money Purchase Adoption Agreement
14(d) Simplified Profit Sharing Adoption Agreement
14(e) Simplified Money Purchase Adoption Agreement
15(a) Plan of Distribution
15(b) Related Agreement to Plan of Distribution
16 Schedule for Computation of Performance Quotations
17 Financial Data Schedule
Semi-Annual Report to Shareholders of the Fund for the six month period
ended April 30, 1996 containing financial statements as and for the six month
period ended April 30, 1996...............................
Part C, P. 8
<PAGE>
The Rockwood Growth Fund, Inc.
545 Shoup Avenue - No. 303
Idaho Falls, Idaho 83405
(208) 522-5593
June 26, 1996
Dear Stockholder:
Attached are the unaudited financial statements as of April 30, 1996 for
the first half of the 1996 fiscal year. The following are brief summaries of the
fund's holding:
Blue Ridge Big Boulder owns two ski resorts and several thousand acres of
land in the Poconos. It develops and/or sells land for development. It is
currently developing a golf course. When the company sells property, it defers
taxes by putting the sale proceeds into income producing property. The company
continues to buy in its stock.
Boise Cascade has potential long-term, both in its paper business and
office products division of which 18% was spun of to the public. In addition, it
is undervalued based on assets.
Cimetrix, Inc. has proprietary software for the control of robots. It is a
young company with a huge market for its product. The company is moving toward a
strategic alliance probably sometime this year.
Cygnus Therapeutic Systems, Inc. is developing a "patch" that will read
glucose levels through a wrist watch like device. It will allow people with
diabetes to "read-out" their sugar level rather prick their finger several times
a day.
Devlieg-Bullard, Inc. is a machine tool servicer and manufacturer. It is a
busted IPO with improving fundamentals.
Innerdyne Corproation manufactures devices for use in the minimally
invasive surgery market. The market for their products is huge and they are on
the leading edge of technology. Additionally, the company has two other
techologies with market potential. The first, a biocompatible coating technology
for coating implantable medical devices. The second is a thermal ablation
technology for treatment of uterine bleeding.
IntelCom Group, Inc.'s principal business is local telephone access. They
have fiberoptic rings in several cities that allow companies to bypass the
local phone companies for access to long distance carriers. They will soon be
able to compete with local telephone service in the venues they currently
serve.
<PAGE>
Lab Volt, Inc. manufactures educational materials and training aids for a
variety of disciplines. Lab Volt's prospects have brightened substantially in
the past two years.
Life Core Biomedical's principal product is a fluid to be used after surgey
to prevent adhesions. The product is currently in FDA trials.
Life Quest Medical has recently made an acquisition in the minimally
invasive surgery (MIS) market and shifted its emphasis to this market. It is in
the process of developing an autoclavable endoscope for use in the MIS market.
It is a looking device for surgey that can be reused freqently.
Noble Drilling is an undervalued oil and gas driller. Its prospects have
improved with increased drilling activity.
Oak Industries has significant upside potential over the next few years.
They continue to make acquistions that will build shareholder value.
Precision Cast Parts has made some small acquisitions and the overall
demand for their products has improved. The values and stock price continue to
increase.
Quest Medical is an operating company with two principal products: a spinal
cord stimulation device for pain control and an automated myocardial protection
system for heart preservation during cardiac surgery.
Sidus Systems is a computer hardware manufacturer selling below book and at
a fraction of revenues.
Telecommunications, Inc. We have a small position. Telecommunications
reform should benefit in the long-term.
Tipperary is a small oil and gas E&P company. It is very well managed and
has rights to a substantial amount of coal bed methane in Australia. The
Australin project has produced commercial results. The company is still in the
early stages of developing the asset.
Todd A/P Corp. has appreciated substantially the first half of the year.
I continue to hold it because of improving fundamentals.
U.S. Environmental Solutions, Inc. has a trucking subsidiary wherein they
provide "back office" functions for indpendents. The stock is cheap by book.
1
<PAGE>
THE ROCKWOOD GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
As of April 30, 1996
(Unaudited)
Assets:
Investment in securities (identified cost $705,550.85) $1,176,532.88
Cash................................................. 35,813.65
Receivables:
Investment Securities Sold....................... 0.00
Accrued Interest................................. 439.43
Accrued Dividends...................................... 0.00
Deferred Fidelity Bond Cost
(net of amortization of $1,236) 3.44
Deferred Audit Costs (net of $12,500)............ 7,170.96
Reserve Premium.................................. 9,378.00
----------
Total Assets............................ 1,229,338.36
==========
Liabilities:
Payable for Investment Securities Purchased............... $ .00
Accruals:
Investment Advisor Fee................................... 1,901.88
Custodian Fee............................................ 246.11
Agency Fee............................................... .00
Audit Fee............................................ .00
Fidelity Bond................................................. .00
Shareholder Payable........................................... .00
Federal Witholding Payable.................................... .00
-------
Total Liabilities........................... 2,209.99
---------
Net Assets:
Capital Stock (100,000,000 shares authorized;
42710.93 shares outstanding...................... $678,052.62
Equalization Credits.......................................... 0.00
Undistributed Net Investment Income.................. (58,988.81
Undistributed Net Realized Gains (losses).............. $132,966.53
Unrealized Appreciation (depreciation) of Invesstment $470,982.03
Other Unrealized Appreciation..................................4,116.00
---------
Total Net Assets Equivalent to 28.73 per share,
based on 42710.93 shares of capital stock outstanding $1,227,128.37
==========
Total Net Assets plus Liabilities................$1,229,338.36
==========
<PAGE>
THE ROCKWOOD GROWTH FUND, INC.
STATEMENT OF OPERATIONS
For the Period Ended April 30, 1996
(Unaudited)
Investment Income:
Income:
Interest $713.86
Dividends 930.03
Other Income 0.00
----------
1,643.89
Expenses:
Investment Advisory Fee 3,402.03
Custodial Fee 1,272.01
Transfer Agent Fee 338.50
Registration Fee 3,767.00
Attorney Fee 20.56
Accountant Fee 6,497.80
Taxes 30.00
Fidelity Bond 715.00
Shareholder Communications 0.00
Directors' Fees 0.00
Reimbursement by Advisor 0.00
--------
16,043.09
Net Investment Income (14,399.20
Realized and Unrealized Gain (Loss) on Invetments:
Net Realized Gain (Loss) on Investments 135,812.20
Change in Unrealized Appreciation (Depreciation)
of investments for the Year 290,440.07
Change in other Unrealizedd Appreciation 1,547.00
-----------
Net Gain (Loss) on Investment 427,769.94
Net Increase (Decrease) in Net Assets
from Operations 413,370.74
==========
<PAGE>
Supplementary Information Regarding
Per-Share Data and Ratios
Period Ended Year Ended Year Ended
April 30, October 31, October 31
1996 1995 1994
Per Share Data:
Investment income $0.04 $0.09 $0.23
Expenses $0.39 $0.41 $0.45
Net investment income (0.35) (0.32) (0.22
Distributions from
investment income (net) $0.00 $0.00 $0.00
Net realized gain (loss) and increase
(decrease) in unrealized appreciation 10.35 $2.44 $0.51
Distributions from realized gains on
securities $0.00 $0.00 $0.00
Distributions from Capital $0.00 $0.00 $0.00
----- ----- -----
Net increase (decrease)
in net asset value 10.00 $2.12 $0.29
Net assets value:
Beginning of year 18.73 16.61 16.33
----- ----- -----
End of period 28.73 18.73 16.61
===== ===== =====
Ratios:
Expenses to average net assets (%) 1.65%** 2.99% 2.82
===== ===== =====
Net investment income
to average net assets (%) (1.48)%** (1.77)% (1.38
===== ===== =====
Portfolio Turnover Rate 13.69%** 30.04% 18.26
===== ===== ====
Number of Shares Outstanding 42333.276 41307.579 42993.736
*Annualized
**For the Period Indicated
4
<PAGE>
THE ROCKWOOD GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended April 30, 1996
and the year Ended October 31, 1995
(Unaudited)
Period Ended Year Ended
4/30/1996 1995
------------ ----------
Increase in Net Assets from Operations:
Investment income, net ($14,399.20) ($12,922.15)
Net realized gain on investments $135,812.87 $14,969.22
Change in unrealized appreciation $290,440.07 $82,389.58
Change in other unrealized gains 1,517.00 (173.00)
Net increase in net assets from operations $413,370.74 $84,263.65
Net equalization credits 0.00 389.23
Less distributions to shareholders from:
Investment income, net 0.00 0.00
Capital share transactions:
Add shares sold $56,665.42 $33,597.01
Add reinvestment of dividend $0.00
Less redemption of shares ($16,779.24) ($58,644.43)
----------- ------------
Total increase $453,256.92 $59,605.46
Net assets
Beginning of period $773,871.45 $714,155.45
----------- ------------
End of period (including undistributed
investment income of ($58,988.81)
and ($48,301.35) respectively) 1,227,128.37 $773,871.45
============ ============
3
<PAGE>
THE ROCKWOOD GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES
AS OF April 30, 1996
Price Principal Percent
per Amount or of Net
Share Shares Value Assets
COMMON STOCK - 96.7%
Biotechnology
Life Core Biomedical 18.50 2000. $37,000.00 3.0%
---------- ----
$37,000.00 3.0%
Computer
Cimetrix, Inc. 9.44 8000. $75,500.00 6.2%
Sidus Systems 2.93 11000. $32,186.00 2.6%
---------- ----
107,686.00 8.9%
Conglomerate
Boise Cascade 46.50 600. $27,900.00 2.3%
Horsham, Inc. 14.13 1500. $21,187.50 1.7%
---------- ----
$49,087.50 4.0%
Contract Services
Host Marriott Service Corp. 7.88 4000. $31,500.00 2.6%
---------- ----
$31,500.00 2.6%
Electronic Media
Todd A/O Corp. 16.75 13200. 221,100.00 18.2%
--------- ----
221,100.00 18.2%
Energy
Tipperary 4.38 9500. $41,562.50 3.4%
---------- -----
$41,562.50 3.4%
Manufacturing
Lab-Volt Systems, Inc. 5.00 9000. $45,000.00 3.7%
DeVlieg Bullard, Inc. 2.69 15000. $40,312.50 3.3%
Oak Industries 27.00 2600. $70,200.00 5.8%
Precision Cast Parts 43.38 1000. $43,375.00 3.6%
---------- -----
198,887.50 16.4%
Medical Devices
Cygnus Therapeutic Systems 21.38 1000. $21,375.00 1.8%
Innerdyne Corporation 3.88 17500. $67,812.50 5.6%
Life Quest Medical, Inc. 3.00 8500. $25,500.00 2.1%
Orthologic Corp. 34.88 2000. $69,750.00 5.7%
Quest Medical, Inc. 12.00 4000. $48,000.00 3.9%
---------- -----
232,437.50 19.1%
Offshore Drilling
Noble Drilling 15.00 3000. $45,000.00 3.7%
---------- ----
$45,000.00 3.7%
Real Estate
Blue Ridge 6.38 8500. $54,187.50 4.5%
Telecommunication
IntelCom Group, Inc. 20.13 2000. $40,250.00 3.3%
Telecommunications, Inc. 19.13 1500. $28,687.50 2.4%
---------- -----
$68,937.50 5.7%
Transportation
Transcisco Industries 4.91 13600. $66,725.00 5.5%
U.S. Environmental Solutions 0.64 35000. $22,421.88 1.8%
---------- -----
$89,146.88 7.3%
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 16th day of August, 1996, by and between THE
ROCKWOOD GROWTH FUND, INC. an Idaho corporation (the "Fund") and ROCKWOOD
ADVISERS, INC., a Delaware corporation (the "Investment Manager").
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and offers for public sale shares of common stock; and
WHEREAS the Fund desires to retain the Investment Manager to furnish
certain investment advisory and portfolio management services to the Fund, and
the Investment Manager desires to furnish such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the assets of the Fund thereof, including the
regular furnishing of advice with respect to the Fund's portfolio transactions
subject at all times to the control and oversight of the Fund's Board of
Directors, for the period and on the terms set forth in this Agreement. The
Investment Manager hereby accepts such employment and agrees during such period
to render the services and to assume the obligations herein set forth, for the
compensation herein provided. The Investment Manager 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. The Fund assumes and shall pay all the expenses required for the
conduct of its business including, but not limited to, (a) salaries of
administrative and clerical personnel; (b) brokerage commissions; (c) taxes and
governmental fees; (d) costs of insurance and fidelity bonds; (e) fees of the
transfer agent, custodian, legal counsel and auditors; (f) association fees; (g)
costs of preparing, printing and mailing proxy materials, reports and notices to
shareholders; (h) costs of preparing, printing and mailing the prospectus and
statement of additional information and supplements thereto; (i) payment of
dividends and other distributions; (j) costs of stock certificates; (k) costs of
Board and shareholders meetings; (l) fees of the independent directors; (m)
necessary office space rental; (n) all fees and expenses (including expenses of
counsel) relating to the registration and qualification of shares of the Fund
under applicable federal and state securities laws and maintaining such
registrations and qualifications; and (o) such non-recurring expenses as may
arise, including, without limitation, actions, suits or proceedings affecting
the Fund and the legal obligation which the Fund may have to indemnify its
officers and directors with respect thereto.
3. The Investment Manager may, but shall not be obligated to, pay or
provide for the payment of expenses which are primarily intended to result in
the sale of the Fund's shares or the servicing and maintenance of shareholder
accounts, including, without limitation, payments for: advertising, direct mail
and promotional expenses; compensation to and expenses, including overhead and
telephone and other communication expenses, of the Investment Manager and its
affiliates, the Fund, and selected
<PAGE>
dealers and their affiliates who engage in or support the distribution of shares
or who service shareholder accounts; fulfillment expenses including the costs of
printing and distributing prospectuses, statements of additional information,
and reports for other than existing shareholders; the costs of preparing,
printing and distributing sales literature and advertising materials; and,
internal costs incurred by the Investment Manager and its affiliates and
allocated to efforts to distribute shares of the Fund such as office rent and
equipment, employee salaries, employee bonuses and other overhead expenses. Such
payments may be for the Investment Manager's own account or may be made on
behalf of the Fund pursuant to a written agreement relating to a plan of
distribution adopted pursuant to Rule 12b-1 under the 1940 Act.
4. If requested by the Fund's Board of Directors, the Investment
Manager may provide other services to the Fund such as, without limitation, the
functions of billing, accounting, certain shareholder communications and
services, administering state and Federal registrations, filings and controls
and other administrative services. Any services so requested and performed will
be for the account of the Fund and the costs of the Investment Manager in
rendering such services shall be reimbursed by the Fund, subject to examination
by those directors of the Fund who are not interested persons of the Investment
Manager or any affiliate thereof.
5. The services of the Investment Manager are not to be deemed
exclusive, and the Investment Manager shall be free to render similar services
to others in addition to the Fund so long as its services hereunder are not
impaired thereby.
6. The Investment Manager shall create and maintain all necessary books
and records in accordance with all applicable laws, rules and regulations,
including but not limited to records required by Section 31(a) of the 1940 Act
and the rules thereunder, as the same may be amended from time to time,
pertaining to the investment management services performed by it hereunder and
not otherwise created and maintained by another party pursuant to a written
contract with the Fund. Where applicable, such records shall be maintained by
the Investment Manager for the periods and in the places required by Rule 31a-2
under the 1940 Act. The books and records pertaining to the Fund which are in
the possession of the Investment Manager shall be the property of the Fund. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records at all times during the Investment Manager's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Investment Manager to the Fund or the Fund's authorized
representatives.
7. As compensation for its services, with respect to the Fund the
Investment Manager will be paid by the Fund a fee payable monthly and computed
at the annual rate of 1% of the first $200 million of average daily net assets
of the Fund, .95% of such net assets over $200 million up to $400 million, .90%
of such net assets over $400 million up to $600 million, .85% of such net assets
over $600 million up to $800 million, .80% of such net assets over $800 million
up to $1 billion, and .75% of such net assets over $1 billion. The aggregate net
assets for each day shall be computed by subtracting the liabilities of the Fund
from the value of its assets, such amount to be computed as of the calculation
of the net asset value per share on each business day.
8. The Investment Manager shall direct portfolio transactions to
broker/dealers for execution on terms and at rates which it believes, in good
faith, to be reasonable in view of the overall nature and quality of services
provided by a particular broker/dealer, including brokerage and research
services and sales of Fund shares and shares of other investment companies or
series thereof for which the Investment Manager or an affiliate thereof serves
as investment adviser. The Investment Manager may
<PAGE>
also allocate portfolio transactions to broker/dealers that remit a portion of
their commissions as a credit against Fund expenses. With respect to brokerage
and research services, the Investment Manager may consider in the selection of
broker/dealers brokerage or research provided and payment may be made of a fee
higher than that charged by another broker/dealer which does not furnish
brokerage or research services or which furnishes brokerage or research services
deemed to be of lesser value, so long as the criteria of Section 28(e) of the
Securities Exchange Act of 1934, as amended, or other applicable law are met.
Although the Investment Manager may direct portfolio transactions without
necessarily obtaining the lowest price at which such broker/dealer, or another,
may be willing to do business, the Investment Manager shall seek the best value
for the Fund on each trade that circumstances in the market place permit,
including the value inherent in on-going relationships with quality brokers. To
the extent any such brokerage or research services may be deemed to be
additional compensation to the Investment Manager from the Fund, it is
authorized by this Agreement. The Investment Manager may place Fund brokerage
through an affiliate of the Investment Manager, provided that: the Fund not deal
with such affiliate in any transaction in which such affiliate acts as
principal; the commissions, fees or other remuneration received by such
affiliate be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on a securities exchange
during a comparable period of time; and such brokerage be undertaken in
compliance with applicable law. The Investment Manager's fees under this
Agreement shall not be reduced by reason of any commissions, fees or other
remuneration received by such affiliate from the Fund.
9. The Investment Manager shall waive all or part of its fee or
reimburse the Fund monthly if and to the extent the aggregate operating expenses
of the Fund exceed the most restrictive limit imposed by any state in which
shares of the Fund are qualified for sale or such lesser amount as may be agreed
to by the Fund's Board of Directors and the Investment Manager. In calculating
the limit of operating expenses, all expenses excludable under state regulation
or otherwise shall be excluded. If this Agreement is in effect for less than all
of a fiscal year, any such limit will be applied proportionate ly.
10. Subject to and in accordance with the Articles of Incorporation and
By-laws of the Fund and of the Investment Manager, it is understood that
directors, officers, agents and shareholders of the Fund are or may be
interested in the Fund as directors, officers, shareholders or otherwise, that
the Investment Manager is or may be interested in the Fund as a shareholder or
otherwise and that the effect and nature of any such interests shall be governed
by law and by the provisions, if any, of said Articles of Incorporation or
By-laws.
11. This Agreement shall become effective upon the date hereinabove
written and, unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Agreement shall continue automatically for successive periods
of twelve months each, provided that such continuance is specifically approved
at least annually (a) by the Board of Directors of the Fund or by the holders of
a majority of the outstanding voting securities of the Fund as defined in the
1940 Act and (b) by a vote of a majority of the Directors of the Fund who are
not parties to this Agreement, or interested persons of any such party. This
Agreement may be terminated without penalty at any time either by vote of the
Board of Directors of the Fund or by vote of the holders of a majority of the
outstanding voting securities of the Fund on 60 days' written notice to the
Investment Manager, or by the Investment Manager on 60 days' written notice to
the Fund. This Agreement shall immediately terminate in the event of its
assignment.
<PAGE>
12. The Investment Manager shall not be liable to the Fund or any
shareholder of the Fund for any error of judgment or mistake of law or for any
loss suffered by the Fund or the Fund's shareholders in connection with the
matters to which this Agreement relates, but nothing herein contained shall be
construed to protect the Investment Manager against any liability to the Fund or
the Fund's shareholders by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of obligations and duties under this Agreement.
13. As used in this Agreement, the terms "interested person,"
"assignment," and "majority of the outstanding voting securities" shall have the
meanings provided therefor in the 1940 Act, and the rules and regulations
thereunder.
14. This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held or
made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
15. This Agreement shall be construed in accordance with and governed
by the laws of the State of New York, provided, however, that nothing herein
shall be construed in a manner inconsistent with the 1940 Act or any rule or
regulation promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
THE ROCKWOOD GROWTH FUND, INC.
By:____________________________
ROCKWOOD ADVISERS, INC.
By:____________________________
<PAGE>
SUBADVISORY AGREEMENT
AGREEMENT made this 16th day of August, 1996, by and between ROCKWOOD
ADVISERS, INC., a Delaware corporation (the "Investment Manager") and ASPEN
SECURITIES AND ADVISORY, INC., an Idaho corporation (the "Subadviser").
WHEREAS the Investment Manager intends to enter into an investment
management agreement (the "Management Agreement") with The Rockwood Growth Fund,
Inc. (the "Fund") pursuant to which the Investment Manager will furnish the Fund
with investment management and other services; and
WHEREAS the Management Agreement provides that the Investment Manager
may, at its own expense, contract for research and other services as it deems
necessary or desirable to fulfill such obligations; and
WHEREAS, the Subadviser is registered under the Investment Advisers Act of
1940; and
WHEREAS, the Investment Manager desires to retain the Subadviser to
provide subadvisory and research services in connection with the Fund and the
Subadviser is willing to provide such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. The Investment Manager will manage the investment and reinvestment of the
assets of Fund including the regular furnishing of advice with respect to the
Fund's portfolio transactions subject at all times to the control and oversight
of the Board of Directors of the Fund, for the period and on the terms set forth
in its Management Agreement with the Fund. The Investment Manager retains
responsibility for selecting brokers, monitoring trade executions, communicating
instructions to the Fund's custodian and other Fund agents, and all other
functions pertaining to the management of the Fund.
2. The Subadviser will make itself available to advise and consult with the
Investment Manager regarding the selection, clearing, and safekeeping of the
Fund's portfolio investments and assist in pricing and generally monitoring such
investments. The Subadviser agrees to permit the use of its name and the names
of its personnel and other information about the Subadviser in the marketing and
other literature in connection with the Fund.
3. In consideration of the Subadviser's services, the Investment Manager, and
not the Fund, shall pay to the Subadviser a percentage of the Investment
Manager's Net Fees. "Net Fees" are hereby defined as the actual amounts received
by the Investment Manager as compensation pursuant to paragraph 7 of the
Management Agreement less reimbursements, if any, pursuant to the guaranty set
forth in paragraph 9 of the Management Agreement and waivers of such
compensation by the Investment Manager. The amount of the percentage and the
timing of the payment shall be determined
<PAGE>
by the schedule and accompanying definitions set forth in Appendix A hereto.
4. The Subadviser will pay all expenses incurred by it in connection with this
Subadvisory Agreement.
5. The services of the Subadviser hereunder are not to be deemed exclusive, and
the Subadviser shall be free to render similar services to others in addition to
the Investment Manager and the Fund so long as its services hereunder are not
impaired thereby. The Subadviser shall not render, however, similar services to
any investment company either directly or indirectly as an adviser, subadviser,
portfolio manager, consultant, or otherwise, other than to the Fund and other
investment companies for which the Investment Manager or its affiliates provide
investment management services. In the event of termination of this Subadvisory
Agreement, the Subadviser agrees that until the later of (A) two years from the
date of this Subadvisory Agreement or (B) one year from the date of such
termination, the Subadviser shall not, and shall use its best efforts to assure
that its directors, officers, employees, agents, and similar personnel shall
not, render similar services to any investment company either directly or
indirectly as an adviser, subadviser, portfolio manager, consultant, or
otherwise, and this agreement shall survive the termination of this Subadvisory
Agreement.
6. This Subadvisory Agreement shall become effective upon approval by the
directors and shareholders of the Fund as required by the Investment Company Act
of 1940 (the "1940 Act"). Thereafter, if not terminated, this Subadvisory
Agreement shall continue from year to year if approved annually by (a) the Board
of Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund as defined in the 1940 Act and (b) by a vote of a
majority of the Directors of the Fund who are not parties to the Subadvisory
Agreement, or interested persons of any such party. This Subadvisory Agreement
may be terminated without penalty at any time either by vote of the Board of
Directors of the Fund or by vote of the holders of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to the Investment
Manager and the Subadviser, or by the Investment Manager or the Subadviser on 60
days' written notice to the Fund. In the event of termination upon notice as
herein described, the Investment Manager and the Subadviser agree that, subject
to the provisions of the 1940 Act, no party hereto will be entitled to or seek
indemnification or compensation from the other party for expenses incurred in
connection with marketing efforts performed during the term of this Agreement.
This Subadvisory Agreement shall immediately terminate in the event of its
assignment or upon the termination of the Management Agreement.
7. The Subadviser shall not be liable to the Fund or any shareholder of the Fund
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Subadvisory Agreement relates, but
nothing herein contained shall be construed to protect the Subadviser against
any liability to the Fund by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of obligations and duties under this Subadvisory Agreement.
8. Subject to and in accordance with the Articles of Incorporation and Bylaws of
the Fund, the Investment Manager, and the Subadviser, it is understood that
directors, officers, agents and shareholders of the Fund, the Investment
Manager, or Subadviser are or may be interested in the Fund, the Investment
Manager, or the Subadviser as directors, officers, shareholders or otherwise,
that the Investment Manager or the Subadviser is or may be interested in the
Fund or the Investment Manager or the Subadviser as a shareholder or otherwise
and that the effect and nature of any such interests shall
<PAGE>
be governed by law and by the provisions, if any, of said Articles of
Incorporation or Bylaws.
9. All notices hereunder shall be in writing and shall be delivered in person or
sent by facsimile transmission that is confirmed by regular, registered, or
certified mail to the following address for the respective parties:
Rockwood Advisers, Inc.
11 Hanover Square
New York, NY 10005
Fax: (212) 785-0400
Aspen Securities and Advisory, Inc.
545 Shoup Avenue, Suite 303
Idaho Falls, ID 83402
Fax: (208) 528-0017
Notice shall be deemed given, five days after depositing in a post office,
postage prepaid and if sent by facsimile transmission five days after
confirmation has been mailed.
10. As used in this Subadvisory Agreement, the terms "interested person,"
"assignment," and "vote of a majority of the outstanding voting securities"
shall have the meaning provided therefor in the 1940 Act, as from time to time
amended.
IN WITNESS WHEREOF, the parties hereto have executed this Subadvisory
Agreement on the day and year first above written.
ROCKWOOD ADVISERS, INC.
By:
ASPEN SECURITIES AND ADVISORY, INC.
By:
<PAGE>
APPENDIX A
THE ROCKWOOD GROWTH FUND, INC.
SUBADVISORY FEE
The Investment Manager shall pay to the Subadviser within 30 days of
each Performance Determination Date, as defined in paragraph A below, a
percentage of the Net Fees, as defined in paragraph 3 of this Subadvisory
Agreement, earned since the later of the effective date of this Subadvisory
Agreement or the prior Performance Determination Date, as defined in paragraph A
below. The amount of the percentage shall be determined by reference to the grid
set forth below.
SUBADVISER'S FEE AS A PERCENTAGE OF INVESTMENT MANAGER'S NET FEES
<TABLE>
RELATIVE PERFORMANCEA
TOTAL NET ASSETSB More than 50 basis Within 50 basis More than 50 basis
points better than ATR points of ATR points below ATR
<S> <C> <C> <C> <C>
Less then or equal to $15,000,000 30% 20% 10%
Greater then $15,000,000 and 40% 30% 20%
Less then or equal to $50,000,000
Greater then $50,000,000 50% 40% 30%
- ---------------------------------- ------------------------------ ------------------------- -------------------------
</TABLE>
A. "Relative Performance" shall be determined from comparing the Fund's total
return with the average total return ("ATR") of funds with the investment
objective of "growth" as compiled by Morningstar, Inc., or, if unavailable,
other similar service acceptable to the parties and the Fund. The Relative
Performance shall be determined as of the last calendar day of each month
("Performance Determination Date") and shall measure the Relative Performance
for the most recent 3 year period ("Measurement Period"), except that (A) for
the first 12 months of this Subadvisory Agreement, Relative Performance shall be
based upon annualized returns, the first three Performance Determination Dates
shall be the next three calendar quarter ends after the effective date of this
Subadvisory Agreement, and the Measurement Periods shall be the most recent
three months and the fourth Performance Determination Date shall be the next
calendar quarter end and the Measurement Period shall be the most recent 1 year
period, and (B) for the 13th through the 24th month of this Subadvisory
Agreement, Relative Performance shall be determined as of the last calendar day
of each month and shall measure the Relative Performance for the most recent 1
year period.
B. "Total Net Assets" shall be the total net assets of the Fund as of the
Performance Determination Date.
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made as of ___________, 1996, between THE ROCKWOOD GROWTH
FUND, INC. ("Fund"), a corporation organized and existing under the laws of the
State of Idaho, and Investor Service Center, Inc. ("Distributor"), a corporation
organized and existing under the laws of the State of Delaware.
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company; and
WHEREAS the Fund desires to retain the Distributor as principal
distributor in connection with the offering and sale of the shares of common
stock ("Shares") and of such other series as may hereafter be designated
("Series") by the Fund's Board of Directors ("Board"); and
WHEREAS the Distributor is willing to act as principal distributor for
each such Series on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Distributor as
its exclusive agent to be the principal distributor to sell and to
arrange for the sale of the Shares on the terms and for the period
set forth in this Agreement. The Distributor hereby accepts such
appointment and agrees to act hereunder.
2. Services and Duties of the Distributor.
(a) The Distributor agrees to sell the Shares on a best
efforts basis from time to time during the term of this Agreement as agent for
the Fund and upon the terms described in the Registration Statement. As used in
this Agreement, the term "Registration Statement" shall mean the currently
effective registration statement of the Fund, and any supplements thereto, under
the Securities Act of 1933, as amended ("1933 Act"), and the 1940 Act.
<PAGE>
(b) Upon the later of the date of this Agreement or the
initial offering of the Shares to the public by a Series, the Distributor will
hold itself available to receive purchase orders, satisfactory to the
Distributor for Shares of that Series and will accept such orders on behalf of
the Fund as of the time of receipt of such orders and promptly transmit such
orders as are accepted to the Fund's transfer agent. Purchase orders shall be
deemed effective at the time and in the manner set forth in the Regis tration
Statement.
(c) The Distributor in its discretion may enter into
agreements to sell Shares to such registered and qualified retail dealers, as it
may select. In making agreements with such dealers, the Distributor shall act
only as principal and not as agent for the Fund.
(d) The offering price of the Shares of each Series shall be
the net asset value per Share as next determined by the Fund following receipt
of an order at the Distributor's principal office. The Fund shall promptly
furnish the Distributor with a statement of each computation of net asset value.
(e) The Distributor shall not be obligated to sell any
certain number of Shares.
(f) The Distributor shall provide ongoing shareholder
services, which include responding to shareholder inquiries, providing
shareholders with information on their investments in the Series and any other
services now or hereafter deemed to be appropriate subjects for the payments of
"service fees" under Section 26(d) of the National Association of Securities
Dealers, Inc. ("NASD") Rules of Fair Practice (collectively, "service
activities").
(g) The Distributor shall have the right to use any lists of
shareholders of the Fund or any other lists of investors which it obtains in
connection with its provision of services under this Agreement; provided,
however, that the Distributor shall not sell or knowingly provide such lists of
shareholders to any unaffiliated person unless reasonable payment is made to the
Fund.
3. Authorization to Enter into Dealer Agreements and to
Delegate Duties as Distributor. With respect to any or all Series,
the Distributor may enter into a dealer agreement with respect to
sales of the Shares or the provision of service activities with any
<PAGE>
registered and qualified dealer. In a separate contract or as part of any such
dealer agreement, the Distributor also may delegate to another registered and
qualified dealer ("sub-distributor") any or all of its duties specified in this
Agreement, provided that such separate contract or dealer agreement imposes on
the sub- distributor bound thereby all applicable duties and conditions to which
the Distributor is subject under this Agreement, and further provided that such
separate contract meets all requirements of the 1940 Act and rules thereunder.
4. Services Not Exclusive. The services furnished by the Distributor
hereunder are not to be deemed exclusive and the Distributor shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of the Distributor, who may also be a
director, officer or employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects
of any other business, whether of a similar or a dissimilar nature.
5. Compensation for Distribution and Service Activities.
(a) As compensation for its distribution and service
activities under this Agreement with respect to each Series and its
shareholders, the Distributor shall receive from the Fund a fee (or fees) at the
rate and under the terms and conditions of the Plan of Distribution pursuant to
Rule 12b-1 under the 1940 Act ("Plan") adopted by the Fund with respect to the
Series, as such Plan is amended from time to time, and subject to any further
limitations on such fee as the Board may impose.
(b) The Distributor may reallow any or all of the fees
it is paid to such dealers as the Distributor may from time to time
determine.
6. Duties of the Fund.
(a) The Fund reserves the right at any time to withdraw
offering Shares of any or all Series by written notice to the
Distributor at its principal office.
(b) The Fund shall determine in its sole discretion
whether certificates shall be issued with respect to the Shares.
If the Fund has determined that certificates shall be issued, the
<PAGE>
Fund will not cause certificates representing Shares to be issued unless so
requested by shareholders. If such request is transmitted by the Distributor,
the Fund will cause certificates evidencing Shares to be issued in such names
and denominations as the Distributor shall from time to time direct.
(c) The Fund shall keep the Distributor fully informed of its
affairs and shall make available to the Distributor copies of all information,
financial statements, and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, including,
without limitation, certified copies of any financial statements prepared for
the Fund by its independent public accountant and such reasonable number of
copies of the most current prospectus, statement of additional information, and
annual and interim reports of any Series as the Distributor may request, and the
Fund shall cooperate fully in the efforts of the Distributor to sell and arrange
for the sale of the Shares of the Series and in the performance of the
Distributor's duties under this Agreement.
(d) The Fund shall take, from time to time, all necessary
action, including payment of the related filing fee, as may be necessary to
register Shares of each Series under the 1933 Act to the end that there will be
available for sale such number of Shares as the Distributor may be expected to
sell. The Fund agrees to file, from time to time, such amendments, reports, and
other documents as may be necessary in order that there will be no untrue
statement of a material fact in the Registration Statement, nor any omission of
a material fact which omission would make the statements therein misleading.
(e) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of Shares of each Series for
sale under the securities laws of such states or other jurisdictions as the
Distributor and the Fund may approve, and, if necessary or appropriate in
connection therewith, to qualify and maintain the qualification of the Fund as a
broker or dealer in such jurisdictions; provided that the Fund shall not be
required to amend its Articles of Incorporation or By-Laws to comply with the
laws of any jurisdiction, to maintain an office in any jurisdiction, to change
the terms of the offering of the Shares in any jurisdiction from the terms set
forth in its Registration Statement, to qualify as a foreign corporation in any
jurisdiction, or to consent to service of process in any jurisdiction other than
with respect to claims arising out of the offering of the Shares.
<PAGE>
The Distributor shall furnish such information and other material relating to
its affairs and activities as may be required by the Fund in connection with
such qualifications.
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
registering the Shares with the Securities and Exchange Commission and state and
other regulatory bodies, and shall assume expenses related to communications
with shareholders of each Series, including (i) fees and disbursements of its
counsel and independent public accountant; (ii) the preparation, filing and
printing of registration statements and/or prospectuses or statements of
additional information required under the federal securities laws; (iii) the
preparation and mailing of annual and interim reports, prospectuses, statements
of additional information and proxy materials to shareholders; and (iv) the
qualifications of Shares for sale and of the Fund as a broker or dealer under
the securities laws of such jurisdictions as shall be selected by the Fund and
the Distributor pursuant to Paragraph 6(e) hereof, and the costs and expenses
payable to each such jurisdiction for continuing qualification therein.
8. Expenses of the Distributor. Distributor shall bear all costs and
expenses of (i) preparing, printing and distributing any materials not prepared
by the Fund and other materials used by the Distributor in connection with the
sale of Shares under this Agreement, including the additional cost of printing
copies of prospectuses, statements of additional information, and annual and
interim shareholder reports other than copies thereof required for distribution
to existing shareholders or for filing with any Federal or state securities
authorities; (ii) any expenses of advertising incurred by the Distributor in
connection with such offering; (iii) the expenses of registration or
qualification of the Distributor as a broker or dealer under federal or state
laws and the expenses of continuing such registration or qualification; and (iv)
all compensation paid to the Distributor's employees and others for selling
Shares, and all expenses of the Distributor, its employees and others who engage
in or support the sale of Shares as may be incurred in connection with their
sales efforts.
9. Indemnification.
(a) The Fund agrees to indemnify, defend and hold the
Distributor, its officers and directors, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims,
<PAGE>
demands, liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred in
connection therewith) which the Distributor, its officers, directors or any such
controlling person may incur under the 1933 Act, or under common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in the Registration Statement or arising out of or based
upon any alleged omission to state a material fact required to be stated in the
Registration Statement or necessary to make the statements therein not
misleading, except insofar as such claims, demands, liabilities or expenses
arise out of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information furnished in writing by the Distributor to the Fund for use in the
Registration Statement; provided, however, that this indemnity agreement shall
not inure to the benefit of any person who is also an officer or director of the
Fund or who controls the Fund within the meaning of Section 15 of the 1933 Act,
unless a court of competent jurisdiction shall determine, or it shall have been
determined by controlling precedent, that such result would not be against
public policy as expressed in the 1933 Act; and further provided, that in no
event shall anything contained herein be so construed as to protect the
Distributor against any liability to the Fund or to the shareholders of any
Series to which the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations under this Agreement. The
Fund shall not be liable to the Distributor under this indemnity agreement with
respect to any claim made against the Distributor or any person indemnified
unless the Distributor or other such person shall have notified the Fund in
writing of the claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim shall have
been served upon the Distributor or such other person (or after the Distributor
or the person shall have received notice of service on any designated agent).
However, failure to notify the Fund of any claim shall not relieve the Fund from
any liability which it may have to the Distributor or any person against whom
such action is brought otherwise than on account of this indemnity agreement.
The Fund shall be entitled to participate at its own expense in the defense or,
if it so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity agreement. If the Fund elects to assume the defense of
any such claim, the defense shall be conducted by counsel chosen by the Fund and
satisfactory to indemnified defen dants in the suit whose approval shall not be
unreasonably with held. In the event that the Fund elects to assume the defense
of any suit and retain counsel, the indemnified defendants shall bear the fees
and expenses of any additional counsel retained by them. If the Fund does not
elect to assume the defense of a suit, it will reimburse the indemnified
defendants for the reasonable fees and expenses of any counsel retained by the
indemnified defendants. The Fund agrees to notify the Distributor promptly of
the commence ment of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any of its
Shares.
(b) The Distributor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates (including any loss arising out
of the receipt by the Distributor of inadequate consideration in connection with
an order to purchase Shares whether in the form of fraudulent check, draft or
wire; a check returned for insufficient funds; or any other inadequate
consideration (hereinafter "Check Loss")), except a loss resulting from the
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement; provided, however, that the Fund shall not be
liable for Check Loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Distributor.
(c) The Distributor agrees to indemnify, defend, and hold the
Fund, its officers and directors and any person who controls the Fund within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its directors or
officers, or any such controlling person may incur under the 1933 Act or under
common law or otherwise arising out of or based upon any alleged untrue
statement of a material fact contained in information furnished in writing by
the Distributor to the Fund for use in the Registration Statement, arising out
of or based upon any alleged omission to state a material fact in connection
with such information required to be stated in the Registration Statement
necessary to make such information not misleading, or arising out of any
agreement between the Distributor and any retail dealer, or arising out of any
supplemental sales literature or advertising used by the Distributor in
connection
<PAGE>
with its duties under this Agreement. The Distributor shall be entitled to
participate, at its own expense, in the defense or, if it so elects, to assume
the defense of any suit brought to enforce the claim, but if the Distributor
elects to assume the defense, the defense shall be conducted by counsel chosen
by the Distributor and satisfactory to the indemnified defendants whose approval
shall not be unreasonably withheld. In the event that the Distributor elects to
assume the defense of any suit and retain counsel, the defendants in the suit
shall bear the fees and expenses of any additional counsel retained by them. If
the Distributor does not elect to assume the defense of any suit, it will
reimburse the indemnified defendants in the suit for the reasonable fees and
expenses of any counsel retained by them.
10. Services Provided to the Fund by Employees of the Distributor. Any
person, even though also an officer, director, employee or agent of the
Distributor who may be or become an officer, director, employee or agent of the
Fund, shall be deemed, when rendering services to the Fund or acting in any
business of the Fund, to be rendering such services to or acting for solely the
Fund and not as an officer, director, employee or agent or one under the control
or direction of the Distributor even though paid by the Distributor.
11. Duration and Termination.
(a) This Agreement shall become effective upon the date
hereabove written, provided that, with respect to any Series, this Agreement
shall not take effect unless such action has first been approved by vote of a
majority of the Board and by vote of a majority of those directors of the Fund
who are not interested persons of the Fund, and have no direct or indirect
financial interest in the operation of the Plan relating to the Series or in any
agreements related thereto (all such directors collectively being referred to
herein as the "Independent Directors"), cast in person at a meeting called for
the purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this
Agreement shall continue in effect for one year from the above written date.
Thereafter, if not terminated, this Agreement shall continue automatically for
successive periods of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of the
Independent Directors, cast in person at a meeting called for the purpose of
<PAGE>
voting on such approval, and (ii) by the Board or with respect to any given
Series by vote of a majority of the outstanding voting securities of such
Series.
(c) Notwithstanding the foregoing, with respect to any Series,
this Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Board, by vote of a majority of the Independent
Directors or by vote of a majority of the outstanding voting securities of the
Shares of such Series on sixty days' written notice to the Distributor or by the
Distributor at any time, without the payment of any penalty, on sixty days'
written notice to the Fund or such Series. This Agreement will automatically
terminate in the event of its assignment.
(d) Termination of this Agreement with respect to any given
Series shall in no way affect the continued validity of this Agreement or the
performance thereunder with respect to any other Series.
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
13. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York and the 1940 Act. To the extent that the
applicable laws of the State of New York conflict with the applicable provisions
of the 1940 Act, the latter shall control.
14. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient upon receipt
in writing at the other party's principal offices.
15. 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 or effect. If any
provision 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.
<PAGE>
As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meaning as
such terms have in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first above
written.
ATTEST: THE ROCKWOOD GROWTH FUND, INC.
By:
ATTEST: INVESTOR SERVICE CENTER, INC.
By:
<PAGE>
CUSTODIAN AGREEMENT
BETWEEN
THE ROCKWOOD GROWTH FUND, INC.
AND
INVESTORS BANK & TRUST COMPANY
<PAGE>
1. Bank Appointed Custodian.....................................4
2. Definitions..................................................4
2.1 Authorized Person..................................4
2.2 Security...........................................4
2.3 Portfolio Security.................................5
2.4 Officers' Certificate..............................5
2.5 Book-Entry System..................................5
2.6 Depository.........................................5
2.7 Proper Instructions................................5
3. Separate Accounts............................................6
4. Certification as to Authorized Persons.......................6
5. Custody of Cash..............................................6
5.1 Purchase of Securities.............................6
5.3 Distributions and Expenses of Fund.................7
5.4 Payment in Respect of Securities...................7
5.5 Repayment of Loans.................................7
5.6 Repayment of Cash..................................7
5.8 Other Authorized Payments..........................7
5.9 Termination........................................8
6. Securities...................................................8
6.1 Segregation and Registration.......................8
6.2 Voting and Proxies.................................8
6.3 Book-Entry System..................................8
6.4 Use of a Depository...............................10
6.5 Use of Book-Entry System for Commercial Paper.....11
6.6 Use of Immobilization Programs....................12
6.7 Eurodollar CDs....................................12
6.8 Options and Futures Transactions..................12
6.9 Segregated Account................................13
6.10 Interest Bearing Call or Time Deposits...........14
6.11 Transfer of Securities...........................15
7. Redemptions.................................................16
8. Merger. Dissolution. etc. of Fund...........................17
9. Actions of Bank Without Prior Authorization.................17
10. Collections and Defaults...................................18
<PAGE>
11. Maintenance of Records and Accounting Services............................18
12. Fund Evaluation...........................................................18
13. Concerning the Bank.......................................................19
13.1 Performance of Duties and Standard of Care...............................19
13.2 Agents and Subcustodians with Respect to Property of the Fund Held in the
United States.................................................................20
13.3 Duties of the Bank with Respect to Property of the Fund Held Outside of
the United States.............................................................21
(a) Appointment of Foreign Sub-Custodians.....................................21
(b) Foreign Securities Depositories...........................................21
(c) Segregation of Securities.................................................21
(d) Agreements with Foreign Banking Institutions..............................21
(e) Access of Independent Accountants of the Fund.............................22
(f) Reports by Bank...........................................................22
(g) Transactions in Foreign Custody Account...................................22
(h) Liability of Selected Foreign Sub-Custodians..............................23
(i) Liability of Bank.........................................................23
(j) Monitoring Responsibilities...............................................23
(k) Tax Law...................................................................24
13.4 Insurance................................................................24
13.5. Fees and Expenses of Bank...............................................24
13.6 Advances by Bank.........................................................24
14. Termination...............................................................25
15. Confidentiality...........................................................25
16. Notices...................................................................26
17. Amendments................................................................26
18. Parties...................................................................26
19. Governing Law.............................................................26
20. Counterparts..............................................................26
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this 16th day of August, 1996, between The
Rockwood Growth Fund, Inc., a corporation (the "Fund") and INVESTORS BANK &
TRUST COMPANY (the "Bank").
WHEREAS, the Fund is an open-end management investment company, and the
Bank has at least the minimum qualifications required by Section 17(f)(1) of the
Investment Company Act of 1940 (the "1940 Act") to act as custodian of the
portfolio securities and cash of the Fund; and
WHEREAS, the Fund and the Bank now desire to enter into this Custodian Agreement
hereby referred to herein as the "Agreement";
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as custodian
of the Fund's portfolio securities and cash delivered to the Bank as hereinafter
described and the Bank agrees to act as such upon the terms and conditions
hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:
2.1 Authorized Person. Authorized Person will mean any of the persons duly
authorized to give Proper Instructions or otherwise act on behalf of the Fund by
appropriate resolution of its Board of Directors or the Board of Trustees ("the
Board"), and set forth in a certificate as required by Section 4 hereof.
2.2 Security. The term security as used herein will have the same meaning
as
4
<PAGE>
when such term is used in the Securities Act of 1933, as amended, including,
without limitation, any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any profit sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.3 Portfolio Security. Portfolio Security will mean any security owned by
the Fund.
2.4 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.5 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.6 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.7 Proper Instructions. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of Portfolio Securities, and payments and
deliveries in connection therewith, given by an Authorized Person as shall have
been designated in an Officers' Certificate, such instructions to be given in
such form and manner as the Bank and the Fund shall agree upon from time to
time, and (ii) instructions (which may be continuing instructions) regarding
other matters signed or initialed by such two or more persons from time to time
designated in an Officers' Certificate as having been authorized by the Board.
Oral instructions will be considered Proper Instructions if the Bank reasonably
believes them to have been given by a person authorized to give such
instructions with respect to
5
<PAGE>
the transaction involved. The Fund shall cause all oral instructions to be
promptly confirmed in writing. The Bank shall act upon and comply with any
subsequent Proper Instruction which modifies a prior instruction and the sole
obligation of the Bank with respect to any follow-up or confirmatory instruction
shall be to make reasonable efforts to detect any discrepancy between the
original instruction and such confirmation and to report such discrepancy to the
Fund. The Fund shall be responsible, at the Fund's expense, for taking any
action, including any reprocessing, necessary to correct any such discrepancy or
error, and to the extent such action requires the Bank to act the Fund shall
give the Bank specific Proper Instructions as to the action required. Upon
receipt of an Officers' Certificate as to the authorization by the Board
accompanied by a detailed description of procedures approved by the Fund, Proper
Instructions may include communication effected directly between
electro-mechanical or electronic devices provided that the Board and the Bank
are satisfied that such procedures afford adequate safeguards for the Fund's
assets.
3. Separate Accounts. If the Fund has more than one series or portfolio, the
Bank will segregate the assets of each series or portfolio to which this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment earnings
thereon).
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
Board, it being understood that upon the occurrence of any change in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund, will sign a new or amended certification setting forth
the change and the new, additional or omitted names or signatures. The Bank will
be entitled to rely and act upon any Officers' Certificate given to it by the
Fund which has been signed by Authorized Persons named in the most recent
certification.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Section 13.2 hereof, including borrowed funds, delivered
to the Bank, subject only to draft or order by the Bank acting pursuant to the
terms of this Agreement. Upon receipt by the Bank of Proper Instructions (which
may be continuing instructions) or in the case of payments for redemptions and
repurchases of outstanding shares of common stock of the Fund, notification from
the Fund's transfer agent as provided in Section 7, requesting such payment,
designating the payee or the account or accounts to which the Bank will release
funds for deposit, and stating that it is for a purpose permitted under the
terms of this
6
<PAGE>
Section 5, specifying the applicable subsection, the Bank will make payments of
cash held for the accounts of the Fund, insofar as funds are available for that
purpose, only as permitted in subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the Fund,
against contemporaneous receipt of such securities by the Bank or, against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper) of
purchase of the securities received by the Bank before such payment is made, as
confirmed in the Proper Instructions received by the Bank before such payment is
made.
5.2 Redemptions. In such amount as may be necessary for the repurchase or
redemption of common shares of the Fund offered for repurchase or redemption in
accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the account of
the Fund of dividends or other distributions to shareholders as may from time to
time be declared by the Board, interest, taxes, management or supervisory fees,
distribution fees, fees of the Bank for its services hereunder and reimbursement
of the expenses and liabilities of the Bank as provided hereunder, fees of any
transfer agent, fees for legal, accounting, and auditing services, or other
operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection with the
conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Fund, but, in
the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund for the
purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions. For payments in connection with
foreign exchange contracts or options to purchase and sell foreign currencies
for spot and future delivery which may be entered into by the Bank on behalf of
the Fund upon the receipt of Proper Instructions, such Proper Instructions to
specify the currency broker or banking institution (which may be the Bank, or
any other subcustodian or agent hereunder, acting
7
<PAGE>
as principal) with which the contract or option is made, and the Bank shall have
no duty with respect to the selection of such currency brokers or banking
institutions with which the Fund deals or for their failure to comply with the
terms of any contract or option.
5.8 Other Authorized Payments. For other authorized transactions of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 Termination: upon the termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 14 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided herein,
and except for securities to be delivered to any subcustodian appointed
pursuant to Section 13.2 hereof, the Bank as custodian, will receive and hold
pursuant to the provisions hereof, in a separate account or accounts and
physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for
the account of the Fund. All such Portfolio Securities will be held or disposed
of by the Bank for, and subject at all times to, the instructions of the Fund
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all Portfolio Securities (unless otherwise
directed by Proper Instructions or an Officers' Certificate), in
the name of a registered nominee of the Bank as defined in the Internal Revenue
Code and any Regulations of the Treasury Department issued thereunder, and will
execute and deliver all such certificates in connection therewith as may be
required by such laws or regulations or under the laws of any state.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered inthe name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank will
vote any of the Portfolio Securities held hereunder, except in accordance with
Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be
8
<PAGE>
executed and delivered, to the Fund all notices, proxies and proxy soliciting
materials with respect to such Securities, such proxies to be executed by the
registered holder of such Securities (if registered otherwise than in the name
of the Fund), but without indicating the manner in which such proxies are to be
voted.
6.3 Book-Entry System. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits of Fund assets
in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to the
Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry Portfolio Securities which are included with
other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Fund. Where securities are
transferred to the Fund's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Fund a quantity of securities in
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased for the
account of the Fund or shall pay cash collateral against the return of Portfolio
Securities loaned by the Fund upon (i) receipt of advice from the Book-Entry
System that such Securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Bank (or its agent) to reflect such
payment and transfer for the account of the Fund. The Bank (or its agent) shall
transfer securities sold or loaned for the account of the Fund upon
(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the delivery
of securities loaned by the Fund has been transferred to the Account; and
(ii) the making of an entry on the records of the Bank (or its
agent) to reflect such transfer and payment for the account of the Fund. Copies
of all advices from the Book-Entry System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for the Fund by the
Bank and shall be provided to the Fund at its request. The Bank shall send the
Fund a confirmation, as defined by Rule 17f-4 of the 1940 Act, of any transfers
to or from the account of the Fund;
9
<PAGE>
(d) The Bank will promptly provide the Fund with any report obtained
by the Bank or its agent on the Book-Entry System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Book-Entry System. The Bank will provide the Fund and cause any such agent to
provide, at such times as the Fund may reasonably require, with reports by
independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, including Securities deposited in the Book-Entry System, relating to
the services provided by the Bank or such agent under the Agreement;
(e) The Bank shall be liable to the Fund for any loss or damage to the
Fund resulting from use of the Book-Entry System by reason of any negligence,
willful misfeasance or bad faith of the Bank or any of its agents or of any of
its or their employees or from any reckless disregard by the Bank or any such
agent of its duty to use its best efforts to enforce such rights as it may have
against the Book-Entry System; at the election of the Fund, it shall be
entitled to be subrogated for the Bank in any claim against the Book-Entry
System or any other person which the Bank or its agent may have as a
consequence of any such loss or damage if and to the extent that the Fund has
not been made whole for any loss or damage;
6.4 Use of a Depository. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange, release,
lend, deliver and otherwise deal with Portfolio Securities including stock
dividends, rights and other items of like nature, and to receive and remit to
the Bank on behalf of the Fund all income and other payments thereon and to take
all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name of any
nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of the Fund and
the Bank shall pay cash collateral from the account of the Fund against the
return of Portfolio Securities loaned bythe Fund only upon delivery of the
Securities to or for the account of the Fund; and upon any sale of Portfolio
Securities, delivery of the Securities will be made only against payment thereof
or, in the event Portfolio Securities are loaned, delivery of Securities will be
made only against receipt of the initial cash collateral to or for the account
of the Fund; and
10
<PAGE>
(d) The Bank shall be subject to the same liability and duty to the
Fund and its shareholders with respect to all securities of the Fund, and all
cash, stock dividends, rights and items of like nature to which the Fund is
entitled, held or received by a central securities system as agent for the Bank,
pursuant to the foregoing authorization, as if the same were held or received by
the Bank at its own offices. In this connection, with respect to the use of the
Depository by the Bank but without limiting the foregoing duty or liability, the
Bank, without cost to the Fund, shall ensure that:
(i) The Depository obtains replacement of any certificated Portfolio
Security deposited with it in the event such Security is lost, destroyed,
wrongfully taken or otherwise not available to be returned to the Bank upon its
request;
(ii) Any proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded immediately to
the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to the Bank confirmation
of any purchase or sale of Portfolio Securities and of the appropriate book
entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank such records
with respect to the performance of the Bank's obligations and duties hereunder
as may be necessary for the Fund to comply with the recordkeeping requirements
of Section 31 (a) of the 1940 Act and Rule 3 l(a) thereunder; and
(v) Such Depository delivers to the Bank and the Fund all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Fund may reasonably request in
order to verify the Portfolio Securities held by such Depository.
6.5 Use of Book-Entry System for Commercial Paper. Provided (i) the Bank
has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining its Book-entry Paper
System, the Bank agrees that:
(a) the Bank will maintain all Book-Entry Paper held by the Fund in an
account of the Bank that includes only assets held by it for customers;
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(b) the records of the Bank with respect to the Fund's purchase of
Book-entry Paper through the Bank will identify, by book-entry, Commercial Paper
belonging to the Fund which is included in the Book-entry Paper System and shall
at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Fund;
(c) the Bank shall pay for Book-Entry Paper purchased for the account
of the Fund upon contemporaneous (i) receipt of advice from the Issuer that such
sale of Book-Entry Paper has been effected, and (ii) the making of an entry on
the records of the Bank to reflect such payment and transfer for the account of
the Fund;
(d) the Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Fund, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Fund;
(e) the Bank shall transmit to the Fund a transaction journal
confirming each transaction in Book-Entry Paper for the account of the Fund on
the next business day following the transaction; and
(f) the Bank will send to the Fund such reports on its system of
internal accounting control with respect to the Book-Entry Paper System as the
Fund may reasonably request from time to time.
6.6 Use of Immobilization Programs. Provided (i) the Bank has received
a certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated by a
bank which meets the requirements of the 1940 Act, and (ii) for each year
following such approval the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval, the Bank shall enter into such immobilization
program with such bank acting as a subcustodian hereunder.
6.7 Eurodollar CDs. Any Portfolio Securities which are Eurodollar CDs
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch"), provided that
such Securities are identified on the books of the Bank as belonging to the Fund
and that the books of the Bank identify the European Branch holding such
Securities. Notwithstanding any other provision of this Agreement to the
contrary, except as stated in the first sentence of this subsection 6.7, the
Bank shall be under no other duty with respect to such Eurodollar CDs belonging
to the Fund, and shall have no liability to the Fund or its shareholders with
respect to the actions, inactions, whether negligent or otherwise of such
European Branch in connection with such Eurodollar CDs, except for any loss or
damage to the Fund resulting from the Bank's own negligence, willful misfeasance
or bad faith in the
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performance of its duties hereunder.
6.8 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
1. Upon receipt of Proper Instructions the Bank shall take action
as to put options ("puts") and call options ("calls") purchased or sold
(written) by the Fund regarding escrow or other arrangements (i) in accordance
with the provisions of any agreement entered into between the Bank, any
broker-dealer registered under the Exchange Act and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), and, if necessary, the
Fund relating to the compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations.
2. Unless another agreement requires it to do so, the Bank shall be
under no duty or obligation to see that the Fund has deposited or is maintaining
adequate margin, if required, with any broker in connection with any option, nor
shall the Bank be under duty or obligation to present such option to the broker
for exercise unless it receives Proper Instructions from the Fund. The Bank
shall have no responsibility for the legality of any put or call purchased or
sold on behalf of the Fund, the propriety of any such purchase or sale, or the
adequacy of any collateral delivered to a broker in connection with an option or
deposited to or withdrawn from a Segregated Account (as defined in subsection
6.9 below). The Bank specifically, but not by way of limitation, shall not be
under any duty or obligation to: (i) periodically check or notify the Fund that
the amount of such collateral held by a broker or held in a Segregated Account
is sufficient to protect such broker of the Fund against any loss; (ii) effect
the return of any collateral delivered to a broker; or (iii) advise the Fund
that any option it holds, has or is about to expire. Such duties or obligations
shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
1. Upon receipt of Proper Instructions, the Bank shall take action
as to puts, calls and futures contracts ("Futures") purchased or sold by the
Fund in accordance with the provisions of any agreement among the Fund, the Bank
and a Futures Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with transactions by the
Fund.
2. The responsibilities and liabilities of the Bank as to futures, puts and
calls traded on commodities exchanges, any Futures Commission Merchant account
and
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the Segregated Account shall be limited as set forth in subparagraph (a)(2) of
this Section 6.8 as if such subparagraph referred to Futures Commission
Merchants rather than brokers, and Futures and puts and calls thereon instead of
options.
6.9 Segregated Account. The Bank 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 upon
receipt of Proper Instructions cash and/or Portfolio Securities:
(a) in accordance with the provisions of any agreement among the Fund,
the Bank 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
organizations regarding escrow or other arrangements in connection with
transactions by the Fund;
(b) for the purpose of segregating cash or securities in connection
with options purchased or written by the Fund or commodity futures purchased or
written by the Fund,
(c) for the deposit of liquid assets, such as cash, U.S. Government
securities or other high grade debt obligations, having a market value (marked
to market on a daily basis) at all times equal to not less than the aggregate
purchase price due on the settlement dates of all the Fund's then outstanding
forward commitment or "when-issued" agreements relating to the purchase of
Portfolio Securities and all the Fund's then outstanding commitments under
reverse repurchase agreements entered into with broker-dealer firms;
(d) for the deposit of any Portfolio Securities which the Fund has agreed
to sell on a forward commitment basis, and;
(e) for other proper corporate purposes, but only n the case of this
clause (f), upon receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Board, or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such Segregated Account and declaring
such purposes to be proper corporate purposes.
(f) Segregated accounts established and maintained hereunder shall
comply with the procedures required by Investment Company Act, including Release
No. 10666, or any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of Segregated Accounts by registered
investment companies;
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(g) Assets may be withdrawn from the Segregated Account pursuant to Proper
Instructions only
(i) in accordance with the provisions of any agreements referenced in (a)
or (b) above;
(ii) for sale or delivery to meet the Fund's obligations under outstanding
firm commitment or when-issued agreements for the purchase of Portfolio
Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater value
deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward commitment or
when-issued agreements for the purchase of portfolio securities or reverse
repurchase agreements are sold to other parties or the Fund's obligations
thereunder are met from assets of the Fund other than those in the Segregated
Account; or
(v) for delivery upon settlement of a forward commitment agreement for the
sale of Portfolio Securities.
6.10 Interest Bearing Call or Time Deposits. The Bank shall, upon receipt
of Proper Instructions relating to the purchase by the Fund of interest-bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Fund appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"), and
shall retain such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Fund and the responsibility of the Bank therefore
shall be the same as and no greater than the Bank's responsibility in respect of
other Portfolio Securities of the Fund.
6.11 Transfer of Securities. The Bank will transfer, exchange, deliver or
release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section the Bank will receive Proper
Instructions requesting such transfer, exchange or delivery stating that it is
for a purpose permitted under the terms of this Section 6.11, specifying the
applicable subsection, or describing the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, only
(a) upon sales of Portfolio Securities for the account of the Fund, against
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contemporaneous receipt by the Bank of payment therefor in full, or, against
payment to the Bank in accordance with generally accepted settlement practices
and customs in the jurisdiction or market in which the transaction occurs, each
such payment to be in the amount of the sale price shown in a broker's
confirmation of sale of the Portfolio Securities received by the Bank before
such payment is made, as confirmed in the Proper Instructions received by the
Bank before such payment is made;
(b) in exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided
however that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and unless the Bank (or
its agent or subcustodian hereunder) has actual possession of such Security at
least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to their terms into
other securities;
(d) for the purpose of redeeming in kind shares of the Fund upon
authorization from the Fund;
(e) in the case of option contracts owned by the Fund, for presentation to
the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or retired or
otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Fund of
the moneys borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, and such fact is made to appear in
the Proper Instructions, further Portfolio Securities may be released for that
purpose without any such payment. In the event that any such pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender, that an event of deficiency or default on the
loan has occurred, the Bank may deliver such pledged Portfolio Securities to or
for the account of the lender;
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market value
of such security, as
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set forth in the Proper Instructions received by the Bank before such payment is
made;
(i) for the purpose of delivering portfolio securities lent by the
Fund to a bank or broker dealer, but only against receipt in accordance with
street delivery custom as set forth in Proper Instructions and subject to as may
be otherwise provided herein, of adequate collateral as agreed upon from time to
time by the Fund and the Bank, and upon receipt of payment in connection with
any repurchase agreement relating to such portfolio securities entered into by
the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such portfolio
securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a), (b), (c),
(e), (f), (g), (h) and (i) securities or cash receivable in exchange therefor
shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of the Fund held by the
Bank in connection with redemptions and repurchases by the Fund of its
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment shall
be made in accordance with the Articles and By-laws of the Fund, from assets
available for said purpose.
8. Merger. Dissolution. etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company where
the Fund is not the surviving entity, the sale by the Fund of all, or
substantially all, of its assets to another investment company, or the
liquidation or dissolution of the Fund and distribution of its assets, the Bank
will deliver the Portfolio Securities held by it under this Agreement and
disburse cash only upon the order of the Fund set forth in an Officers'
Certificate, accompanied by a certified copy of a resolution of the Board
authorizing any of the foregoing transactions. Upon completion of such delivery
and disbursement and the payment of the fees, disbursements and expenses of the
Bank, this Agreement will
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terminate.
9. Actions of Bank Without Prior Authorization. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or instruction
of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of
the Fund all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the Fund
and hold for the account of the Fund all income, dividends, interest and other
payments or distribution of cash with respect to the Portfolio Securities held
thereunder;
9.2 Present for payment all coupons and other income items held by it
for the account of the Fund which call for payment upon presentation and hold
the cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any state;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use all reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon
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which such income is payable are in default or payment is refused after due
demand or presentation, the Bank will notify the Fund in writing of any default
or refusal to pay within two business days from the day on which it receives
knowledge of such default or refusal. In addition, the Bank will send the Fund a
written report once each month showing any income on any Portfolio Security held
by it which is more than ten days overdue on the date of such report and which
has not previously been reported.
11. Maintenance of Records and Accounting Services. The Bank will maintain
records with respect to transactions for which the Bank is responsible pursuant
to the terms and conditions of this Agreement, and in compliance with the
applicable rules and regulations of the 1940 Act and will furnish the Fund daily
with a statement of condition of the Fund. The Bank will furnish to the Fund at
the end of every month, and at the close of each quarter of the Fund's fiscal
year, a list of the Portfolio Securities and the aggregate amount of cash held
by it for the Fund. The books and records of the Bank pertaining to its actions
under this Agreement and reports by the Bank or its independent accountants
concerning its accounting system, procedures for safeguarding securities and
internal accounting controls will be open to inspection and audit at reasonable
times by officers of or auditors employed by the Fund and will be preserved by
the Bank in the manner and in accordance with the applicable rules and
regulations under the 1940 Act.
The Bank shall keep the books of account and render statements or copies from
time to time as reasonably requested by the Treasurer or any executive officer
of the Fund.
The Bank shall assist generally in the preparation of reports to shareholders
and others, audits of accounts, and other ministerial matters of like nature.
12. Fund Evaluation. The Bank shall compute and, unless otherwise directed by
the Board, determine as of the close of business on the New York Stock Exchange
on each day on which said Exchange is open for unrestricted trading and as of
such other hours, if any, as may be authorized by the Board the net asset value
and the public offering price of a share of capital stock of the Fund, such
determination to be made in accordance with the provisions of the Articles and
By-laws of the Fund and Prospectus and Statement of Additional Information
relating to the Fund, as they may from time to time be amended, and any
applicable resolutions of the Board at the time in force and applicable; and
promptly to notify the Fund, the proper exchange and the NASD or such other
persons as the Fund may request of the results of such computation and
determination.
The Bank shall use reasonable care in computing the net asset value
hereunder, and the Bank shall be liable and shall hold the fund harmless for any
losses to the Fund occasioned by the Bank's own negligence in the performance of
its duties under this paragraph, provided however that the Bank may rely in good
faith upon information furnished to it by any Authorized Person in respect of
(i) the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books
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of account kept by the Bank, (ii) reserves, if any, authorized by the Board of
Directors or that no such reserves have been authorized, (iii) the source of the
quotations to be used in computing the net asset value, (iv) the value to be
assigned to any security for which no price quotations are available, and (v)
the method of computation of the public offering price on the basis of the net
asset value of the shares, and the Bank shall not be responsible for any loss
occasioned by such reliance or for any good faith reliance on any source
pursuant to (iii) above, provided the Bank has timely supplied the Fund with
such variance reports as are specifically set forth on Schedule B annexed
hereto.
13. Concerning the Bank.
13.1 Performance of Duties and Standard of Care.
In performing its duties hereunder and any other duties listed on any
Schedule hereto, if any, the Bank will be entitled to receive and act upon the
advice of independent counsel of its own selection, which may be counsel for the
Fund, and will be without liability for any action taken or thing done or
omitted to be done in accordance with this Agreement in good faith in conformity
with such advice. Except as otherwise expressly provided in Section 12, in the
performance of its duties hereunder, the Bank will be protected and not be
liable, and will be indemnified and held harmless for any action taken or
omitted to be taken by it in good faith reliance upon the terms of this
Agreement, any Officers' Certificate, Proper Instructions, resolution of the
Board, telegram, notice, request, certificate or other instrument reasonably
believed by the Bank to be genuine and for any other loss to the Fund except in
the case of its negligence, willful misfeasance or bad faith in the performance
of its duties or reckless disregard of its obligations and duties hereunder.
The Bank will be under no duty or obligation to inquire into and will not be
liable for:
(a) the validity of the issue of any Portfolio Securities purchased by or
for the Fund, the legality of the purchases thereof or the propriety of the
price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or for the Fund
or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the Fund
or the sufficiency of the amount to be received therefor except to the extent
provided in Section 12;
(d) the legality of the repurchase of any common shares of the Fund or
the propriety of the amount to be paid therefor except to the extent provided in
Section 12;
(e) the legality of the declaration of any dividend by the Fund or the
legality of the distribution of any Portfolio Securities as payment in kind of
such dividend; and
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(f) any property or moneys of the Fund unless and until received by it,
and any such property or moneys delivered or paid by it pursuant to the terms
hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in no event shall
the Bank be liable hereunder or to any third party:
(a) for any losses or damages of any kind resulting from acts of God,
earthquakes, fires, floods, storms or other disturbances of nature, epidemics,
strikes, riots, nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation,
the interruption, loss or malfunction of utilities, transportation, the
unavailability of energy sources and other similar happenings or events except
as results from the Bank's own gross negligence; or
(b) for special, punitive or consequential damages arising from the
provision of services hereunder, even if the Bank has been advised of the
possibility of such damages.
13.2 Agents and Subcustodians with Respect to Property of the Fund Held in
the United States. The Bank may employ agents in the performance of its duties
hereunder and shall be responsible for the acts and omissions of such agents as
if performed by the Bank hereunder.
Upon receipt of Proper Instructions, the Bank may employ Subcustodians,
provided that any such subcustodian meets at least the minimum qualifications
required by Section 17(f)(1) of the 1940 Act to act as a custodian of the Fund's
assets with respect to property of the Fund held in the United States. The Bank
shall have no liability to the Fund or any other person by reason of any act or
omission of any such subcustodian and the Fund shall indemnify the Bank and hold
it harmless from and against any and all actions, suits and claims, arising
directly or indirectly out of the performance of any such subcustodian. Upon
request of the Bank, the Fund shall assume the entire defense of any action,
suit, or claim subject to the foregoing indemnity. The Fund shall pay all fees
and expenses of any subcustodian.
13.3 Duties of the Bank with Respect to Property of the Fund Held
Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Bank to employ as sub-custodians for the Fund's Portfolio
Securities and other assets maintained outside the United States the foreign
banking institutions and
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foreign securities depositories designated on the Schedule attached hereto
(each, a "Selected Foreign Sub-Custodian"). Upon receipt of Proper Instructions,
together with a certified resolution of the Fund's Board of Trustees, the Bank
and the Fund may agree to designate additional foreign banking institutions and
foreign securities depositories to act as Selected Foreign Sub-Custodians
hereunder. Upon receipt of Proper Instructions, the Fund may instruct the Bank
to cease the employment of any one or more such Selected Foreign Sub-Custodians
for maintaining custody of the Fund's assets, and the Bank shall so cease to
employ such sub-custodian as soon as alternate custodial arrangements have been
implemented.
(b) Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Bank and the Fund, assets of the Fund shall be maintained
in foreign securities depositories only through arrangements implemented by the
foreign banking institutions serving as Selected Foreign Sub-Custodians pursuant
to the terms hereof. Where possible, such arrangements shall include entry into
agreements containing the provisions set forth in subparagraph (d) hereof.
Notwithstanding the foregoing, except as may otherwise be agreed upon in writing
by the Bank and the Fund, the Fund authorizes the deposit in Euroclear, the
securities clearance and depository facilities operated by Morgan Guaranty Trust
Company of New York in Brussels, Belgium, of Foreign Portfolio Securities
eligible for deposit therein and to utilize such securities depository in
connection with settlements of purchases and sales of securities and deliveries
and returns of securities, until notified to the contrary pursuant to
subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify on its books as
belonging to the Fund the Foreign Portfolio Securities held by each Selected
Foreign Sub-Custodian. Each agreement pursuant to which the Bank employs a
foreign banking institution shall require that such institution establish a
custody account for the Bank and hold in that account, Foreign Portfolio
Securities and other assets of the Fund, and, in the event that such institution
deposits Foreign Portfolio Securities in a foreign securities depository, that
it shall identify on its books as belonging to the Bank the securities so
deposited.
(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially in the
form previously made available to the Fund and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security interest, lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (b) beneficial ownership of the
Fund's assets will be freely transferable without the payment of money or value
other than for custody or administration (including, without limitation, any
fees or taxes payable upon transfers or reregistration of securities); (c)
adequate records will be maintained identifying the assets
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as belonging to Bank; (d) officers of or auditors employed by, or other
representatives of the Bank, including to the extent permitted under applicable
law, the independent public accountants for the Fund, will be given access to
the books and records of the foreign banking institution relating to its actions
under its agreement with the Bank; and (e) assets of the Fund held by the
Selected Foreign Sub-Custodian will be subject only to the instructions of the
Bank or its agents.
(e) Access of Independent Accountants of the Fund. Upon request of the
Fund, the Bank will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a Selected Foreign Sub-Custodian insofar
as such books and records relate to the performance of such foreign banking
institution under its Foreign Sub-Custodian Agreement.
(f) Reports by Bank. The Bank will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and other
assets of the Fund held by Selected Foreign Sub-Custodians, including but not
limited to an identification of entities having possession of the Foreign
Portfolio Securities and other assets of the Fund.
(g) Transactions in Foreign Custody Account. Transactions with respect
to the assets of the Fund held by a Selected Foreign Sub-Custodian shall be
effected pursuant to Proper Instructions from the Fund to the Bank and shall be
effected in accordance with the applicable Foreign Sub-Custodian Agreement. If
at any time any Foreign Portfolio Securities shall be registered in the name of
the nominee of the Selected Foreign Sub-Custodian, the Fund agrees to hold any
such nominee harmless from any liability by reason of the registration of such
securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the account
of the Fund and delivery of Foreign Portfolio Securities maintained for the
account of the Fund may be effected in accordance with the customary 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.
In connection with any action to be taken with respect to the Foreign
Portfolio Securities held hereunder, including, without limitation, the exercise
of any voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Foreign Sub-Custodian, and shall promptly forward to the applicable Foreign
Sub-Custodian any
23
<PAGE>
instructions, forms or certifications with respect to such Rights, and any
instructions relating to the actions to be taken in connection therewith, as the
Bank shall receive from the Fund pursuant to Proper Instructions.
Notwithstanding the foregoing, the Bank shall have no further duty or obligation
with respect to such Rights, including, without limitation, the determination of
whether the Fund is entitled to participate in such Rights under applicable U.S.
and foreign laws, or the determination of whether any action proposed to be
taken with respect to such Rights by the Fund or by the applicable Foreign
Sub-Custodian will comply with all applicable terms and conditions of any such
Rights or any applicable laws or regulations, or market practices within the
market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and each Fund from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-Custodian Agreement. The Fund acknowledges
that the Bank, as a participant in Euroclear, is subject to the Terms and
Conditions Governing the Euroclear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euroclear in connection with the Fund's securities and
other assets.
(i) Liability of Bank. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any Selected
Foreign Sub-Custodian employed hereunder than any such Selected Foreign
Sub-Custodian has to the Bank and, without limiting the foregoing, the Bank
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or acts of
war or terrorism, political risk (including, but not limited to, exchange
control restrictions, confiscation, insurrection, civil strife or armed
hostilities) other losses due to Acts of God, nuclear incident or any loss where
the Selected Foreign Sub-Custodian has otherwise exercised reasonable care.
(j) Monitoring Responsibilities. The Bank shall furnish annually to the
Fund, information concerning the Selected Foreign Sub-Custodians employed
hereunder for use by the Fund in evaluating such Selected Foreign Sub-Custodians
to ensure compliance with the requirements of Rule 17f-5 of the Act. In
addition, the Bank will promptly inform the Fund in the event that the Bank is
notified by a Selected Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in
24
<PAGE>
accordance with generally accepted U.S. accounting principles) or any other
capital adequacy test applicable to it by exemptive order, or if the Bank has
actual knowledge of any material loss of the assets of the Fund held by a
Foreign Sub-Custodian.
(k) Tax Law. The Bank shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Bank as custodian of the
Fund by the tax laws of any jurisdiction, and it shall be the responsibility of
the Fund to notify the Bank of the obligations imposed on the Fund or the Bank
as the custodian of the Fund by the tax law of any non-U.S. jurisdiction,
including responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of jurisdictions for which the Fund has provided such
information.
13.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property and will maintain insurance in accordance
with industry practice but it need not maintain any special insurance for the
benefit of the Fund.
13.5. Fees and Expenses of Bank. The Fund will pay or reimburse the Bank
from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Fund will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Fund for all reasonable out of pocket expenses incurred in
conjunction with termination of this Agreement by the Fund.
13.6 Advances by Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any Proper Authorization for such payments by the Fund. Should such a
payment or payments, with advanced funds, result in an overdraft (due to
insufficiencies of the Fund's account with the Bank, or for any other reason)
this Agreement deems any such overdraft or related indebtedness, a loan made by
the Bank to the Fund payable on demand and bearing interest at the current rate
charged by the Bank for such loans unless the Fund shall provide the Bank with
agreed upon compensating balances. The Fund agrees that the Bank shall have a
continuing lien and security interest to the extent of any overdraft or
indebtedness, in and to any property at any time held by it for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Fund authorizes the Bank, in its sole discretion, at
any time to charge any overdraft or
25
<PAGE>
indebtedness, together with interest due thereon against any balance of account
standing to the credit of the Fund on the Bank's books.
14. Termination.
14.1 This Agreement may be terminated at any time without penalty upon
sixty days written notice delivered by either party to the other by means of
registered mail, and upon the expiration of such sixty days this Agreement will
terminate; provided, however, that the effective date of such termination may be
postponed to a date not more than ninety days from the date of delivery of such
notice (i) by the Bank in order to prepare for the transfer by the Bank of all
of the assets of the Fund held hereunder, and (ii) by the Fund in order to give
the Fund an opportunity to make suitable arrangements for a successor custodian.
At any time after the termination of this Agreement, the Fund will, at its
request, have access to the records of the Bank relating to the performance of
its duties as custodian.
14.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection (14.3), deliver the Portfolio Securities and cash of
the Fund held by the Bank to a bank or trust company of its own selection which
meets the requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than $2,000,000, to
be held as the property of the Fund under terms similar to those on which they
were held by the Bank, whereupon such bank or trust company so selected by the
Bank will become the successor custodian of such assets of the Fund with the
same effect as though selected by the Board.
14.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund
26
<PAGE>
in form and content satisfactory to the Bank.
15. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them is
entitled, without bond or other security, to an injunction or injunctions to
prevent breaches of this provision.
16. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
The Rockwood Growth Fund, Inc.
11 Hanover Square
New York, New York 10005
Attn: President
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Henry Joyce
or at such other place as such party may from time to time designate in
writing.
17. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties, and in the case of the Fund,
such alteration or amendment will be authorized and approved by its Board.
18. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by the Board; and provided further
that termination proceedings pursuant to Section 14 hereof will not be deemed to
be an assignment within the meaning of this provision.
19. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts.
27
<PAGE>
20. Counterparts. 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.
28
<PAGE>
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 written above.
The Rockwood Growth Fund, Inc.
By:_____________________________
Name:
Title:
ATTEST:
- -----------------------------
Investors Bank & Trust Company
By:_____________________________
Name:
Title:
ATTEST:
- -----------------------------
DATE: _______________________
29
<PAGE>
<TABLE>
FOREIGN SUBCUSTODIAN NETWORK
Securities Depository /
Country Subcustodian Clearing Agency
<S> <C> <C>
Argentina Citibank, N. A., Buenos Aires Caja de Valores
Citibank New York Agreement November 15, 1990
Australia National Australia Bank Limited Austraclear
Agreement December 1990 CHESS
RITS
Austria Euroclear / Creditanstalt Bankverein OEKB
Euroclear Agreement May 1, 1990
Bangladesh Standard Chartered Bank, Dhaka None
Standard Chartered Regional Agreement July 23, 1992
Belgium Euroclear / General de Banque CIK
Euroclear Agreement May 1, 1990 Banque Nationale
de Belge
Botswana Barclays Bank PLC/Barclays Bank of Botswana Ltd. None
Barclays Regional Agreement November 21, 1994
Brazil Banco de Boston, Sao Paulo BOVESPA
Agreement BVRJ
Canada Euroclear / Royal Bank of Canada CDS
Euroclear Agreement May 1, 1990
Canada Royal Trust Corporation of Canada CDS
Agreement October 22,1991
China Standard Chartered Bank, Shanghai SSCCRC
Standard Chartered Regional Agreement July 23, 1992
China Standard Chartered Bank, Shenzhen Shenzen Central
Standard Chartered Regional Agreement July 23, 1992 Registrars Co.
Colombia Cititrust Colombia S. A. Sociedad Fiduciaria, Bogota None
Citibank New York Agreement November 15, 1990
Czech Republic Chase Manhattan, N. A. / Ceskoslovenska Obchodni Banka SCP
Chase New York Agreement March 1, 1994
Denmark Euroclear / Den Danske Bank Vardipapercentralen
Euroclear Agreement May 1, 1990
Egypt Chase Manhattan, N. A. / National Bank of Egypt None
Chase New York Agreement March 1, 1994
30
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Finland Euroclear / Kansallis-Osake-Pankki Central Share Registry
Euroclear Agreement May 1, 1990 Helsinki Money Market
France Euroclear / Morgan Guaranty Paris, Societe Generale Sicovam
Euroclear Agreement May 1, 1990 Banque de France
Germany Euroclear / Deutsche Bank A. G. Kassenverein
Euroclear Agreement May 1, 1990
Ghana Barclays Bank PLC / Barclays Bank of Ghana Ltd. None
Barclays Regional Agreement November 21,1994
Greece Citibank, N. A., Athens CSD
Citibank New York Agreement November 15, 1990
Hong Kong Standard Chartered Bank, Hong Kong CCASS
Standard Chartered Regional Agreement July 23, 1992
Hungary Citibank, Rt., Budapest Keler
Citibank New York Agreement November 15, 1990
Indonesia Standard Chartered Bank, Jakarta PT Klering Dep Efek
Standard Charterd Regional Agreement July 23, 1992
Ireland Bank of Ireland Securities Services Gilts Settlement Of fice
Agreement February 22, 1995
Israel Chase Manhattan, N.A. / Bank Leumi le-Israel The Stock Exchange
Chase New York Agreement March 1, 1994 Clearing House Ltd.
Italy Citibank, N. A., Milan Monte Titoli
Citibank New York Agreement November 15, 1990 Banca d'Italia
Italy Euroclear / Credito Italiano Banca d'Italia
EuroclearAgreementMay 1, 1990
Japan Standard Chartered Bank, Tokyo JASDEC
Standard Chartered Regional Agreement July 23, 1992 Bank of Japan
Jordan Citibank, N. A., Amman None
Citibank New York Agreement November 15,1990
Korea Standard Chartered Bank, Seoul KSD
Standard Chartered Regional Agreement July 23, 1992
Luxembourg Euroclear / Banque et Caisse d'Epargne de l'Etat None
Euroclear Agreement May 1, 1990
Malaysia Standard Chartered Bank Malaysia Berhad, Kuala Lumpur MCD
Standard Chartered Regional Agreement July 23, 1992
</TABLE>
31
<PAGE>
<TABLE>
<S> <C> <C>
Mauritius Chase Manhattan, N. A. / Hongkong Shanghai Banking Corp. None
Chase New York Agreement March 1, 1994
Mexico Bancomer, S. A. S. D. Indeval
Agreement October 7,1994 Banco de Mexico
Morocco Chase Manhattan, N. A. / Banque Commercial du Maroc None
Chase New York Agreement March 1, 1994
Netherlands Euroclear / ABN Amro Bank NECIGEF
Euroclear Agreement May 1, 1990 De Nederlandsche Bank
New Zealand National Australia Bank Austraclear
AgreementDecember, 1990
Norway Euroclear I Christiania Bank VPS
Euroclear Agreement May 1, 1990
Pakistan Standard Chartered Bank, Karachi None
Standard Chartered Regional Agreement July 23, 1992
Peru Citibank, N. A., Lima CAVAL
Citibank New York Agreement November 15, 1990
Philippines Standard Chartered Bank, Manila None
Standard Chartered Regional Agreement July 23, 1992
Poland Citibank (Poland), S.A., Warsaw National Depository of
Citibank New York Agreement November 15, 1990 Securities
Portugal Citibank Portugal S. A., Lisbon Central de Valores
Citibank New York Agreement November 15,1990 Mobiliarios
Portugal Euroclear / Banco Comercial Portugues Central de Valores
Euroclear Agreement May 1,1990 Mobiliarios
Singapore Standard Chartered Bank, Singapore CDS
Standard Chartered Regional Agreement July 23, 1992
South Africa Chase Manhattan N. A. / Standard Bank of South Africa None
Chase New York Agreement March 1, 1994
Spain Euroclear I Banco Santander SCLV
Euroclear Agreement May 1, 1990 Banco de Espana
Sri Lanka Standard Chartered Bank, Colombo Central Depository
Standard Chartered Regional Agreement July 23,1992 System
Sweden Euroclear I Skandinaviska Enskilda Banken Vardepapperscentralen
Euroclear Agreement May 1, 1990
</TABLE>
32
<PAGE>
<TABLE>
<S> <C> <C>
Switzerland Citibank (Switzerland), Zurich SEGA
Citibank New York Agreement November 15, 1990
Switzerland Euroclear I Credit Suisse SEGA
EuroclearAgreementMay 1, 1990
Taiwan Standard Chartered Bank, Taipei Taiwan Securities
Standard Chartered Regional Agreement July 23, 1992 Depository
Thailand Standard Chartered Bank, Bangkok SDC
Standard Chartered Regional Agreement July 23,1992
Turkey Chase Manhattan N. A., Istanbul IMKB
Chase New York Agreement March 1, 1994
Transnational Investors Bank & Trust Company Euroclear
United Kingdom Barclays Bank PLC CGO
Barclays Bank Regionl Agreement November 21,1994 CMO
Venezuela Citibank, N. A., Caracas None
Citibank New York Agreement November 15, 1990
Zambia Barclays Bank PLC None
Barclays Bank Regional Agreement November 21, 1994
Zimbabwe Barclays Bank PLC None
Barclays Bank Regional Agreement November 21,1994
</TABLE>
33
<PAGE>
34
<PAGE>
SERVICE AND AGENCY AGREEMENT
This Service and Agency Agreement (the "Agreement") is among Investors
Bank & Trust Company (hereinafter referred to as "Investors Bank & Trust
Company") and The Rockwood Growth Fund, Inc. (hereinafter referred to as
"Rockwood Growth Fund"), and is effective as of August 16, 1996. As of its
effective date, this Agreement supersedes any prior agreement relating to the
subject matter hereof.
Article 1: Recitals
1.1 Rockwood Growth Fund has developed certain materials that may be
used by an individual to establish an individual retirement custodial account
("IRA"). These Rockwood Growth Fund materials use the provisions of IRS Form
5305-A, Individual Retirement Custodial Account, provisions developed by
Rockwood Growth Fund in Article VIII of Form 5305-A, an IRA disclosure statement
and related forms and materials (and such materials are hereinafter collectively
called the "IRA Materials"), and the provisions of IRS Form 5305-SEP, Simplified
Employee Pension Individual Retirement Accounts Contribution Agreement, and
related informational or other materials (and such materials are hereafter
referred to collectively as the "SEP Materials." In addition, Rockwood Growth
Fund has developed or contracted for certain materials that may be used by an
individual to establish a 403(b)(7) custodial account (the "403(b) Account
Materials") and master or prototype qualified plan materials that may be used by
an Employer to establish a tax-qualified profit sharing or money purchase
pension plan (the "Prototype Plan Materials"). The IRA Materials, the SEP
Materials, the 403(b) Account Materials, and the Prototype Plan Materials are
hereinafter referred to collectively as the "Materials". Contributions to an
IRA, 403(b) Account or Employer Plan established using the IRA Materials, the
403(b) Account Materials or the Prototype Plan Materials (as the case may be)
may be invested in shares of open-end regulated investment companies in the
Rockwood Growth Fund Funds Group ("Shares").
1.2 Rockwood Growth Fund desires to have Investors Bank & Trust Company
serve as Custodian of IRAs or 403(b) Accounts established using the IRA
Materials or the 403(b) Account Materials, and to serve as Trustee of Employer
Plans established using the Prototype Plan Materials. Investors Bank & Trust
Company is willing to serve as such Custodian or Trustee in
<PAGE>
accordance with the terms and conditions of this Agreement. For purposes of this
Agreement, in its capacity as Custodian or Trustee of a Customer Arrangement
hereunder, Investors Bank & Trust Company will be referred to as the "Custodian"
(even though with respect to Employer Plans, Investors Bank & Trust Company is
serving as Trustee).
1.3 Investors Bank & Trust represents to Rockwood Growth Fund that it
is and, as long as any Customer Arrangements established hereunder are in
effect, will be a "bank" as defined in Section 408(n)(1) of the Internal Revenue
Code of 1986, as amended.
Article 2: Definitions
As used in this Agreement, the following terms have the following
meanings:
2.1 "Customer" means an individual or business maintaining a Customer
IRA, Customer 403(b) Account, or Employer Plan.
2.2 "Customer Arrangement" means a Customer IRA, a Customer 403(b)
Account, or an Employer Plan.
2.3 "Customer IRA" means the individual retirement custodial account,
as hereafter adopted by an individual using the IRA Materials.
2.4 "Customer 403(b) Account" means the 403(b)(7) custodial account, as
hereafter adopted by an individual using the 403(b) Account Materials.
2.5 "Employer" means an entity (whether incorporated or not) that has
established an Employer SEP or an Employer Plan.
2.6 "Employer Plan" means a tax-qualified prototype profit sharing or
money purchase pension plan as hereafter established by an Employer using the
Prototype Plan Materials.
2.7 "Employer SEP" means a simplified employee pension plan, as
hereafter established by an Employer using the SEP Materials.
Article 3: IRA Materials
<PAGE>
3.1 Rockwood Growth Fund will be responsible for preparing and
maintaining all of the Materials. Rockwood Growth Fund will be responsible for
the legal and tax effect of such Materials, and will take all steps necessary to
ensure that all the Materials contain such terms and conditions and meet such
other requirements as are necessary to comply with all provisions of the
Internal Revenue Code and any other laws applicable to individual retirement
accounts, simplified employee pension plans, 403(b)(7) custodial accounts or
tax-qualified profit sharing or money purchase pension plans, in order to
achieve tax deferral for Customers who establish or employees or owner-
employees who participate in a Customer Arrangement and to achieve tax
deductibility for the Employer for any contributions to any such Customer
Arrangement (within applicable limitations). This responsibility will include
(without limitation) timely amending the Materials and causing amended Materials
to be distributed to and if necessary signed by Customers and/or Employers. All
costs and expense of the preparation and maintenance of the Materials will be
borne by Rockwood Growth Fund.
Rockwood Growth Fund may contract for or arrange with a vendor
selected with reasonable care by Rockwood Growth Fund for the provision of any
or all the Materials, provided that, as between Rockwood Growth Fund and
Investors Bank & Trust Company, Rockwood Growth Fund will be responsible for all
the Materials as provided in the preceding paragraph and for all other purposes
of this Agreement.
.The Materials (and all explanatory, advertising, marketing or other
Materials used in connection with any Customer Arrangement) will provide that
Investors Bank & Trust Company as Custodian of any Customer Arrangement will
have no investment responsibilities and no fiduciary or other responsibility or
liability for the selection of investments for any Customer Arrangement, and
will not serve as the "plan administrator" (as defined in the Employee
Retirement Income Security Act of 1974, as amended) of any Customer Arrangement.
Article 4: Employment of Investors Bank & Trust Company as Custodian
4.1 Investors Bank & Trust Company agrees to serve as
Custodian of any Customer Arrangement hereafter established by a
Customer using the Materials. As such Custodian, Investors Bank
<PAGE>
& Trust Company will be designated as the owner of the Shares purchased for each
Customer Arrangement on the records of Rockwood Growth Fund. Rockwood Growth
Fund represents and warrants to Investors Bank & Trust Company that the Shares
will meet all applicable legal requirements, including registration in
accordance with the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, in order to be legal investments for Customer
Arrangements.
4.2 Records of the Custodian's ownership of Shares will be maintained
by Rockwood Growth Fund in the name of Investors Bank & Trust Company as
Custodian (or its nominee) and no physical shares will be issued.
4.3 Investors Bank & Trust Company and Rockwood Growth Fund acknowledge
and agree that:
(a) Under the Materials, Investors Bank & Trust Company as
Custodian has no investment responsibility for the selection of Shares
for any Customer Arrangement and Investors Bank & Trust Company will
have no liability for any investments made for a Customer Arrangement.
(b) Investors Bank & Trust Company will not serve as "plan
administrator" (as defined in the Employee Retirement Income Security
Act of 1974, as amended) of any Customer Arrangement whatsoever, or in
any other administrative capacity or other capacity except as Custodian
thereof.
(c) Rockwood Growth Fund agrees that, in any written, oral, or
electronic communications from Rockwood Growth Fund to any prospective
or actual Customer or Employer, it will not state or represent that
Investors Bank & Trust Company has any investment discretion or other
power concerning investments of any Customer Arrangement, or that
Investors Bank & Trust Company will serve as plan administrator or have
any administrative or other responsibility for the administration or
operation of any Customer Arrangement.
4.4 (a) Investors Bank & Trust Company hereby delegates to Rockwood
Growth Fund all record keeping and other duties of the Custodian as are
specified in any of the Materials or as may be necessary or convenient to
administer and maintain any Customer Arrangement. With respect to any Customer
Arrangement, such
<PAGE>
duties include, without implied limitation, receiving and maintaining copies of
the signed Materials and other documentation necessary to reflect the
establishment of and activity in each Customer Arrangement, processing all
contributions to a Customer Arrangement (including rollover or direct rollover
contributions), properly investing all such contributions in Shares in
accordance with the Customer's instructions, processing investment transfers
among Shares in accordance with the Customer's instructions, processing
distributions and rollovers or transfers from the Customer Arrangement,
providing periodic Customer Arrangement account statements (including a year-end
statement), performing all required government reporting in a timely manner in
accordance with applicable requirements, including timely filing Form 5498 and
Form 1099R (where applicable) with the Customer and the Internal Revenue
Service, performing income tax withholding, where applicable, timely providing a
Schedule P to each Employer with an Employer Plan to be filed with the Annual
Report of the Employer Plan to the Internal Revenue Service, and responding to
all Customer and other inquiries concerning a Customer Arrangement. With respect
to Employer SEPs and Employer Plans, such duties may include, without implied
limitation, receiving Employer SEP or Employer Plan contributions and properly
allocating such contributions to participants' accounts or (in the case of an
Employer SEP) individual retirement accounts operating in connection with such
Employer SEP or Employer Plan, and responding to all Employer and other
inquiries concerning an Employer SEP or Employer Plan. Rockwood Growth Fund will
perform all such duties, and will do so with the same degree of care that
Investors Bank & Trust Company would be required to exercise if it were
performing such duties itself.
(b) Rockwood Growth Fund may delegate any of its duties under
the preceding subsection (a) to a third party service provider or service bureau
(which may include an affiliate of Rockwood Growth Fund or the transfer agent or
distributor of the Shares) selected by Rockwood Growth Fund with reasonable
care. Notwithstanding any such delegation, Rockwood Growth Fund will remain
responsible to Investors Bank & Trust Company for the complete and proper
performance of Rockwood Growth Fund's duties under the preceding subsection (a).
4.5 Rockwood Growth Fund will upon reasonable advance notice make
available access to its facilities and access to or copies of such records to
Investors Bank & Trust Company as
<PAGE>
Investors Bank & Trust Company may request in order that Investors Bank & Trust
Company may determine that Rockwood Growth Fund is properly performing its
duties and obligations hereunder or as may be necessary to comply with bank
regulatory or other legal requirements to which Investors Bank & Trust Company
is subject; Investors Bank & Trust Company's right of access under this sentence
will include access to any service provider or service bureau performing any of
Rockwood Growth Fund's duties and obligations under this Agreement on behalf of
Rockwood Growth Fund.
Article 5: Reviews of Materials
5.1 Rockwood Growth Fund will submit to Investors Bank & Trust Company
and await its advance approval of all Materials and of any other materials
concerning Investors Bank & Trust Company or the duties of the Custodian which
will be used by Rockwood Growth Fund in marketing the Materials to prospective
or actual Customers or Employers or in communicating with Customers or
Employers. Investors Bank & Trust Company will not unreasonably withhold its
approval of any such materials.
5.2 Any approvals by Investors Bank & Trust Company under Section 5.1
will constitute Investors Bank & Trust Company's acquiescence to the use of such
materials and not its approval of their contents or their effect. Rockwood
Growth Fund will assume full responsibility to Investors Bank & Trust Company
and to all other interested persons (including Customers and Employers) for such
contents and such effect.
Article 6: Applications and Correspondence
6.1 Investors Bank & Trust Company will sign all applications to
establish a Customer Arrangement or other documents related to Customer
Arrangements which Rockwood Growth Fund submits to Investors Bank & Trust
Company for its signature. However, Investors Bank & Trust Company may in
writing authorize Rockwood Growth Fund or Rockwood Growth Fund's designee to
execute Investors Bank & Trust Company's name to one or more specific documents
or categories of documents (and such authorization may be a blanket or standing
authorization until revoked by Investors Bank & Trust Company). In no event will
Rockwood Growth Fund sign Investors Bank & Trust Company's name on any
application or other document without Investors Bank & Trust Company's prior
written approval.
<PAGE>
6.2 Upon receipt, Investors Bank & Trust Company will promptly forward
or refer all written and oral inquiries from Customers, Employers and/or other
parties to Rockwood Growth Fund. Rockwood Growth Fund will appropriately handle
all inquiries directed to the Custodian.
Article 7: Returns and Reports
7.1 Rockwood Growth Fund will timely prepare and file all returns,
reports and statements relating to Customer Arrangements required by the Code
and regulations thereunder or any other applicable federal or state law, or as
agreed to in the relevant Materials relating to a Customer Arrangement.
Article 8: Fees and Expenses
8.1 In consideration for Investors Bank & Trust Company's service as
Custodian hereunder, Rockwood Growth Fund will pay Investors Bank & Trust
Company such compensation as is specified in attached Schedule A. In addition,
Investors Bank & Trust Company will be entitled to be reimbursed by Rockwood
Growth Fund for Investors Bank & Trust Company's reasonable expenses (including
fees of legal counsel or other advisors) incurred in performing any services
under this Agreement other than serving as Custodian of a Customer Arrangement
(such as, by way of an example of a reimbursable expense and not by way of
limitation, fees of legal counsel to review the Materials) or any services
requested by Rockwood Growth Fund.
8.2 Investors Bank & Trust Company will receive reimbursement for any
expenses it incurs in connection with serving as Custodian of any Customer
Arrangement to the extent provided for under the relevant Materials and as
Custodian will have the right to charge such expenses directly to a Customer
Arrangement (or an account thereunder) as provided for under the relevant
Materials. To the extent that Investors Bank & Trust Company does not collect
the entire amount of any such expense from the Customer Arrangement involved,
Rockwood Growth Fund will pay such shortfall to Investors Bank & Trust Company.
Article 9: Indemnification of Investors Bank & Trust Company
9.1 Rockwood Growth Fund and its successors and assigns will at all
times jointly and severally indemnify and hold Investors Bank & Trust Company
and its successors and assigns
<PAGE>
harmless from any and all liability, claims, actions, loss, costs or expense
(including (a) reasonable fees for counsel, (b) taxes, penalties, expenses or
fees, and (c) any liability imposed directly or indirectly as a consequence of
limiting investment options available under any Customer Arrangement to the
Shares), hereinafter referred to as "Losses", which Investors Bank & Trust
Company incurs in any manner arising directly or indirectly from or out of or in
connection with the performance or non-performance by Rockwood Growth Fund of
Rockwood Growth Fund's duties and obligations under this Agreement or applicable
law, or arising directly or indirectly from, out of or in connection with
Investors Bank & Trust Company's being named Custodian of any Customer
Arrangement under this Agreement or under any of the Materials.
The indemnification of Investors Bank & Trust Company (and its
successors and assigns) provided for in the preceding paragraph will include
indemnification for any Losses arising directly or indirectly from or out of or
in connection with the performance or non-performance by either any third-party
service provider or service bureau to whom Rockwood Growth Fund has delegated
any of its duties under Section 4.4(b) or any provider or vendor with whom
Rockwood Growth Fund has contracted for the provision of any of the Materials
under Section 3.1.
9.2 No Losses which might be subject to the indemnification provision
in Section 9.1 will be confessed, settled or compromised by Investors Bank &
Trust Company until Investors Bank & Trust Company gives Rockwood Growth Fund at
least ten business days' written notice of the material facts as then known to
Investors Bank & Trust Company, and Rockwood Growth Fund will have the right,
upon written demand given to Investors Bank & Trust Company within ten business
days after the date of such notice from Investors Bank & Trust Company, to
confess or defend against such Losses at its expense.
Article 10: Resignation or Removal of Custodian
10.1 If at any time hereafter, Rockwood Growth Fund chooses to
discontinue performing any of its duties and obligations described in or
contemplated by this Agreement, either of a general nature or in respect to any
or all Customer Arrangements, it will give Investors Bank & Trust Company at
least 90 days' written notice prior to such discontinuance. Investors Bank &
Trust Company may thereupon resign as Custodian in respect to any
<PAGE>
or all Customer Arrangements in accordance with the provisions of the relevant
Materials. If within 30 days after Investors Bank & Trust Company receives such
a notice from Rockwood Growth Fund, or if any other time prior to receipt of any
such notice from Rockwood Growth Fund, Investors Bank & Trust Company chooses to
resign as Custodian of any or all Customer Arrangements, Rockwood Growth Fund
will promptly distribute the notice of Investors Bank & Trust Company's
resignation to such persons and in such manner as are called for under the
applicable provisions of the relevant Materials and in form and content
satisfactory to Investors Bank & Trust Company. Rockwood Growth Fund will
continue to perform such duties and obligations in respect to such Customer
Arrangements at least until Investors Bank & Trust Company's resignation takes
effect and the assets have been transferred to its successor custodian or
trustee or have been distributed.
Article 11: Miscellaneous
11.1 No party to this Agreement will be liable to any other party for
consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder
(provided that this Section 11.1 is not intended to and will not be construed to
reduce or terminate in any way Rockwood Growth Fund's indemnification obligation
under Section 9.1).
11.2 This Agreement will become effective as of the date stated above
and will continue in full force while Investors Bank & Trust Company serves as
Custodian of any Customer Arrangements, and will terminate when Investors Bank &
Trust Company no longer serves as Custodian of any such Customer Arrangement;
provided, however, that the indemnification provisions of Article 9 will
continue to apply after termination of this Agreement with respect to any act or
omission which is alleged to have occurred while this Agreement was in effect.
11.3 This Agreement may be amended from time to time by mutual written
agreement of the parties. Any such amendment must be in writing and signed by
both parties. Schedules appended hereto may be amended by written agreement
between the parties without re-execution of this Agreement.
11.4 Rockwood Growth Fund represents and warrants to Investors Bank &
Trust Company that it has power under its Articles of
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Incorporation and by-laws (or equivalent) to enter into and perform its
obligations under this Agreement, and has duly executed this Agreement so as to
constitute its valid and binding obligation.
11.5 Notices delivered or mailed postage prepaid to:
The Rockwood Growth Fund, Inc. at
11 Hanover Square
New York, NY 10005
Attn: Thomas B. Winmill, Co-President
Investors Bank & Trust Company at
P.O. Box 1537 - ADM27
Boston, MA 02205
Attn: Henry N. Joyce, Managing Director
or to such other addresses Rockwood Growth Fund or Investors Bank & Trust
Company may hereafter specify to the other in writing.
11.6 This Agreement will be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts. Rockwood Growth Fund hereby submits to the jurisdiction of the
courts located in the Commonwealth of Massachusetts, including any appellate
court thereof or the federal district court located therein with respect to any
litigation involving this Agreement.
11.7 Unless otherwise required by law, each party agrees to maintain in
confidence any confidential or proprietary information of any other party and
not to disclose any such information without the consent of the party owning
such information.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf by its duly authorized officer and to be duly
attested.
ATTEST:
THE ROCKWOOD GROWTH FUND, INC.
By:
Authorized Signer
INVESTORS BANK & TRUST COMPANY
By:
Authorized Signer
<PAGE>
SCHEDULE A
In consideration for Investors Bank & Trust Company's service as
Custodian, Rockwood Growth Fund will pay Investors Bank & Trust Company the per
account or per participant amount shown below per calendar year or any portion
thereof that Investors Bank & Trust Company is serving as Custodian of one or
more Customer Arrangements:
Customer IRAs (including SEP - IRAs):
$1.00 Per Customer IRA
Customer 403(b) Accounts:
$1.00 per Customer 403(b) Account
Employer Plans
$10.00 Per Participant in the Employer Plan
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SELF-DIRECTED
INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT
DISCLOSURE STATEMENT
SELF-DIRECTED INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT DISCLOSURE STATEMENT
If you do not receive this statement at least seven days before you establish
your Individual Retirement Account, you have the right to revoke your account
within seven days after it is established and to receive a return of the entire
amount of your investment in the account. If this right to revoke applies to you
and if you should desire to exercise your right to revoke your Individual
Retirement Custodial Account, you should mail or deliver a written notice of
revocation to the Service Company, the name and address of which appear on the
Application and Adoption Agreement. Mailed notice will be deemed given on the
date it is postmarked (or, if sent by certified or registered mail, on the date
of certification or registration by the post office.) The Service Company has
the right under the Custodial Account Agreement to hold your initial
contribution uninvested until the period when you may revoke your account has
expired.
1. ELIGIBILITY
You are eligible to set up an IRA if you are younger than age 70 1/2 and if,
at any time during the year, you are an employee or are self-employed and
receive compensation or earned income that is includible in your gross income.
Additionally, regardless of your age, you may also transfer funds from
another IRA or certain qualified plan distributions to a "Rollover" IRA, which
is described in paragraph 9 of this statement.
2. LIMIT ON ANNUAL CONTRIBUTIONS
(a) You can make annual contributions to an individual IRA of up to $2,000,
or 100% of your compensation or earned income, whichever is less.
(b) If you and your spouse both work and have compensation that is includible
in your gross income, each of you can annually contribute to a separate IRA up
to the lesser of $2,000 or 100% of compensation or earned income.
(c) If your spouse earns no income from employment, or elects to be treated
as earning no income (this can be advantageous if your spouse has
<PAGE>
$250 or less in earned income), and is under age 70 1/2, you can establish a
"spousal IRA" with two separate accounts if you file a joint Federal tax return.
The aggregate annual amount you can contribute to both IRAs each year cannot
exceed the lesser of $2,250 or 100% of your earned income or compensation. This
amount is divided between the two spousal IRA accounts as you direct, but not
more than $2,000 may be contributed to one account each year.
(d) If you are a divorced spouse, all taxable alimony received by you under a
decree of divorce or separate maintenance will be treated as compensation for
purposes of the IRA contribution limit and the rules for contributing to a
regular IRA will apply. Accordingly, you can make annual contributions of up to
the lesser of $2,000, or 100% of compensation or earned income (including
taxable alimony).
3. DEDUCTIBILITY OF CONTRIBUTIONS
(a) You may deduct the full amount of your IRA contribution up to the annual
maximum limit if you are not an "active participant" in an employer-sponsored
retirement plan (including qualified 401(k), profit sharing or retirement plans
maintained by your employer, Simplified Employee Pension plans, tax-sheltered
annuity plans, and certain governmental plans) for any part of such year. If you
are married and you and your spouse file a joint return, or you live together
with your spouse at anytime during the year, you will be deemed to be an active
participant in an employer-sponsored retirement plan if either you or your
spouse is an active participant in such a plan.
You are (or your spouse is) an "active participant" for a year if at any time
during the year you are covered by any employer plan under which contributions
are made to your account (including a required or voluntary employee
contribution by you) or under which you are eligible to earn pension benefit
credits. You are considered an active participant even if you are not vested
under the plan. Your Form W-2 for the year should indicate your participation
status. You should consult your own tax or financial advisor if you should have
any further questions.
Even if you are an active participant in such a plan, you may deduct the full
amount of your IRA contribution up to the annual maximum limit if you have
adjusted gross income equal to or below a specified level ($40,000 for married
taxpayers filing joint returns and $25,000 for single taxpayers). If you are
single and an active participant in an employer-sponsored retirement plan, the
amount of your IRA contribution which is deductible will be phased out on the
basis of adjusted gross income between $25,000 and $35,000. If you are married
and you and your spouse file a joint return, if either you or your spouse is an
active participant in an employer-sponsored retirement
<PAGE>
plan, the amount of your IRA contribution which is deductible will be phased out
on the basis of your combined adjusted gross income between $40,000 and $50,000.
If you are married and file a separate return, the deduction for IRA
contributions phases out with adjusted gross income between $0 and $10,000.
In general, the IRA deduction is phased out at a rate of $200 per $1,000 of
adjusted gross income in excess of the phase out amount ($25,000 for single
taxpayers, $40,000 for married taxpayers who file joint returns and $0 for
married taxpayers who file separate returns). However, if you contribute to a
spousal IRA, your IRA deduction is phased out at a rate of $225 per $1,000 of
adjusted gross income in excess of $40,000.
When calculating your reduced IRA deduction limit, you always round up to the
next highest $10. Therefore, your deduction limit is always a multiple of $10.
In addition, if your adjusted gross income is within the phase-out range and
your reduced deduction limit is more than $0 but less than $200, you are
permitted to deduct up to $200 of your IRA contributions.
If your adjusted gross income exceeds the applicable level specified above
and you are an active participant in an employer-sponsored retirement plan (or
your spouse is an active participant in such a plan if you are married), then
you may not deduct any portion of your IRA contribution.
(b) Even if you will not be able to deduct the full amount of your IRA
contribution under the rules described above, you can still contribute up to
your annual maximum amount with all or part of the contribution being a non-
tax-deductible contribution. Of course, the combined total of deductible and
non-deductible contributions must not exceed your annual maximum contribution
limit amount. Any earnings on all your IRA contributions (deductible and
nondeductible) accumulate tax-free until you withdraw them.
4. CONTRIBUTIONS WHICH CAN NEVER BE DEDUCTED
You may not make any contribution (other than a rollover contribution) to
your IRA with respect to the tax year in which you reach age 70 1/2 or any
subsequent year. However, you may continue to make contributions to your
spouse's spousal IRA and deduct the deductible portion of such payments until
the year in which your spouse reaches age 70 1/2.
You may not deduct any portion of IRA contributions allocable to the cost of
life insurance. For this reason, life insurance is not offered as an investment
for your IRA.
5. ANNUAL CONTRIBUTIONS
<PAGE>
Contributions to your IRA for a tax year must be made in cash on or before
the due date (not including extensions) for your Federal income tax return for
that tax year (April 15 for most individuals). If you intend to report
contributions made between January 1 and April 15 as contributions for your
prior tax year, you should notify us in writing that such contributions have
been made on account of such prior tax year. Otherwise, the Custodian will
assume the payment is for the current tax year.
6. EXCESS CONTRIBUTIONS
If you contribute to your IRA more than the maximum contribution limit
allowed any year, the excess contribution could be subject to a 6% nondeductible
excise tax. The excess is taxed in the year the excess contribution is made and
each year that the excess remains in your IRA at the end of the year. (Remember,
the excess contribution excise tax is based on contributions above the maximum
contribution limit, not the maximum deduction limit.)
If, by accident, you should contribute more than the maximum amount allowed,
you can eliminate the excess contribution as follows:
(a) You can avoid the 6% excise tax by withdrawing the excess contribution
and the net earnings attributable to it before the due date (including any
extensions) for filing your Federal income tax return for the year the excess
occurred. Upon removing an excess contribution in this manner, the net earnings
attributable to it are includible in your income for the tax year in which the
excess contribution was made, and you may also have to pay an additional 10%
premature distribution tax on the amount of such net earnings (see paragraph
7(a)). However, the excess contribution itself will not be included in your
taxable income and will not be subject to the 10% premature distribution tax.
(b) If you elect not to withdraw an excess contribution, you can eliminate
the excess by contributing less than the maximum amount allowed to your IRA in a
later year. This is known as a "make-up" contribution and is allowed only to the
extent that you under-contribute in the later year. Further, to the extent that
you have not contributed your full deductible amount for that later year, the
amount of the excess so eliminated may be deductible as a "make-up" deduction,
depending on your active participant status and adjusted gross income for the
year. The 6% excise tax will, however, be imposed in the year you make the
excess contribution and each subsequent year until eliminated.
(c) If you do not withdraw an excess contribution on or before the due
date for filing your Federal income tax return and your contribution did not
<PAGE>
exceed $2,250, you can withdraw the excess at any time as long as you have not
deducted it on your Federal tax return. The amount of the excess which you
withdraw will not be included in your gross income and will not be subject to
regular Federal income tax. However, the 6% excise tax will be imposed for the
year in which you make the excess contribution and each subsequent year, until
the year of withdrawal.
(d) If you do not withdraw an excess contribution on or before the due date
for filing your Federal income tax return and your contribution exceeded $2,250,
you must include in your gross income any excess amount which you withdraw even
if you have not deducted it on your Federal income tax return. You may also have
to pay a 10% premature distribution tax on the amount you withdraw (See
paragraph 7 (a)). Additionally, the 6% excise tax will be imposed for the year
in which you make the excess contribution and each subsequent year, until the
year of withdrawal.
7. PAYMENTS FROM YOUR IRA DURING YOUR LIFE
(a) You can make withdrawals from your IRA at any time. However, if you
withdraw any of the funds in your IRA before age 59 1/2, the amount includible
in your gross income is subject to a 10% non-deductible premature distribution
tax unless:
(i) the withdrawal is made because of your death or permanent disability;
(ii) the withdrawal is an exempt withdrawal of an excess contribution; or
(iii) the withdrawal is rolled over into another qualified plan or IRA.
You are considered "disabled" for purposes of clause (i) if you are unable to
engage in any substantial gainful activity because of a physical or mental
impairment which can be expected to result in death or to be of long-lasting or
indefinite duration.
You can also withdraw funds held in your IRA without any tax penalty before
you reach age 59 1/2 if you choose to receive systematic payments in
substantially equal amounts over a period that does not exceed your life
expectancy or the life expectancy of you and your designated beneficiary. You
should be aware, however, that the 10% premature distribution tax will be
applied retroactively (with interest) to all systematic payments if you change
to a method of distribution that does not qualify for the exception either
before you attain age 59 1/2 or during the first five years of the
distributions.
The 10% premature distribution tax discussed above does not apply to the
<PAGE>
portion of your IRA distribution which is not includible in your gross income.
(b) When you reach age 70 1/2, you must elect to receive distributions in
either (a) systematic payments (monthly, quarterly or annually), or (b) one lump
sum distribution of all the funds held in your IRA. The law requires that you
begin to receive distributions from your IRA no later than the April 1 following
the year in which you reach age 70 1/2 (the "Required Distribution Date"). If
you elect systematic payments, there is a minimum amount which you must withdraw
by the Required Distribution Date and by each December 31 thereafter. This could
result in two minimum distributions in one calendar year. This minimum amount is
determined by your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary, subject to the minimum
distribution incidental death benefit rule. Your life expectancy (and your
spouse's life expectancy if your spouse is your designated beneficiary) may be
recalculated each year. If you established a spousal IRA, the minimum required
annual distribution from the spousal IRA is determined using the life expectancy
of your spouse.
You should consult your own tax or financial advisor with regard to the
calculation of the amount of your minimum distribution each year because it is
your responsibility to make sure that this requirement is met. The Custodian is
not required to advise you in this matter and will only make distributions to
you from your IRA in accordance with your specific instructions.
You may receive installment payments larger than the minimum amount. However,
if the amount distributed during a taxable year is less than the minimum amount
required to be distributed, the Internal Revenue Service may impose a tax equal
to 50% of the deficiency, unless it is satisfied that the deficiency was due to
reasonable error and that responsible steps are being taken to remedy the
deficiency.
8. PAYMENTS FROM YOUR IRA AFTER YOUR DEATH
If you die before all the funds held in your IRA have been distributed, the
remaining funds in the account will be distributed to your designated
beneficiary either outright or periodically, as selected by such beneficiary.
The Custodian will make distributions to your beneficiary in accordance with his
or her specific instructions. Your beneficiary should be aware that he or she is
subject to minimum distribution rules and it is his or her responsibility to
make sure that the rules are met. Under the post-death minimum distribution
rules, if you die after your Required Distribution Date, the funds remaining in
your IRA must continue to be distributed to your designated beneficiary at least
as rapidly as under the method of distribution in effect prior to your death. If
you die prior to your Required Distribution Date, all the funds in your IRA must
be completely distributed to your
<PAGE>
designated beneficiary by December 31 of the year containing the fifth
anniversary of your death unless your designated beneficiary elects, no later
than December 31 of the year following the year of your death, to receive funds
from your IRA over a fixed period that is no longer than his or her life
expectancy. If your beneficiary is your surviving spouse, distribution of funds
from your IRA can be made to him or her over a fixed period that is no longer
than his or her life expectancy and commencing at any date prior to
<PAGE>
December 31 of the year in which you would have attained age 70 1/2. In all
instances, your spousal beneficiary may also elect to rollover the funds in your
IRA into his or her own account or treat your IRA as his or her own by making
contributions to it. In this case, he or she is not required to make withdrawals
from the IRA until April 1 following the year in which he or she reaches age 70
1/2.
The designation of a beneficiary to receive funds from your IRA at your death
is not considered a transfer subject to Federal gift taxes. However, any funds
remaining in your IRA at your death would be includible in your Federal gross
estate.
Be sure to keep your designation of beneficiary up-to-date as your personal
or financial circumstances change. You may file a new designation of beneficiary
form at any time with the Custodian. If no designation of beneficiary is in
effect at your death, or if all designated beneficiaries have predeceased you,
the balance in your account will be paid to your estate.
9. TAX-FREE ROLLOVERS
(a) Under certain circumstances, you can receive a distribution from an IRA,
or from a qualified plan, or a tax-sheltered annuity or other arrangement under
Section 403(b) of the Code, and transfer the amount received to another IRA
without including the distribution in your income for federal income tax
purposes. Such a "tax-free rollover" must be completed within 60 days after you
receive the distribution. A transfer from a qualified plan or 403(b) arrangement
directly to an IRA is a way to avoid the required 20% income tax withholding
requirements. Starting in 1993, most distributions from qualified plans or
403(b) accounts are subject to 20% withholding unless transferred directly to
another plan or 403(b) or to an IRA (this is called a "direct rollover").
There are complex, specific rules for each kind of transfer, so you should
consult your tax advisor or the IRS if you have questions about the rules.
Rollover contributions are not subject to the limits on annual contributions
to an IRA. However, all amounts in your IRA, including rollover contributions,
<PAGE>
are subject to the rules discussed above concerning the time and method of
withdrawal.
(b) IRA-to-IRA Rollover. If you have an IRA, you can withdraw all or part of
the amount in that account and transfer all or part of the amount withdrawn to
another IRA. The amount transferred will not be subject to federal income tax
(or the 10% premature withdrawal penalty) if you complete the transfer within 60
days after the withdrawal. After an IRA-to-IRA tax-free rollover, you must wait
at least a year before making another IRA-to-IRA rollover.
(c) Direct Transfer. As an alternative to a rollover, arrangements may be
made for a direct transfer from one IRA custodian or trustee to another. The
one-year waiting period does not apply to direct transfers from one IRA
custodian or trustee to another.
(d) Rollovers from Qualified Plan or 403(b) Arrangement to IRA. Most
distributions from a qualified plan or 403(b) arrangement are now eligible for
rollover to an IRA. The main exceptions are:
* payments over the lifetime or life expectancy of the participant
(or participant and a designated beneficiary),
* installment payments for a period of 10 years or more,
* required distributions starting at age 70 1/2, and
* payments that are a return of after-tax amounts previously
contributed by the individual.
<PAGE>
If you will receive an eligible distribution from a qualified plan or 403(b)
or a distribution upon termination of such a plan, you can defer paying taxes by
requesting the plan administrator or 403(b) sponsor to transfer the distribution
amount (except amounts previously contributed by you) directly to an IRA in a
direct rollover. Or, you may receive the distribution and roll it over to an IRA
within 60 days after you receive the distribution. However, unless you elect a
direct rollover of your distribution, the person making payment MUST WITHHOLD
20% OF YOUR DISTRIBUTION for federal income taxes. Your plan or 403(b) sponsor
will provide you with a notice concerning direct rollovers, regular 60-day
rollovers and withholding taxes before you receive your distribution.
If you have a regular IRA, you should establish a separate IRA to receive any
rollover contribution from a qualified plan. You can later transfer the separate
rollover IRA into a different employer plan if you desire and the plan
<PAGE>
permits such transfers.
(e) Rollovers by A Surviving Spouse. If a surviving spouse receives a
distribution from a qualified plan or 403(b) because of the employee-spouse's
death, the surviving spouse may be able to defer income taxes by having all or a
part of the distribution (other than employee contributions to the plan)
transferred directly to an IRA.
(f) Rollovers or transfers cannot include any amount you are required to
receive for the year from the qualified plan or IRA.
(g) Please note that: (i) the IRA you set up to receive "rollover" amounts
should be separate from an IRA you set up to receive annual contributions; (ii)
rollover amounts you receive may not be deposited in your spouse's IRA or
deducted on your Federal income tax return; (iii) if you establish a "Rollover"
IRA during the year in which you reach age 70 1/2, you must be receiving
distributions from such IRA no later than April 1 of such following year; (iv)
if you establish a "Rollover" IRA after the year in which you reach age 70 1/2,
you must begin receiving distributions from such IRA immediately; and (v) strict
limitations apply to rollovers, and a variety of tax and financial planning
issues should be considered in determining whether to make a rollover
contribution. You should consult your own tax or financial advisor regarding
these matters.
10. FEDERAL TAX RETURNS
(a) Deductible and non-deductible IRA contributions are reported on IRS Form
1040 or Form 1040A. You may choose to file your Federal income tax return before
it is due (without extensions) and report your IRA contributions before they are
made. You must, however, make the contributions by the due date (without
extensions) of such return. To the extent your contribution is deductible, you
can claim a deduction on your tax return. To the extent your contribution is not
deductible, you must designate it on Form 8606. There is a $100 penalty each
time you overstate the amount of your non-deductible contributions unless you
can prove that the overstatement was due to reasonable cause. You will also be
required to give additional information on Form 8606 in years you make a
withdrawal from your IRA. If you fail to file a required Form 8606, there is a
$50 penalty for each such failure unless you can prove the failure was due to
reasonable cause.
(Special Note: This Disclosure Statement discusses the effect and
requirements of the Federal tax laws. For Massachusetts tax purposes,
contributions to an IRA are not deductible, but interest earned each year is
currently not taxable until distributed. If you are a resident of another state,
you should check with your tax advisor with regard to the applicable tax
<PAGE>
laws of your state.)
(b) IRS Form 5329 is required as an attachment to Form 1040 (or separately
if you do not file a Form 1040) for any year the contribution limits in
paragraph 2 are exceeded, a premature distribution (as described in paragraph
7(a)) takes place, less than the required minimum amount (as described in
paragraph 7(b)) is distributed, or a prohibited transaction (as described in
paragraph 11(e)) takes place.
<PAGE>
11. TAX CONSEQUENCES
(a) Income on your IRA account is not taxed as it is earned, but only when it
is distributed to you.
(b) Amounts paid to you from your IRA are taxable as ordinary income, except
that you recover your nondeductible IRA contributions tax free. The special tax
rules which permit recipients of certain lump sum distributions from other
tax-qualified retirement plans to get certain tax advantages (such as capital
gains treatment and five or ten-year averaging) do not apply to distributions
from IRAs.
(c) If you withdraw an amount from any IRA during a taxable year and you have
previously made non-deductible IRA contributions, then part of the amount
withdrawn is excludible from ordinary income and not subject to taxation. The
amount excludible for the taxable year is determined by multiplying the amount
withdrawn by a fraction, the numerator of which is your aggregate non-deductible
IRA contributions remaining in all your IRAs and the denominator of which is the
aggregate balance of all your IRAs at the end of the year plus the amount
withdrawn during the year. For example, in 1992 an individual withdraws $1,000
from an IRA to which both deductible and non-deductible contributions were made.
At the end of 1992, the account balance of all his IRAs is $4,000 of which
$2,500 is non-deductible contributions. The amount excludible from income is
$500 ($2,500/$5,000 x $1,000). It should also be pointed out that in the event
you receive a distribution from your IRA within the last 60 days of the calendar
year, if you do not roll this amount into another IRA by December 31 but you do
so after December 31 and before the 60th day after the distribution, this amount
must be added to the denominator of the fraction discussed above.
(d) In general, if you receive distributions from your IRAs, Section 403
annuities and custodial accounts, and qualified plans which, in the aggregate,
exceed $150,000 in any calendar year, you may be subject to a 15% penalty tax on
the amount in excess of $150,000. If the total amount of your benefits payable
from such plans at your death exceeds a certain permissible level, a similar 15%
estate tax is imposed on the amount in excess of the permissible
<PAGE>
level. Special rules apply in certain circumstances and you should consult your
tax adviser if you have any questions regarding this tax.
(e) If you engage in a so-called "prohibited transaction" as defined in the
Internal Revenue Code, your IRA will be disqualified and the entire balance in
your IRA will be taxed as ordinary income during the year in which such
transaction occurs. You may also have to pay the 10% penalty tax on premature
distributions. A "prohibited transaction" includes:
(i) the sale, exchange, or leasing of any property between your IRA
account and you;
(ii) the lending of money or other extension of credit between your IRA
account and you;
(iii) the furnishing of goods, services, or facilities between your IRA
account and you; or
(iv) the transfer of assets of your IRA account for your use or for your
benefit.
(f) If you pledge all or part of your IRA as security for a loan, or invest
your IRA in "collectibles" such as art, antiques, coins (other than certain
United States gold and silver coins or coins issued by a state government) or
gems, the amount so pledged or invested is considered by the Internal Revenue
Service to have been distributed to you and will be taxed as ordinary income
during the year in which you make such pledge or investment. You may also have
to pay the 10% premature distribution tax.
(g) Amounts withdrawn from your IRA are subject to withholding of Federal
income tax unless you direct no withholding. Form W-4P provides a space to elect
against withholding, and contains additional information on withholding. To make
a withdrawal or to establish a program of installment withdrawals, simply
complete the Withdrawal Form and the W-4P Form and send both forms to the
Service Company which invests your funds.
<PAGE>
(h) Be sure to start withdrawals no later than the required starting date to
avoid penalties for insufficient withdrawals. Also, remember that the minimum
amount required to be withdrawn may change from year to year because of earnings
or changes in the value of your account or because you recalculated your life
expectancy. Therefore, if you have established a program of installment
withdrawals, you should submit a new Withdrawal Form each year if you need (or
want) to adjust the amount of each installment.
(i) If tax, or estate or financial planning considerations affect the
<PAGE>
timing of your IRA withdrawals, be sure to consult a qualified professional.
12. CUSTODIAN
The Custodian of your IRA is Investors Bank & Trust Company. The Custodian,
through the Service Company, will invest your contributions and earnings in
accordance with your instructions in any of the investment vehicles permitted
under the Individual Retirement Custodian Account Agreement. You will receive
periodic reports describing each transaction in your account, and proxies on
securities will be sent to you to vote as you wish. Since the investment of your
account is at your discretion and return of the permissible investment vehicles
is generally not guaranteed, growth in the value of your account cannot be
projected.
For information concerning the custodial charges and service charges which
will be assessed against your account by Investors Bank & Trust Company, or by
the Service Company, be sure to read the schedule of charges attached to this
Statement. Custodial and service charges may be changed or adjusted on thirty
days' notice to you. In addition, you will incur normal brokerage commissions on
the purchases and sales of securities. Before making any decision whatsoever to
establish an IRA, you should carefully review all applicable commissions with
your Service Company representative.
13. ADDITIONAL INFORMATION
(a) Your IRA will help build your retirement income. Your IRA funds are
non-forfeitable. They are always yours, and will be invested according to your
agreement with the Custodian. Your IRA will be clearly identified as your
property and will not be commingled with property of any other depositor.
(b) The form of this Individual Retirement Custodial Account uses the precise
language of Form 5305-A, currently provided by the Internal Revenue Service, and
has therefore been approved as a form to use as a qualified Individual
Retirement Account. The IRS approval of the form does not represent a
determination as to the merits of the account. It simply means that the form of
the printed IRA document satisfies the requirements of the IRS. However, if you
adopt and maintain your IRA within the stated guidelines, you may assume that
you are properly meeting all requirements for a bona fide individual retirement
plan under Federal income tax law.
(c) Further information concerning your IRA can be obtained from any district
office of the Internal Revenue Service.
(d) You should consult with your tax or financial advisor to determine
whether this Individual Retirement Custodial Account is the right investment
<PAGE>
for you, since we cannot offer legal or tax advice.
Schedule of Charges
1. Investors Bank & Trust Company:
2. Service Company:
<PAGE>
AGREEMENT FOR
SELF-DIRECTED
INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT
Form 5305-A
(Rev. October, 1992)
SELF-DIRECTED INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT
The Depositor whose name appears on the Application is establishing an
individual retirement account (under section 408(a) of the Internal Revenue
Code) to provide for his or her retirement and for the support of his or her
beneficiaries after death.
The Custodian, Investors Bank & Trust Company, has through its agent, given
the Depositor the disclosure statement required under the Income Tax Regulations
under section 408(i) of the Code.
The Depositor has made a cash deposit with the Custodian as indicated on the
Application.
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
<PAGE>
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.
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
<PAGE>
period that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her
interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election
of the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over
the life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following
the year of the Depositor's death. If, however, the
beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of
the year in which the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions
may be accepted in the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Depositor's entire interest in the custodial account as of the close
of business on December 31 of the preceding year by the life expectancy of the
Depositor (or the joint life and last survivor
<PAGE>
expectancy of the Depositor and the Depositor's designated beneficiary, or the
life expectancy of the designated beneficiary, whichever applies). In the case
of distributions under paragraph 3, determine the initial life expectancy (or
joint life and last survivor expectancy) using the attained ages of the
Depositor and designated beneficiary as of their birthdays in the year the
Depositor reaches age 70 1/2. In the case of 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 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.
ARTICLE VIII
1. Except as otherwise permitted in Paragraph 5(a) below, all contributions
made under this Agreement shall be deposited in the form of cash. All such
contributions shall be credited to a Custodial Account for the account of the
Depositor. Any contribution so made with respect to a tax year of the Depositor
shall be made prior to the due date of the Depositor's tax return
<PAGE>
(not including extensions). Unless otherwise indicated in writing by the
Depositor, contributions shall be credited to the tax year in which they are
received by the Custodian. Subject to the limitations set forth in the
Application, all funds in the Custodial Account (including contributions,
dividends, interest, proceeds from the sale or other disposition of investments
and any other cash receipts) shall be invested and reinvested in:
(a) any marketable securities obtainable through the service company
which is designated by the Depositor on the Application (the
"Service Company") either "over the counter" or on a recognized
exchange (excluding securities issued by the Custodian or the
Service Company);
(b) any interest-bearing deposits in any bank (including the Custodian,
the Service Company if it is a bank, or any bank affiliated with the
Service Company) approved by the Custodian;
(c) any shares of open-end regulated investment companies designated
by the Service Company; and
(d) any other investment, but only if, in the sole judgment of the
Custodian, such investment will not impose upon it an administrative
burden greater than that normally incident to investments described
in (a) above (such judgment by the Custodian not to be construed in
any respect as a judgment concerning the prudence or advisability of
such an investment).
Such investments shall be made in such specific securities and other
investments, in such proportions and in such amounts as the Depositor may direct
from time to time by notice to the Service Company (in such form as may be
acceptable to the Service Company). However, the Custodian or the Service
Company may establish minimum amounts for any type of investment.
The Service Company shall be responsible for the execution of such orders.
The Custodian shall maintain or cause to be maintained adequate records thereof
(provided that the Custodian may retain the Service Company as its agent or
recordkeeper to maintain adequate records of transactions on behalf of the
Custodian). However, if any such orders are not received as required or, if
received, are unclear or incomplete in the opinion of the Service Company, all
or a portion of the assets of the Custodial Account may be held uninvested
without liability for loss of income or appreciation, and without liability for
interest, pending receipt of complete orders or clarification; or such assets
may be invested in an interest-bearing account described in (b) above or in a
money-market type open-end investment company
<PAGE>
designated by the Service Company.
2. Any brokerage account maintained in connection herewith shall be in the
name of the Custodian for the benefit of the Depositor. All assets of the
Custodial Account shall be registered in the name of the Custodian or of a
suitable nominee (and the same nominee may be used with respect to assets of
other investors whether or not held under agreements similar to this one or in
any capacity whatsoever); provided, however, that the Custodian may hold any
security in bearer form or by or through the Service Company, or by or through a
central clearing corporation maintained by institutions active in the national
securities markets; provided further, however, that (a) the books and records of
the Custodian (or the Service Company acting as the agent or recordkeeper for
the Custodian) shall show that all such investments are part of the Custodial
Account; (b) each Custodial Account shall be separate and distinct; (c) a
separate account thereof shall be maintained by the party having actual custody
of such assets; and (d) the assets thereof shall be held in individual or bulk
segregation in such party's vaults or in depositories approved by the Securities
and Exchange Commission under the Securities Exchange Act of 1934.
3. Neither the Custodian, the Service Company nor any other party providing
services to the Custodial Account assumes any responsibility for rendering
advice with respect to the investment or reinvestment of the Depositor's
Custodial Account and shall not be liable for any loss which results from
Depositor's exercise of control over his or her Custodial Account. Depositor
shall have and exercise exclusive responsibility for and control over the
investment of the assets of his or her Custodial Account in accordance with the
terms of this Agreement, and neither the Custodian, the Service Company nor any
other such party shall have any duty to question his or her directions in that
regard or to advise him or her regarding purchase, retention, or sale of such
assets.
4. The Depositor shall have the right by written notice to the Custodian to
designate (or to change) one or more beneficiaries to receive any amount
remaining in the Custodial Account in the event of his or her death prior to the
complete distribution of all assets in the Custodial Account. Any such
designation (or change of designation) of beneficiary may be on a form provided
by the Custodian or the Service Company or on a written instrument acceptable to
the Custodian, signed by the Depositor and filed with the Custodian. Any
designation or change of designation shall be effective upon receipt by the
Custodian. Any change of designation received by the Custodian will revoke all
prior designations previously filed with the Custodian. If no such designation
is in effect on the Depositor's death, or if all designated beneficiaries have
predeceased the Depositor, the Depositor's estate shall be deemed to be the
beneficiary.
<PAGE>
5. (a) The Custodian shall have the right to receive rollover
contributions as described in Article I of this Agreement and
amounts transferred from another individual retirement account or
individual retirement annuity. Any property so transferred to it
in a form other than cash shall be held by the Custodian in
accordance with the provisions of paragraph 1 of this Article
VIII. The Custodian reserves the right to refuse to accept any
property which is not in the form of cash.
(b) The Custodian, upon written direction of the Depositor, shall
transfer the assets held under this Agreement (reduced by (i) any
amounts referred to in paragraph 7 of this Article VIII and (ii) any
amounts required to be distributed during the calendar year of
transfer to the Depositor under Section 408(a)(6) or 408(b)(3) of
the Code) to a successor individual retirement account or individual
retirement annuity for the Depositor's benefit.
(c) Any amounts received or transferred by the Custodian under this
paragraph 5 shall be accomplished by such instructions, records and
other documents as the Custodian deems necessary.
6. The Depositor hereby delegates to the Custodian the power to amend at any
time and from time to time the terms and provisions of this Agreement and
hereby consents to all such amendments, provided that an amendment
is not contrary to any applicable provision of the Internal Revenue Code,
the regulations thereunder, or any other applicable law, regulation or
ruling. Any such amendments shall be effective when the notice of such
amendments is mailed to the address of the Depositor indicated by the
Custodian's records.
7. Any income taxes or other taxes of any kind whatsoever which may be levied
or assessed upon or in respect of the assets of the Custodial Account, or the
income arising therefrom, any transfer taxes incurred, any expenses incurred by
the Custodian in the performance of its duties including fees for legal services
rendered to the Custodian, and the Custodian's and the Service Company's
compensation as set forth in the Disclosure Statement, may be paid by the
Depositor and, unless and until so paid within such time period as the Custodian
may establish, shall be paid from the assets of the Custodial Account. The
Custodian and the Service Company shall be empowered to take any action
necessary to effectuate the provisions of this paragraph and shall have no
liability to the Depositor therefor. The Custodian and the Service Company shall
each have the right to change or adjust its fees and compensation upon 30 days'
notice to the Depositor, and may reduce or waive fees with respect to any class
or group of Depositors.
<PAGE>
8. Amounts in the Custodial Account and the benefits provided hereunder shall
not be subject to alienation, assignment, garnishment, attachment, execution or
levy of any kind, and any attempt to cause such benefits to be so subjected
shall not be recognized, except to such extent as may be required by law.
9. Any pledging of assets in the Custodial Account by the Depositor as a
security for a loan, or any loan or other extension of credit from the Custodial
Account to the Depositor, shall be prohibited.
10. In taking or refraining from taking any action or determining any factor
or question which may arise under this Custodial Agreement, the Custodian may
rely upon any statement by the Depositor or the Service Company with respect
thereto. The Depositor hereby agrees that the Custodian will not be liable for
any loss or expense resulting from taking or not taking such action or
determination taken in reliance on any such statement.
11. The Custodian may resign at any time upon 90 days' written notice to the
Depositor and may be removed by the Depositor at any time upon 90 days' written
notice to the Custodian. Upon the resignation or removal of the Custodian, a
successor Custodian shall be appointed by the Depositor within 90 days of such
resignation or removal and, in the absence of such appointment, the Custodian
may designate a successor unless this Agreement is sooner terminated. Any
successor Custodian shall be a bank (as defined in section 408(n) of the Code)
or another person found qualified to act as custodian under an individual
retirement account plan by the Secretary of Treasury or his delegate. The
appointment of a successor custodian shall be effective upon receipt by the
Custodian of such successor's written acceptance which shall be submitted to the
Custodian and to the Depositor. As soon as reasonably practical after the
effective date of the successor custodian's appointment, the Custodian shall
transfer and deliver to the successor custodian applicable account records and
assets of the Custodial Account (reduced by any unpaid amounts referred to in
paragraph 7 of this Article VIII). The successor custodian shall be subject to
the provisions of this Agreement (or any successor thereto) on the effective
date of its appointment.
12. The Custodian shall, from time to time, in accordance with instructions
in writing from the Depositor, make distributions out of the Custodial Account
to the Depositor in the manner and amounts as may be specified in such
instructions. Notwithstanding the provision of Article IV above, the Custodian
assumes (and shall have) no responsibility to make any distribution to the
Depositor (or the Depositor's beneficiary if the Depositor is deceased) unless
and until such written instructions specify the occasion for such distribution,
the elected manner of distribution, and any other information
<PAGE>
that may be required. If the Depositor (or, following the Depositor's death, the
beneficiary) does not direct the Custodian to make distributions from the
Custodial Account by the time that such distributions are required to begin in
accordance with the preceding Articles, the Custodian and the Service Company
may assume that the Depositor (or the beneficiary) is meeting the minimum
distribution requirements from another individual retirement arrangement
maintained by the Depositor and the Custodian and the Service Company shall be
fully protected in so doing.
Prior to making any distribution from the Custodial Account, the Custodian
shall be furnished with any and all applications, certificates, tax waivers,
signature guarantees, and other documents (including proof of any legal
representative's authority) deemed necessary or advisable by the Custodian, but
the Custodian shall not be liable for complying with written instructions which
appear on their face to be genuine, or for refusing to comply if not satisfied
such instructions are genuine, and assumes no duty of further inquiry. Upon
receipt of proper written instructions as required above, the Custodian shall
cause the assets of the Custodial Account to be distributed, as specified in
such written order.
13. Distribution of the assets of the Custodial Account shall (subject to the
first paragraph of paragraph 12 of this Article VIII) be made in accordance with
the provisions of Article IV as the Depositor (or Depositor's beneficiary if the
Depositor is deceased) shall elect by written instructions to the Custodian;
subject, however, to the provisions of Sections 401(a)(9), 408(a)(6) and
408(b)(3) of the Code, the regulations promulgated thereunder, and the
following:
(i) No distribution from the Custodial Account shall be made in the
form of an annuity contract.
(ii) The recalculation of life expectancy of the Depositor and/or the
Depositor's spouse shall only be made at the written election
of the Depositor. The recalculation of life expectancy of the
surviving spouse shall only be made at the written election of
the surviving spouse. By establishing the Custodial Account,
the Depositor (for himself and his surviving spouse, if any)
elects not to recalculate life expectancies unless the
Depositor (or surviving spouse) specifically elects the
recalculation of life expectancies approach in accordance with
the following sentence. Any such election may be made in such
form as the Depositor (or the surviving spouse) provides for
(including instructions to such effect to the Custodian, or the
calculation of minimum distribution amounts in accordance with a
<PAGE>
method that provides for recalculation of life expectancy and
instructions to the Custodian to make distributions in accordance
with such method).
(iii) If the Depositor dies before his/her entire interest in the
Custodial Account has been distributed, and if the designated
beneficiary of the Depositor is the Depositor's surviving spouse,
the spouse may treat the Custodial Account as the spouse's own
individual retirement arrangement. This election will be deemed
to have been made if the surviving spouse makes a regular IRA
contribution to the Custodial Account, makes a rollover to or
from the Custodial Account, or fails to receive a payment from
the Custodial Account within the appropriate time period
applicable to the deceased Depositor under Section 401(a)(9)(B)
of the Code.
(iv) If the Depositor's designated beneficiary is not his/her spouse,
then distributions to the Depositor and his/her beneficiary,
commencing with the Depositor's required beginning date, shall
comply with the minimum distribution incidental benefit
requirement.
14. If the Depositor is disabled, as that term is defined in Section 72(m) of
the Code, he or she may give notice to the Custodian of such disability and
request that up to the balance of the Custodial Account be distributed. The
Custodian, within a reasonable time after submission of satisfactory proof of
such disability, shall order the distribution of the balance of the Custodial
Account to the Depositor or such portion as the Depositor requested.
15. This Agreement shall terminate coincident with the complete distribution
of the assets of the Custodial Account, and the Custodian shall have no further
duties or responsibilities with respect to the Custodial Account after its
termination.
16. The Depositor hereby agrees to indemnify and hold harmless the Custodian
from and against any and all claims, loss, damages, costs or expenses (including
reasonable attorneys' fees) which the Custodian may incur or pay out by reason
of any alleged or actual act, or failure to act, on the part of the Depositor,
the Service Company, or any other person. The preceding sentence will survive
the termination of the Agreement.
17. Any notice herein required or permitted to be given to the Custodian
shall be sufficiently given if mailed to the Custodian by first class mail, care
of Investors Bank & Trust Company, P.O. Box 1537, L07FPS, Boston, MA 02205-1537,
or to such other address as the Custodian shall provide the
<PAGE>
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 sufficiently given if mailed to the Depositor
at the Depositor's address appearing on the Application, or at such other
address as the Depositor shall have provided the Custodian from time to time in
writing, which writing shall state that such other address is to be used for
purposes of this Agreement.
18. The Custodian and the Service Company shall keep or cause to be kept
adequate records of the transactions they are required to perform hereunder. In
addition to the reports required by paragraph 2 of Article V, the Custodian or
the Service Company shall cause to be mailed to the Depositor in respect of each
tax year an account of all transactions affecting the Custodial Account during
such year and a statement showing the Custodial Account as of the end of such
year. If, within 60 days after such mailing, the Depositor has not given the
Custodian or the Service Company written notice of any exception or objection
thereto, the annual accounting shall be deemed to have been approved, and in
such case, or upon the written approval of the Depositor, the Custodian and the
Service Company shall be released, relieved and discharged with respect to all
matters and statements set forth in such accounting as though the account had
been settled by judgment or decree of a court of competent jurisdiction.
19. The Service Company shall deliver, or cause to be executed and delivered,
to the Depositor all notices, prospectuses, financial statements, proxies and
proxy soliciting materials relating to securities or other investments credited
to the Custodial Account. No shares of stock shall be voted, and no other action
shall be taken pursuant to such documents except upon receipt of adequate
written instructions from the Depositor.
20. The Custodian and the Service Company shall be agents for the Depositor
to perform the duties conferred on each of them, respectively hereunder, as
directed by the Depositor. The parties do not intend to confer any fiduciary
duties on the Custodian or the Service Company, and none shall be implied.
Neither shall be liable (nor assumes any responsibility for) the collection of
contributions, the deductibility of any contribution or the propriety of any
contributions under this Agreement, the selection of any investments for the
Custodial Account, or the purpose or propriety of any distribution ordered in
accordance with Article IV or paragraphs 12, 13, or 14 of this Article VIII,
which matters are the sole responsibility of the Depositor or the Depositor's
beneficiary, as the case may be.
21. The Custodian and the Service Company shall each be responsible solely
for performance of those duties expressly assigned to it in this Agreement;
neither assumes any responsibility as to duties assigned to anyone else
<PAGE>
hereunder or by operation of law.
22. This Agreement, which incorporates the Application as a part hereof,
shall be governed by and construed, administered and enforced according to the
laws of the Commonwealth of Massachusetts.
23. Notwithstanding anything in the foregoing to the contrary, any provision
which is inconsistent with section 219 and 408 of the Code shall be disregarded
and the regulations promulgated under said sections of the Code shall be
incorporated by reference and this Agreement shall be administered in accordance
with said regulations.
24. The Depositor may revoke the Custodial Account established under this
Agreement by written notice to the Custodian received by the Custodian within 7
calendar days after the Depositor establishes the Custodial Account. Upon
revocation, the amount of the Depositor's initial deposit or contribution will
be returned to him, without adjustment for interest, earnings, investment
fluctuations or fees or expenses. The Custodian or the Service Company may
retain the Depositor's initial contribution for a period of up to 10 days after
the receipt thereof, without investing such amount in accordance with the
Depositor's instructions, and may invest such amount after the expiration of
such period if the Depositor has not revoked the Custodial Account.
25. The Depositor acknowledges that he or she has received and read the
Disclosure Statement relating to the Custodial Account.
26. Articles I through VII of this Agreement are in the form promulgated by
the Internal Revenue Service as Form 5305-A. It is anticipated that, if and when
the Internal Revenue Service promulgates changes to Form 5305-A, the Custodian
will adopt such changes as an amendment to this Agreement. Pending the adoption
of any amendment necessary or desirable to conform this Agreement to the
requirements of any amendment to the Internal Revenue Code or regulations or
rulings thereunder, the Custodian and the Service Company may operate the
Depositor's Custodial Account in accordance with such requirements to the extent
that the Custodian and/or the Service Company deem necessary to preserve the tax
benefits of the Custodial Account.
* * *
Purpose. This model custodial account may be used by an individual who wishes to
adopt an individual retirement account under section 408(a). When fully executed
by the Depositor and the Custodian not later than the time prescribed by law for
filing the federal income tax return for the Depositor's tax year (not including
any extensions thereof), an individual will have an individual retirement
account (IRA) custodial account which meets the
<PAGE>
requirements of section 408(a). This account must be created in the United
States for the exclusive benefit of the Depositor or his/her beneficiaries.
Definitions. Custodian - The Custodian must be a bank or savings and loan
association, as defined in section 408(n), or other person who has the
approval of the Internal Revenue Service to act as custodian. The Custodian
in this plan is Investors Bank & Trust Company.
Depositor - The Depositor is the person who establishes the custodial
account.
IRA FOR NON-WORKING SPOUSE
Contributions to an IRA custodial account for a non-working spouse must be
made to a separate IRA custodial account established by the non-working spouse.
This form may be used to establish the IRA custodial account for the
non-working spouse.
An employee's social security number will serve as the identification number
of his or her individual retirement account. An employer identification number
is only required for each individual retirement account that needs to file an
unrelated business income tax return. An employer identification number is also
required for a common fund created for individual retirement accounts.
For more information, get a copy of the required disclosure statement from
your Custodian or get Publication 590, Individual Retirement Arrangements
(IRAs).
SPECIFIC INSTRUCTIONS
ARTICLE IV. Distributions made under this Article may be made in a single sum,
periodic payments, or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70 1/2 to make sure the
requirements of section 408(a)(6) have been met.
ARTICLE VIII. This Article and any that follow it may incorporate additional
provisions that are agreed upon by the Depositor and Custodian to complete the
agreement. These may include for example: definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of Custodian,
Custodian's fees, State law requirements, beginning date of distributions,
prohibited transactions with the Depositor, etc. Use additional pages if
necessary and attach them to this form.
<PAGE>
TRANSFER AGENCY AGREEMENT
This Agreement made as of the _____ of ____________, 1996 between The
Rockwood Growth Fund, Inc., an Idaho corporation ("Fund"), having its principal
office and place of business at 11 Hanover Square, New York, New York 10005 and
DST Systems, Inc., ("DST") a Delaware corporation having its principal office
and place of business at 1055 Broadway, Kansas City, Missouri 64105-1594
(hereinafter referred to as the "Transfer Agent").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth, the
parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have the
following meanings:
1. "APPROVED INSTITUTION" shall mean an entity so named in a
Certificate. From time to time the Fund may amend a previously delivered
Certificate by delivering to the Transfer Agent a Certificate naming an
additional entity or deleting any entity named in a previously delivered
Certificate.
2. THE "BOARD OF DIRECTORS" shall mean the Board of
Directors of the Fund.
3. "CERTIFICATE" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Transfer Agent by the Fund which is signed by any Officer, as hereinafter
defined, and actually received by the Transfer Agent.
4. "CUSTODIAN" shall mean the financial institution
appointed as custodian under the terms and conditions of the
Custody Agreement between the financial institution and the Fund,
or its successor(s).
5. "FUND BUSINESS DAY" shall be deemed to be each day on
which the New York Stock Exchange, Inc. is open for trading.
6. "OFFICER" shall be deemed to be the Fund's President, any Vice
President of the Fund, the Fund's Secretary, the Fund's Treasurer, the Fund's
Controller, any Assistant Controller of the Fund, any Assistant Treasurer of the
Fund and any Assistant Secretary of the Fund, and any other person duly
authorized by the Board of Directors of the Fund to execute any Certificate,
instruction, notice or other instrument on behalf of the Fund and named in the
Certificate annexed hereto as Appendix A, as such Certificate may be amended
from time to time, and any person reasonably believed by the Transfer Agent to
be such a person.
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7. "OUT-OF-POCKET EXPENSES" means amounts reasonably necessary and
actually incurred by Transfer Agent in the provision of Transfer Agent services
or pursuant to this Agreement for the following purposes: postage (and first
class mail insurance in connection with mailing share certificates), envelopes,
check forms, continuous forms, forms for reports and statements, stationery, and
other similar items, telephone and telegraph charges incurred in answering
inquiries from dealers or shareholders, microfilm used to record transactions in
shareholder accounts and computer tapes used for permanent storage of records
and cost of insertion of materials in mailing envelopes by outside firms.
Transfer Agent may, at its option, arrange to have various service providers
submit invoices directly to the Fund for payment of out-of-pocket expenses
reimbursable hereunder; and such other expenses paid or incurred by Transfer
Agent at the request of the Fund. Any charges associated with special or
exception processing shall also be considered Out-of-Pocket Expenses.
8. "PROSPECTUS" shall mean the most recent Fund prospectus actually
received by the Transfer Agent from the Fund with respect to which the Fund has
indicated a registration statement under the Federal Securities Act of 1933 has
becomes effective, including the Statement of Additional Information,
incorporated by reference therein.
9. "SHARES" shall mean all or any part of each class or series of the
shares of common stock of the Fund or Portfolio listed in the Certificate as to
which the Transfer Agent acts as transfer agent hereunder, as may be amended
from time to time, which are authorized and/or issued by the Fund.
10. "TRANSFER AGENT" shall mean DST Systems, Inc., ("DST"),
as transfer agent and dividend disbursing agent under the terms and
conditions of this Agreement, its successor(s) or assign(s).
ARTICLE II
APPOINTMENT OF TRANSFER AGENT
1. The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Fund and as dividend disbursing agent
during the period of this Agreement.
2. The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform duties thereof as hereinafter
set forth.
3. In connection with such appointment, the Fund upon the request of
the Transfer Agent, shall deliver the following documents to the Transfer Agent:
(i) A copy of the Articles of Incorporation of the
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<PAGE>
Fund and all amendments thereto certified by the Secretary of the
Fund;
(ii) A copy of the By-Laws of the Fund certified by the
Secretary of the Fund;
(iii) A copy of a resolution of the Board of Directors of the
Fund certified by the Secretary of the Fund appointing the Transfer Agent and
authorizing the execution of this Transfer Agency Agreement;
(iv) A Certificate signed by the Secretary of the Fund
specifying: the number of authorized Shares, the number of such authorized
Shares issued, the number of such authorized Shares issued and currently
outstanding; the names and specimen signatures of the Officers of the Fund; and
the name and address of the legal counsel for the Fund;
(v) Specimen Share certificate for each or series class of
Shares in the form approved by the Board of Directors of the Fund (and in a
format compatible with the Transfer Agent's system), together with a Certificate
signed by the Secretary of the Fund as to such approval;
(vi) Copies of the Fund's Registration Statement, as amended
to date, and the most recently filed Post-Effective Amendment thereto, filed by
the Fund with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended,
together with any applications filed in connection therewith; and
(vii) Opinion of counsel for the Fund with respect to the
validity of the authorized and outstanding Shares, whether such Shares are fully
paid and non-assessable and the status of such Shares under the Securities Act
of 1933, as amended, and any other applicable federal law or regulation (i.e.,
if subject to registration, that they have been registered and that the
Registration Statement has become effective or, if exempt, the specific grounds
therefor.)
ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
1. The Fund shall deliver to the Transfer Agent the following documents
on or before the effective date of any increase or decrease in the total number
of Shares authorized to be issued:
(a) A certified copy of the amendment to the Articles of
Incorporation giving effect to such increase or decrease;
(b) In the case of an increase, an opinion of counsel for the
Fund with respect to the validity of the Shares of the Fund and the status of
such Shares under the Securities Act of 1933, as
3
<PAGE>
amended, and any other applicable federal law or regulation (i.e., if subject to
registration, that they have been registered and that the Registration Statement
has become effective or, if exempt, the specific grounds therefor); and
(c) In the case of an increase, if the appointment of the
Transfer Agent was theretofore expressly limited, a certified copy of a
resolution of the Board of Directors of the Fund increasing the authority of the
Transfer Agent.
2. Prior to the issuance of any additional Shares of the Fund pursuant
to stock dividends or stock splits, etc., and prior to any reduction in the
number of shares outstanding, the Fund shall deliver the following documents to
the Transfer Agent:
(a) A certified copy of the resolution(s) adopted by the Board
of Directors and/or the shareholders of the Fund authorizing such issuance of
additional Shares of the Fund or such reduction, as the case may be, and
(b) An opinion of counsel for the Fund with respect to the
validity of the Shares of the Fund and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that they have been registered and
that the Registration Statement has become effective, or, if exempt, the
specific grounds therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share certificates, the
Transfer Agent will issue Share certificates in the new form in exchange for, or
upon transfer of, outstanding Share certificates in the old form, upon
receiving:
(a) A Certificate authorizing the issuance of the Share
certificates in the new form;
(b) A certified copy of any amendment to the Articles of
Incorporation with respect to the change;
(c) Specimen Share certificates for each class of Shares in
the new form approved by the Board of Directors of the Fund, with a Certificate
signed by the Secretary of the Fund as to such approval; and
(d) An opinion of counsel for the Fund with respect to the
validity of the Shares in the new form and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that the Shares have been
registered and that the
4
<PAGE>
Registration Statement has become effective or, if exempt, the specific grounds
therefor.)
2. The Fund at its expense shall furnish the Transfer Agent with a
sufficient supply of blank Share certificates in the new form and from time to
time will replenish such supply upon the request of the Transfer Agent. Such
blank Share certificates shall be compatible with the Transfer Agent's system
and shall be properly signed by facsimile or otherwise by Officers of the Fund
authorized by law or by the By-Laws to sign Share certificates and, if required
shall bear the corporate Seal or facsimile thereof. The Fund agrees to indemnify
and exonerate, save and hold the Transfer Agent harmless, from and against any
and all claims or demands that may be asserted against the Transfer Agent with
respect to the genuineness of any Share certificate supplied to the Transfer
Agent by the Fund pursuant to this section 2.
ARTICLE V
ISSUANCE,
REDEMPTION AND TRANSFER OF SHARES
1. (a) The Transfer Agent acknowledges that it has received a copy of
the Fund's Prospectus, which Prospectus describes how sales and redemption of
shares of the Fund shall be made, and the Transfer Agent agrees to accept
purchase orders and redemption requests with respect to Fund shares on each Fund
Business Day in accordance with such Prospectus. The Fund agrees to provide the
Transfer Agent with sufficient advance notice to enable the Transfer Agent to
effect any changes in the procedures set forth in the Prospectus regarding such
purchase and redemption procedure; provided, however, that in no event will such
advance notice be less than 30 days.
(b) The Transfer Agent shall also accept with respect to each
Fund Business Day, at such times as are agreed upon from time to time by the
Transfer Agent and the Fund, a computer tape or electronic data transmission
consistent in all respects with the Transfer Agent's record format, as amended
from time to time, which is reasonably believed by the Transfer Agent to be
furnished by or on behalf of any Approved Institution. The Transfer Agent shall
not be liable for any losses or damages to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
2. On each Fund Business Day the Transfer Agent shall, as of
5
<PAGE>
the time at which the Fund computes the net asset value of the Fund, issue to
and redeem from the accounts specified in a purchase order, redemption request,
or computer tape or electronic data transmission, which in accordance with the
Prospectus is effective on such Fund Business Day, the appropriate number of
full and fractional Shares based on the net asset value per Share of such Fund
specified in an advice received on such Fund Business Day from the Fund.
Notwithstanding the foregoing, if a redemption specified in a computer tape or
electronic data transmission is for a dollar value of Shares in excess of the
dollar value of uncertificated Shares in the specified account, the Transfer
Agent shall not effect such redemption in whole or in part and shall within
twenty-four hours orally advise the Approved Institution which supplied such
tape of the discrepancy.
3. In connection with a reinvestment of a dividend or distribution of
Shares of the Fund, the Transfer Agent shall as of each Fund Business Day, as
specified in a Certificate or resolution described in paragraph 1 of succeeding
Article VI, issue Shares of the Fund based on the net asset value per Share of
such Fund specified in an advice received from the Fund on such Fund Business
Day.
4. On each Fund Business Day the Transfer Agent shall supply the Fund
with a statement specifying with respect to the immediately preceding Fund
Business Day: the total number of Shares of the Fund (including fractional
Shares) issued and outstanding at the opening of business on such day; the total
number of Shares of the Fund sold on such day, pursuant to preceding paragraph 2
of this Article; the total number of Shares of the Fund redeemed from
Shareholders by the Transfer Agent on such day; the total number of Shares of
the Fund, if any, sold on such day pursuant to preceding paragraph 3 of this
Article, and the total number of Shares of the Fund issued and outstanding.
5. In connection with each purchase and each redemption of Shares, the
Transfer Agent shall send such statements as are prescribed by the Federal
Securities laws applicable to transfer agents or as described in the Prospectus.
If the Prospectus indicates that certificates for Shares are available and if
specifically requested in writing by any shareholder, or if otherwise required
hereunder, the Transfer Agent will countersign, issue and mail to such
shareholder at the address set forth in the records of the Transfer Agent a
Share certificate for any full Share requested.
6. As of each Fund Business Day the Transfer Agent shall
6
<PAGE>
furnish the Fund with an advice setting forth the number and dollar amount of
Shares to be redeemed on such Fund Business Day in accordance with paragraph 2
of this Article.
7. Upon receipt of a proper redemption request and moneys paid to it by
the Custodian in connection with a redemption of Shares, the Transfer Agent
shall cancel the redeemed Shares and after making appropriate deduction for any
withholding of taxes required of it by applicable law (a) in the case of a
redemption of Shares pursuant to a redemption described in preceding paragraph
1(a) of this Article, make payment in accordance with the Fund's redemption and
payment procedures described in the Prospectus, and (b) in the case of a
redemption of Shares pursuant to a computer tape or electronic data transmission
described in preceding paragraph 1(b) of this Article, make payment by directing
a federal funds wire order to the account previously designated by the Approved
Institution specified in said computer tape or electronic data transmission.
8. The Transfer Agent shall not be required to issue any Shares after
it has received from an Officer of the Fund or from an appropriate federal or
state authority written notification that the sale of Shares has been suspended
or discontinued, and the Transfer Agent shall be entitled to rely upon such
written notification.
9. Upon the issuance of any Shares in accordance with this Agreement
the Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
10. The Transfer Agent shall accept a computer tape or electronic data
transmission consistent with the Transfer Agent's record format, as amended from
time to time, which is reasonably believed by the Transfer Agent to be furnished
by or on behalf of any Approved Institution and is represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and shall effect the transfers
specified in said computer tape or electronic data transmission. The Transfer
Agent shall not be liable for any losses to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
11.(a) Except as otherwise provided in sub-paragraph (b) of
this paragraph and in paragraph 13 of this Article, Shares will be
7
<PAGE>
transferred or redeemed upon presentation to the Transfer Agent of Share
certificates or instructions properly endorsed for transfer or redemption,
accompanied by such documents as the Transfer Agent deems necessary to evidence
the authority of the person making such transfer or redemption, and bearing
satisfactory evidence of the payment of stock transfer taxes. In the case of
small estates where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate surety bond, and without further approval of
the Fund, transfer or redeem Shares registered in the name of a decedent where
the current market value of the Shares being transferred does not exceed such
amount as may from time to time be prescribed by various states. The Transfer
Agent reserves the right to refuse to transfer or redeem Shares until it is
satisfied that the endorsement on the stock certificate or instructions is valid
and genuine, and for that purpose it will require, unless otherwise instructed
by an authorized officer of the Fund, a guarantee of signature by an "Eligible
Guarantor Institution" as that term is defined by SEC Rule 17Ad-15 under the
Securities Exchange Act of 1934. The Transfer Agent also reserves the right to
refuse to transfer or redeem Shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers or redemptions which the
Transfer Agent, in its judgement, deems improper or unauthorized, or until it is
satisfied that there is no basis to any claims adverse to such transfer or
redemption. The Transfer Agent may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer of securities, and the
Fund shall indemnify the Transfer Agent for any act done or omitted by it in
good faith in reliance upon such laws. In no event will the Fund indemnify the
Transfer Agent for any act done by it as a result of willful misfeasance, bad
faith, negligence or reckless disregard of its duties.
(b) Notwithstanding the foregoing or any other provision contained in
this Agreement to the contrary, the Transfer Agent shall be fully protected by
the Fund in not requiring any instruments, documents, assurances, endorsements
or guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, or transfer, of Shares whenever the Transfer Agent
reasonably believes that requiring the same would be inconsistent with the
transfer and redemption procedures as
8
<PAGE>
described in the Prospectus.
12. Notwithstanding any provision contained in this agreement to the
contrary, the Transfer Agent shall not be required or expected to require, as a
condition to any transfer of any Shares pursuant to paragraph 13 of this Article
or any redemption of any Shares pursuant to a computer tape or electronic data
transmission described in this Agreement, any documents, including, without
limitation, any documents of the kind described in sub-paragraph (a) of
paragraph 13 of this Article, to evidence the authority of the person requesting
the transfer or redemption and/or the payment of any stock transfer taxes, and
shall be fully protected in acting in accordance with the applicable provisions
of this Article.
13. (a) As used in this Agreement, the terms "computer tape or
electronic data transmission" and "computer tape believed by the Transfer Agent
to be furnished by an Approved Institution", shall include any tapes generated
by the Transfer Agent to reflect information believed by the Transfer Agent to
have been input by an Approved Institution, via a remote terminal or other
similar link, into a data processing, storage, or collection system, or similar
system (the "System"), located on the Transfer Agent's premises. For purposes of
paragraph 1 of this Article, such a computer tape or electronic data
transmission shall be deemed to have been furnished at such times as are agreed
upon from time to time by the Transfer Agent and Fund only if the information
reflected thereon was input to the System at such times as are agreed upon in
writing from time to time by the Transfer Agent and the Fund.
(b) Nothing contained in this Agreement shall constitute any agreement
or representation by the Transfer Agent to permit, or to agree to permit, any
Approved Institution to input information into a System.
(c) The Transfer Agent reserves the right to approve, in advance, any
Approved Institution, such approval not to be unreasonably withheld. The
Transfer Agent also reserves the right to terminate any and all automated data
communications, at its discretion, upon a reasonable attempt to notify the Fund
when in the reasonable opinion of the Transfer Agent continuation of such
communications would jeopardize the accuracy and/or integrity of the Fund's
records on the System.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
1. The Fund shall furnish to the Transfer Agent a copy of a
resolution of its Board of Directors, certified by the Secretary or
any Assistant Secretary, either (i) setting forth the date of the
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<PAGE>
declaration of a dividend or distribution, the date of accrual or payment, as
the case may be, thereof, the record date as of which Shareholders entitled to
payment, or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution, the payment date on which all previously
accrued and unpaid dividends are to be paid, and the total amount, if any,
payable to the Transfer Agent on such payment date, or (ii) authorizing the
declaration of dividends and distributions on a daily or other periodic basis
and authorizing the Transfer Agent to rely on a Certificate setting forth the
information described in subsection (i) of this paragraph.
2. Upon the mail date specified in such Certificate or resolution, as
the case may be, the Fund shall, in the case of a cash dividend or distribution,
cause the Custodian to deposit in an account in the name of the Transfer Agent
on behalf of the Fund an amount of cash, if any, sufficient for the Transfer
Agent to make the payment, as of the mail date, specified in such Certificate or
resolution, as the case may be, to the Shareholders who were of record on the
record date. The Transfer Agent will, upon receipt of any such cash, make
payment of such cash dividends or distributions to the shareholders of record as
of the record date by: (i) mailing a check, payable to the registered
shareholder, to the address of record or dividend mailing address, or (ii)
wiring such amounts to the accounts previously designated by an Approved
Institution, as the case may be. The Transfer Agent shall not be liable for any
improper payments made in good faith and without negligence, in accordance with
a Certificate or resolution described in the preceding paragraph. If the
Transfer Agent shall not receive from the Custodian sufficient cash to make
payments of any cash dividend or distribution to all shareholders of the Fund as
of the record date, the Transfer Agent shall, upon notifying the Fund, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to the Transfer Agent.
3. It is understood that the Transfer Agent shall in no way be
responsible for the determination of the rate or form of dividends or capital
gain distributions due to the shareholders. It is expressly agreed and
understood that the Transfer Agent is not liable for any loss as a result of
processing a distribution based on information provided in the Certificate that
is incorrect. The Fund agrees to pay the Transfer Agent for any and all costs,
both direct and out-of-pocket expenses, incurred in such corrective work as
necessary to remedy such error.
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<PAGE>
4. It is understood that the Transfer Agent shall file such appropriate
information returns concerning the payment of dividend and capital gain
distributions with the proper federal, state and local authorities as are
required by law to be filed by the Fund but shall in no way be responsible for
the collection or withholding of taxes due on such dividends or distributions
due to shareholders, except and only to the extent, required by applicable law.
ARTICLE VII
CONCERNING THE FUND
1. The Fund represents to the Transfer Agent that:
(a) It is a corporation duly organized and existing
under the laws of the State of Maryland.
(b) It is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and perform
this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(d) It is an investment company registered under the
Investment Company Act of 1940, as amended.
(e) A registration statement under the Securities Act of 1933,
as amended, with respect to the Shares is effective. The Fund shall notify the
Transfer Agent if such registration statement or any state securities
registrations have been terminated or a stop order has been entered with respect
to the Shares.
2. Each copy of the Articles of Incorporation of the Fund and copies of
all amendments thereto shall be certified by the Secretary of State (or other
appropriate official) of the state of organization, and if such Articles of
Incorporation and/or amendments are required by law also to be filed with a
county or other officer or official body, a certificate of such filing shall be
filed with a certified copy submitted to the Transfer Agent. Each copy of the
By-Laws and copies of all amendments thereto, and copies of resolutions of the
Board of Directors of the Fund, shall be certified by the Secretary of the Fund.
3. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign Share Certificates,
notifications or requests, together with a specimen signature of each new
Officer. In the event any Officer who shall have signed manually or whose
facsimile signature shall have been affixed to blank Share certificates shall
die, resign or be removed prior to issuance of such Share certificates, the
Transfer Agent may issue such Share certificates of the Fund
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<PAGE>
notwithstanding such death, resignation or removal, and the Fund shall promptly
deliver to the Transfer Agent such approval, adoption or ratification as may be
required by law.
4. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent the Fund's currently effective Prospectus and, for purposes of
this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus until a reasonable time, not to exceed
ten (10) business days, after it is actually received by the Transfer Agent.
ARTICLE VIII
CONCERNING THE TRANSFER AGENT
1. The Transfer Agent represents and warrants to the Fund
that:
(a) It is a corporation duly organized and existing
under the laws of the State of Delaware.
(b) It is empowered under applicable law and by its
Charter and By-laws to enter into and perform this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(d) It is duly registered as a transfer agent under Section
17A of the Securities Exchange Act of 1934, as amended.
2. The Transfer Agent shall not be liable and shall be indemnified in
acting upon any computer tape or electronic data transmission, writing or
document reasonably believed by it to be genuine and to have been signed or made
by an Officer of the Fund or person designated by the Fund and shall not be held
to have any notice of any change of authority of any person until receipt of
written notice thereof from the Fund or such person. It shall also be protected
in processing Share certificates which bear the proper countersignature of the
Transfer Agent and which it reasonably believes to bear the proper manual or
facsimile signature of the Officers of the Fund.
3. The Transfer Agent upon reasonable notice to the Fund may establish
such additional procedures, rules and regulations governing the transfer or
registration of Share certificates as it may deem advisable and consistent with
such rules and regulations generally adopted by mutual fund transfer agents.
4. The Transfer Agent shall keep such records as are
specified in Schedule II hereto in the form and manner, and for
such period, as it may deem advisable and is agreeable to the Fund
but not inconsistent with the rules and regulations of appropriate
government authorities, in particular Rules 31a-2 and 31a-3 under
the Investment Company Act of 1940, as amended. The Transfer Agent
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acknowledges that such records are the property of the Fund. The Transfer Agent
may deliver to the Fund from time to time at its discretion, for safekeeping or
disposition by the Fund in accordance with law, such records, papers, documents
accumulated in the execution of its duties as such Transfer Agent, as the
Transfer Agent may deem expedient, other than those which the Transfer Agent is
itself required to maintain pursuant to applicable laws and regulations. The
Fund shall assume all responsibility for any failure thereafter to produce any
record, paper, canceled Share certificate, or other document so returned, if and
when required. The records specified in Schedule II hereto maintained by the
Transfer Agent pursuant to this paragraph 4, which have not been previously
delivered to the Fund pursuant to the foregoing provisions of this paragraph 4,
shall be considered to be the property of the Fund, shall be made available upon
request for inspection by the officers, employees, auditors of the Fund, or such
staff of applicable regulatory agencies as the Fund may designate, and records
shall be delivered to the Fund upon request and in any event upon the date of
termination of this Agreement, as specified in Article IX of this Agreement, in
the form and manner kept by the Transfer Agent on such date of termination or
such earlier date as may be requested by the Fund.
5. The Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its actions or omissions to act or
otherwise, except for any loss or damage arising out of its bad faith,
negligence, willful misfeasance, gross negligence or reckless disregard of its
duties under this agreement.
6 (a) The Fund shall indemnify and exonerate, save and hold harmless
the Transfer Agent from and against any and all claims (whether with or without
basis in fact or law), demands, expenses (including reasonable attorney's fees)
and liabilities of any and every nature which the Transfer Agent may sustain or
incur or which may be asserted against the Transfer Agent by any person by
reason of or as a result of any action taken or omitted to be taken by any prior
transfer agent of the Fund or as a result of any action taken or omitted to be
taken by the Transfer Agent in good faith and without negligence or willful
misconduct or in reliance upon (i) any provision of this Agreement; (ii) the
Prospectus; (iii) any instruction or order including, without limitation, any
computer tape or electronic data transmission reasonably believed by the
Transfer Agent to have been received from an Approved Institution; (iv) any
instrument, order or Share certificate
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<PAGE>
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized Officer of the Fund; (v) any Certificate or
other instructions of an Officer; or (vi) any opinion of legal counsel for the
Fund or the Transfer Agent. The Fund shall indemnify and exonerate, save and
hold the Transfer Agent harmless from and against any and all claims (whether
with or without basis in fact or law), demands, expenses (including reasonable
attorney's fees) and liabilities of any and every nature which the Transfer
Agent may sustain or incur or which may be asserted against the Transfer Agent
by any person by reason of or as a result of any action taken or omitted to be
taken by the Transfer Agent in good faith and without negligence in connection
with its appointment or in reliance upon any law, act, regulation or any
interpretation of the same even though such law, act or regulation may
thereafter have been altered, changed, amended or repealed.
(b) The Transfer Agent shall not settle any claim, demand,
expense or liability to which it may seek indemnity pursuant to paragraph 6(a)
above (each, an "Indemnifiable Claim") without the express written consent of an
Officer of the Fund. The Transfer Agent shall notify the Fund within 15 days of
receipt of notification of an Indemnifiable Claim, provided that the failure by
the Transfer Agent to furnish such notification shall not impair its right to
seek indemnification from the Fund unless the Fund is unable to adequately
defend the Indemnifiable Claim as a result of such failure, or if as a result of
the Transfer Agent's failure to provide the Fund with timely notice of the
institution of litigation a judgment by default is entered. The Fund shall have
the right to defend any Indemnifiable Claim at its own expense, provided that
such defense shall be conducted by counsel selected by the Fund. The Transfer
Agent may join in such defense at its own expense, but to the extent that it
shall so desire the Fund shall direct such defense. The Fund shall not settle
any Indemnifiable Claim without the express written consent of the Transfer
Agent if the Transfer Agent determines that such settlement would have an
adverse effect on the Transfer Agent beyond the scope of this Agreement. In the
event the Transfer Agent does not provide its written consent, each of the Fund
and the Transfer Agent shall be responsible for their own defense at their own
cost and expense, and such claim shall not be deemed an Indemnifiable Claim
hereunder. If the Fund shall fail or refuse to defend an Indemnifiable Claim,
the Transfer Agent may provide its own defense at the cost and expense of the
Fund. Anything in this
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<PAGE>
Agreement to the contrary notwithstanding, the Fund shall not indemnify the
Transfer Agent against any liability or expense arising out of the Transfer
Agent's willful misfeasance, bad faith, negligence or reckless disregard of its
duties and obligations under this Agreement.
The Transfer Agent shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Transfer Agent as a result of the Transfer Agent's
lack of good faith, negligence or willful misconduct.
7. The Transfer Agent shall not be liable to the Fund with respect to
any redemption draft on which the signature of the drawer is forged and which
the Fund's Custodian or Cash Management Bank has advised the Transfer Agent to
honor the redemption. Provided that the Transfer Agent inspects redemption
drafts with reasonable care to verify the drawer's signature against signatures
on file, the Transfer Agent shall not be liable for any material alteration or
absence or forgery of any endorsement.
8. There shall be excluded from the consideration of whether the
Transfer Agent has been negligent or has breached this Agreement, any period of
time, and only such period of time, during which the Transfer Agent's
performance is materially affected, by reason of circumstances beyond its
control and not reasonably foreseeable in that the Transfer Agent could not
reasonable have made back-up or alternative arrangements (collectively,
"Causes"), including, without limitation (except as provided below), mechanical
breakdowns of equipment (including any alternative power supply and operating
systems software), flood or catastrophe, acts of God, failures of
transportation, communication or power supply, strikes, lockouts, work stoppages
or other similar circumstances.
9. At any time the Transfer Agent may apply to an Officer of the Fund
for written instructions with respect to any matter arising in connection with
the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by the
Transfer Agent for written instructions from an Officer of the Fund may set
forth in writing any action proposed to be taken or omitted by the Transfer
Agent with respect to its duties or obligations under this Agreement and the
date on and/or after which such action shall be taken. The Transfer Agent shall
not be liable for any action taken or omitted in accordance with a proposal
included in
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any such application on or after the date specified therein unless, prior to
taking or omitting any such action, the Transfer Agent has received written
instructions in response to such application specifying the action to be taken
or omitted. The Transfer Agent may consult counsel of the Fund, or if acceptable
to the Fund, its own counsel, at the expense of the Fund and shall be fully
protected with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the Fund or its own counsel.
10. The Transfer Agent may issue new Share certificates in place of
certificates represented to have been lost, stolen, or destroyed upon receiving
written instructions from the shareholder accompanied by proof of an indemnity
or surety bond issued by a recognized insurance institution specified by the
Fund or the Transfer Agent. If the Transfer Agent receives written notification
from the shareholder or broker dealer that the certificate issued was never
received, and such notification is made within 30 days of the date of issuance,
the Transfer Agent may reissue the certificate without requiring a surety bond.
The Transfer Agent may also reissue certificates which are represented as lost,
stolen, or destroyed without requiring a surety bond provided that the
notification is in writing and accompanied by an indemnification signed on
behalf of a member firm of the New York Stock Exchange and signed by an officer
of said firm with the signature guaranteed. Notwithstanding the foregoing, the
Transfer Agent will reissue a certificate upon written authorization from an
Officer of the Fund.
11. In case of any requests or demands for the inspection of the
shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund promptly and to secure instructions from an Officer as to such inspection.
The Transfer Agent reserves the right, however, to exhibit the shareholder
records to any person whenever it receives an opinion from its counsel that
there is a reasonable likelihood that the Transfer Agent will be held liable for
the failure to exhibit the shareholder records to such person; provided,
however, that in connection with any such disclosure the Transfer Agent shall
promptly notify the Fund that such disclosure has been made or is to be made.
12. At the request of an Officer of the Fund the Transfer
Agent will address and mail such appropriate notices to
shareholders as the Fund may direct.
13. Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation
16
<PAGE>
to inquire into, and shall not be liable for:
(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of the
Approved Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer of Shares, or of a redemption
of any Shares, the propriety of the amount to be paid therefor, or the authority
of the Approved Institution or of the Fund, as the case may be, to request such
transfer or redemption;
(c) The legality of the declaration of any dividend by
the Fund, or the legality of the issue of any Shares in payment of
any stock dividend; or
(d) The legality of any recapitalization or readjustment
of Shares.
14. The Transfer Agent shall be entitled to receive and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Schedule I hereto, (i) its
reasonable out-of-pocket expenses (including reasonable legal expenses and
attorney's fees) incurred in connection with its performance hereunder and (ii)
such compensation as may be agreed upon in writing from time to time by the
Transfer Agent and the Fund.
15. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
16. Purchase and Prices of Services.
(a) The Fund will compensate the Transfer Agent for, and
Transfer Agent will provide, beginning on the execution date of this Agreement
and continuing until the termination of this Agreement as provided hereinafter,
the Services set forth in Schedule I.
(b) The current unit prices for the Services are set forth in
Schedule III (the "Schedule III Fee Schedule"). Once in each calendar year,
after the third anniversary of the date hereof, the Transfer Agent may elect to
raise the Schedule III Fees upon ninety (90) days prior notice to the Fund.
Notwithstanding the annual right to raise the Schedule III Fees, the Transfer
Agent may increase prices due to changes in legal or regulatory requirements
subject to the approval of the Fund, which approval shall not be unreasonably
withheld.
17. Billing and Payment.
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(a) The Transfer Agent shall bill the Fund as follows: (i)
monthly in arrears for Accounts maintained and Out-of-Pocket Expenses; and (ii)
monthly in advance for estimated postage expenses to be incurred by the Transfer
Agent for the following month. Documentation to support reconciliation of actual
postage expense charges will be provided to the Fund monthly. The Transfer Agent
may from time to time request the Fund to make additional advances when
appropriate.
(b) The Fund shall pay the Transfer Agent in immediately
available funds at United Missouri Bank in Kansas City, Missouri within thirty
(30) days of the date of the bill and receipt of supporting documents. Any
amounts due under this Agreement which are not paid within said thirty (30) day
period shall bear interest at the rate of one and one-half percent (1 1/2%) per
month from such date until paid in full.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of
receipt of such notice. In the event such notice is given by the Fund, it shall
be accompanied by a copy of a resolution of the Board of Directors of the Fund,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement and designating the successor transfer agent or transfer agents.
In the event such notice is given by the Transfer Agent, the Fund shall on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Directors certified by the Secretary or any Assistant
Secretary designating a successor transfer agent or transfer agents. In the
absence of such designation by the Fund, the Fund shall upon the date specified
in the notice of termination of this Agreement and delivery of the records
maintained hereunder, be deemed to be its own transfer agent and the Transfer
Agent shall thereby be relieved of all duties and responsibilities pursuant to
this Agreement.
In the event this Agreement is terminated as provided herein, the
Transfer Agent, upon the written request of the Fund, shall deliver the records
of the Fund on electromagnetic media to the Fund or its successor transfer
agent. The Fund shall be responsible to the Transfer Agent for the reasonable
costs and expenses associated with the preparation and delivery of such media.
ARTICLE X
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<PAGE>
MISCELLANEOUS
1. The Fund agrees that prior to effecting any change in the Prospectus
which would increase or alter the duties and obligations of the Transfer Agent
hereunder, it shall advise the Transfer Agent of such proposed change at least
30 days prior to the intended date of the same, and shall proceed with such
change only if it shall have received the written consent of the Transfer Agent
thereto, which consent shall not be unreasonably withheld.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address first
above written, or at such other place as the Fund may from time to time
designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent and mailed or delivered to the Secretary at 1055
Broadway, Kansas City, Missouri 64105-1594 with a copy to the President at 1055
Broadway, Kansas City, Missouri 64105-1594 or at such other place as the
Transfer Agent may from time to time designate in writing.
4. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with
the formality of this Agreement.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns. This Agreement shall not be
assignable by either party without the written consent of the other party,
except that the Transfer Agent may assign this Agreement to a corporate
affiliate with advance written notice to and consent by the Fund, which consent
shall not be unreasonably withheld.
6. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
7. This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
9. (a) The Transfer Agent will endeavor to assist in resolving
shareholder inquiries and errors relating to the period during which prior
transfer agents acted as such for the Fund. Any such inquiries or errors which
cannot be expediently resolved by the Transfer Agent will be referred to the
Fund.
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(b) The Transfer Agent shall only be responsible for the
safekeeping and maintenance of transfer agency records, canceled certificates
and correspondence of the Fund created or produced prior to the time of
conversion which are under its control and acknowledged in a writing to the Fund
to be in its possession. Any expenses or liabilities incurred by the Transfer
Agent as a result of shareholder inquiries, regulatory compliance or audits
related to such records and not caused as a result of Transfer Agent's bad
faith, willful malfeasance or negligence shall be the responsibility of the Fund
as provided in Article VIII herein.
10. The Transfer Agent shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provision for
periodic backup or computer files and data with respect to the Fund and
emergency use of electronic data processing equipment. In the event of equipment
failures the Transfer Agent shall at no additional expense to the Fund, take all
reasonable steps to minimize service interruptions, the Transfer Agent shall
have no liability with respect to the loss of data or service interruptions
caused by equipment failures, provided such loss or interruption is not caused
by the negligence of the Transfer Agent and provided further that the Transfer
Agent has complied with the provisions of this Paragraph.
11. The Transfer Agent agrees on its own behalf and that of its
employees to make reasonable efforts to keep confidential all records of the
Fund and information relating to the Fund and its shareholders (past, present
and future), its investment advisor and its principal underwriter, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund prior to its release. The Fund agrees that such consent shall not be
unreasonably withheld, and may not be withheld where Transfer Agent may be
exposed to civil or criminal contempt proceedings or when required to divulge
such information or records to duly constituted authorities.
12. The Transfer Agent shall maintain insurance of the types and in the
amounts deemed by it to be appropriate. To the extent that policies of insurance
may provide for coverage of claims for liability or indemnity by the parties set
forth in this Agreement, the contracts of insurance shall take precedence, and
no provision of this Agreement shall be construed to relieve an insurer of any
obligation to pay claims to the Fund, the Transfer Agent or other insured party
which would otherwise be a covered claim in the absence of any provision of this
Agreement.
13. The Transfer Agent represents and warrants that, to the
20
<PAGE>
best of its knowledge, the various procedures and systems which the Transfer
Agent has implemented with regard to the safeguarding from loss or damage
attributable to fire, theft or any other cause (including provision for
twenty-four hours a day restricted access) of the Fund's blank checks,
certificates, records and other data and the Transfer Agent's equipment,
facilities and other property used in the performance of its obligations
hereunder are adequate, and that it will make such changes therein from time to
time as in its judgment are required for the secure performance of its
obligations hereunder. The Transfer Agent shall review such systems and
procedures on a periodic basis and the Fund shall have access to review these
systems and procedures.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officer, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as the day and year
first above written.
DST SYSTEMS, INC. THE ROCKWOOD GROWTH
FUND, INC.
By: __________________________ By: _______________________
(Signature) (Signature)
-------------------------- -----------------------
(Name) (Name)
-------------------------- -----------------------
(Title) (Title)
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<PAGE>
SCHEDULE I
DESCRIPTION OF SERVICES
In consideration of the fees to be paid in such manner and at such
times as Fund and Transfer Agent may agree, Transfer Agent will provide the
services set forth below:
Examine and Process New Accounts, Subsequent Payments, Liquidations,
Exchanges, Telephone Transactions, Check Redemptions, Automatic Withdrawals,
Certificate Issuance, Wire Order Trades, Dividends, Dividend Statements, Dealer
Statements.
DAILY ACTIVITY
Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
Name and Address, including Zip Code
Balance of Uncertificated Shares
Balance of Certificated Shares
Certificate number, number of shares, issuance date of each certificate
outstanding and cancellation date for each certificate date for each
certificate no longer outstanding, if issued
Balance of dollars available for redemption
Dividend code (daily accrual, monthly reinvest, monthly cash
or quarterly cash)
Type of account code
Establishment date indicating the date an account was opened,
carrying forward pre-conversion data as available
Original establishment date for accounts opened by exchange
W-9 withholding status and periodic reporting
State of residence code
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<PAGE>
Social Security or taxpayer identification number, and
indication of certification
Historical transactions on the account for the most recent 18 months,
or other period as mutually agreed to from time-to-time
Indication as to whether phone transactions can be accepted
for this account. Beneficial owner code, i.e. male, female,
joint tenant, etc.
An alternate or "secondary" account number issued by a dealer
(or bank, etc.) to a customer for use, inquiry and transaction
input by "remote accessors"
FUNCTIONS
Answer investor and dealer telephone and/or written inquiries, except
those concerning Fund policy, or requests for investment advice which
will be referred to the Fund, or those which the Fund chooses to answer
Deposit Fund share certificates into accounts upon receipt of
instructions from the investor or other authorized person, if issued
Examine and process transfers of shares insuring that all transfer
requirements and legal documents have been supplied
Process and confirm address changes
Process standard account record changes as required, i.e.
Dividend Codes, etc.
Microfilm source documents for transactions, such as account
applications and correspondence
Perform backup withholding for those accounts which federal
government regulations indicate is necessary
Perform withholdings on liquidations, if applicable, for
23
<PAGE>
employee benefit plans. Prepare and mail 5498s and 1099R's
Solicit missing taxpayer identification numbers
Provide remote access inquiry to Fund records via Fund supplied
hardware (Fund responsible for connection line and monthly fee)
REPORTS PROVIDED
Daily Journals Reflecting all shares and
dollar activity for the
previous day
Blue Sky Report Supply information monthly
for Fund's preparation of
Blue Sky Reporting
N-SAR Report Supply monthly correspondence,
redemption and liquidation
information for use in fund's
N-SAR Report
Additionally, monthly average daily balance reports will be provided at
the Fund's request to the Fund at no charge. Prepare and mail copies of
summary statements to dealers and investment advisers
Generate and mail confirmation statements for financial
transactions
DIVIDEND ACTIVITY
Reinvest or pay in cash including reinvesting in other funds within the
fund group serviced by the Transfer Agent as described in each Fund
Prospectus
Distribute capital gains simultaneously with income dividends
DEALER SERVICES
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<PAGE>
Prepare and mail confirmation statements to dealers daily
Prepare and mail copies of statements to dealers, same
frequency as investor statements
ANNUAL MEETINGS
Assist Fund in obtaining a qualified service to: address and mail
proxies and related material, tabulate returned proxies and supply
daily reports when sufficient proxies have been received
Prepare certified list of stockholders, hard copy or microform
PERIODIC ACTIVITIES
Mail transaction confirmation statements daily to investors
Address and mail four (4) periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably
specified by the Transfer Agent)
Mail periodic statement to investors
Compute, prepare and furnish all necessary reports to
Governmental authorities: Forms 1099R, 1099DIV, 1099B, 1042
and 1042S
Enclose various marketing material as designated by the Fund in
statement mailings, i.e. monthly and quarterly statements (material
must be adaptable to mechanical equipment as reasonably specified by
the Transfer Agent)
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<PAGE>
SCHEDULE II
RECORDS MAINTAINED BY TRANSFER AGENT
- Account applications
- Canceled certificates plus stock powers and supporting
documents
- Checks including check registers, reconciliation records,
any adjustment records and tax withholding documentation
- Indemnity bonds for replacement of lost or missing stock
certificates and checks
- Liquidation, redemption, withdrawal and transfer requests
including stock powers, signature guarantees and any
supporting documentation
26
<PAGE>
TRANSFER AGENCY AGREEMENT
This Agreement made as of the _____ of ____________, 1996 between The
Rockwood Growth Fund, Inc., an Idaho corporation ("Fund"), having its principal
office and place of business at 11 Hanover Square, New York, New York 10005 and
DST Systems, Inc., ("DST") a Delaware corporation having its principal office
and place of business at 1055 Broadway, Kansas City, Missouri 64105-1594
(hereinafter referred to as the "Transfer Agent").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth, the
parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have the
following meanings:
1. "APPROVED INSTITUTION" shall mean an entity so named in a
Certificate. From time to time the Fund may amend a previously delivered
Certificate by delivering to the Transfer Agent a Certificate naming an
additional entity or deleting any entity named in a previously delivered
Certificate.
2. THE "BOARD OF DIRECTORS" shall mean the Board of
Directors of the Fund.
3. "CERTIFICATE" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Transfer Agent by the Fund which is signed by any Officer, as hereinafter
defined, and actually received by the Transfer Agent.
4. "CUSTODIAN" shall mean the financial institution
appointed as custodian under the terms and conditions of the
Custody Agreement between the financial institution and the Fund,
or its successor(s).
5. "FUND BUSINESS DAY" shall be deemed to be each day on
which the New York Stock Exchange, Inc. is open for trading.
6. "OFFICER" shall be deemed to be the Fund's President, any Vice
President of the Fund, the Fund's Secretary, the Fund's Treasurer, the Fund's
Controller, any Assistant Controller of the Fund, any Assistant Treasurer of the
Fund and any Assistant Secretary of the Fund, and any other person duly
authorized by the Board of Directors of the Fund to execute any Certificate,
instruction, notice or other instrument on behalf of the Fund and named in the
Certificate annexed hereto as Appendix A, as such Certificate may be amended
from time to time, and any person reasonably believed by the Transfer Agent to
be such a person.
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<PAGE>
7. "OUT-OF-POCKET EXPENSES" means amounts reasonably necessary and
actually incurred by Transfer Agent in the provision of Transfer Agent services
or pursuant to this Agreement for the following purposes: postage (and first
class mail insurance in connection with mailing share certificates), envelopes,
check forms, continuous forms, forms for reports and statements, stationery, and
other similar items, telephone and telegraph charges incurred in answering
inquiries from dealers or shareholders, microfilm used to record transactions in
shareholder accounts and computer tapes used for permanent storage of records
and cost of insertion of materials in mailing envelopes by outside firms.
Transfer Agent may, at its option, arrange to have various service providers
submit invoices directly to the Fund for payment of out-of-pocket expenses
reimbursable hereunder; and such other expenses paid or incurred by Transfer
Agent at the request of the Fund. Any charges associated with special or
exception processing shall also be considered Out-of-Pocket Expenses.
8. "PROSPECTUS" shall mean the most recent Fund prospectus actually
received by the Transfer Agent from the Fund with respect to which the Fund has
indicated a registration statement under the Federal Securities Act of 1933 has
becomes effective, including the Statement of Additional Information,
incorporated by reference therein.
9. "SHARES" shall mean all or any part of each class or series of the
shares of common stock of the Fund or Portfolio listed in the Certificate as to
which the Transfer Agent acts as transfer agent hereunder, as may be amended
from time to time, which are authorized and/or issued by the Fund.
10. "TRANSFER AGENT" shall mean DST Systems, Inc., ("DST"),
as transfer agent and dividend disbursing agent under the terms and
conditions of this Agreement, its successor(s) or assign(s).
ARTICLE II
APPOINTMENT OF TRANSFER AGENT
1. The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Fund and as dividend disbursing agent
during the period of this Agreement.
2. The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform duties thereof as hereinafter
set forth.
3. In connection with such appointment, the Fund upon the request of
the Transfer Agent, shall deliver the following documents to the Transfer Agent:
(i) A copy of the Articles of Incorporation of the
2
<PAGE>
Fund and all amendments thereto certified by the Secretary of the
Fund;
(ii) A copy of the By-Laws of the Fund certified by the
Secretary of the Fund;
(iii) A copy of a resolution of the Board of Directors of the
Fund certified by the Secretary of the Fund appointing the Transfer Agent and
authorizing the execution of this Transfer Agency Agreement;
(iv) A Certificate signed by the Secretary of the Fund
specifying: the number of authorized Shares, the number of such authorized
Shares issued, the number of such authorized Shares issued and currently
outstanding; the names and specimen signatures of the Officers of the Fund; and
the name and address of the legal counsel for the Fund;
(v) Specimen Share certificate for each or series class of
Shares in the form approved by the Board of Directors of the Fund (and in a
format compatible with the Transfer Agent's system), together with a Certificate
signed by the Secretary of the Fund as to such approval;
(vi) Copies of the Fund's Registration Statement, as amended
to date, and the most recently filed Post-Effective Amendment thereto, filed by
the Fund with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended,
together with any applications filed in connection therewith; and
(vii) Opinion of counsel for the Fund with respect to the
validity of the authorized and outstanding Shares, whether such Shares are fully
paid and non-assessable and the status of such Shares under the Securities Act
of 1933, as amended, and any other applicable federal law or regulation (i.e.,
if subject to registration, that they have been registered and that the
Registration Statement has become effective or, if exempt, the specific grounds
therefor.)
ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
1. The Fund shall deliver to the Transfer Agent the following documents
on or before the effective date of any increase or decrease in the total number
of Shares authorized to be issued:
(a) A certified copy of the amendment to the Articles of
Incorporation giving effect to such increase or decrease;
(b) In the case of an increase, an opinion of counsel for the
Fund with respect to the validity of the Shares of the Fund and the status of
such Shares under the Securities Act of 1933, as
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amended, and any other applicable federal law or regulation (i.e., if subject to
registration, that they have been registered and that the Registration Statement
has become effective or, if exempt, the specific grounds therefor); and
(c) In the case of an increase, if the appointment of the
Transfer Agent was theretofore expressly limited, a certified copy of a
resolution of the Board of Directors of the Fund increasing the authority of the
Transfer Agent.
2. Prior to the issuance of any additional Shares of the Fund pursuant
to stock dividends or stock splits, etc., and prior to any reduction in the
number of shares outstanding, the Fund shall deliver the following documents to
the Transfer Agent:
(a) A certified copy of the resolution(s) adopted by the Board
of Directors and/or the shareholders of the Fund authorizing such issuance of
additional Shares of the Fund or such reduction, as the case may be, and
(b) An opinion of counsel for the Fund with respect to the
validity of the Shares of the Fund and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that they have been registered and
that the Registration Statement has become effective, or, if exempt, the
specific grounds therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share certificates, the
Transfer Agent will issue Share certificates in the new form in exchange for, or
upon transfer of, outstanding Share certificates in the old form, upon
receiving:
(a) A Certificate authorizing the issuance of the Share
certificates in the new form;
(b) A certified copy of any amendment to the Articles of
Incorporation with respect to the change;
(c) Specimen Share certificates for each class of Shares in
the new form approved by the Board of Directors of the Fund, with a Certificate
signed by the Secretary of the Fund as to such approval; and
(d) An opinion of counsel for the Fund with respect to the
validity of the Shares in the new form and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that the Shares have been
registered and that the
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Registration Statement has become effective or, if exempt, the specific grounds
therefor.)
2. The Fund at its expense shall furnish the Transfer Agent with a
sufficient supply of blank Share certificates in the new form and from time to
time will replenish such supply upon the request of the Transfer Agent. Such
blank Share certificates shall be compatible with the Transfer Agent's system
and shall be properly signed by facsimile or otherwise by Officers of the Fund
authorized by law or by the By-Laws to sign Share certificates and, if required
shall bear the corporate Seal or facsimile thereof. The Fund agrees to indemnify
and exonerate, save and hold the Transfer Agent harmless, from and against any
and all claims or demands that may be asserted against the Transfer Agent with
respect to the genuineness of any Share certificate supplied to the Transfer
Agent by the Fund pursuant to this section 2.
ARTICLE V
ISSUANCE,
REDEMPTION AND TRANSFER OF SHARES
1. (a) The Transfer Agent acknowledges that it has received a copy of
the Fund's Prospectus, which Prospectus describes how sales and redemption of
shares of the Fund shall be made, and the Transfer Agent agrees to accept
purchase orders and redemption requests with respect to Fund shares on each Fund
Business Day in accordance with such Prospectus. The Fund agrees to provide the
Transfer Agent with sufficient advance notice to enable the Transfer Agent to
effect any changes in the procedures set forth in the Prospectus regarding such
purchase and redemption procedure; provided, however, that in no event will such
advance notice be less than 30 days.
(b) The Transfer Agent shall also accept with respect to each
Fund Business Day, at such times as are agreed upon from time to time by the
Transfer Agent and the Fund, a computer tape or electronic data transmission
consistent in all respects with the Transfer Agent's record format, as amended
from time to time, which is reasonably believed by the Transfer Agent to be
furnished by or on behalf of any Approved Institution. The Transfer Agent shall
not be liable for any losses or damages to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
2. On each Fund Business Day the Transfer Agent shall, as of
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the time at which the Fund computes the net asset value of the Fund, issue to
and redeem from the accounts specified in a purchase order, redemption request,
or computer tape or electronic data transmission, which in accordance with the
Prospectus is effective on such Fund Business Day, the appropriate number of
full and fractional Shares based on the net asset value per Share of such Fund
specified in an advice received on such Fund Business Day from the Fund.
Notwithstanding the foregoing, if a redemption specified in a computer tape or
electronic data transmission is for a dollar value of Shares in excess of the
dollar value of uncertificated Shares in the specified account, the Transfer
Agent shall not effect such redemption in whole or in part and shall within
twenty-four hours orally advise the Approved Institution which supplied such
tape of the discrepancy.
3. In connection with a reinvestment of a dividend or distribution of
Shares of the Fund, the Transfer Agent shall as of each Fund Business Day, as
specified in a Certificate or resolution described in paragraph 1 of succeeding
Article VI, issue Shares of the Fund based on the net asset value per Share of
such Fund specified in an advice received from the Fund on such Fund Business
Day.
4. On each Fund Business Day the Transfer Agent shall supply the Fund
with a statement specifying with respect to the immediately preceding Fund
Business Day: the total number of Shares of the Fund (including fractional
Shares) issued and outstanding at the opening of business on such day; the total
number of Shares of the Fund sold on such day, pursuant to preceding paragraph 2
of this Article; the total number of Shares of the Fund redeemed from
Shareholders by the Transfer Agent on such day; the total number of Shares of
the Fund, if any, sold on such day pursuant to preceding paragraph 3 of this
Article, and the total number of Shares of the Fund issued and outstanding.
5. In connection with each purchase and each redemption of Shares, the
Transfer Agent shall send such statements as are prescribed by the Federal
Securities laws applicable to transfer agents or as described in the Prospectus.
If the Prospectus indicates that certificates for Shares are available and if
specifically requested in writing by any shareholder, or if otherwise required
hereunder, the Transfer Agent will countersign, issue and mail to such
shareholder at the address set forth in the records of the Transfer Agent a
Share certificate for any full Share requested.
6. As of each Fund Business Day the Transfer Agent shall
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furnish the Fund with an advice setting forth the number and dollar amount of
Shares to be redeemed on such Fund Business Day in accordance with paragraph 2
of this Article.
7. Upon receipt of a proper redemption request and moneys paid to it by
the Custodian in connection with a redemption of Shares, the Transfer Agent
shall cancel the redeemed Shares and after making appropriate deduction for any
withholding of taxes required of it by applicable law (a) in the case of a
redemption of Shares pursuant to a redemption described in preceding paragraph
1(a) of this Article, make payment in accordance with the Fund's redemption and
payment procedures described in the Prospectus, and (b) in the case of a
redemption of Shares pursuant to a computer tape or electronic data transmission
described in preceding paragraph 1(b) of this Article, make payment by directing
a federal funds wire order to the account previously designated by the Approved
Institution specified in said computer tape or electronic data transmission.
8. The Transfer Agent shall not be required to issue any Shares after
it has received from an Officer of the Fund or from an appropriate federal or
state authority written notification that the sale of Shares has been suspended
or discontinued, and the Transfer Agent shall be entitled to rely upon such
written notification.
9. Upon the issuance of any Shares in accordance with this Agreement
the Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
10. The Transfer Agent shall accept a computer tape or electronic data
transmission consistent with the Transfer Agent's record format, as amended from
time to time, which is reasonably believed by the Transfer Agent to be furnished
by or on behalf of any Approved Institution and is represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and shall effect the transfers
specified in said computer tape or electronic data transmission. The Transfer
Agent shall not be liable for any losses to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
11.(a) Except as otherwise provided in sub-paragraph (b) of
this paragraph and in paragraph 13 of this Article, Shares will be
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<PAGE>
transferred or redeemed upon presentation to the Transfer Agent of Share
certificates or instructions properly endorsed for transfer or redemption,
accompanied by such documents as the Transfer Agent deems necessary to evidence
the authority of the person making such transfer or redemption, and bearing
satisfactory evidence of the payment of stock transfer taxes. In the case of
small estates where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate surety bond, and without further approval of
the Fund, transfer or redeem Shares registered in the name of a decedent where
the current market value of the Shares being transferred does not exceed such
amount as may from time to time be prescribed by various states. The Transfer
Agent reserves the right to refuse to transfer or redeem Shares until it is
satisfied that the endorsement on the stock certificate or instructions is valid
and genuine, and for that purpose it will require, unless otherwise instructed
by an authorized officer of the Fund, a guarantee of signature by an "Eligible
Guarantor Institution" as that term is defined by SEC Rule 17Ad-15 under the
Securities Exchange Act of 1934. The Transfer Agent also reserves the right to
refuse to transfer or redeem Shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers or redemptions which the
Transfer Agent, in its judgement, deems improper or unauthorized, or until it is
satisfied that there is no basis to any claims adverse to such transfer or
redemption. The Transfer Agent may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer of securities, and the
Fund shall indemnify the Transfer Agent for any act done or omitted by it in
good faith in reliance upon such laws. In no event will the Fund indemnify the
Transfer Agent for any act done by it as a result of willful misfeasance, bad
faith, negligence or reckless disregard of its duties.
(b) Notwithstanding the foregoing or any other provision contained in
this Agreement to the contrary, the Transfer Agent shall be fully protected by
the Fund in not requiring any instruments, documents, assurances, endorsements
or guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, or transfer, of Shares whenever the Transfer Agent
reasonably believes that requiring the same would be inconsistent with the
transfer and redemption procedures as
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<PAGE>
described in the Prospectus.
12. Notwithstanding any provision contained in this agreement to the
contrary, the Transfer Agent shall not be required or expected to require, as a
condition to any transfer of any Shares pursuant to paragraph 13 of this Article
or any redemption of any Shares pursuant to a computer tape or electronic data
transmission described in this Agreement, any documents, including, without
limitation, any documents of the kind described in sub-paragraph (a) of
paragraph 13 of this Article, to evidence the authority of the person requesting
the transfer or redemption and/or the payment of any stock transfer taxes, and
shall be fully protected in acting in accordance with the applicable provisions
of this Article.
13. (a) As used in this Agreement, the terms "computer tape or
electronic data transmission" and "computer tape believed by the Transfer Agent
to be furnished by an Approved Institution", shall include any tapes generated
by the Transfer Agent to reflect information believed by the Transfer Agent to
have been input by an Approved Institution, via a remote terminal or other
similar link, into a data processing, storage, or collection system, or similar
system (the "System"), located on the Transfer Agent's premises. For purposes of
paragraph 1 of this Article, such a computer tape or electronic data
transmission shall be deemed to have been furnished at such times as are agreed
upon from time to time by the Transfer Agent and Fund only if the information
reflected thereon was input to the System at such times as are agreed upon in
writing from time to time by the Transfer Agent and the Fund.
(b) Nothing contained in this Agreement shall constitute any agreement
or representation by the Transfer Agent to permit, or to agree to permit, any
Approved Institution to input information into a System.
(c) The Transfer Agent reserves the right to approve, in advance, any
Approved Institution, such approval not to be unreasonably withheld. The
Transfer Agent also reserves the right to terminate any and all automated data
communications, at its discretion, upon a reasonable attempt to notify the Fund
when in the reasonable opinion of the Transfer Agent continuation of such
communications would jeopardize the accuracy and/or integrity of the Fund's
records on the System.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
1. The Fund shall furnish to the Transfer Agent a copy of a
resolution of its Board of Directors, certified by the Secretary or
any Assistant Secretary, either (i) setting forth the date of the
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<PAGE>
declaration of a dividend or distribution, the date of accrual or payment, as
the case may be, thereof, the record date as of which Shareholders entitled to
payment, or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution, the payment date on which all previously
accrued and unpaid dividends are to be paid, and the total amount, if any,
payable to the Transfer Agent on such payment date, or (ii) authorizing the
declaration of dividends and distributions on a daily or other periodic basis
and authorizing the Transfer Agent to rely on a Certificate setting forth the
information described in subsection (i) of this paragraph.
2. Upon the mail date specified in such Certificate or resolution, as
the case may be, the Fund shall, in the case of a cash dividend or distribution,
cause the Custodian to deposit in an account in the name of the Transfer Agent
on behalf of the Fund an amount of cash, if any, sufficient for the Transfer
Agent to make the payment, as of the mail date, specified in such Certificate or
resolution, as the case may be, to the Shareholders who were of record on the
record date. The Transfer Agent will, upon receipt of any such cash, make
payment of such cash dividends or distributions to the shareholders of record as
of the record date by: (i) mailing a check, payable to the registered
shareholder, to the address of record or dividend mailing address, or (ii)
wiring such amounts to the accounts previously designated by an Approved
Institution, as the case may be. The Transfer Agent shall not be liable for any
improper payments made in good faith and without negligence, in accordance with
a Certificate or resolution described in the preceding paragraph. If the
Transfer Agent shall not receive from the Custodian sufficient cash to make
payments of any cash dividend or distribution to all shareholders of the Fund as
of the record date, the Transfer Agent shall, upon notifying the Fund, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to the Transfer Agent.
3. It is understood that the Transfer Agent shall in no way be
responsible for the determination of the rate or form of dividends or capital
gain distributions due to the shareholders. It is expressly agreed and
understood that the Transfer Agent is not liable for any loss as a result of
processing a distribution based on information provided in the Certificate that
is incorrect. The Fund agrees to pay the Transfer Agent for any and all costs,
both direct and out-of-pocket expenses, incurred in such corrective work as
necessary to remedy such error.
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4. It is understood that the Transfer Agent shall file such appropriate
information returns concerning the payment of dividend and capital gain
distributions with the proper federal, state and local authorities as are
required by law to be filed by the Fund but shall in no way be responsible for
the collection or withholding of taxes due on such dividends or distributions
due to shareholders, except and only to the extent, required by applicable law.
ARTICLE VII
CONCERNING THE FUND
1. The Fund represents to the Transfer Agent that:
(a) It is a corporation duly organized and existing
under the laws of the State of Maryland.
(b) It is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and perform
this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(d) It is an investment company registered under the
Investment Company Act of 1940, as amended.
(e) A registration statement under the Securities Act of 1933,
as amended, with respect to the Shares is effective. The Fund shall notify the
Transfer Agent if such registration statement or any state securities
registrations have been terminated or a stop order has been entered with respect
to the Shares.
2. Each copy of the Articles of Incorporation of the Fund and copies of
all amendments thereto shall be certified by the Secretary of State (or other
appropriate official) of the state of organization, and if such Articles of
Incorporation and/or amendments are required by law also to be filed with a
county or other officer or official body, a certificate of such filing shall be
filed with a certified copy submitted to the Transfer Agent. Each copy of the
By-Laws and copies of all amendments thereto, and copies of resolutions of the
Board of Directors of the Fund, shall be certified by the Secretary of the Fund.
3. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign Share Certificates,
notifications or requests, together with a specimen signature of each new
Officer. In the event any Officer who shall have signed manually or whose
facsimile signature shall have been affixed to blank Share certificates shall
die, resign or be removed prior to issuance of such Share certificates, the
Transfer Agent may issue such Share certificates of the Fund
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<PAGE>
notwithstanding such death, resignation or removal, and the Fund shall promptly
deliver to the Transfer Agent such approval, adoption or ratification as may be
required by law.
4. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent the Fund's currently effective Prospectus and, for purposes of
this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus until a reasonable time, not to exceed
ten (10) business days, after it is actually received by the Transfer Agent.
ARTICLE VIII
CONCERNING THE TRANSFER AGENT
1. The Transfer Agent represents and warrants to the Fund
that:
(a) It is a corporation duly organized and existing
under the laws of the State of Delaware.
(b) It is empowered under applicable law and by its
Charter and By-laws to enter into and perform this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(d) It is duly registered as a transfer agent under Section
17A of the Securities Exchange Act of 1934, as amended.
2. The Transfer Agent shall not be liable and shall be indemnified in
acting upon any computer tape or electronic data transmission, writing or
document reasonably believed by it to be genuine and to have been signed or made
by an Officer of the Fund or person designated by the Fund and shall not be held
to have any notice of any change of authority of any person until receipt of
written notice thereof from the Fund or such person. It shall also be protected
in processing Share certificates which bear the proper countersignature of the
Transfer Agent and which it reasonably believes to bear the proper manual or
facsimile signature of the Officers of the Fund.
3. The Transfer Agent upon reasonable notice to the Fund may establish
such additional procedures, rules and regulations governing the transfer or
registration of Share certificates as it may deem advisable and consistent with
such rules and regulations generally adopted by mutual fund transfer agents.
4. The Transfer Agent shall keep such records as are
specified in Schedule II hereto in the form and manner, and for
such period, as it may deem advisable and is agreeable to the Fund
but not inconsistent with the rules and regulations of appropriate
government authorities, in particular Rules 31a-2 and 31a-3 under
the Investment Company Act of 1940, as amended. The Transfer Agent
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<PAGE>
acknowledges that such records are the property of the Fund. The Transfer Agent
may deliver to the Fund from time to time at its discretion, for safekeeping or
disposition by the Fund in accordance with law, such records, papers, documents
accumulated in the execution of its duties as such Transfer Agent, as the
Transfer Agent may deem expedient, other than those which the Transfer Agent is
itself required to maintain pursuant to applicable laws and regulations. The
Fund shall assume all responsibility for any failure thereafter to produce any
record, paper, canceled Share certificate, or other document so returned, if and
when required. The records specified in Schedule II hereto maintained by the
Transfer Agent pursuant to this paragraph 4, which have not been previously
delivered to the Fund pursuant to the foregoing provisions of this paragraph 4,
shall be considered to be the property of the Fund, shall be made available upon
request for inspection by the officers, employees, auditors of the Fund, or such
staff of applicable regulatory agencies as the Fund may designate, and records
shall be delivered to the Fund upon request and in any event upon the date of
termination of this Agreement, as specified in Article IX of this Agreement, in
the form and manner kept by the Transfer Agent on such date of termination or
such earlier date as may be requested by the Fund.
5. The Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its actions or omissions to act or
otherwise, except for any loss or damage arising out of its bad faith,
negligence, willful misfeasance, gross negligence or reckless disregard of its
duties under this agreement.
6 (a) The Fund shall indemnify and exonerate, save and hold harmless
the Transfer Agent from and against any and all claims (whether with or without
basis in fact or law), demands, expenses (including reasonable attorney's fees)
and liabilities of any and every nature which the Transfer Agent may sustain or
incur or which may be asserted against the Transfer Agent by any person by
reason of or as a result of any action taken or omitted to be taken by any prior
transfer agent of the Fund or as a result of any action taken or omitted to be
taken by the Transfer Agent in good faith and without negligence or willful
misconduct or in reliance upon (i) any provision of this Agreement; (ii) the
Prospectus; (iii) any instruction or order including, without limitation, any
computer tape or electronic data transmission reasonably believed by the
Transfer Agent to have been received from an Approved Institution; (iv) any
instrument, order or Share certificate
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<PAGE>
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized Officer of the Fund; (v) any Certificate or
other instructions of an Officer; or (vi) any opinion of legal counsel for the
Fund or the Transfer Agent. The Fund shall indemnify and exonerate, save and
hold the Transfer Agent harmless from and against any and all claims (whether
with or without basis in fact or law), demands, expenses (including reasonable
attorney's fees) and liabilities of any and every nature which the Transfer
Agent may sustain or incur or which may be asserted against the Transfer Agent
by any person by reason of or as a result of any action taken or omitted to be
taken by the Transfer Agent in good faith and without negligence in connection
with its appointment or in reliance upon any law, act, regulation or any
interpretation of the same even though such law, act or regulation may
thereafter have been altered, changed, amended or repealed.
(b) The Transfer Agent shall not settle any claim, demand,
expense or liability to which it may seek indemnity pursuant to paragraph 6(a)
above (each, an "Indemnifiable Claim") without the express written consent of an
Officer of the Fund. The Transfer Agent shall notify the Fund within 15 days of
receipt of notification of an Indemnifiable Claim, provided that the failure by
the Transfer Agent to furnish such notification shall not impair its right to
seek indemnification from the Fund unless the Fund is unable to adequately
defend the Indemnifiable Claim as a result of such failure, or if as a result of
the Transfer Agent's failure to provide the Fund with timely notice of the
institution of litigation a judgment by default is entered. The Fund shall have
the right to defend any Indemnifiable Claim at its own expense, provided that
such defense shall be conducted by counsel selected by the Fund. The Transfer
Agent may join in such defense at its own expense, but to the extent that it
shall so desire the Fund shall direct such defense. The Fund shall not settle
any Indemnifiable Claim without the express written consent of the Transfer
Agent if the Transfer Agent determines that such settlement would have an
adverse effect on the Transfer Agent beyond the scope of this Agreement. In the
event the Transfer Agent does not provide its written consent, each of the Fund
and the Transfer Agent shall be responsible for their own defense at their own
cost and expense, and such claim shall not be deemed an Indemnifiable Claim
hereunder. If the Fund shall fail or refuse to defend an Indemnifiable Claim,
the Transfer Agent may provide its own defense at the cost and expense of the
Fund. Anything in this
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<PAGE>
Agreement to the contrary notwithstanding, the Fund shall not indemnify the
Transfer Agent against any liability or expense arising out of the Transfer
Agent's willful misfeasance, bad faith, negligence or reckless disregard of its
duties and obligations under this Agreement.
The Transfer Agent shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Transfer Agent as a result of the Transfer Agent's
lack of good faith, negligence or willful misconduct.
7. The Transfer Agent shall not be liable to the Fund with respect to
any redemption draft on which the signature of the drawer is forged and which
the Fund's Custodian or Cash Management Bank has advised the Transfer Agent to
honor the redemption. Provided that the Transfer Agent inspects redemption
drafts with reasonable care to verify the drawer's signature against signatures
on file, the Transfer Agent shall not be liable for any material alteration or
absence or forgery of any endorsement.
8. There shall be excluded from the consideration of whether the
Transfer Agent has been negligent or has breached this Agreement, any period of
time, and only such period of time, during which the Transfer Agent's
performance is materially affected, by reason of circumstances beyond its
control and not reasonably foreseeable in that the Transfer Agent could not
reasonable have made back-up or alternative arrangements (collectively,
"Causes"), including, without limitation (except as provided below), mechanical
breakdowns of equipment (including any alternative power supply and operating
systems software), flood or catastrophe, acts of God, failures of
transportation, communication or power supply, strikes, lockouts, work stoppages
or other similar circumstances.
9. At any time the Transfer Agent may apply to an Officer of the Fund
for written instructions with respect to any matter arising in connection with
the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by the
Transfer Agent for written instructions from an Officer of the Fund may set
forth in writing any action proposed to be taken or omitted by the Transfer
Agent with respect to its duties or obligations under this Agreement and the
date on and/or after which such action shall be taken. The Transfer Agent shall
not be liable for any action taken or omitted in accordance with a proposal
included in
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any such application on or after the date specified therein unless, prior to
taking or omitting any such action, the Transfer Agent has received written
instructions in response to such application specifying the action to be taken
or omitted. The Transfer Agent may consult counsel of the Fund, or if acceptable
to the Fund, its own counsel, at the expense of the Fund and shall be fully
protected with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the Fund or its own counsel.
10. The Transfer Agent may issue new Share certificates in place of
certificates represented to have been lost, stolen, or destroyed upon receiving
written instructions from the shareholder accompanied by proof of an indemnity
or surety bond issued by a recognized insurance institution specified by the
Fund or the Transfer Agent. If the Transfer Agent receives written notification
from the shareholder or broker dealer that the certificate issued was never
received, and such notification is made within 30 days of the date of issuance,
the Transfer Agent may reissue the certificate without requiring a surety bond.
The Transfer Agent may also reissue certificates which are represented as lost,
stolen, or destroyed without requiring a surety bond provided that the
notification is in writing and accompanied by an indemnification signed on
behalf of a member firm of the New York Stock Exchange and signed by an officer
of said firm with the signature guaranteed. Notwithstanding the foregoing, the
Transfer Agent will reissue a certificate upon written authorization from an
Officer of the Fund.
11. In case of any requests or demands for the inspection of the
shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund promptly and to secure instructions from an Officer as to such inspection.
The Transfer Agent reserves the right, however, to exhibit the shareholder
records to any person whenever it receives an opinion from its counsel that
there is a reasonable likelihood that the Transfer Agent will be held liable for
the failure to exhibit the shareholder records to such person; provided,
however, that in connection with any such disclosure the Transfer Agent shall
promptly notify the Fund that such disclosure has been made or is to be made.
12. At the request of an Officer of the Fund the Transfer
Agent will address and mail such appropriate notices to
shareholders as the Fund may direct.
13. Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation
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<PAGE>
to inquire into, and shall not be liable for:
(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of the
Approved Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer of Shares, or of a redemption
of any Shares, the propriety of the amount to be paid therefor, or the authority
of the Approved Institution or of the Fund, as the case may be, to request such
transfer or redemption;
(c) The legality of the declaration of any dividend by
the Fund, or the legality of the issue of any Shares in payment of
any stock dividend; or
(d) The legality of any recapitalization or readjustment
of Shares.
14. The Transfer Agent shall be entitled to receive and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Schedule I hereto, (i) its
reasonable out-of-pocket expenses (including reasonable legal expenses and
attorney's fees) incurred in connection with its performance hereunder and (ii)
such compensation as may be agreed upon in writing from time to time by the
Transfer Agent and the Fund.
15. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
16. Purchase and Prices of Services.
(a) The Fund will compensate the Transfer Agent for, and
Transfer Agent will provide, beginning on the execution date of this Agreement
and continuing until the termination of this Agreement as provided hereinafter,
the Services set forth in Schedule I.
(b) The current unit prices for the Services are set forth in
Schedule III (the "Schedule III Fee Schedule"). Once in each calendar year,
after the third anniversary of the date hereof, the Transfer Agent may elect to
raise the Schedule III Fees upon ninety (90) days prior notice to the Fund.
Notwithstanding the annual right to raise the Schedule III Fees, the Transfer
Agent may increase prices due to changes in legal or regulatory requirements
subject to the approval of the Fund, which approval shall not be unreasonably
withheld.
17. Billing and Payment.
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(a) The Transfer Agent shall bill the Fund as follows: (i)
monthly in arrears for Accounts maintained and Out-of-Pocket Expenses; and (ii)
monthly in advance for estimated postage expenses to be incurred by the Transfer
Agent for the following month. Documentation to support reconciliation of actual
postage expense charges will be provided to the Fund monthly. The Transfer Agent
may from time to time request the Fund to make additional advances when
appropriate.
(b) The Fund shall pay the Transfer Agent in immediately
available funds at United Missouri Bank in Kansas City, Missouri within thirty
(30) days of the date of the bill and receipt of supporting documents. Any
amounts due under this Agreement which are not paid within said thirty (30) day
period shall bear interest at the rate of one and one-half percent (1 1/2%) per
month from such date until paid in full.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of
receipt of such notice. In the event such notice is given by the Fund, it shall
be accompanied by a copy of a resolution of the Board of Directors of the Fund,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement and designating the successor transfer agent or transfer agents.
In the event such notice is given by the Transfer Agent, the Fund shall on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Directors certified by the Secretary or any Assistant
Secretary designating a successor transfer agent or transfer agents. In the
absence of such designation by the Fund, the Fund shall upon the date specified
in the notice of termination of this Agreement and delivery of the records
maintained hereunder, be deemed to be its own transfer agent and the Transfer
Agent shall thereby be relieved of all duties and responsibilities pursuant to
this Agreement.
In the event this Agreement is terminated as provided herein, the
Transfer Agent, upon the written request of the Fund, shall deliver the records
of the Fund on electromagnetic media to the Fund or its successor transfer
agent. The Fund shall be responsible to the Transfer Agent for the reasonable
costs and expenses associated with the preparation and delivery of such media.
ARTICLE X
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MISCELLANEOUS
1. The Fund agrees that prior to effecting any change in the Prospectus
which would increase or alter the duties and obligations of the Transfer Agent
hereunder, it shall advise the Transfer Agent of such proposed change at least
30 days prior to the intended date of the same, and shall proceed with such
change only if it shall have received the written consent of the Transfer Agent
thereto, which consent shall not be unreasonably withheld.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address first
above written, or at such other place as the Fund may from time to time
designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent and mailed or delivered to the Secretary at 1055
Broadway, Kansas City, Missouri 64105-1594 with a copy to the President at 1055
Broadway, Kansas City, Missouri 64105-1594 or at such other place as the
Transfer Agent may from time to time designate in writing.
4. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with
the formality of this Agreement.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns. This Agreement shall not be
assignable by either party without the written consent of the other party,
except that the Transfer Agent may assign this Agreement to a corporate
affiliate with advance written notice to and consent by the Fund, which consent
shall not be unreasonably withheld.
6. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
7. This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
9. (a) The Transfer Agent will endeavor to assist in resolving
shareholder inquiries and errors relating to the period during which prior
transfer agents acted as such for the Fund. Any such inquiries or errors which
cannot be expediently resolved by the Transfer Agent will be referred to the
Fund.
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(b) The Transfer Agent shall only be responsible for the
safekeeping and maintenance of transfer agency records, canceled certificates
and correspondence of the Fund created or produced prior to the time of
conversion which are under its control and acknowledged in a writing to the Fund
to be in its possession. Any expenses or liabilities incurred by the Transfer
Agent as a result of shareholder inquiries, regulatory compliance or audits
related to such records and not caused as a result of Transfer Agent's bad
faith, willful malfeasance or negligence shall be the responsibility of the Fund
as provided in Article VIII herein.
10. The Transfer Agent shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provision for
periodic backup or computer files and data with respect to the Fund and
emergency use of electronic data processing equipment. In the event of equipment
failures the Transfer Agent shall at no additional expense to the Fund, take all
reasonable steps to minimize service interruptions, the Transfer Agent shall
have no liability with respect to the loss of data or service interruptions
caused by equipment failures, provided such loss or interruption is not caused
by the negligence of the Transfer Agent and provided further that the Transfer
Agent has complied with the provisions of this Paragraph.
11. The Transfer Agent agrees on its own behalf and that of its
employees to make reasonable efforts to keep confidential all records of the
Fund and information relating to the Fund and its shareholders (past, present
and future), its investment advisor and its principal underwriter, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund prior to its release. The Fund agrees that such consent shall not be
unreasonably withheld, and may not be withheld where Transfer Agent may be
exposed to civil or criminal contempt proceedings or when required to divulge
such information or records to duly constituted authorities.
12. The Transfer Agent shall maintain insurance of the types and in the
amounts deemed by it to be appropriate. To the extent that policies of insurance
may provide for coverage of claims for liability or indemnity by the parties set
forth in this Agreement, the contracts of insurance shall take precedence, and
no provision of this Agreement shall be construed to relieve an insurer of any
obligation to pay claims to the Fund, the Transfer Agent or other insured party
which would otherwise be a covered claim in the absence of any provision of this
Agreement.
13. The Transfer Agent represents and warrants that, to the
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best of its knowledge, the various procedures and systems which the Transfer
Agent has implemented with regard to the safeguarding from loss or damage
attributable to fire, theft or any other cause (including provision for
twenty-four hours a day restricted access) of the Fund's blank checks,
certificates, records and other data and the Transfer Agent's equipment,
facilities and other property used in the performance of its obligations
hereunder are adequate, and that it will make such changes therein from time to
time as in its judgment are required for the secure performance of its
obligations hereunder. The Transfer Agent shall review such systems and
procedures on a periodic basis and the Fund shall have access to review these
systems and procedures.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officer, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as the day and year
first above written.
DST SYSTEMS, INC. THE ROCKWOOD GROWTH
FUND, INC.
By: __________________________ By: _______________________
(Signature) (Signature)
-------------------------- -----------------------
(Name) (Name)
-------------------------- -----------------------
(Title) (Title)
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<PAGE>
SCHEDULE I
DESCRIPTION OF SERVICES
In consideration of the fees to be paid in such manner and at such
times as Fund and Transfer Agent may agree, Transfer Agent will provide the
services set forth below:
Examine and Process New Accounts, Subsequent Payments, Liquidations,
Exchanges, Telephone Transactions, Check Redemptions, Automatic Withdrawals,
Certificate Issuance, Wire Order Trades, Dividends, Dividend Statements, Dealer
Statements.
DAILY ACTIVITY
Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
Name and Address, including Zip Code
Balance of Uncertificated Shares
Balance of Certificated Shares
Certificate number, number of shares, issuance date of each certificate
outstanding and cancellation date for each certificate date for each
certificate no longer outstanding, if issued
Balance of dollars available for redemption
Dividend code (daily accrual, monthly reinvest, monthly cash
or quarterly cash)
Type of account code
Establishment date indicating the date an account was opened,
carrying forward pre-conversion data as available
Original establishment date for accounts opened by exchange
W-9 withholding status and periodic reporting
State of residence code
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Social Security or taxpayer identification number, and
indication of certification
Historical transactions on the account for the most recent 18 months,
or other period as mutually agreed to from time-to-time
Indication as to whether phone transactions can be accepted
for this account. Beneficial owner code, i.e. male, female,
joint tenant, etc.
An alternate or "secondary" account number issued by a dealer
(or bank, etc.) to a customer for use, inquiry and transaction
input by "remote accessors"
FUNCTIONS
Answer investor and dealer telephone and/or written inquiries, except
those concerning Fund policy, or requests for investment advice which
will be referred to the Fund, or those which the Fund chooses to answer
Deposit Fund share certificates into accounts upon receipt of
instructions from the investor or other authorized person, if issued
Examine and process transfers of shares insuring that all transfer
requirements and legal documents have been supplied
Process and confirm address changes
Process standard account record changes as required, i.e.
Dividend Codes, etc.
Microfilm source documents for transactions, such as account
applications and correspondence
Perform backup withholding for those accounts which federal
government regulations indicate is necessary
Perform withholdings on liquidations, if applicable, for
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<PAGE>
employee benefit plans. Prepare and mail 5498s and 1099R's
Solicit missing taxpayer identification numbers
Provide remote access inquiry to Fund records via Fund supplied
hardware (Fund responsible for connection line and monthly fee)
REPORTS PROVIDED
Daily Journals Reflecting all shares and
dollar activity for the
previous day
Blue Sky Report Supply information monthly
for Fund's preparation of
Blue Sky Reporting
N-SAR Report Supply monthly correspondence,
redemption and liquidation
information for use in fund's
N-SAR Report
Additionally, monthly average daily balance reports will be provided at
the Fund's request to the Fund at no charge. Prepare and mail copies of
summary statements to dealers and investment advisers
Generate and mail confirmation statements for financial
transactions
DIVIDEND ACTIVITY
Reinvest or pay in cash including reinvesting in other funds within the
fund group serviced by the Transfer Agent as described in each Fund
Prospectus
Distribute capital gains simultaneously with income dividends
DEALER SERVICES
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<PAGE>
Prepare and mail confirmation statements to dealers daily
Prepare and mail copies of statements to dealers, same
frequency as investor statements
ANNUAL MEETINGS
Assist Fund in obtaining a qualified service to: address and mail
proxies and related material, tabulate returned proxies and supply
daily reports when sufficient proxies have been received
Prepare certified list of stockholders, hard copy or microform
PERIODIC ACTIVITIES
Mail transaction confirmation statements daily to investors
Address and mail four (4) periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably
specified by the Transfer Agent)
Mail periodic statement to investors
Compute, prepare and furnish all necessary reports to
Governmental authorities: Forms 1099R, 1099DIV, 1099B, 1042
and 1042S
Enclose various marketing material as designated by the Fund in
statement mailings, i.e. monthly and quarterly statements (material
must be adaptable to mechanical equipment as reasonably specified by
the Transfer Agent)
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<PAGE>
SCHEDULE II
RECORDS MAINTAINED BY TRANSFER AGENT
- Account applications
- Canceled certificates plus stock powers and supporting
documents
- Checks including check registers, reconciliation records,
any adjustment records and tax withholding documentation
- Indemnity bonds for replacement of lost or missing stock
certificates and checks
- Liquidation, redemption, withdrawal and transfer requests
including stock powers, signature guarantees and any
supporting documentation
26
<PAGE>
TRANSFER AGENCY AGREEMENT
This Agreement made as of the _____ of ____________, 1996 between The
Rockwood Growth Fund, Inc., an Idaho corporation ("Fund"), having its principal
office and place of business at 11 Hanover Square, New York, New York 10005 and
DST Systems, Inc., ("DST") a Delaware corporation having its principal office
and place of business at 1055 Broadway, Kansas City, Missouri 64105-1594
(hereinafter referred to as the "Transfer Agent").
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set forth, the
parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases shall have the
following meanings:
1. "APPROVED INSTITUTION" shall mean an entity so named in a
Certificate. From time to time the Fund may amend a previously delivered
Certificate by delivering to the Transfer Agent a Certificate naming an
additional entity or deleting any entity named in a previously delivered
Certificate.
2. THE "BOARD OF DIRECTORS" shall mean the Board of
Directors of the Fund.
3. "CERTIFICATE" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Transfer Agent by the Fund which is signed by any Officer, as hereinafter
defined, and actually received by the Transfer Agent.
4. "CUSTODIAN" shall mean the financial institution
appointed as custodian under the terms and conditions of the
Custody Agreement between the financial institution and the Fund,
or its successor(s).
5. "FUND BUSINESS DAY" shall be deemed to be each day on
which the New York Stock Exchange, Inc. is open for trading.
6. "OFFICER" shall be deemed to be the Fund's President, any Vice
President of the Fund, the Fund's Secretary, the Fund's Treasurer, the Fund's
Controller, any Assistant Controller of the Fund, any Assistant Treasurer of the
Fund and any Assistant Secretary of the Fund, and any other person duly
authorized by the Board of Directors of the Fund to execute any Certificate,
instruction, notice or other instrument on behalf of the Fund and named in the
Certificate annexed hereto as Appendix A, as such Certificate may be amended
from time to time, and any person reasonably believed by the Transfer Agent to
be such a person.
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<PAGE>
7. "OUT-OF-POCKET EXPENSES" means amounts reasonably necessary and
actually incurred by Transfer Agent in the provision of Transfer Agent services
or pursuant to this Agreement for the following purposes: postage (and first
class mail insurance in connection with mailing share certificates), envelopes,
check forms, continuous forms, forms for reports and statements, stationery, and
other similar items, telephone and telegraph charges incurred in answering
inquiries from dealers or shareholders, microfilm used to record transactions in
shareholder accounts and computer tapes used for permanent storage of records
and cost of insertion of materials in mailing envelopes by outside firms.
Transfer Agent may, at its option, arrange to have various service providers
submit invoices directly to the Fund for payment of out-of-pocket expenses
reimbursable hereunder; and such other expenses paid or incurred by Transfer
Agent at the request of the Fund. Any charges associated with special or
exception processing shall also be considered Out-of-Pocket Expenses.
8. "PROSPECTUS" shall mean the most recent Fund prospectus actually
received by the Transfer Agent from the Fund with respect to which the Fund has
indicated a registration statement under the Federal Securities Act of 1933 has
becomes effective, including the Statement of Additional Information,
incorporated by reference therein.
9. "SHARES" shall mean all or any part of each class or series of the
shares of common stock of the Fund or Portfolio listed in the Certificate as to
which the Transfer Agent acts as transfer agent hereunder, as may be amended
from time to time, which are authorized and/or issued by the Fund.
10. "TRANSFER AGENT" shall mean DST Systems, Inc., ("DST"),
as transfer agent and dividend disbursing agent under the terms and
conditions of this Agreement, its successor(s) or assign(s).
ARTICLE II
APPOINTMENT OF TRANSFER AGENT
1. The Fund hereby constitutes and appoints the Transfer Agent as
transfer agent of all the Shares of the Fund and as dividend disbursing agent
during the period of this Agreement.
2. The Transfer Agent hereby accepts appointment as transfer agent and
dividend disbursing agent and agrees to perform duties thereof as hereinafter
set forth.
3. In connection with such appointment, the Fund upon the request of
the Transfer Agent, shall deliver the following documents to the Transfer Agent:
(i) A copy of the Articles of Incorporation of the
2
<PAGE>
Fund and all amendments thereto certified by the Secretary of the
Fund;
(ii) A copy of the By-Laws of the Fund certified by the
Secretary of the Fund;
(iii) A copy of a resolution of the Board of Directors of the
Fund certified by the Secretary of the Fund appointing the Transfer Agent and
authorizing the execution of this Transfer Agency Agreement;
(iv) A Certificate signed by the Secretary of the Fund
specifying: the number of authorized Shares, the number of such authorized
Shares issued, the number of such authorized Shares issued and currently
outstanding; the names and specimen signatures of the Officers of the Fund; and
the name and address of the legal counsel for the Fund;
(v) Specimen Share certificate for each or series class of
Shares in the form approved by the Board of Directors of the Fund (and in a
format compatible with the Transfer Agent's system), together with a Certificate
signed by the Secretary of the Fund as to such approval;
(vi) Copies of the Fund's Registration Statement, as amended
to date, and the most recently filed Post-Effective Amendment thereto, filed by
the Fund with the Securities and Exchange Commission under the Securities Act of
1933, as amended, and under the Investment Company Act of 1940, as amended,
together with any applications filed in connection therewith; and
(vii) Opinion of counsel for the Fund with respect to the
validity of the authorized and outstanding Shares, whether such Shares are fully
paid and non-assessable and the status of such Shares under the Securities Act
of 1933, as amended, and any other applicable federal law or regulation (i.e.,
if subject to registration, that they have been registered and that the
Registration Statement has become effective or, if exempt, the specific grounds
therefor.)
ARTICLE III
AUTHORIZATION AND ISSUANCE OF SHARES
1. The Fund shall deliver to the Transfer Agent the following documents
on or before the effective date of any increase or decrease in the total number
of Shares authorized to be issued:
(a) A certified copy of the amendment to the Articles of
Incorporation giving effect to such increase or decrease;
(b) In the case of an increase, an opinion of counsel for the
Fund with respect to the validity of the Shares of the Fund and the status of
such Shares under the Securities Act of 1933, as
3
<PAGE>
amended, and any other applicable federal law or regulation (i.e., if subject to
registration, that they have been registered and that the Registration Statement
has become effective or, if exempt, the specific grounds therefor); and
(c) In the case of an increase, if the appointment of the
Transfer Agent was theretofore expressly limited, a certified copy of a
resolution of the Board of Directors of the Fund increasing the authority of the
Transfer Agent.
2. Prior to the issuance of any additional Shares of the Fund pursuant
to stock dividends or stock splits, etc., and prior to any reduction in the
number of shares outstanding, the Fund shall deliver the following documents to
the Transfer Agent:
(a) A certified copy of the resolution(s) adopted by the Board
of Directors and/or the shareholders of the Fund authorizing such issuance of
additional Shares of the Fund or such reduction, as the case may be, and
(b) An opinion of counsel for the Fund with respect to the
validity of the Shares of the Fund and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that they have been registered and
that the Registration Statement has become effective, or, if exempt, the
specific grounds therefor).
ARTICLE IV
RECAPITALIZATION OR CAPITAL ADJUSTMENT
1. In the case of any negative stock split, recapitalization or other
capital adjustment requiring a change in the form of Share certificates, the
Transfer Agent will issue Share certificates in the new form in exchange for, or
upon transfer of, outstanding Share certificates in the old form, upon
receiving:
(a) A Certificate authorizing the issuance of the Share
certificates in the new form;
(b) A certified copy of any amendment to the Articles of
Incorporation with respect to the change;
(c) Specimen Share certificates for each class of Shares in
the new form approved by the Board of Directors of the Fund, with a Certificate
signed by the Secretary of the Fund as to such approval; and
(d) An opinion of counsel for the Fund with respect to the
validity of the Shares in the new form and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law or
regulation (i.e., if subject to registration, that the Shares have been
registered and that the
4
<PAGE>
Registration Statement has become effective or, if exempt, the specific grounds
therefor.)
2. The Fund at its expense shall furnish the Transfer Agent with a
sufficient supply of blank Share certificates in the new form and from time to
time will replenish such supply upon the request of the Transfer Agent. Such
blank Share certificates shall be compatible with the Transfer Agent's system
and shall be properly signed by facsimile or otherwise by Officers of the Fund
authorized by law or by the By-Laws to sign Share certificates and, if required
shall bear the corporate Seal or facsimile thereof. The Fund agrees to indemnify
and exonerate, save and hold the Transfer Agent harmless, from and against any
and all claims or demands that may be asserted against the Transfer Agent with
respect to the genuineness of any Share certificate supplied to the Transfer
Agent by the Fund pursuant to this section 2.
ARTICLE V
ISSUANCE,
REDEMPTION AND TRANSFER OF SHARES
1. (a) The Transfer Agent acknowledges that it has received a copy of
the Fund's Prospectus, which Prospectus describes how sales and redemption of
shares of the Fund shall be made, and the Transfer Agent agrees to accept
purchase orders and redemption requests with respect to Fund shares on each Fund
Business Day in accordance with such Prospectus. The Fund agrees to provide the
Transfer Agent with sufficient advance notice to enable the Transfer Agent to
effect any changes in the procedures set forth in the Prospectus regarding such
purchase and redemption procedure; provided, however, that in no event will such
advance notice be less than 30 days.
(b) The Transfer Agent shall also accept with respect to each
Fund Business Day, at such times as are agreed upon from time to time by the
Transfer Agent and the Fund, a computer tape or electronic data transmission
consistent in all respects with the Transfer Agent's record format, as amended
from time to time, which is reasonably believed by the Transfer Agent to be
furnished by or on behalf of any Approved Institution. The Transfer Agent shall
not be liable for any losses or damages to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
2. On each Fund Business Day the Transfer Agent shall, as of
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<PAGE>
the time at which the Fund computes the net asset value of the Fund, issue to
and redeem from the accounts specified in a purchase order, redemption request,
or computer tape or electronic data transmission, which in accordance with the
Prospectus is effective on such Fund Business Day, the appropriate number of
full and fractional Shares based on the net asset value per Share of such Fund
specified in an advice received on such Fund Business Day from the Fund.
Notwithstanding the foregoing, if a redemption specified in a computer tape or
electronic data transmission is for a dollar value of Shares in excess of the
dollar value of uncertificated Shares in the specified account, the Transfer
Agent shall not effect such redemption in whole or in part and shall within
twenty-four hours orally advise the Approved Institution which supplied such
tape of the discrepancy.
3. In connection with a reinvestment of a dividend or distribution of
Shares of the Fund, the Transfer Agent shall as of each Fund Business Day, as
specified in a Certificate or resolution described in paragraph 1 of succeeding
Article VI, issue Shares of the Fund based on the net asset value per Share of
such Fund specified in an advice received from the Fund on such Fund Business
Day.
4. On each Fund Business Day the Transfer Agent shall supply the Fund
with a statement specifying with respect to the immediately preceding Fund
Business Day: the total number of Shares of the Fund (including fractional
Shares) issued and outstanding at the opening of business on such day; the total
number of Shares of the Fund sold on such day, pursuant to preceding paragraph 2
of this Article; the total number of Shares of the Fund redeemed from
Shareholders by the Transfer Agent on such day; the total number of Shares of
the Fund, if any, sold on such day pursuant to preceding paragraph 3 of this
Article, and the total number of Shares of the Fund issued and outstanding.
5. In connection with each purchase and each redemption of Shares, the
Transfer Agent shall send such statements as are prescribed by the Federal
Securities laws applicable to transfer agents or as described in the Prospectus.
If the Prospectus indicates that certificates for Shares are available and if
specifically requested in writing by any shareholder, or if otherwise required
hereunder, the Transfer Agent will countersign, issue and mail to such
shareholder at the address set forth in the records of the Transfer Agent a
Share certificate for any full Share requested.
6. As of each Fund Business Day the Transfer Agent shall
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<PAGE>
furnish the Fund with an advice setting forth the number and dollar amount of
Shares to be redeemed on such Fund Business Day in accordance with paragraph 2
of this Article.
7. Upon receipt of a proper redemption request and moneys paid to it by
the Custodian in connection with a redemption of Shares, the Transfer Agent
shall cancel the redeemed Shares and after making appropriate deduction for any
withholding of taxes required of it by applicable law (a) in the case of a
redemption of Shares pursuant to a redemption described in preceding paragraph
1(a) of this Article, make payment in accordance with the Fund's redemption and
payment procedures described in the Prospectus, and (b) in the case of a
redemption of Shares pursuant to a computer tape or electronic data transmission
described in preceding paragraph 1(b) of this Article, make payment by directing
a federal funds wire order to the account previously designated by the Approved
Institution specified in said computer tape or electronic data transmission.
8. The Transfer Agent shall not be required to issue any Shares after
it has received from an Officer of the Fund or from an appropriate federal or
state authority written notification that the sale of Shares has been suspended
or discontinued, and the Transfer Agent shall be entitled to rely upon such
written notification.
9. Upon the issuance of any Shares in accordance with this Agreement
the Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Fund in connection with such
issuance of any Shares.
10. The Transfer Agent shall accept a computer tape or electronic data
transmission consistent with the Transfer Agent's record format, as amended from
time to time, which is reasonably believed by the Transfer Agent to be furnished
by or on behalf of any Approved Institution and is represented to be
instructions with respect to the transfer of Shares from one account of such
Approved Institution to another such account, and shall effect the transfers
specified in said computer tape or electronic data transmission. The Transfer
Agent shall not be liable for any losses to the Fund or its shareholders in the
event that a computer tape or electronic data transmission from an Approved
Institution is unable to be processed for any reason beyond the control of the
Transfer Agent, or if any of the information on such tape or transmission is
found to be incorrect.
11.(a) Except as otherwise provided in sub-paragraph (b) of
this paragraph and in paragraph 13 of this Article, Shares will be
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<PAGE>
transferred or redeemed upon presentation to the Transfer Agent of Share
certificates or instructions properly endorsed for transfer or redemption,
accompanied by such documents as the Transfer Agent deems necessary to evidence
the authority of the person making such transfer or redemption, and bearing
satisfactory evidence of the payment of stock transfer taxes. In the case of
small estates where no administration is contemplated, the Transfer Agent may,
when furnished with an appropriate surety bond, and without further approval of
the Fund, transfer or redeem Shares registered in the name of a decedent where
the current market value of the Shares being transferred does not exceed such
amount as may from time to time be prescribed by various states. The Transfer
Agent reserves the right to refuse to transfer or redeem Shares until it is
satisfied that the endorsement on the stock certificate or instructions is valid
and genuine, and for that purpose it will require, unless otherwise instructed
by an authorized officer of the Fund, a guarantee of signature by an "Eligible
Guarantor Institution" as that term is defined by SEC Rule 17Ad-15 under the
Securities Exchange Act of 1934. The Transfer Agent also reserves the right to
refuse to transfer or redeem Shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers or redemptions which the
Transfer Agent, in its judgement, deems improper or unauthorized, or until it is
satisfied that there is no basis to any claims adverse to such transfer or
redemption. The Transfer Agent may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act for the Simplification of
Fiduciary Security Transfers or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer of securities, and the
Fund shall indemnify the Transfer Agent for any act done or omitted by it in
good faith in reliance upon such laws. In no event will the Fund indemnify the
Transfer Agent for any act done by it as a result of willful misfeasance, bad
faith, negligence or reckless disregard of its duties.
(b) Notwithstanding the foregoing or any other provision contained in
this Agreement to the contrary, the Transfer Agent shall be fully protected by
the Fund in not requiring any instruments, documents, assurances, endorsements
or guarantees, including, without limitation, any signature guarantees, in
connection with a redemption, or transfer, of Shares whenever the Transfer Agent
reasonably believes that requiring the same would be inconsistent with the
transfer and redemption procedures as
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<PAGE>
described in the Prospectus.
12. Notwithstanding any provision contained in this agreement to the
contrary, the Transfer Agent shall not be required or expected to require, as a
condition to any transfer of any Shares pursuant to paragraph 13 of this Article
or any redemption of any Shares pursuant to a computer tape or electronic data
transmission described in this Agreement, any documents, including, without
limitation, any documents of the kind described in sub-paragraph (a) of
paragraph 13 of this Article, to evidence the authority of the person requesting
the transfer or redemption and/or the payment of any stock transfer taxes, and
shall be fully protected in acting in accordance with the applicable provisions
of this Article.
13. (a) As used in this Agreement, the terms "computer tape or
electronic data transmission" and "computer tape believed by the Transfer Agent
to be furnished by an Approved Institution", shall include any tapes generated
by the Transfer Agent to reflect information believed by the Transfer Agent to
have been input by an Approved Institution, via a remote terminal or other
similar link, into a data processing, storage, or collection system, or similar
system (the "System"), located on the Transfer Agent's premises. For purposes of
paragraph 1 of this Article, such a computer tape or electronic data
transmission shall be deemed to have been furnished at such times as are agreed
upon from time to time by the Transfer Agent and Fund only if the information
reflected thereon was input to the System at such times as are agreed upon in
writing from time to time by the Transfer Agent and the Fund.
(b) Nothing contained in this Agreement shall constitute any agreement
or representation by the Transfer Agent to permit, or to agree to permit, any
Approved Institution to input information into a System.
(c) The Transfer Agent reserves the right to approve, in advance, any
Approved Institution, such approval not to be unreasonably withheld. The
Transfer Agent also reserves the right to terminate any and all automated data
communications, at its discretion, upon a reasonable attempt to notify the Fund
when in the reasonable opinion of the Transfer Agent continuation of such
communications would jeopardize the accuracy and/or integrity of the Fund's
records on the System.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
1. The Fund shall furnish to the Transfer Agent a copy of a
resolution of its Board of Directors, certified by the Secretary or
any Assistant Secretary, either (i) setting forth the date of the
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<PAGE>
declaration of a dividend or distribution, the date of accrual or payment, as
the case may be, thereof, the record date as of which Shareholders entitled to
payment, or accrual, as the case may be, shall be determined, the amount per
Share of such dividend or distribution, the payment date on which all previously
accrued and unpaid dividends are to be paid, and the total amount, if any,
payable to the Transfer Agent on such payment date, or (ii) authorizing the
declaration of dividends and distributions on a daily or other periodic basis
and authorizing the Transfer Agent to rely on a Certificate setting forth the
information described in subsection (i) of this paragraph.
2. Upon the mail date specified in such Certificate or resolution, as
the case may be, the Fund shall, in the case of a cash dividend or distribution,
cause the Custodian to deposit in an account in the name of the Transfer Agent
on behalf of the Fund an amount of cash, if any, sufficient for the Transfer
Agent to make the payment, as of the mail date, specified in such Certificate or
resolution, as the case may be, to the Shareholders who were of record on the
record date. The Transfer Agent will, upon receipt of any such cash, make
payment of such cash dividends or distributions to the shareholders of record as
of the record date by: (i) mailing a check, payable to the registered
shareholder, to the address of record or dividend mailing address, or (ii)
wiring such amounts to the accounts previously designated by an Approved
Institution, as the case may be. The Transfer Agent shall not be liable for any
improper payments made in good faith and without negligence, in accordance with
a Certificate or resolution described in the preceding paragraph. If the
Transfer Agent shall not receive from the Custodian sufficient cash to make
payments of any cash dividend or distribution to all shareholders of the Fund as
of the record date, the Transfer Agent shall, upon notifying the Fund, withhold
payment to all shareholders of record as of the record date until sufficient
cash is provided to the Transfer Agent.
3. It is understood that the Transfer Agent shall in no way be
responsible for the determination of the rate or form of dividends or capital
gain distributions due to the shareholders. It is expressly agreed and
understood that the Transfer Agent is not liable for any loss as a result of
processing a distribution based on information provided in the Certificate that
is incorrect. The Fund agrees to pay the Transfer Agent for any and all costs,
both direct and out-of-pocket expenses, incurred in such corrective work as
necessary to remedy such error.
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<PAGE>
4. It is understood that the Transfer Agent shall file such appropriate
information returns concerning the payment of dividend and capital gain
distributions with the proper federal, state and local authorities as are
required by law to be filed by the Fund but shall in no way be responsible for
the collection or withholding of taxes due on such dividends or distributions
due to shareholders, except and only to the extent, required by applicable law.
ARTICLE VII
CONCERNING THE FUND
1. The Fund represents to the Transfer Agent that:
(a) It is a corporation duly organized and existing
under the laws of the State of Maryland.
(b) It is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and perform
this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(d) It is an investment company registered under the
Investment Company Act of 1940, as amended.
(e) A registration statement under the Securities Act of 1933,
as amended, with respect to the Shares is effective. The Fund shall notify the
Transfer Agent if such registration statement or any state securities
registrations have been terminated or a stop order has been entered with respect
to the Shares.
2. Each copy of the Articles of Incorporation of the Fund and copies of
all amendments thereto shall be certified by the Secretary of State (or other
appropriate official) of the state of organization, and if such Articles of
Incorporation and/or amendments are required by law also to be filed with a
county or other officer or official body, a certificate of such filing shall be
filed with a certified copy submitted to the Transfer Agent. Each copy of the
By-Laws and copies of all amendments thereto, and copies of resolutions of the
Board of Directors of the Fund, shall be certified by the Secretary of the Fund.
3. The Fund shall promptly deliver to the Transfer Agent written notice
of any change in the Officers authorized to sign Share Certificates,
notifications or requests, together with a specimen signature of each new
Officer. In the event any Officer who shall have signed manually or whose
facsimile signature shall have been affixed to blank Share certificates shall
die, resign or be removed prior to issuance of such Share certificates, the
Transfer Agent may issue such Share certificates of the Fund
11
<PAGE>
notwithstanding such death, resignation or removal, and the Fund shall promptly
deliver to the Transfer Agent such approval, adoption or ratification as may be
required by law.
4. It shall be the sole responsibility of the Fund to deliver to the
Transfer Agent the Fund's currently effective Prospectus and, for purposes of
this Agreement, the Transfer Agent shall not be deemed to have notice of any
information contained in such Prospectus until a reasonable time, not to exceed
ten (10) business days, after it is actually received by the Transfer Agent.
ARTICLE VIII
CONCERNING THE TRANSFER AGENT
1. The Transfer Agent represents and warrants to the Fund
that:
(a) It is a corporation duly organized and existing
under the laws of the State of Delaware.
(b) It is empowered under applicable law and by its
Charter and By-laws to enter into and perform this Agreement.
(c) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(d) It is duly registered as a transfer agent under Section
17A of the Securities Exchange Act of 1934, as amended.
2. The Transfer Agent shall not be liable and shall be indemnified in
acting upon any computer tape or electronic data transmission, writing or
document reasonably believed by it to be genuine and to have been signed or made
by an Officer of the Fund or person designated by the Fund and shall not be held
to have any notice of any change of authority of any person until receipt of
written notice thereof from the Fund or such person. It shall also be protected
in processing Share certificates which bear the proper countersignature of the
Transfer Agent and which it reasonably believes to bear the proper manual or
facsimile signature of the Officers of the Fund.
3. The Transfer Agent upon reasonable notice to the Fund may establish
such additional procedures, rules and regulations governing the transfer or
registration of Share certificates as it may deem advisable and consistent with
such rules and regulations generally adopted by mutual fund transfer agents.
4. The Transfer Agent shall keep such records as are
specified in Schedule II hereto in the form and manner, and for
such period, as it may deem advisable and is agreeable to the Fund
but not inconsistent with the rules and regulations of appropriate
government authorities, in particular Rules 31a-2 and 31a-3 under
the Investment Company Act of 1940, as amended. The Transfer Agent
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<PAGE>
acknowledges that such records are the property of the Fund. The Transfer Agent
may deliver to the Fund from time to time at its discretion, for safekeeping or
disposition by the Fund in accordance with law, such records, papers, documents
accumulated in the execution of its duties as such Transfer Agent, as the
Transfer Agent may deem expedient, other than those which the Transfer Agent is
itself required to maintain pursuant to applicable laws and regulations. The
Fund shall assume all responsibility for any failure thereafter to produce any
record, paper, canceled Share certificate, or other document so returned, if and
when required. The records specified in Schedule II hereto maintained by the
Transfer Agent pursuant to this paragraph 4, which have not been previously
delivered to the Fund pursuant to the foregoing provisions of this paragraph 4,
shall be considered to be the property of the Fund, shall be made available upon
request for inspection by the officers, employees, auditors of the Fund, or such
staff of applicable regulatory agencies as the Fund may designate, and records
shall be delivered to the Fund upon request and in any event upon the date of
termination of this Agreement, as specified in Article IX of this Agreement, in
the form and manner kept by the Transfer Agent on such date of termination or
such earlier date as may be requested by the Fund.
5. The Transfer Agent shall not be liable for any loss or damage,
including counsel fees, resulting from its actions or omissions to act or
otherwise, except for any loss or damage arising out of its bad faith,
negligence, willful misfeasance, gross negligence or reckless disregard of its
duties under this agreement.
6 (a) The Fund shall indemnify and exonerate, save and hold harmless
the Transfer Agent from and against any and all claims (whether with or without
basis in fact or law), demands, expenses (including reasonable attorney's fees)
and liabilities of any and every nature which the Transfer Agent may sustain or
incur or which may be asserted against the Transfer Agent by any person by
reason of or as a result of any action taken or omitted to be taken by any prior
transfer agent of the Fund or as a result of any action taken or omitted to be
taken by the Transfer Agent in good faith and without negligence or willful
misconduct or in reliance upon (i) any provision of this Agreement; (ii) the
Prospectus; (iii) any instruction or order including, without limitation, any
computer tape or electronic data transmission reasonably believed by the
Transfer Agent to have been received from an Approved Institution; (iv) any
instrument, order or Share certificate
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<PAGE>
reasonably believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized Officer of the Fund; (v) any Certificate or
other instructions of an Officer; or (vi) any opinion of legal counsel for the
Fund or the Transfer Agent. The Fund shall indemnify and exonerate, save and
hold the Transfer Agent harmless from and against any and all claims (whether
with or without basis in fact or law), demands, expenses (including reasonable
attorney's fees) and liabilities of any and every nature which the Transfer
Agent may sustain or incur or which may be asserted against the Transfer Agent
by any person by reason of or as a result of any action taken or omitted to be
taken by the Transfer Agent in good faith and without negligence in connection
with its appointment or in reliance upon any law, act, regulation or any
interpretation of the same even though such law, act or regulation may
thereafter have been altered, changed, amended or repealed.
(b) The Transfer Agent shall not settle any claim, demand,
expense or liability to which it may seek indemnity pursuant to paragraph 6(a)
above (each, an "Indemnifiable Claim") without the express written consent of an
Officer of the Fund. The Transfer Agent shall notify the Fund within 15 days of
receipt of notification of an Indemnifiable Claim, provided that the failure by
the Transfer Agent to furnish such notification shall not impair its right to
seek indemnification from the Fund unless the Fund is unable to adequately
defend the Indemnifiable Claim as a result of such failure, or if as a result of
the Transfer Agent's failure to provide the Fund with timely notice of the
institution of litigation a judgment by default is entered. The Fund shall have
the right to defend any Indemnifiable Claim at its own expense, provided that
such defense shall be conducted by counsel selected by the Fund. The Transfer
Agent may join in such defense at its own expense, but to the extent that it
shall so desire the Fund shall direct such defense. The Fund shall not settle
any Indemnifiable Claim without the express written consent of the Transfer
Agent if the Transfer Agent determines that such settlement would have an
adverse effect on the Transfer Agent beyond the scope of this Agreement. In the
event the Transfer Agent does not provide its written consent, each of the Fund
and the Transfer Agent shall be responsible for their own defense at their own
cost and expense, and such claim shall not be deemed an Indemnifiable Claim
hereunder. If the Fund shall fail or refuse to defend an Indemnifiable Claim,
the Transfer Agent may provide its own defense at the cost and expense of the
Fund. Anything in this
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<PAGE>
Agreement to the contrary notwithstanding, the Fund shall not indemnify the
Transfer Agent against any liability or expense arising out of the Transfer
Agent's willful misfeasance, bad faith, negligence or reckless disregard of its
duties and obligations under this Agreement.
The Transfer Agent shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Transfer Agent as a result of the Transfer Agent's
lack of good faith, negligence or willful misconduct.
7. The Transfer Agent shall not be liable to the Fund with respect to
any redemption draft on which the signature of the drawer is forged and which
the Fund's Custodian or Cash Management Bank has advised the Transfer Agent to
honor the redemption. Provided that the Transfer Agent inspects redemption
drafts with reasonable care to verify the drawer's signature against signatures
on file, the Transfer Agent shall not be liable for any material alteration or
absence or forgery of any endorsement.
8. There shall be excluded from the consideration of whether the
Transfer Agent has been negligent or has breached this Agreement, any period of
time, and only such period of time, during which the Transfer Agent's
performance is materially affected, by reason of circumstances beyond its
control and not reasonably foreseeable in that the Transfer Agent could not
reasonable have made back-up or alternative arrangements (collectively,
"Causes"), including, without limitation (except as provided below), mechanical
breakdowns of equipment (including any alternative power supply and operating
systems software), flood or catastrophe, acts of God, failures of
transportation, communication or power supply, strikes, lockouts, work stoppages
or other similar circumstances.
9. At any time the Transfer Agent may apply to an Officer of the Fund
for written instructions with respect to any matter arising in connection with
the Transfer Agent's duties and obligations under this Agreement, and the
Transfer Agent shall not be liable for any action taken or permitted by it in
good faith in accordance with such written instructions. Such application by the
Transfer Agent for written instructions from an Officer of the Fund may set
forth in writing any action proposed to be taken or omitted by the Transfer
Agent with respect to its duties or obligations under this Agreement and the
date on and/or after which such action shall be taken. The Transfer Agent shall
not be liable for any action taken or omitted in accordance with a proposal
included in
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<PAGE>
any such application on or after the date specified therein unless, prior to
taking or omitting any such action, the Transfer Agent has received written
instructions in response to such application specifying the action to be taken
or omitted. The Transfer Agent may consult counsel of the Fund, or if acceptable
to the Fund, its own counsel, at the expense of the Fund and shall be fully
protected with respect to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the Fund or its own counsel.
10. The Transfer Agent may issue new Share certificates in place of
certificates represented to have been lost, stolen, or destroyed upon receiving
written instructions from the shareholder accompanied by proof of an indemnity
or surety bond issued by a recognized insurance institution specified by the
Fund or the Transfer Agent. If the Transfer Agent receives written notification
from the shareholder or broker dealer that the certificate issued was never
received, and such notification is made within 30 days of the date of issuance,
the Transfer Agent may reissue the certificate without requiring a surety bond.
The Transfer Agent may also reissue certificates which are represented as lost,
stolen, or destroyed without requiring a surety bond provided that the
notification is in writing and accompanied by an indemnification signed on
behalf of a member firm of the New York Stock Exchange and signed by an officer
of said firm with the signature guaranteed. Notwithstanding the foregoing, the
Transfer Agent will reissue a certificate upon written authorization from an
Officer of the Fund.
11. In case of any requests or demands for the inspection of the
shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund promptly and to secure instructions from an Officer as to such inspection.
The Transfer Agent reserves the right, however, to exhibit the shareholder
records to any person whenever it receives an opinion from its counsel that
there is a reasonable likelihood that the Transfer Agent will be held liable for
the failure to exhibit the shareholder records to such person; provided,
however, that in connection with any such disclosure the Transfer Agent shall
promptly notify the Fund that such disclosure has been made or is to be made.
12. At the request of an Officer of the Fund the Transfer
Agent will address and mail such appropriate notices to
shareholders as the Fund may direct.
13. Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation
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<PAGE>
to inquire into, and shall not be liable for:
(a) The legality of the issue or sale of any Shares, the
sufficiency of the amount to be received therefor, or the authority of the
Approved Institution or of the Fund, as the case may be, to request such sale or
issuance;
(b) The legality of a transfer of Shares, or of a redemption
of any Shares, the propriety of the amount to be paid therefor, or the authority
of the Approved Institution or of the Fund, as the case may be, to request such
transfer or redemption;
(c) The legality of the declaration of any dividend by
the Fund, or the legality of the issue of any Shares in payment of
any stock dividend; or
(d) The legality of any recapitalization or readjustment
of Shares.
14. The Transfer Agent shall be entitled to receive and the Fund hereby
agrees to pay to the Transfer Agent for its performance hereunder, including its
performance of the duties and functions set forth in Schedule I hereto, (i) its
reasonable out-of-pocket expenses (including reasonable legal expenses and
attorney's fees) incurred in connection with its performance hereunder and (ii)
such compensation as may be agreed upon in writing from time to time by the
Transfer Agent and the Fund.
15. The Transfer Agent shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are specifically set forth
in this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Transfer Agent.
16. Purchase and Prices of Services.
(a) The Fund will compensate the Transfer Agent for, and
Transfer Agent will provide, beginning on the execution date of this Agreement
and continuing until the termination of this Agreement as provided hereinafter,
the Services set forth in Schedule I.
(b) The current unit prices for the Services are set forth in
Schedule III (the "Schedule III Fee Schedule"). Once in each calendar year,
after the third anniversary of the date hereof, the Transfer Agent may elect to
raise the Schedule III Fees upon ninety (90) days prior notice to the Fund.
Notwithstanding the annual right to raise the Schedule III Fees, the Transfer
Agent may increase prices due to changes in legal or regulatory requirements
subject to the approval of the Fund, which approval shall not be unreasonably
withheld.
17. Billing and Payment.
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(a) The Transfer Agent shall bill the Fund as follows: (i)
monthly in arrears for Accounts maintained and Out-of-Pocket Expenses; and (ii)
monthly in advance for estimated postage expenses to be incurred by the Transfer
Agent for the following month. Documentation to support reconciliation of actual
postage expense charges will be provided to the Fund monthly. The Transfer Agent
may from time to time request the Fund to make additional advances when
appropriate.
(b) The Fund shall pay the Transfer Agent in immediately
available funds at United Missouri Bank in Kansas City, Missouri within thirty
(30) days of the date of the bill and receipt of supporting documents. Any
amounts due under this Agreement which are not paid within said thirty (30) day
period shall bear interest at the rate of one and one-half percent (1 1/2%) per
month from such date until paid in full.
ARTICLE IX
TERMINATION
Either of the parties hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of
receipt of such notice. In the event such notice is given by the Fund, it shall
be accompanied by a copy of a resolution of the Board of Directors of the Fund,
certified by the Secretary or any Assistant Secretary, electing to terminate
this Agreement and designating the successor transfer agent or transfer agents.
In the event such notice is given by the Transfer Agent, the Fund shall on or
before the termination date, deliver to the Transfer Agent a copy of a
resolution of its Board of Directors certified by the Secretary or any Assistant
Secretary designating a successor transfer agent or transfer agents. In the
absence of such designation by the Fund, the Fund shall upon the date specified
in the notice of termination of this Agreement and delivery of the records
maintained hereunder, be deemed to be its own transfer agent and the Transfer
Agent shall thereby be relieved of all duties and responsibilities pursuant to
this Agreement.
In the event this Agreement is terminated as provided herein, the
Transfer Agent, upon the written request of the Fund, shall deliver the records
of the Fund on electromagnetic media to the Fund or its successor transfer
agent. The Fund shall be responsible to the Transfer Agent for the reasonable
costs and expenses associated with the preparation and delivery of such media.
ARTICLE X
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<PAGE>
MISCELLANEOUS
1. The Fund agrees that prior to effecting any change in the Prospectus
which would increase or alter the duties and obligations of the Transfer Agent
hereunder, it shall advise the Transfer Agent of such proposed change at least
30 days prior to the intended date of the same, and shall proceed with such
change only if it shall have received the written consent of the Transfer Agent
thereto, which consent shall not be unreasonably withheld.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address first
above written, or at such other place as the Fund may from time to time
designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Transfer Agent shall be sufficiently given if
addressed to the Transfer Agent and mailed or delivered to the Secretary at 1055
Broadway, Kansas City, Missouri 64105-1594 with a copy to the President at 1055
Broadway, Kansas City, Missouri 64105-1594 or at such other place as the
Transfer Agent may from time to time designate in writing.
4. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties with
the formality of this Agreement.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns. This Agreement shall not be
assignable by either party without the written consent of the other party,
except that the Transfer Agent may assign this Agreement to a corporate
affiliate with advance written notice to and consent by the Fund, which consent
shall not be unreasonably withheld.
6. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
7. This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
8. The provisions of this Agreement are intended to benefit only the
Transfer Agent and the Fund, and no rights shall be granted to any other person
by virtue of this Agreement.
9. (a) The Transfer Agent will endeavor to assist in resolving
shareholder inquiries and errors relating to the period during which prior
transfer agents acted as such for the Fund. Any such inquiries or errors which
cannot be expediently resolved by the Transfer Agent will be referred to the
Fund.
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(b) The Transfer Agent shall only be responsible for the
safekeeping and maintenance of transfer agency records, canceled certificates
and correspondence of the Fund created or produced prior to the time of
conversion which are under its control and acknowledged in a writing to the Fund
to be in its possession. Any expenses or liabilities incurred by the Transfer
Agent as a result of shareholder inquiries, regulatory compliance or audits
related to such records and not caused as a result of Transfer Agent's bad
faith, willful malfeasance or negligence shall be the responsibility of the Fund
as provided in Article VIII herein.
10. The Transfer Agent shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provision for
periodic backup or computer files and data with respect to the Fund and
emergency use of electronic data processing equipment. In the event of equipment
failures the Transfer Agent shall at no additional expense to the Fund, take all
reasonable steps to minimize service interruptions, the Transfer Agent shall
have no liability with respect to the loss of data or service interruptions
caused by equipment failures, provided such loss or interruption is not caused
by the negligence of the Transfer Agent and provided further that the Transfer
Agent has complied with the provisions of this Paragraph.
11. The Transfer Agent agrees on its own behalf and that of its
employees to make reasonable efforts to keep confidential all records of the
Fund and information relating to the Fund and its shareholders (past, present
and future), its investment advisor and its principal underwriter, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund prior to its release. The Fund agrees that such consent shall not be
unreasonably withheld, and may not be withheld where Transfer Agent may be
exposed to civil or criminal contempt proceedings or when required to divulge
such information or records to duly constituted authorities.
12. The Transfer Agent shall maintain insurance of the types and in the
amounts deemed by it to be appropriate. To the extent that policies of insurance
may provide for coverage of claims for liability or indemnity by the parties set
forth in this Agreement, the contracts of insurance shall take precedence, and
no provision of this Agreement shall be construed to relieve an insurer of any
obligation to pay claims to the Fund, the Transfer Agent or other insured party
which would otherwise be a covered claim in the absence of any provision of this
Agreement.
13. The Transfer Agent represents and warrants that, to the
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<PAGE>
best of its knowledge, the various procedures and systems which the Transfer
Agent has implemented with regard to the safeguarding from loss or damage
attributable to fire, theft or any other cause (including provision for
twenty-four hours a day restricted access) of the Fund's blank checks,
certificates, records and other data and the Transfer Agent's equipment,
facilities and other property used in the performance of its obligations
hereunder are adequate, and that it will make such changes therein from time to
time as in its judgment are required for the secure performance of its
obligations hereunder. The Transfer Agent shall review such systems and
procedures on a periodic basis and the Fund shall have access to review these
systems and procedures.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officer, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as the day and year
first above written.
DST SYSTEMS, INC. THE ROCKWOOD GROWTH
FUND, INC.
By: __________________________ By: _______________________
(Signature) (Signature)
-------------------------- -----------------------
(Name) (Name)
-------------------------- -----------------------
(Title) (Title)
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<PAGE>
SCHEDULE I
DESCRIPTION OF SERVICES
In consideration of the fees to be paid in such manner and at such
times as Fund and Transfer Agent may agree, Transfer Agent will provide the
services set forth below:
Examine and Process New Accounts, Subsequent Payments, Liquidations,
Exchanges, Telephone Transactions, Check Redemptions, Automatic Withdrawals,
Certificate Issuance, Wire Order Trades, Dividends, Dividend Statements, Dealer
Statements.
DAILY ACTIVITY
Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
Name and Address, including Zip Code
Balance of Uncertificated Shares
Balance of Certificated Shares
Certificate number, number of shares, issuance date of each certificate
outstanding and cancellation date for each certificate date for each
certificate no longer outstanding, if issued
Balance of dollars available for redemption
Dividend code (daily accrual, monthly reinvest, monthly cash
or quarterly cash)
Type of account code
Establishment date indicating the date an account was opened,
carrying forward pre-conversion data as available
Original establishment date for accounts opened by exchange
W-9 withholding status and periodic reporting
State of residence code
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Social Security or taxpayer identification number, and
indication of certification
Historical transactions on the account for the most recent 18 months,
or other period as mutually agreed to from time-to-time
Indication as to whether phone transactions can be accepted
for this account. Beneficial owner code, i.e. male, female,
joint tenant, etc.
An alternate or "secondary" account number issued by a dealer
(or bank, etc.) to a customer for use, inquiry and transaction
input by "remote accessors"
FUNCTIONS
Answer investor and dealer telephone and/or written inquiries, except
those concerning Fund policy, or requests for investment advice which
will be referred to the Fund, or those which the Fund chooses to answer
Deposit Fund share certificates into accounts upon receipt of
instructions from the investor or other authorized person, if issued
Examine and process transfers of shares insuring that all transfer
requirements and legal documents have been supplied
Process and confirm address changes
Process standard account record changes as required, i.e.
Dividend Codes, etc.
Microfilm source documents for transactions, such as account
applications and correspondence
Perform backup withholding for those accounts which federal
government regulations indicate is necessary
Perform withholdings on liquidations, if applicable, for
23
<PAGE>
employee benefit plans. Prepare and mail 5498s and 1099R's
Solicit missing taxpayer identification numbers
Provide remote access inquiry to Fund records via Fund supplied
hardware (Fund responsible for connection line and monthly fee)
REPORTS PROVIDED
Daily Journals Reflecting all shares and
dollar activity for the
previous day
Blue Sky Report Supply information monthly
for Fund's preparation of
Blue Sky Reporting
N-SAR Report Supply monthly correspondence,
redemption and liquidation
information for use in fund's
N-SAR Report
Additionally, monthly average daily balance reports will be provided at
the Fund's request to the Fund at no charge. Prepare and mail copies of
summary statements to dealers and investment advisers
Generate and mail confirmation statements for financial
transactions
DIVIDEND ACTIVITY
Reinvest or pay in cash including reinvesting in other funds within the
fund group serviced by the Transfer Agent as described in each Fund
Prospectus
Distribute capital gains simultaneously with income dividends
DEALER SERVICES
24
<PAGE>
Prepare and mail confirmation statements to dealers daily
Prepare and mail copies of statements to dealers, same
frequency as investor statements
ANNUAL MEETINGS
Assist Fund in obtaining a qualified service to: address and mail
proxies and related material, tabulate returned proxies and supply
daily reports when sufficient proxies have been received
Prepare certified list of stockholders, hard copy or microform
PERIODIC ACTIVITIES
Mail transaction confirmation statements daily to investors
Address and mail four (4) periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably
specified by the Transfer Agent)
Mail periodic statement to investors
Compute, prepare and furnish all necessary reports to
Governmental authorities: Forms 1099R, 1099DIV, 1099B, 1042
and 1042S
Enclose various marketing material as designated by the Fund in
statement mailings, i.e. monthly and quarterly statements (material
must be adaptable to mechanical equipment as reasonably specified by
the Transfer Agent)
25
<PAGE>
SCHEDULE II
RECORDS MAINTAINED BY TRANSFER AGENT
- Account applications
- Canceled certificates plus stock powers and supporting
documents
- Checks including check registers, reconciliation records,
any adjustment records and tax withholding documentation
- Indemnity bonds for replacement of lost or missing stock
certificates and checks
- Liquidation, redemption, withdrawal and transfer requests
including stock powers, signature guarantees and any
supporting documentation
26
<PAGE>
AGENCY AGREEMENT
This Agency Agreement is made as of _____________, 1996 by and between
The Rockwood Growth Fund, Inc., an Idaho corporation, having its principal
office and place of business at 11 Hanover Square, New York, New York 10005
(hereinafter referred to as "Rockwood Fund"), and DST Systems, Inc., a Delaware
corporation, having its principal office and place of business at 1055 Broadway,
Kansas City, Missouri 64105-1594 (hereinafter referred to as the "Agent").
WHEREAS, Agent is the transfer agent of certain affiliated mutual funds
("Funds"), which Funds are listed on the attached Exhibit A; and
WHEREAS, Rockwood Fund is the sponsor of certain Individual
Retirement Accounts (the "Accounts") in the Funds; and
WHEREAS, Rockwood Fund wishes to retain the Agent to perform certain
recordkeeping and other duties which have been delegated to Rockwood Fund by
Investors Bank & Trust Company ("IBT") as Custodian for the Accounts pursuant to
the Service and Agency Agreement ("SAA") attached hereto as Exhibit B and the
Agent wishes
to perform such duties.
NOW, THEREFORE, Rockwood Fund and the Agent agree as follows:
1. Rockwood Fund hereby retains and employs the Agent to
perform the duties described herein. The Agent accepts such
employment and agrees to perform such duties.
2. The Agent shall, in fulfilling its duties hereunder, act in good
faith, with due diligence, and without negligence. The Agent shall perform its
duties in accordance with the copy of the Individual Retirement Account
Custodial Agreement which is attached hereto and made a part hereof ("Custodial
Agreement") and present and future requirements of Section 408(a) of the
Internal Revenue Code and any rule or regulation issued in interpretation of
Section 408(a) and applicable law ("IRS Requirements").
3. The duties of the Agent will include the following:
(a) Receiving all Accounts which are in existence,
opening new Accounts and receiving cash contributions for
Accounts;
(b) Making distributions from Accounts as well as withholding
tax in accordance with the provisions of the Custodial
Agreement and IRS Requirements.
(c) Preparing and delivering all returns, reports, proxies,
valuations, and accounting in accordance with IRS Requirements and as
reasonably required by Rockwood Fund or by IBT.
(d) Maintaining all records for the Accounts in
accordance with IRS Requirements and as reasonably required by
Rockwood Fund or by IBT; and
(e) assuming all duties and obligations of Rockwood Fund
as set forth in Article 4.4(a) of the SAA.
4. Agent agrees to permit Rockwood Fund and IBT to conduct review
procedures as either may deem necessary to monitor the activities of the Agent
under this Agreement. The Agent also agrees to perform or have performed such
audit review procedures of those activities as Rockwood Fund and IBT may
reasonably request at the expense of Rockwood Fund.
5. No provision of this Agreement shall modify or supersede
any provision of the Transfer Agency Agreements executed by the
Agent and Rockwood Fund.
6. Rockwood Fund agrees to indemnify and exonerate, save and hold Agent
harmless from and against any and all claims (whether with or without basis in
fact or law), demands, expenses (including reasonable attorneys' fees) and
liabilities of any nature which Agent may sustain or incur unless such claims,
demands, expenses, and liabilities are caused as a result of Agent's bad faith,
willful misconduct, negligence or failure to perform its duties hereunder in
accordance with the standards set forth herein.
7. This Agreement may be terminated at any time by mutual
consent of the parties hereto or upon thirty (30) days' written
notice by either party. Further, this Agreement may be immediately
terminated by either party in the event the Rockwood Fund appoints
1
<PAGE>
a successor Custodian as provided in the Custodial Agreement. Upon termination,
Agent shall transfer the records of the Accounts as directed by Rockwood Fund at
Rockwood Fund's expense.
8. For its services hereunder, Agent shall be entitled to
receive 75% of all annual maintenance (fiduciary) fees collected
from the accounts.
9. No modification or amendment of this Agreement shall be valid or
binding on the parties unless made in writing and signed on behalf of each of
the parties by their respective duly authorized officers or representatives.
10. Notices shall be communicated by fax and first class mail, or by
such other means as the parties may agree, to the persons and addresses
specified below or to such other persons and addresses as the parties may
specify in writing.
If to Rockwood Fund: The Rockwood Growth Fund, Inc.
11 Hanover Square
New York, NY 10005
with copy to: Rockwood Advisers, Inc.
11 Hanover Square
New York, NY 10005
Attn: Legal Department
If to Agent: DST Systems, Inc.
1055 Broadway
Kansas City, Missouri 64105-1594
Attn: Thomas A. McCullough
with copy to: DST Systems, Inc.
Legal Department
1055 Broadway
Kansas City, Missouri 64105-1594
11. This Agreement shall be governed by the laws of the State
of Missouri.
12. This Agreement may be executed in any number of
counterparts, and by the parties hereto on separate counterparts,
2
<PAGE>
each of which when so executed shall be deemed an original and all of which when
taken together shall constitute one and the same agreement.
Executed by the parties on the date(s) set forth below.
THE ROCKWOOD GROWTH FUND, INC.
"ROCKWOOD FUND"
By:
Thomas B. Winmill
Its: Co-President
Date:
DST SYSTEMS, INC.
"AGENT"
By:
Its: Senior Vice President
Date:
3
<PAGE>
EXHIBIT A - Dated ___________, 1995
Bull & Bear Dollar Reserves
Bull & Bear Global Income Fund
Bull & Bear Gold Investors Ltd.
Bull & Bear Municipal Income Fund
Bull & Bear Special Equities Fund, Inc.
Bull & Bear U.S. and Overseas Fund
Bull & Bear U.S. Government Securities Fund
Midas Fund, Inc.
The Rockwood Growth Fund, Inc.
4
<PAGE>
AGENCY AGREEMENT
This Agency Agreement is made as of _____________, 1996 by and between
The Rockwood Growth Fund, Inc., an Idaho corporation, having its principal
office and place of business at 11 Hanover Square, New York, New York 10005
(hereinafter referred to as "Rockwood Fund"), and DST Systems, Inc., a Delaware
corporation, having its principal office and place of business at 1055 Broadway,
Kansas City, Missouri 64105-1594 (hereinafter referred to as the "Agent").
WHEREAS, Agent is the transfer agent of certain affiliated mutual funds
("Funds"), which Funds are listed on the attached Exhibit A; and
WHEREAS, Rockwood Fund is the sponsor of certain Individual
Retirement Accounts (the "Accounts") in the Funds; and
WHEREAS, Rockwood Fund wishes to retain the Agent to perform certain
recordkeeping and other duties which have been delegated to Rockwood Fund by
Investors Bank & Trust Company ("IBT") as Custodian for the Accounts pursuant to
the Service and Agency Agreement ("SAA") attached hereto as Exhibit B and the
Agent wishes
to perform such duties.
NOW, THEREFORE, Rockwood Fund and the Agent agree as follows:
1. Rockwood Fund hereby retains and employs the Agent to
perform the duties described herein. The Agent accepts such
employment and agrees to perform such duties.
2. The Agent shall, in fulfilling its duties hereunder, act in good
faith, with due diligence, and without negligence. The Agent shall perform its
duties in accordance with the copy of the Individual Retirement Account
Custodial Agreement which is attached hereto and made a part hereof ("Custodial
Agreement") and present and future requirements of Section 408(a) of the
Internal Revenue Code and any rule or regulation issued in interpretation of
Section 408(a) and applicable law ("IRS Requirements").
3. The duties of the Agent will include the following:
(a) Receiving all Accounts which are in existence,
opening new Accounts and receiving cash contributions for
Accounts;
(b) Making distributions from Accounts as well as withholding
tax in accordance with the provisions of the Custodial
Agreement and IRS Requirements.
(c) Preparing and delivering all returns, reports, proxies,
valuations, and accounting in accordance with IRS Requirements and as
reasonably required by Rockwood Fund or by IBT.
(d) Maintaining all records for the Accounts in
accordance with IRS Requirements and as reasonably required by
Rockwood Fund or by IBT; and
(e) assuming all duties and obligations of Rockwood Fund
as set forth in Article 4.4(a) of the SAA.
4. Agent agrees to permit Rockwood Fund and IBT to conduct review
procedures as either may deem necessary to monitor the activities of the Agent
under this Agreement. The Agent also agrees to perform or have performed such
audit review procedures of those activities as Rockwood Fund and IBT may
reasonably request at the expense of Rockwood Fund.
5. No provision of this Agreement shall modify or supersede
any provision of the Transfer Agency Agreements executed by the
Agent and Rockwood Fund.
6. Rockwood Fund agrees to indemnify and exonerate, save and hold Agent
harmless from and against any and all claims (whether with or without basis in
fact or law), demands, expenses (including reasonable attorneys' fees) and
liabilities of any nature which Agent may sustain or incur unless such claims,
demands, expenses, and liabilities are caused as a result of Agent's bad faith,
willful misconduct, negligence or failure to perform its duties hereunder in
accordance with the standards set forth herein.
7. This Agreement may be terminated at any time by mutual
consent of the parties hereto or upon thirty (30) days' written
notice by either party. Further, this Agreement may be immediately
terminated by either party in the event the Rockwood Fund appoints
1
<PAGE>
a successor Custodian as provided in the Custodial Agreement. Upon termination,
Agent shall transfer the records of the Accounts as directed by Rockwood Fund at
Rockwood Fund's expense.
8. For its services hereunder, Agent shall be entitled to
receive 75% of all annual maintenance (fiduciary) fees collected
from the accounts.
9. No modification or amendment of this Agreement shall be valid or
binding on the parties unless made in writing and signed on behalf of each of
the parties by their respective duly authorized officers or representatives.
10. Notices shall be communicated by fax and first class mail, or by
such other means as the parties may agree, to the persons and addresses
specified below or to such other persons and addresses as the parties may
specify in writing.
If to Rockwood Fund: The Rockwood Growth Fund, Inc.
11 Hanover Square
New York, NY 10005
with copy to: Rockwood Advisers, Inc.
11 Hanover Square
New York, NY 10005
Attn: Legal Department
If to Agent: DST Systems, Inc.
1055 Broadway
Kansas City, Missouri 64105-1594
Attn: Thomas A. McCullough
with copy to: DST Systems, Inc.
Legal Department
1055 Broadway
Kansas City, Missouri 64105-1594
11. This Agreement shall be governed by the laws of the State
of Missouri.
12. This Agreement may be executed in any number of
counterparts, and by the parties hereto on separate counterparts,
2
<PAGE>
each of which when so executed shall be deemed an original and all of which when
taken together shall constitute one and the same agreement.
Executed by the parties on the date(s) set forth below.
THE ROCKWOOD GROWTH FUND, INC.
"ROCKWOOD FUND"
By:
Thomas B. Winmill
Its: Co-President
Date:
DST SYSTEMS, INC.
"AGENT"
By:
Its: Senior Vice President
Date:
3
<PAGE>
EXHIBIT A - Dated ___________, 1995
Bull & Bear Dollar Reserves
Bull & Bear Global Income Fund
Bull & Bear Gold Investors Ltd.
Bull & Bear Municipal Income Fund
Bull & Bear Special Equities Fund, Inc.
Bull & Bear U.S. and Overseas Fund
Bull & Bear U.S. Government Securities Fund
Midas Fund, Inc.
The Rockwood Growth Fund, Inc.
4
<PAGE>
SHAREHOLDER ADMINISTRATION AGREEMENT
AGREEMENT made as of ______________, 1996 between The
Rockwood Growth Fund, Inc., an Idaho corporation ("Fund"), and
Investor Service Center, Inc. ("ISC"), a Delaware corporation.
WHEREAS, the Fund is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended ("1940 Act"); and
WHEREAS, the Fund desires to retain ISC to provide certain
shareholder services for the Fund and each Series of shares now
existing or as hereinafter may be established; and
WHEREAS, as a convenience to the Fund and its shareholders
ISC is willing to furnish such services at cost and without a
view to profit thereby;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties
hereto as follows:
1. Appointment. The Fund hereby appoints ISC as agent to
perform the services for the period and on the terms set forth in
this Agreement. ISC accepts such appointment and agrees to
furnish the services herein set forth, in return for the
reimbursement specified in paragraph 3 of this Agreement. ISC
agrees to comply with all relevant provisions of the 1940 Act and
the Securities Exchange Act of 1934, as amended ("1934 Act"), and
applicable rules and regulations thereunder in performing such
services.
2. Services and Duties of ISC. ISC shall be responsible
for the following services relating to shareholders of the Fund
("Shareholders"):
(a) assisting the transfer agent in receiving and responding to
written and telephone Shareholder inquiries concerning their
accounts; (b) processing Shareholder telephone requests for
transfers, purchases, redemptions, changes of address and similar
matters; (c) assisting as necessary in proxy solicitation; (d)
providing a service center for coordinating, researching and
answering general inquiries, as well as those required by legal
1
process, regarding Shareholder account data; and (e)
administering and correcting Fund records as authorized by the
Board of Directors of the Fund.
3. Reimbursement. For the performance of its obligations
hereunder, the Fund will reimburse ISC the actual costs incurred
with respect thereto, including, without limitation, the
following costs and all other expenses related to the performance
of ISC's obligations hereunder:
(a) benefits, payroll taxes, and search costs of ISC personnel;
(b) telephone; (c) rent; (d) equipment, including telephone PBX,
answering machine, call distributor, conversation recording
machine and maintenance thereon; (e) blue sky registration and
filing for ISC and its registered representatives; (f) travel and
meals; (g) mail, postage, and overnight delivery services; (h)
allocated E&O and fidelity bond insurance; (i) publications,
memberships, and subscriptions; (j) office supplies; (k)
printing; (l) Shareholder service related training courses; and
(m) corporate audit and franchise taxes. Such costs and expenses
shall be allocated among the Fund and the other investment companies or series
thereof for which ISC or any affiliate thereof provides services similar to
those provided hereunder based on the relative number of open Shareholder
accounts and other factors deemed appropriate by the Board of Directors of the
Fund.
4. Cooperation with Accountants. ISC shall cooperate with
the Fund's independent public accountants and shall take all
reasonable action in the performance of its obligations under
this Agreement to assure that the necessary information is made
available to such accountants for the expression of their
unqualified opinion, including but not limited to the opinion
included in the Fund's semi-annual reports on Form N-SAR.
5. Equipment Failures. In the event of failures beyond
ISC's control, ISC shall take reasonable steps to minimize
service interruptions but shall have no liability with respect
thereto.
6. Responsibility of ISC. ISC shall be under no duty to
take any action on behalf of the Fund or any Series except as
specifically set forth herein or as may be specifically agreed to
by ISC in writing. In the performance of its duties hereunder,
ISC shall be obligated to exercise care and diligence, but shall
not be liable for any act or omission which does not constitute
2
willful misfeasance, bad faith or gross negligence on the part of
ISC or reckless disregard by ISC of its duties under this
Agreement. Without limiting the generality of the foregoing or
of any other provision of this Agreement, in connection with its
duties under this Agreement, ISC shall not be liable for delays
or errors occurring by reason of circumstances beyond ISC's
control, including acts of civil or military authorities,
national emergencies, labor difficulties, fire, mechanical
breakdown, flood or catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or
power supply.
7. Indemnification. The Fund agrees to indemnify and hold
harmless ISC and its agents from all taxes, charges, expenses,
assessments, claims and liabilities including (without
limitation) liabilities arising under the Securities Act of 1933,
as amended, the 1934 Act and any state and foreign securities and
blue sky laws and regulations, all as or to be amended from time
to time, and expenses, including (without limitation) attorneys'
fees and disbursements arising directly or indirectly from any
action or matter which ISC takes or does or omits to take or do.
8. Duration and Termination. This Agreement shall
continue until terminated by the Fund with respect to any or all
Series thereof, or by ISC. Termination of this Agreement with
respect to any given Series shall in no way affect the continued
validity of this Agreement or the performance thereunder with
respect to any other Series.
9. Amendments. This Agreement or any part thereof may be
changed or waived only by an instrument in writing signed by the
party against which enforcement of such change or waiver is
sought.
10. Miscellaneous. This Agreement embodies the entire
contract and understanding between the parties hereto. The
captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the
provisions thereof or otherwise affect their construction or
effect. If any provision 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 and shall inure to the benefit of the
3
parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below as of
the date first above written.
ATTEST: THE ROCKWOOD GROWTH FUND, INC.
By:
Secretary Co-President
ATTEST: INVESTOR SERVICE CENTER, INC.
By:
Secretary President
4
Form Of
CREDIT AGREEMENT
INVESTORS BANK & TRUST COMPANY
and
BULL & BEAR FUNDS I, INC.
BULL & BEAR FUNDS II, INC.
BULL & BEAR GOLD INVESTORS LTD.
BULL & BEAR MUNICIPAL SECURITIES, INC.
BULL & BEAR SPECIAL EQUITIES FUND, INC. and
MIDAS FUND, INC.
THE ROCKWOOD GROWTH FUND, INC.
$20,000,000 REVOLVING CREDIT FACILITY
_______, 1996
TABLE OF CONTENTS
Page
ARTICLE I. THE CREDIT FACILITY
1.01 The Credit Facility 1
1.02 Availability 3
1.03 Charges Against Accounts 3
1.04 Payments 3
1.05 Payment on Non-Business Days 3
1.06 Net Payments 3
1.07 Additional Amounts Payable 3
1.08 Source of Repayment; Payment of Fees and Other Charge 4
ARTICLE II. CONDITIONS
<PAGE>
2.01 Conditions to Closing 5
2.02 Conditions of Making Loans 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES
3.01 Organization 7
3.02 Authority 7
3.03 Approvals 8
3.04 Valid Obligations 8
3.05 Assets 8
3.06 Claims 8
3.07 Financial Statements 9
3.08 Taxes 9
3.09 Investment Company 9
3.10 Margin Stock 10
3.11 Representations Accurate 10
4.01 Affirmative Covenants Other Than
4.02 Negative Covenants 11
4.03 Reporting Requirements 13
ARTICLE V. EVENTS OF DEFAULT; REMEDIES
5.01 Events of Default 15
5.02 Remedies 16
5.03 Set-off 17
ARTICLE VI. MISCELLANEOUS
6.01 Right to Cure 17
6.02 Waivers 17
6.03 Delays 17
6.04 Notices 17
6.05 Captions 18
6.06 Jurisdiction 18
6.07 Execution 18
<PAGE>
6.08 Governing Law 18
6.09 Fees 18
6.10 Binding Nature 18
6.11 Severability 18
6.12 Under Seal 19
ARTICLE VII. DEFINITIONS
7.01 Definitions 19
7.02 Use of Defined Terms 20
7.03 Accounting Terms 20
Exhibits
Exhibit A Form of Note
Exhibit B Form of Borrowing Notice
Exhibit C Designation of Portfolios
Schedules
Schedule A Additional Disclosure and Covenants
This Credit Agreement (the "Agreement") is made as of _____, 1996 between
Investors Bank & Trust Company, a Massachusetts trust company (the "Bank"), and
each of Bull & Bear Funds I, Inc., Bull & Bear Funds II, Inc., Bull & Bear Gold
Investors Ltd., Bull & Bear Municipal Securities, Inc., Bull & Bear Special
Equities Fund, Inc., Midas Fund, Inc. and The Rockwood Growth Fund, Inc., each a
Maryland corporation with its principal office at 11 Hanover Square, New York,
NY 10005 (each a "Borrower" and collectively the "Borrowers").
WHEREAS, the Borrowers have requested that the Bank provide, and subject
to the terms and conditions of this Agreement and of the other agreements and
documents referred to herein, the Bank has agreed to provide, to the Borrowers a
credit facility (the "Credit Facility") of up to $20,000,000 to provide for the
short-term working capital requirements of the Borrowers;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
<PAGE>
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Borrowers, in
order to induce the Bank to provide the Credit Facility, and intending to be
legally bound, hereby severally but not jointly agree with the Bank as follows:
ARTICLE I
THE CREDIT FACILITY
1.01.The Credit Facility. The Credit Facility shall consist of a revolving line
of credit pursuant to which the Bank may from time to time make Loans to the
Borrowers.
(a) Loans. Subject to the terms and conditions hereinafter set
forth, the Bank agrees to make Loans to any or all of the Borrowers and, with
respect to Borrowers composed of Portfolios, any and all of the Portfolios at
the Principal Office of the Bank on any Business Day prior to the Termination
Date, in such amounts as the Borrowers may request; provided, however, that any
such requests by the Borrowers or the Portfolios may not exceed the Aggregate
Eligible Loan Amount as to all Borrowers and Portfolios and the Eligible Loan
Amount as to any Borrower or Portfolio and further provided that the aggregate
of all Loans to any or all of the Borrowers outstanding shall at no time exceed
the lesser of (a) the Aggregate Eligible Loan Amount; or (b) $20,000,000. Within
the foregoing limits, subject to the terms and conditions of this Agreement, any
or all of the Borrowers and, with respect to Borrowers composed of Portfolios,
any and all of the Portfolios may obtain Loans, repay Loans in whole or in part
and obtain Loans again on one or more occasions. The Loans shall be evidenced by
the respective Note of each Borrower or Portfolio, dated as of the date hereof.
The Borrowers and Portfolios severally but not jointly hereby irrevocably
authorize the Bank to make or cause to be made, on a schedule to be attached to
the Notes or on the books of the Bank, at or following the time of making each
Loan and of receiving any payment of principal, an appropriate notation
reflecting such transaction and the then aggregate unpaid principal balance of
the Loans. The amount so noted shall constitute presumptive evidence as to the
amount owed by the Borrowers and the Portfolios with respect to the principal
amount of the Loans. Failure of the Bank to make any such notation shall not,
however, affect any obligation of the Borrowers and the Portfolios hereunder or
under the Notes.
(b) Request for Loans. Each Borrower or Portfolio shall give the
Bank telephonic or written notice, specifying the amount and date of each Loan
requested, no later than 2:00 p.m. (Boston time) on the Business Day on which
<PAGE>
the Borrower or Portfolio requests the proceeds of such Loan to be made
available by the Bank. Upon receipt from the Bank of a Borrowing Notice prepared
by the Bank in connection with such Loan request, the Borrower or Portfolio
shall execute such Borrowing Notice and return it promptly to the Bank.
(c) Repayment of Principal. Each Borrower or Portfolio shall
repay in full all Loans and all interest thereon upon the first to occur of (i)
the Termination Date; or (ii) an acceleration under Section 5.02(b) following an
Event of Default. Each Borrower or Portfolio may prepay, at any time, without
penalty, the whole or any portion of any Loans; provided that each such
prepayment shall be accompanied by a payment of all interest under the
respective Note or Notes accrued but unpaid to the date of prepayment.
(d) Interest Payments. Each Borrower and Portfolio will pay
interest on the principal amount of the aggregate Loans outstanding from time to
time, from the date of the initial Loan until payment of all Loans and the Notes
in full and the termination of the Credit Facility, such interest to be payable
monthly in arrears on the first Business Day of the next month, commencing with
May 1, 1996, and on the date of payment of the Loans in full. The rate of
interest so payable shall be a floating rate per annum equal to the Federal
Funds Rate plus one and three-quarters percent (1.75%) (but in no event in
excess of the maximum rate then permitted by applicable law), with a change in
such rate of interest to become effective on the same day on which any change in
the Federal Funds Rate is effective. Overdue principal and, to the extent
permitted by law, overdue interest shall bear interest at a floating rate per
annum which at all times shall be five percent (5%) plus the Federal Funds Rate
(but in no event in excess of the maximum rate from time to time then permitted
by applicable law), compounded monthly and payable on demand, with a change in
such rate of interest to become effective on the same day on which any change in
the Federal Funds Rate is effective.
(e) Commitment Fee. The Borrowers and Portfolios shall pay to the
Bank an annual commitment fee, in connection with the establishment and
maintenance of the Credit Facility at the rate of one-twentieth of one percent
(0.05%) per annum on the difference between (i) $20,000,000 and (ii) the average
daily amount of Loans outstanding under the Credit Facility, payable quarterly
in arrears on the first Business Day of the next calendar quarter.
(f) Use of Loan Proceeds. The proceeds of each Loan will be used
by the Borrowers and Portfolios solely to finance redemptions, purchase and hold
investment securities, finance working capital requirements and pay fund
expenses.
(g) Reduction or Termination of Credit Facility. The Borrowers and Portfolios
shall have the right, at any time for any reason and without penalty, upon no
<PAGE>
less than ten (10) days' prior written notice to the Bank, to terminate or
reduce the amount of the Credit Facility. Any such reduction shall be in the
amount of $500,000 or a whole multiple thereof (or, if less, the maximum amount
of the Credit Facility) and shall be irrevocable. Each Borrower or Portfolio
shall have the right, at any time for any reason and without penalty, upon no
less than ten (10) days' prior written notice to the Bank, to terminate its
participation in the Credit Facility provided by this Agreement. Upon any such
termination of participation by any Borrower or Portfolio, the Bank shall have
the right, at any time for any reason and without liability, upon no less than
ten (10) days' prior written notice to the Borrowers and the Portfolios, to
terminate the Credit Facility.
1.02. Availability. The proceeds of all Loans shall be credited by the Bank to a
general deposit account of the respective Borrower or Portfolio with the Bank.
1.03. Charges Against Accounts. The Bank may charge any deposit account,
and, after the occurrence of any Event of Default by a Borrower or Portfolio,
any custody, trust or agency account, of such defaulting Borrower or Portfolio
at or with the Bank, if any, with such Borrower's or Portfolio's payments of
interest, principal and other sums due, from time to time, under this Agreement,
or due under such Borrower's or Portfolio's Note, and will thereafter notify the
Borrower or Portfolio of the amount so charged. The failure of the Bank so to
charge any account or to give any such notice shall not affect the obligation of
the Borrower or Portfolio to pay interest, principal or other sums as provided
herein or in the Notes.
1.04. Payments. Except as otherwise provided in this Agreement, all
payments of interest, principal and any other sum payable hereunder and/or the
Notes shall be made to the Bank at its Principal Office, in immediately
available funds or by check. All payments received by the Bank after 11:00 a.m.
Eastern time on any day shall be deemed received as of the next succeeding
Business Day. All monies received by the Bank hereunder shall be applied first
to fees, charges, costs and expenses payable to the Bank under this Agreement,
next to interest then accrued on account of the Loans and only thereafter to
principal of the Loans. Interest payable under the Notes shall be computed on
the basis of a 360-day year for the number of days actually elapsed.
1.05. Payment on Non-Business Days. Whenever any payment to be made to the
Bank hereunder or under the Notes shall be stated to be due on a day which is
not a Business Day, such payment may be made on the next succeeding Business
Day, and interest payable on each such date shall include the amount thereof
which shall accrue during the period of such extension of time.
1.06. Net Payments. All payments to the Bank hereunder and/or in respect of the
<PAGE>
Notes shall be made without deduction, set-off or counterclaim, notwithstanding
any claim which any Borrower or Portfolio may now or at any time hereafter have
against the Bank.
1.07. Additional Amounts Payable.
(a) If the adoption of or any change in any statute, rule,
regulation, order or policy of any government authority or agency or in the
interpretation or application thereof or compliance by the Bank with any request
or directive (whether or not having the force of law) from any central bank or
other government authority or agency made subsequent to the date hereof:
(i) shall subject the Bank to any tax of any kind whatsoever with respect to
this Agreement, any Note or any Loan or change the basis of taxation of payments
to the Bank in respect thereof (except for changes in the rate of tax on the
overall net income of the Bank).
(ii) shall impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or other extensions of
credit by, or any other acquisition of funds, by, any office of the Bank; or
(iii) shall impose on the Bank any other condition affecting the Credit
Facility, this Agreement or any Loan;
and the result of any of the foregoing is to increase the cost to the Bank, by
an amount which the Bank deems to be material, of making, continuing or
maintaining Loans or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, each Borrower or Portfolio whose Loans or
access to Loans under the Credit Facility are affected by the foregoing shall
promptly pay to the Bank, upon demand therefor by the Bank, such additional
amount or amounts as will compensate the Bank for such increased cost or reduced
amount receivable for all periods commencing 60 days after the Bank has provided
notice thereof to the Borrowers.
(b) If the Bank shall have determined that the adoption of or any
change in any statute, rule, regulation, order or policy of any government
authority or agency regarding capital adequacy or in the interpretation or
application thereof or compliance by the Bank or any corporation controlling the
Bank with any request or directive regarding capital adequacy (whether or not
having the force of law) from any governmental authority or agency made
subsequent to the date hereof shall have the effect of reducing the rate of
return on the Bank's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which the Bank or such corporation
could have achieved but for such adoption, change or compliance by an amount
<PAGE>
deemed by the Bank to be material, then from time to time, the Borrowers and the
Portfolios shall promptly pay to the Bank, upon demand therefor by the Bank,
such additional amount or amounts as will compensate the Bank for such reduction
for all periods commencing 60 days after the Bank has provided notice thereof to
the Borrowers and the Portfolios.
(c) If the Bank claims any additional amounts pursuant to this
Section 1.07, it shall promptly notify the Borrowers and the Portfolios of the
event by reason of which it has become so entitled. A certificate of an
authorized officer of the Bank as to any additional amounts payable pursuant to
this subsection submitted by the Bank to the Borrowers and the Portfolios shall
be conclusive in the absence of manifest error.
1.08. Source of Repayment; Payment of Fees and Other Charges.
(a) Notwithstanding any other provision of this Agreement, the parties agree
that the assets and liabilities of each Portfolio of a Borrower are separate and
distinct from the assets and liabilities of each other Portfolio of such
Borrower, and no Portfolio shall be liable hereunder or shall be charged for any
debt, obligation, liability, fee, or expense hereunder arising out of or in
connection with a transaction entered into hereunder by or on behalf of any
other Portfolio.
(b) Notwithstanding any other provision of this Agreement, each
Borrower or Portfolio, as the case may be, shall be liable only for its portion
of the commitment fee or any other fee or amount payable under this Agreement
(including, without limitation, under Sections 1.07 and 6.09), and such Borrower
or Portfolio shall not be liable for any portion of the commitment fee or such
other fee or amount of any other Borrower or Portfolio hereunder. The Borrowers
and Portfolios shall notify the Bank at least two Business Days in advance of a
commitment fee or other payment date of the manner in which the fees or other
amounts to be paid on such payment date are to be allocated among the Borrowers
and Portfolios.
ARTICLE II
CONDITIONS
2.01. Conditions to Closing. The obligation of the Bank to make the
initial Loans to each Borrower and with respect to a Borrower composed of
Portfolios, each Portfolio is subject to the satisfaction of all of the
following conditions on or prior to the Closing Date:
(a) Documents. The Bank shall have received this Agreement and
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the Notes duly executed and delivered by the Borrowers and, with respect to a
Borrower composed of Portfolios, the Borrower on behalf of each Portfolio.
(b) Warranties True; Covenants Performed. All warranties and
representations of each Borrower or Portfolio in this Agreement shall be true
and accurate on the date of the Closing as if then given, and each Borrower or
Portfolio shall have performed or observed all of the terms, covenants,
conditions and obligations under this Agreement which are required to be
performed or observed by them on or prior to such date.
(c) Closing Certificate. The Bank shall have received a
certificate, dated as of the Closing Date and executed by or on behalf of the
Co-Chief Executive Officer or Chief Accounting Officer of each Borrower or
Portfolio, in form and content satisfactory to the Bank, stating the substance
of Section 2.01(b).
(d) Other Documents. The Bank shall have received all other
documents and assurances required hereunder or which it may reasonably request
in connection with the transactions contemplated by this Agreement, and such
documents shall be certified, when appropriate, by the proper authorities or
representatives of each Borrower or Portfolio, including without limitation the
following, and all such documents and all proceedings to be taken in connection
with such transactions shall be reasonably satisfactory in form and substance to
the Bank and its counsel:
(i) Copies of all documents evidencing necessary corporate action or approvals,
if any, with respect to this Agreement, the Notes and such other matters,
including, without limitation, any required approvals of governmental
authorities and other persons or entities.
(ii) A certificate, signed by the Co-Chief Executive Officer or Chief Accounting
Officer of each Borrower or Portfolio, setting forth the names of the Co-Chief
Executive Officers, Chief Accounting Officer and any other persons authorized to
sign this Agreement, the Notes and any and all certificates, notices and reports
referred to herein on behalf of such Borrower or Portfolio; such certificate
shall state that the Bank may conclusively rely on the statements made therein
until the Bank shall receive a further certificate of a Co-Chief Executive
Officer or Chief Accounting Officer of such Borrower canceling or amending the
prior certificate.
(iii) A copy of the Certificate of Incorporation or comparable instrument of
each Borrower and all amendments thereto; a copy of the By-laws or comparable
instrument of each Borrower and Portfolio, as amended to date; a copy of the
prospectus and statement of additional information of each Borrower; as amended
to date; and a certificate of legal existence and good standing for each
<PAGE>
Borrower issued as of a recent date by the appropriate public officials.
(iv) FR Forms U-1 executed by each Borrower or Portfolio and such other
documents which, in the opinion of the Bank or its counsel, are required to be
obtained in connection with the Loans under the Credit Facility by reason of the
provisions of any law or regulation applicable to the Bank, and the statements
made in such documents shall be such as, in the opinion of the Bank, will permit
such Loans under the Credit Facility from the Bank in accordance with such laws
and regulations.
(e) No Adverse Change. There shall have occurred no material adverse change
in the business, operations, properties, financial condition, or prospects of
any Borrower or Portfolio.
(f) Legal Opinion. All legal matters incident to this Agreement shall be
reasonably satisfactory to the Bank's counsel, and the Bank shall have received
at the Closing the legal opinion of counsel to the Borrowers and Portfolios in
form and substance reasonably satisfactory to the Bank.
(g) Borrowing Notice. Each Borrower or Portfolio requesting a Loan on the
Closing Date shall have executed and delivered to the Bank a Borrowing Notice.
2.02. Conditions of Making Loans. The obligation of the Bank to make any
Loans to any Borrower or Portfolio subsequent to the Closing Date is subject to
the satisfaction of the following conditions precedent on or before the date of
each such subsequent advance (the "Borrowing Date"):
(a) Representations and Warranties. The representations and warranties of such
Borrower or Portfolio in this Agreement and otherwise made by such Borrower or
Portfolio in writing in connection with the transactions contemplated by this
Agreement shall have been correct as of the date on which made and shall also be
correct at and as of such Borrowing Date with the same effect as if made at and
as of such time, except as may have been disclosed in writing to the Bank by
such Borrower or Portfolio and to which the Bank has consented in writing and to
the extent that the facts upon which such representations and warranties are
based may in the ordinary course be changed by the transactions permitted or
contemplated hereby.
(b) Performance. Such Borrower or Portfolio shall have performed
and complied with all terms and conditions herein required to be performed or
complied with by it prior to or on such Borrowing Date, and on such Borrowing
Date there shall exist no Event of Default or condition which would, with any or
all the giving of notice or the lapse of time, result in an Event of Default
upon consummation of the subsequent advance to be made on such Borrowing Date.
<PAGE>
(c) Borrowing Notice. Such Borrower or Portfolio shall have executed and
delivered to the Bank a Borrowing Notice.
Each request by any Borrower or Portfolio for a Loan subsequent to the Closing
Date shall constitute a certification by such Borrower or Portfolio that the
conditions specified in this Section 2.02 will be duly satisfied on the date of
the making of such Loan with respect to such Borrower or Portfolio.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrowers and Portfolios severally but not jointly represent and
warrant as follows:
3.01. Organization. Each Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. Other
than as disclosed in Schedule A, each Borrower: (i) is duly qualified to do
business and in good standing in each jurisdiction where such qualification is
required, except those jurisdictions where the failure to so qualify will not
have a material adverse effect on such Borrower's business, prospects or
financial condition; (ii) has all requisite power and authority to conduct its
business as presently being conducted and as proposed to be conducted after the
Closing and to own its properties now and after the Closing; and (iii) has all
requisite power and authority to execute and deliver, and to perform all of its
obligations under, this Agreement and its respective Note provided, however,
that the Borrowers and Portfolios do not have the requisite authority to pledge
all of their assets as may be required by the Bank pursuant to Section 4.01(g)
of this Agreement..
3.02. Authority. The execution, delivery and performance by each Borrower and
Portfolio of this Agreement and its respective Note: (i) have been duly
authorized by all necessary corporate action; (ii) do not contravene any
provision of such Borrower's Certificate of Incorporation or comparable
instrument, or By-laws, prospectus, statement of additional information or
comparable documents provided, however, that certain Borrowers and Portfolios
are limited by investment limitations contained in their prospectuses or
statements of additional information that limit their ability to pledge or
otherwise grant a security interest in their assets; (iii) do not violate any
provision of any law, rule or regulation or any judgment, determination or award
provided, however, that the Borrowers and Portfolios are limited by law, rule or
regulation that limit their ability to pledge or otherwise grant a security
interest in their assets; (iv) do not and will not result in a breach or
<PAGE>
constitute a default (or constitute an event which with the passage of time or
giving of notice or both could constitute an event of default) under any
agreement to which such Borrower or Portfolio is a party or by which any of its
properties are bound, including, without limitation, any indenture, loan or
credit agreement, lease, debt instrument or mortgage; and (v) do not and will
not result in or require the creation or imposition of any mortgage, deed of
trust, pledge, lien, security interest or other charge or encumbrance of any
nature upon or with respect to any of the properties of the Borrower or
Portfolio except in accordance with the terms of this Agreement. No Borrower or
Portfolio is in default under its Certificate of Incorporation or comparable
instrument, or By-laws, prospectus, statement of additional information or
comparable documents as now in effect, or any law, rule or regulation, order,
writ, judgment, injunction, decree, determination, award or agreement referred
to above, and no Borrower or Portfolio will be in any such default by virtue of
the transactions to be entered into at the Closing, other than a default that
will not have a material adverse effect on such Borrower's or Portfolio's
operations, assets or financial condition.
3.03. Approvals. No authorization, consent, approval, license or exemption
of, or filing a registration with, any court or governmental department or
commission, board, bureau, agency, instrumentality or other person or entity,
domestic or foreign, is or will be necessary for the valid execution, delivery
or performance by each Borrower or Portfolio of this Agreement and/or its
respective Note other than filings which have already been made and consents or
approvals which have already been received.
3.04. Valid Obligations. This Agreement and the respective Notes have been
duly executed and delivered by each Borrower and, with respect to a Borrower
composed of Portfolios, each Portfolio and constitute legal, valid and binding
obligations of such Borrower or Portfolio, enforceable in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and except as enforceability may be
subject to general principles of equity, whether such principles are applied in
a court of equity or at law.
3.05. Assets. Each Borrower and Portfolio has good and valid title in and
to its respective assets, subject to no security interest, mortgage, pledge,
lien, lease, encumbrance, charge, easement, restriction or encroachment except
for Permitted Liens and for defects and claims which, in the aggregate, could
not have a material adverse effect on the business, operations, properties,
financial condition or prospects of such Borrower or Portfolio. Each Borrower's
and Portfolio's principal place of business is maintained at its Principal
Office at the location indicated in the preamble to this Agreement.
<PAGE>
3.06. Claims. There are no actions, suits, proceedings or investigations pending
or threatened against any Borrower or Portfolio before any court or any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which could prevent or hinder the consummation of the
transactions contemplated hereby or call into question the validity of this
Agreement, any of the Notes or any other document or instrument provided for or
contemplated by this Agreement or any action taken or to be taken in connection
with the transactions contemplated hereby or thereby, or which in any single
case or in the aggregate might result in any material adverse change in the
business, operations, properties, financial condition or prospects of such
Borrower or Portfolio or any material impairment of the right or ability of such
Borrower or Portfolio to carry on its operations as now conducted or proposed to
be conducted after the Closing.
3.07. Financial Statements. The Borrowers and Portfolios have previously
delivered to the Bank the audited financial statements of each Borrower and
Portfolio as of the end of its most recently completed fiscal year. All such
financial statements were prepared in accordance with GAAP, and accurately
reflect the financial condition of each such Borrower and Portfolio as of such
date. No Borrower or Portfolio has any liability, contingent or otherwise, that
could materially adversely affect its financial condition which is not reflected
in the financial statements previously delivered by the Borrower or Portfolio to
the Bank. Since the end of such Borrower's or Portfolio's most recently
completed fiscal year, there has not been a material adverse change in the
business, operations, property, financial condition or prospects of any Borrower
or Portfolio.
3.08. Taxes. Each Borrower and Portfolio has filed all federal, foreign,
state, local and other tax returns, reports and estimates which are required to
be filed and has paid all taxes, fees and other governmental charges shown on
such returns, reports and estimates and on all assessments received by it, to
the extent that such taxes have become due, except for any tax or assessment
which is being contested by such Borrower or Portfolio in good faith and by
appropriate proceedings and such Borrower or Portfolio has set aside on its
books sufficient reserves with respect thereto. All of such tax returns are
accurate and complete in all material respects. All other taxes and assessments
of any nature with respect to which each Borrower or Portfolio is obligated and
which have become due are being paid or adequate accruals have been set up
therefor. There are in effect no waivers of applicable statutes of limitations
for federal, state or local taxes for any period. No Borrower or Portfolio is
delinquent in the payment of any tax, assessment or governmental charge and no
Borrower or Portfolio has requested any extension of time within which to file
any tax return, which return has not since been filed, and no deficiencies for
<PAGE>
any tax, assessment or governmental charge have been asserted or assessed, and
no Borrower or Portfolio knows of any material liability or basis therefor.
3.09. Investment Company. Each Borrower or Portfolio is duly registered as an
investment company pursuant to the Investment Company Act of 1940, as amended
(the "1940 Act") and is in compliance with all regulations, rules and orders
issued or promulgated pursuant to the 1940 Act, other than such regulations,
rules, and orders the non-compliance with which will not have a material adverse
effect on such Borrower's or Portfolio's operations, assets or financial
condition. Each Borrower and Portfolio is in compliance with its respective
prospectus and the investment policies and other policies described therein,
other than such investment policies, investment restrictions, other policies and
other requirements the non-compliance with which will not have a material
adverse effect on such Borrower's or Portfolio's operations, assets or financial
condition.
3.10. Margin Stock. Each Borrower and Portfolio has executed and delivered
to the Bank an executed FR Form U-1 (as defined in Regulation U of the Board of
Governors of the Federal Reserve System).
3.11. Representations Accurate. No representation or warranty made by any
Borrower or Portfolio herein, in any Note or in any other agreement, document,
instrument or certificate furnished from time to time in connection herewith or
therewith contains any misrepresentation of a material fact or omits to state
any material fact necessary to make the statements herein or therein (taken as a
whole in conjunction with all such documents) not misleading when made.
ARTICLE IV
COVENANTS
4.01. Affirmative Covenants Other Than Reporting Requirements. Without
limiting any other covenants and provisions hereof, each Borrower and, with
respect to a Borrower composed of Portfolios, each Portfolio severally but not
jointly covenant and agree that, so long as any Note, any Loan or any obligation
of such Borrower or Portfolio to the Bank, in any capacity, remains unpaid:
(a) Payments. Each Borrower or Portfolio shall duly and
punctually make the payments required under this Agreement and its respective
Note and shall perform and observe all of its other obligations under the
foregoing documents, in each case within any applicable grace period or cure
period provided for in Section 5.01 hereof.
(b) Payment of Taxes and Trade Debt. Each Borrower or Portfolio
will promptly pay and discharge all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profit or upon any property,
<PAGE>
real, personal or mixed, belonging to it; provided, however, that such Borrower
or Portfolio shall not be required to pay any such tax, assessment, charge or
levy if the same shall not at the time be due and payable or if the same can be
paid thereafter without penalty or if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if such Borrower or
Portfolio shall have made adequate provision on its books for the payment of
such tax, assessment, charge or levy. Each Borrower or Portfolio will pay in a
timely manner all of its trade payables.
(c) Maintain Rights. Each Borrower or Portfolio shall:
(i) keep in full force and effect its corporate existence;
(ii)keep in full force and effect all material rights, registrations, licenses,
leases and franchises reasonably necessary to the conduct of its business;
provided that nothing in this Section 4.01(c)(ii) shall prevent the abandonment
or termination of any right, registration, license, lease or franchise, if, in
the reasonable opinion of the Board of Directors of the
applicable Borrower or Portfolio, such abandonment or termination is in the best
interest of such Borrower or Portfolio and not disadvantageous to the Bank;
(iii) duly observe and conform to all applicable material
laws, statutes, regulations, decrees, judgments, orders, writs and other
requirements of all governmental authorities in any way relating to it or the
conduct of its business (including without limitation the 1940 Act and the
regulations, rules and orders issued or promulgated thereunder), except where
the failure to so comply could not have a material adverse affect on the
business, operations, properties or financial condition or prospects of such
Borrower or Portfolio; and
(iv) abide by the additional covenants set forth in Schedule A.
(d) Books and Records. Each Borrower or Portfolio will (i) keep
proper books of record and account in which entries therein are full, true and
correct in all material respects in conformity with GAAP and all requirements of
law and shall be made of all material dealings and transactions in relation to
its business and activities, and (ii) permit representatives of the Bank to
<PAGE>
visit and inspect any of its properties and to examine and make abstracts from
any of their books and records upon reasonable notice, at any reasonable time
during normal business hours and as often as may reasonably be desired, and to
discuss the business, operations, properties and financial condition of such
Borrower or Portfolio with its officers and employees and with their independent
certified public accountants.
(e) Compliance. Each Borrower or Portfolio will comply with its
respective prospectus, statement of additional information and other comparable
documents or instruments and all investment policies and other policies
described therein, other than such investment policies, investment restrictions,
other policies and other requirements the non-compliance with which will not
have a material adverse effect on such Borrower's or Portfolio's operations,
assets or financial condition.
(f) Use of Proceeds. Each Borrower or Portfolio shall use the proceeds of
each Loan solely for the purposes set forth in Section 1.01(f) hereof.
(g) Security. Immediately upon the request of the Bank in
accordance with Section 5.02(a) hereof, each Borrower or Portfolio shall execute
and deliver to the Bank a pledge agreement or security agreement and all other
documents, each in form and substance reasonably satisfactory to the Bank,
granting to the Bank a security interest in all assets of such Borrower or
Portfolio. In addition, such Borrower or Portfolio, at its expense, shall
execute, file and record all such further instruments (including without
limitation UCC-1 financing statements), and perform such other acts, as the Bank
may reasonably determine are necessary or advisable to maintain the priority of
the security interests in favor of the Bank created by the such documents on all
property subject thereto.
4.02. Negative Covenants. Without limiting any other covenants and provisions
hereof, each Borrower and, with respect to a Borrower composed of Portfolios,
each Portfolio severally but not jointly covenant and agree that, so long as any
Note or any Loan is outstanding or any obligation of such Borrower or Portfolio
to the Bank, in any capacity, have not been fully performed:
(a) Liens. No Borrower or Portfolio will create, incur, assume or
suffer to exist any security interest, lien, mortgage, deed of trust, pledge,
levy, attachment, claim or other charge or encumbrance of any nature whatsoever
upon or with respect to any of its assets, whether now owned or hereafter
acquired, or assign or otherwise convey any right to receive income from any of
such assets ("Lien"), except for (1) Liens in favor of the Bank, (2)
restrictions under applicable securities laws, and agreements (such as
securities lending, stockholder voting or stock restriction agreements) entered
into by such Borrower or Portfolio in the ordinary course of its business, (3)
<PAGE>
Liens for current taxes not delinquent or taxes being contested in good faith
and by appropriate proceedings and as to which reserves or other appropriate
provisions required by GAAP are being maintained, (4) Liens as are necessary in
connection with a secured letter of credit opened by such Borrower or Portfolio
in connection with such Borrower's or Portfolio's directors' and officers'
errors and omissions liability insurance policy, and (5) Liens in connection
with the payment of initial and variation margin in connection with futures and
options transactions and collateral arrangements with respect to options,
futures contracts, options on futures contracts, forward contracts, swaps, caps,
collars, floors, when-issued or delayed delivery securities or other authorized
investments ("Permitted Liens").
(b) Transfers. No Borrower or Portfolio shall sell, lease,
transfer or otherwise dispose of any of its assets, provided that such Borrower
or Portfolio may from time to time sell, lend or distribute its assets in the
ordinary course of such Borrower's or Portfolio's business absent the prior
written consent of the Bank.
(c) Mergers. No Borrower or Portfolio will enter into any
transaction of merger or consolidation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), without the prior written consent of
the Bank, which shall not be unreasonably withheld, other than a merger or
consolidation with another person in accordance with 17 C.F.R. Section 270.17a-8
if (1) such merger or consolidation complies in all respects with the
requirements of 17 C.F.R. Section 270.17a-8 and all rules promulgated in
connection therewith, and (2) the surviving entity assumes all of the
obligations to the Bank of the merging or consolidating Borrower(s) or
Portfolio(s).
(d) Indebtedness. No Borrower or Portfolio will incur any
additional Indebtedness, except for (1) Indebtedness to the Bank, (2) pursuant
to such Borrower's or Portfolio's securities lending activities conducted in the
ordinary course of its business and (3) reverse repurchase transactions entered
into in the ordinary course of its business in an amount not exceeding that
permitted by such Borrower's or Portfolio's investment policies and
restrictions.
(e) Bankruptcy. No Borrower or Portfolio will petition for relief
under the United States Bankruptcy Code or institute any similar bankruptcy,
insolvency, or receivership proceedings under any other federal or state law.
(f) No Amendment. No Borrower or Portfolio shall amend in any
material respect its respective registration statement, prospectus or investment
<PAGE>
or other policies described therein if such amendment would materially and
adversely affect the Bank's rights under this Agreement or the respective Notes
without the prior written consent of the Bank, which shall not be unreasonably
withheld.
(g) No Change. No Borrower or Portfolio shall change or replace
its investment adviser, administrator, distributor or sponsor, without the prior
written consent of the Bank, which shall not be unreasonably withheld. No
Borrower or Portfolio shall change or replace its custodian without the prior
written consent of the Bank.
4.03. Reporting Requirements. So long as any Loan or any Note shall be
outstanding or any other obligation of each Borrower, or with respect to a
Borrower composed of Portfolios, each Portfolio to the Bank, in any capacity,
shall remain unpaid, such Borrower or Portfolio shall:
(a) Financial Reports. Furnish to the Bank:
(i) as soon as available, but in any event within ninety (90) days after
the end of each fiscal year of such Borrower or Portfolio, a copy of the audited
statement of assets and liabilities of such Borrower or Portfolio as at the end
of such fiscal year and the related audited statements of operations and cash
flows for such fiscal year, in each case setting forth in comparative form the
figures for the previous year, reported on by independent certified public
accountants of nationally recognized standing or otherwise reasonably acceptable
to the Bank, without a "going concern" or similar qualification or exception or
qualification as to the scope of the audit, together with any letter from the
management of such Borrower or Portfolio prepared in connection with such
Borrower's or Portfolio's annual audit report; and
(ii) as soon as available, but in any event within thirty (30) days after
the end of the first six months of each fiscal year of such Borrower or
Portfolio, copies of the unaudited statement of assets and liabilities of such
Borrower or Portfolio as at the end of such six-month period, together with the
related unaudited statement of operations for the portion of the fiscal year of
such Borrower or Portfolio through such six-month period, in each case certified
by the Chief Accounting Officer of such Borrower or Portfolio as presenting
fairly the financial condition and results of operations of such Borrower or
Portfolio, in conformity with GAAP (subject to normal year-end audit adjustments
and to the fact that such financial statements may be condensed and may not
include footnotes);
all such financial statements to be complete and correct in all material
<PAGE>
respects and prepared in reasonable detail and, except as provided in (ii)
above, in conformity with GAAP applied consistently throughout the periods
reflected therein.
(b) Other Financial Reports. Furnish to the Bank:
(i) concurrently with the delivery of each set of the financial statements
referred to above, a certificate of the Chief Accounting Officer of such
Borrower or Portfolio stating that, to the best of such person's knowledge,
during the period covered by such set of financial statements the Borrower or
Portfolio has observed or performed in all respects all of its covenants and
agreements contained in this Agreement and its respective Note to be observed,
performed or satisfied by it, and that such person has obtained no knowledge of
any default or Event of Default (except as specified in such certificate);
(ii) promptly after the same are sent, copies of all other financial
statements of such Borrower or Portfolio, if any, which it sends to its
stockholders;
(iii) within thirty (30) days of the end of each quarter, a
schedule of such Borrower's or Portfolio's investment assets stating the cost
and fair market value of all such investments;
(iv) promptly, such additional financial and other information as the Bank
may from time to time reasonably request; and
(v) as soon as available, a copy of each other report submitted to such
Borrower or Portfolio by its certified public accountants in connection with any
annual, interim or special audit made by them of the books of such Borrower or
Portfolio.
(c) Notices. Give notice to the Bank, within five days of knowledge
thereof, of: (i) the occurrence of any Event of Default under this Agreement;
(ii) any default or event of default under any other contractual obligations of
such Borrower or Portfolio which, if not paid or remedied by such Borrower or
Portfolio or waived by the obligee thereon, could result in liability to such
Borrower or Portfolio in excess of $500,000 in any single instance or $1,000,000
in the aggregate;
(iii) any pending or threatened litigation, investigation or
proceeding of which such Borrower or Portfolio has received written notice which
<PAGE>
may exist at any time between such Borrower or Portfolio and any other party
(including without limitation any governmental authority) which may have a
material adverse effect on the business, operations, property or financial
condition of such Borrower or Portfolio, or any material adverse development in
previously disclosed litigation, and such Borrower or Portfolio shall furnish
the Bank with copies of all legal process served upon such Borrower or
Portfolio;
(iv) a material adverse change in the business, operations, properties,
financial condition or prospects of such Borrower or Portfolio; and
(v) the revocation, expiration or loss of any material license,
registration, permit or other governmental authorization of such Borrower or
Portfolio;
each notice pursuant to paragraphs (i) through (v) of this Section 4.03(c)to be
accompanied by a statement of the Chief Accounting Officer of such Borrower or
Portfolio setting forth details of the occurrence referred to therein and
stating what action, if any, such Borrower or Portfolio proposes to take with
respect thereto.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
5.01. Events of Default. The occurrence of each of the following shall
constitute an Event of Default with respect to a Borrower or, with respect to a
Borrower composed of Portfolios, a Portfolio under this Agreement and under the
Notes:
(a) Failure to Make Payment. Such Borrower or Portfolio shall
fail to make any payment of principal or interest on its respective Note, any
payment of the commitment fee hereunder or any other obligation in respect
hereof or thereof on or before the date when due; provided that any failure to
make any payment of interest on its respective Note shall not constitute an
Event of Default under this Agreement until such failure shall have continued
uncured for five (5) days.
(b) Representations and Warranties. Any representation or
<PAGE>
warranty made by such Borrower or Portfolio in this Agreement, in any Note, or
in any certificate or writing in connection with this Agreement shall prove to
have been incorrect in any material respect when made, or any information
furnished in writing by such Borrower or Portfolio to the Bank, whether in this
Agreement or in any certificate or other writing required or contemplated by
this Agreement or by any of the Notes, shall prove to be untrue in any material
respect on the date on which it is or was given.
(c) Covenants. Such Borrower or Portfolio shall fail to perform
or observe any covenant or condition contained or referred to in this Agreement,
and such failure shall continue uncured for ten days after the Bank has provided
written notice thereof to such Borrower or Portfolio.
(d) Other Defaults. Any default shall exist and remain unwaived
or uncured with respect to other Indebtedness of such Borrower or Portfolio
which permits the acceleration of the maturity of any such Indebtedness in an
amount in excess of $500,000.
(e) Liens. Any lien, security interest, levy or assessment (other
than a Permitted Lien) is filed, recorded or perfected with respect to any
material part of the assets of such Borrower or Portfolio and is not released,
canceled, revoked, removed, repealed or otherwise terminated within thirty (30)
days after such filing or recording.
(f) Seizure of Assets. Any substantial part of the assets or
other property of such Borrower or Portfolio comes within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors.
(g) Judgments. Any judgment, order or writ in excess of $500,000
is rendered or entered against such Borrower or Portfolio or property of such
Borrower or Portfolio and not paid, satisfied or otherwise discharged within
sixty (60) days of the date such judgment, order or writ becomes final and
non-appealable.
(h) Insolvency. Such Borrower or Portfolio shall be generally
unable to pay its debts as they become due; the dissolution, termination of
existence, cessation of normal business operations or insolvency of such
Borrower or Portfolio; the appointment of a receiver of any part of the property
of, legal or equitable assignment, conveyance or transfer of property for the
benefit of creditors by, or the commencement of any proceedings under any
bankruptcy or insolvency laws by or against, such Borrower or Portfolio.
5.02. Remedies. Upon the occurrence of any Event of Default with respect
to any Borrower or Portfolio and at any time thereafter so long as the Event of
Default continues, in addition to any other rights and remedies available to the
<PAGE>
Bank hereunder or otherwise, the Bank may exercise any one or more of the
following rights and remedies with respect to such Borrower or Portfolio (all of
which shall be cumulative):
(a) Require the defaulting Borrower or Portfolio to provide to
the Bank collateral security for the performance of its obligations to the Bank,
in form, substance and amount satisfactory to the Bank in its sole discretion.
(b) Declare the entire unpaid principal amount of the respective
Note then outstanding, all interest accrued and unpaid thereon and all other
amounts payable under this Agreement, and all other Indebtedness of the
defaulting Borrower or Portfolio to the Bank, forthwith due and payable,
whereupon the same shall become forthwith due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived
by each Borrower or Portfolio.
(c) Terminate the Credit Facility established by this Agreement
with respect to the defaulting Borrower or Portfolio.
(d) Enforce the provisions of this Agreement and any Note or
Notes by legal proceedings for the specific performance of any covenant or
agreement contained herein or for the enforcement of any other appropriate legal
or equitable remedy, and the Bank may recover damages caused by any breach by
the defaulting Borrower or Portfolio from such Borrower or Portfolio of the
provisions of this Agreement and any Note or Notes, including court costs,
reasonable attorneys' fees and other costs and expenses incurred in the
enforcement of the obligations of that Borrower or Portfolio hereunder.
(e) Exercise all rights and remedies hereunder, under the Notes
and under any other agreement with such Borrower or Portfolio; and exercise all
other rights and remedies which the Bank may have under applicable law.
5.03. Set-off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any rights, after the occurrence
of any Event of Default, the Bank is hereby authorized at any time or from time
to time, without presentment, demand, protest or other notice of any kind to the
defaulting Borrower or Portfolio or to any other person or entity, all of which
are hereby expressly waived, to set off and to appropriate and apply any and all
deposits (general or special), securities and other property and any other
Indebtedness at any time in the possession of, or held or owing by, the Bank to
or for the credit or the account of such Borrower or Portfolio against and on
account of the obligations and liabilities of the defaulting Borrower or
Portfolio to the Bank under this Agreement or otherwise, without regard for the
availability or adequacy of other collateral. The defaulting Borrower or
Portfolio agrees to grant to the Bank, upon its request therefor after the
<PAGE>
occurrence of any Event of Default, a security interest in and to all deposits
and all securities or other property of such Borrower or Portfolio in the
possession of the Bank from time to time, to secure the prompt and full payment
and performance of any and all obligations of such Borrower or Portfolio to the
Bank.
ARTICLE VI
MISCELLANEOUS
6.01. Right to Cure. In the event that any Borrower or Portfolio shall
fail to pay any tax, assessment, governmental charge or levy, except as the same
may be otherwise permitted hereunder, or in the event that any lien, encumbrance
or security interest prohibited hereby shall not be paid in full or discharged,
or in the event that any Borrower or Portfolio shall fail to pay or comply with
any other obligation hereunder, the Bank may, but shall not be required to, pay,
satisfy, perform, discharge or bond the same for the account of such Borrower or
Portfolio, and all moneys so paid by the Bank shall be payable on demand and
shall bear interest at the lesser of (i) a floating rate per annum equal to five
percent (5%) plus the Federal Funds Rate, with a change in such rate of interest
to become effective on the same day on which any change in the Federal Funds
Rate is effective, or (ii) the maximum rate permitted by the applicable law.
6.02. Waivers. This Agreement and the Notes may not be changed, waived,
discharged or terminated orally. The performance or observance by the Bank, on
the one hand, or any Borrower or Portfolio, on the other hand, of any term of
this Agreement or any of the Notes may be waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the prior written consent of the Borrower or Portfolio, on the one hand,
or the Bank, on the other hand.
6.03. Delays. No delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any partial exercise or waiver of any privilege or right hereunder preclude any
further exercise of such privilege or right or the exercise of any other right,
power or privilege. The rights and remedies expressed in this Agreement and in
the Notes are cumulative and not exclusive of any right or remedy which any
party hereto may otherwise have.
6.04. Notices. Any notices, consents or other communications to be given under
this Agreement or under the Notes shall be in writing and shall be deemed given
when mailed to therespective parties by overnight courier or by registered mail
addressed, in the case of each Borrower or Portfolio, to Bull & Bear Funds,
attention of the Co-President, at the address set forth on the first page of
this Agreement, with a copy to the Chief Accounting Officer at the same address,
and in the case of the Bank to the Bank, attention of David F. Flynn, Managing
<PAGE>
Director, at 89 South Street, Boston, MA 02111, with a copy to Mark D. Smith at
Testa, Hurwitz & Thibeault, 125 High Street, High Street Tower, Boston, MA 02110
or to such other addresses as either party may from time to time designate for
that purpose.
6.05. Captions. Section headings and defined terms in this Agreement are
included for convenience only and are not intended to modify or define any term
or provision of any such instrument.
6.06. Jurisdiction. The Borrowers and Portfolios accept for themselves and
in conjunction with their properties, unconditionally, the non-exclusive
jurisdiction of any state or federal court of competent jurisdiction in the
Commonwealth of Massachusetts in any action, suit, or proceeding of any kind,
including agreements waiving the right to a trial by jury, against them, which
arises out of or by reason of this Agreement.
6.07. Execution. This Agreement may be signed in any number of
counterparts, which together will be one and the same instrument. This Agreement
shall become effective whenever each party shall have signed at least one such
counterpart.
6.08. Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts (without reference to the conflicts of laws or
choice of law provisions thereof) and for all purposes shall be construed in
accordance with the laws of such Commonwealth.
6.09. Fees. Whether or not any funds are disbursed hereunder, the
Borrowers and Portfolios shall pay all of the Bank's reasonable costs and
expenses in connection with the preparation, execution, delivery, review, and
enforcement of this Agreement and the Notes, and in connection with any
subsequent amendments thereto or waivers thereof, including reasonable legal
fees and disbursements, provided, however, that the amount of such legal fees
through the Closing Date shall not exceed $7,500.
6.10. Binding Nature. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns; provided that the rights and obligations under this Agreement and under
any of the Notes may not be assigned by any Borrower or Portfolio without the
written consent of the Bank or by the Bank without the written consent of each
Borrower and Portfolio (other than assignments by the Bank to entities meeting
the definition of "bank" in Section 2(a)(5) of the 1940 Act where written notice
of such assignment has been provided to each Borrower and Portfolio prior to or
contemporaneous with such assignment).
<PAGE>
6.11. Severability. In the event that any provision of this Agreement or the
application hereof to any person, entity property or circumstances shall be held
to any extent to be invalid orunenforceable, the remainder of this Agreement,
and the application of such provision to persons, entities, properties or
circumstances other than those as to which it has been held invalid or
unenforceable, shall not be affected thereby, and each provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
6.12.Under Seal. This Agreement shall be deemed to be an instrument under seal.
ARTICLE VII
Definitions
7.01.Definitions. For purposes of this Agreement and of the Notes, the following
additional definitions shall apply:
"Aggregate Eligible Loan Amount" shall mean the total of all
Eligible Loan Amounts.
"Borrowing Notice" shall mean a written notice from any Borrower
or Portfolio to the Bank substantially in the form of Exhibit B-1 or Exhibit B-2
attached hereto.
"Business Day" shall mean any day which is not a Saturday, a
Sunday or a public holiday under the laws of the United States of America or the
Commonwealth of Massachusetts applicable to banks or banking associations.
"Closing" shall mean a closing held at 10:00 A.M., in the offices
of Testa, Hurwitz & Thibeault, High Street Tower, 125 High Street, Boston,
Massachusetts 02110, on April 3, 1996, or such other date, time and place as the
parties hereto mutually agree.
"Closing Date" shall mean the date on which the Closing shall occur.
"Credit Facility" shall have the meaning specified in the preamble to this
Agreement.
"Eligible Loan Amount" shall mean the lesser of (i) $9,500,000 or
(ii) 33% of the net assets of the applicable Borrower or Portfolio.
"Event of Default" shall have the meaning specified in Section 5.01 hereof.
"Federal Funds Rate" shall mean the prevailing target Federal
<PAGE>
Funds rate established by the Board of Governors or the Open Market Committee of
the Federal Reserve System for loans in the domestic U.S. overnight bank funds
market. For any day on which such target Federal Funds rate has not been
established or cannot be determined, then "Federal Funds Rate" shall mean the
Federal Funds Effective Rate for such day displayed on Bloomberg screen FEDL at
index:HP.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Indebtedness" shall mean with respect to any Borrower or
Portfolio (i) all indebtedness or other obligations of such Borrower or
Portfolio for borrowed money, other than for trade accounts payable incurred in
the ordinary course of such Borrower's or Portfolio's businesses; and (ii) all
lease obligations of the Borrower or Portfolio which are required, in accordance
with GAAP, to be capitalized on the books of the lessee.
"Loan" shall mean a loan made by the Bank to any Borrower or
Portfolio pursuant to Section 1.01(a) of this Agreement.
"1940 Act" shall have the meaning given that term in Section 3.09
hereof.
"Note" or "Notes" shall mean the promissory note of each
respective Borrower or Portfolio substantially in the form of Exhibit A-1 or
Exhibit A-2 attached hereto.
"Permitted Liens" shall have the meaning given that term in
Section 4.02 hereof.
"Portfolio" means each series or class of shares of a Borrower
that constitutes a series under the 1940 Act, which such Borrower has previously
identified to the Bank as a Portfolio in a certificate substantially in the form
of Exhibit C hereto.
"Principal Office" shall mean, for the Borrowers and Portfolios,
the office at the location set forth in the preamble to this Agreement, and for
the Bank, the office located at 89 South Street, Boston, MA 02111.
<PAGE>
"Termination Date" shall mean the earlier of (i) March 31, 1997,
(ii) such date on which the Borrowers and Portfolios terminate the Credit
Facility pursuant to Section 1.01(g) hereof or (iii) such date on which the Bank
terminates the Credit Facility pursuant to Section 1.01(g) or Section 5.02
hereof. The Bank may, in its sole and absolute discretion and with the consent
of the Borrowers and Portfolios, extend the Termination Date for successive
one-year periods, but no term or provision hereof shall be deemed to create any
implication that the Bank will or is required to extend the Termination Date.
7.02. Use of Defined Terms. Any defined term used in the plural preceded
by the definite article shall be taken to encompass all members of the relevant
class. Any defined term used in the singular preceded by "any" shall be taken to
indicate any number of the members of the relevant class.
7.03. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with United States generally accepted
accounting principles consistently applied on the basis used by the Borrowers in
prior years.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Borrowers and the Bank have caused this Credit
Agreement to be executed by their duly authorized officers as of the date first
above written.
INVESTORS BANK & TRUST COMPANY
By:______________________________
David F. Flynn
Managing Director
BULL & BEAR FUNDS I, INC.
By:________________________________
Name:
Title:
<PAGE>
BULL & BEAR FUNDS II, INC.
By:________________________________
Name:
Title:
BULL & BEAR GOLD INVESTORS LTD.
By:________________________________
Name:
Title:
BULL & BEAR MUNICIPAL SECURITIES, INC.
By:________________________________
Name:
Title:
BULL & BEAR SPECIAL EQUITIES FUND, INC.
By:________________________________
Name:
Title:
MIDAS FUND, INC.
By:________________________________
Name:
Title:
THE ROCKWOOD GROWTH FUND, INC.
By:________________________________
Name:
Title:
<PAGE>
NOTE
$ 9,500,000.00 April 3, 1996
For value received, the undersigned, Midas Fund, Inc., a Maryland corporation
(the "Borrower"), hereby promises to pay Investors Bank & Trust Company (the
"Bank"), at its principal office at 89 South Street, Boston, MA 02111 or at such
other place as may be designated from time to time in writing by the Bank, the
principal sum of Nine Million Five Hundred Thousand dollars ($ 9,500,000.00), or
such lesser amount as may be from time to time outstanding, together with
interest in arrears from and including the date hereof on the unpaid principal
balance hereunder, computed daily, at the Federal Funds Rate as defined in the
Credit Agreement as hereinafter defined (the "Federal Funds Rate"), such rate of
interest to change with and as of each change in the Federal Funds Rate, payable
as set forth below. At the option of the Bank and to the extent permitted by
applicable law, the rate of interest on any unpaid principal or interest not
paid when due and payable hereunder shall be five percent (5%) per annum above
the Federal Funds Rate. Interest shall be calculated on the basis of actual
number of days elapsed and a year of 360 days. Notwithstanding any other
provision of this Note, the Bank does not intend to charge and the Borrower
shall not be required to pay any interest or other fees or charges in excess of
the maximum permitted by applicable law; any payments in excess of such maximum
shall be refunded to the Borrower or credited to reduce principal hereunder. All
payments received by the Bank hereunder will be applied first to costs of
collection and fees, if any, then to interest and the balance to principal.
Principal and interest shall be payable in lawful money of the United States of
America.
Principal shall be paid in accordance with Section 1.01(c) of the Credit
Agreement. Interest shall be paid monthly in arrears commencing on May 1, 1996,
and continuing on the first Business Day (as defined in the Credit Agreement) of
each successive month thereafter with a final payment of all unpaid interest at
<PAGE>
the time of payment of the principal. If any day on which a payment is due
pursuant to the terms of this Note is not a Business Day, such payment shall be
due on the next Business Day following.
This Note may be prepaid at any time, without premium or penalty, in whole or in
part. Any prepayment of principal shall be accompanied by a payment of accrued
interest in respect of the principal being prepaid.
This Note is entitled to the benefits of a Credit Agreement (the "Credit
Agreement") by and among the Borrower on behalf of the Portfolio, the other
Borrowers and Portfolios identified therein and the Bank of even date herewith.
Upon the occurrence of any Event of Default (as defined in the Credit Agreement)
by or with respect to the Borrower, the Bank may declare any or all obligations
or liabilities of the Borrower on behalf of the Portfolio to the Bank (including
the unpaid principal hereunder and any interest due thereon) immediately due and
payable without presentment, demand, protest or notice.
In accordance with Section 5.03 of the Credit Agreement, after the occurrence of
an Event of Default, the Bank may set off or apply any deposits, securities or
other assets at any time held, credited by or due from the Bank to or for the
Borrower against this Note and any other liability now existing or hereafter
arising of the Borrower to the Bank.
If this Note is not paid in accordance with its terms, the Borrower shall pay to
the Bank, in addition to principal and accrued interest thereon, all costs of
collection of the principal and accrued interest, including, but not limited to,
reasonable attorneys' fees, court costs and other costs for the enforcement of
payment of this Note.
No waiver of any obligation of the Borrower under this Note shall be effective
unless it is in a writing signed by the Bank. A waiver by the Bank of any right
or remedy under this Note on any occasion shall not be a bar to exercise of the
same right or remedy on any subsequent occasion or of any other right or remedy
at any time.
Any notice required or permitted under this Note shall be in writing and shall
be deemed to have been given on the date of delivery, if personally delivered to
the party to whom notice is to be given, or if mailed to the party to whom
notice is to be given, by registered mail, return receipt requested, postage
<PAGE>
prepaid, and addressed to the addressee at the address of the addressee set
forth in the Credit Agreement, or to the most recent address, specified by
written notice, given to the sender pursuant to this paragraph.
This Note is delivered in and shall be enforceable in accordance with the laws
of the Commonwealth of Massachusetts (without reference to the conflicts of laws
or choice of law provision thereof), and shall be construed in accordance
therewith, and shall have the effect of a sealed instrument.
The Borrower hereby expressly waives presentment, demand, and protest, notice of
demand, dishonor and nonpayment of this Note, and all other notices or demands
of any kind in connection with the delivery, acceptance, performance, default or
enforcement hereof, and hereby consents to any delays, extensions of time,
renewals, waivers or modifications that may be granted or consented to by the
holder hereof with respect to the time of payment or any other provision hereof
or of the Credit Agreement.
In the event any one or more of the provisions of this Note shall for any reason
be held to be invalid, illegal or unenforceable, in whole or in part or in any
respect, or in the event that any one or more of the provisions of this Note
operate or would prospectively operate to invalidate this Note, then and in any
such event, such provision(s) only shall be deemed null and void and shall not
affect any other provision of this Note and the remaining provisions of this
Note shall remain operative and in full force and effect and in no way shall be
affected, prejudiced, or disturbed thereby.
BORROWER:
MIDAS FUND, INC.
By: __________________________
Name:
Title:
ATTESTED:
By: ________________
Name:
Title:
<PAGE>
EXHIBIT A-2
NOTE
$ April 3, 1996
For value received, the undersigned, , a Maryland corporation (the
"Borrower"), on behalf of the Portfolio designated below ("Portfolio"), hereby
promises to pay Investors Bank & Trust Company (the "Bank"), at its principal
office at 89 South Street, Boston, MA 02111 or at such other place as may be
designated from time to time in writing by the Bank, the principal sum ($
), or such lesser amount as may be from time to time outstanding,
together with interest in arrears from and including the date hereof on the
unpaid principal balance hereunder, computed daily, at the Federal Funds Rate as
defined in the Credit Agreement as hereinafter defined (the "Federal Funds
Rate"), such rate of interest to change with and as of each change in the
Federal Funds Rate, payable as set forth below. At the option of the Bank and to
the extent permitted by applicable law, the rate of interest on any unpaid
principal or interest not paid when due and payable hereunder shall be five
percent (5%) per annum above the Federal Funds Rate. Interest shall be
calculated on the basis of actual number of days elapsed and a year of 360 days.
Notwithstanding any other provision of this Note, the Bank does not intend to
charge and the Borrower on behalf of the Portfolio shall not be required to pay
any interest or other fees or charges in excess of the maximum permitted by
applicable law; any payments in excess of such maximum shall be refunded to the
Borrower on behalf of the Portfolio or credited to reduce principal hereunder.
All payments received by the Bank hereunder will be applied first to costs of
collection and fees, if any, then to interest and the balance to principal.
Principal and interest shall be payable in lawful money of the United States of
America.
Principal shall be paid in accordance with Section 1.01(c) of the Credit
Agreement. Interest shall be paid monthly in arrears commencing on May 1, 1996,
and continuing on the first Business Day (as defined in the Credit Agreement) of
each successive month thereafter with a final payment of all unpaid interest at
the time of payment of the principal. If any day on which a payment is due
pursuant to the terms of this Note is not a Business Day, such payment shall be
due on the next Business Day following.
<PAGE>
This Note may be prepaid at any time, without premium or penalty, in whole
or in part. Any prepayment of principal shall be accompanied by a payment of
accrued interest in respect of the principal being prepaid.
This Note is entitled to the benefits of a Credit Agreement (the "Credit
Agreement") by and among the Borrower on behalf of the Portfolio, the other
Borrowers and Portfolios identified therein and the Bank of even date herewith.
Upon the occurrence of any Event of Default (as defined in the Credit Agreement)
by or with respect to the Borrower on behalf of the Portfolio the Bank may
declare any or all obligations or liabilities of the Borrower on behalf of the
Portfolio to the Bank (including the unpaid principal hereunder and any interest
due thereon) immediately due and payable without presentment, demand, protest or
notice.
In accordance with Section 5.03 of the Credit Agreement, after the
occurrence of an Event of Default, the Bank may set off or apply any deposits,
securities or other assets at any time held, credited by or due from the Bank to
or for the Borrower on behalf of the Portfolio against this Note and any other
liability now existing or hereafter arising of the Borrower on behalf of the
Portfolio to the Bank.
If this Note is not paid in accordance with its terms, the Borrower on
behalf of the Portfolio shall pay to the Bank, in addition to principal and
accrued interest thereon, all costs of collection of the principal and accrued
interest, including, but not limited to, reasonable attorneys' fees, court costs
and other costs for the enforcement of payment of this Note.
No waiver of any obligation of the Borrower on behalf of the Portfolio
under this Note shall be effective unless it is in a writing signed by the Bank.
A waiver by the Bank of any right or remedy under this Note on any occasion
shall not be a bar to exercise of the same right or remedy on any subsequent
occasion or of any other right or remedy at any time.
Any notice required or permitted under this Note shall be in writing and
shall be deemed to have been given on the date of delivery, if personally
delivered to the party to whom notice is to be given, or if mailed to the party
to whom notice is to be given, by registered mail, return receipt requested,
postage prepaid, and addressed to the addressee at the address of the addressee
set forth in the Credit Agreement, or to the most recent address, specified by
written notice, given to the sender pursuant to this paragraph.
This Note is delivered in and shall be enforceable in accordance with the
laws of the Commonwealth of Massachusetts (without reference to the conflicts of
<PAGE>
laws or choice of law provision thereof), and shall be construed in accordance
therewith, and shall have the effect of a sealed instrument.
The Borrower on behalf of the Portfolio hereby expressly waives
presentment, demand, and protest, notice of demand, dishonor and nonpayment of
this Note, and all other notices or demands of any kind in connection with the
delivery, acceptance, performance, default or enforcement hereof, and hereby
consents to any delays, extensions of time, renewals, waivers or modifications
that may be granted or consented to by the holder hereof with respect to the
time of payment or any other provision hereof or of the Credit Agreement.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, in whole or in part or
in any respect, or in the event that any one or more of the provisions of this
Note operate or would prospectively operate to invalidate this Note, then and in
any such event, such provision(s) only shall be deemed null and void and shall
not affect any other provision of this Note and the remaining provisions of this
Note shall remain operative and in full force and effect and in no way shall be
affected, prejudiced, or disturbed thereby.
BORROWER:
on behalf of
-----------------------------------
(Name of Portfolio)
By: __________________________
Name:
Title:
ATTESTED:
By:_______________________
Name:
Title:
<PAGE>
EXHIBIT B-1
BORROWING NOTICE
___________________________ (the "Borrower") hereby certifies as follows:
This Borrowing Notice is furnished to Investors Bank & Trust Company (the
"Bank") pursuant to the Credit Agreement dated as of April 3, 1996 by and among
the Bank, the Borrower and the other Borrowers and Portfolios party thereto (the
"Credit Agreement"). Unless otherwise defined herein, the terms used in this
Borrowing Notice have the meanings given them in the Credit Agreement.
The following information is correct as of the close of business on
_____________________________, 199__:
1. Maximum availability of all Borrowers and Portfolios: $________
(Lesser of (a) $20,000,000 or (b) Aggregate
Eligible Loan Amounts of all Borrowers and Portfolios)
2. Loans outstanding to all Borrowers and Portfolios: $________
3. Current availability of all Borrowers and Portfolios: $________
(Line 1 minus Line 2)
4. Net assets of the Borrower: $________
5. Eligible Loan Amount of the Borrower: $________
(Lesser of (a) $9,500,000 or
(b) 33% of Line 4)
6. Loans outstanding to the Borrower: $________
7. Current availability of the Borrower: $_______
(Line 5 minus Line 6)
8. Loan requested by the Borrower: $_______
(Cannot be larger than either
Line 3 or Line 7)
<PAGE>
The conditions contained or referred to Sections 2.02(a) and (b) of the
Credit Agreement with respect to the undersigned Borrower have been satisfied on
and as of the date of this Borrowing Notice.
EXHIBIT B-2
BORROWING NOTICE
___________________________ (the "Borrower") hereby certifies as follows:
This Borrowing Notice is furnished to Investors Bank & Trust Company
(the "Bank") pursuant to the Credit Agreement dated as of April 3, 1996 by and
among the Bank, the Borrower on behalf of the Portfolio designated below and the
other Borrowers and Portfolios party thereto (the "Credit Agreement"). Unless
otherwise defined herein, the terms used in this Borrowing Notice have the
meanings given them in the Credit Agreement.
The following information is correct as of the close of business on
_____________________________, 199__:
1. Maximum availability of all Borrowers and Portfolios: $___________
(Lesser of (a) $20,000,000 or (b) Aggregate
Eligible Loan Amounts of all Borrowers and Portfolios)
2. Loans outstanding to all Borrowers and Portfolios: $___________
3. Current availability of all Borrowers and Portfolios: $___________
(Line 1 minus Line 2)
4. Net assets of the Portfolio: $__________
5. Eligible Loan Amount of the Portfolio: $___________
<PAGE>
(Lesser of (a) $9,500,000 or (b) 33% of Line 4)
6. Loans outstanding to the Portfolio: $___________
7. Current availability of the Portfolio: $___________
(Line 5 minus Line 6)
8. Loan requested by the Portfolio: $___________
(Cannot be larger than either
<PAGE>
Line 3 or Line 7)
The conditions contained or referred to Sections 2.02(a) and (b) of the
Credit Agreement with respect to the undersigned Borrower on behalf of the
Portfolio designated below have been satisfied on and as of the date of this
Borrowing Notice.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
__________ day of _________________________, 199____.
BORROWER
-----------------------
(Name of Borrower)
on behalf of
-----------------------
(Name of Portfolio)
By: __________________________
Name:
Title:
EXHIBIT C
DESIGNATION OF PORTFOLIOS
<PAGE>
April 3, 1996
Any of the following designated Portfolios of Bull & Bear
Funds I, Inc. (the "Borrower") may hereafter utilize the proceeds of the Loans
made to the Borrower under the Credit Agreement dated as of April 3, 1996:
Bull & Bear Quality Growth Fund
Bull & Bear U.S. and Overseas Fund
IN WITNESS WHEREOF, the undersigned has caused this
notice to be executed by its officer duly authorized as of the date written
above.
Bull & Bear Funds I,
Inc.
By:
- ----------------------------
Name:
- --------------------------
Title:
- ---------------------------
EXHIBIT C
DESIGNATION OF PORTFOLIOS
April 3, 1996
<PAGE>
Any of the following designated Portfolios of Bull & Bear
Funds II, Inc. (the "Borrower") may hereafter utilize the proceeds of the Loans
made to the Borrower under the Credit Agreement dated as of April 3, 1996:
Bull & Bear Global Income Fund
Bull & Bear U.S. Government
Securities Fund
IN WITNESS WHEREOF, the undersigned has caused this notice to
be executed by its officer duly authorized as of the date written above.
Bull & Bear Funds II,
Inc.
By:
- ----------------------------
Name:
- --------------------------
Title:
- ---------------------------
EXHIBIT C
DESIGNATION OF PORTFOLIOS
April 3, 1996
The following designated Portfolio of Bull & Bear
Municipal Securities, Inc. (the "Borrower") may hereafter utilize the
proceeds of the Loans made to the Borrower under the Credit Agreement dated as
of April 3, 1996:
<PAGE>
Bull & Bear Municipal Income Fund
IN WITNESS WHEREOF, the undersigned has caused this
notice to be executed by its officer duly authorized as of the date written
above.
Bull & Bear
Municipal Securities, Inc.
By:
- ----------------------------
Name:
- --------------------------
Title:
- ---------------------------
Standardized Profit Sharing Plan
ADOPTION AGREEMENT
- ---------------------------------------------------------------------
- ----------
SECTION 1. EMPLOYER INFORMATION
Name of Employer:
- -------------------------------------------------------
Address_______________________________________________________________
- -----
City: _______________________State:______________________ Zip:
- --------------
Telephone: _________________ Federal Tax Identification
Number_______________
Income Tax Year End __________________________
Type of Business (Check only one) [ ] Sole Proprietorship [ ] Partnership [ ]
Corporation [ ] Other (Specify)_______________
Nature of Business
(Describe)_______________________________________________
Plan Sequence No. __________ (Enter 001 if this is the first qualified plan
the Employer has ever maintained, enter 002 if it is the second, etc.)
For a plan which covers only the owner of the business, please provide the
following information about the owner:
Social Security No._________________ Date Business Established ____________
Date of Birth________________________ Marital
Status_______________________
Home Address
- ---------------------------------------------------------------
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
<PAGE>
Option A: [ ] This is the initial adoption of a profit sharing plan by
the Employer. The Effective Date of this Plan is ________, 19 .
NOTE: The effective date is usually the first day of the Plan
Year in which this Adoption Agreement is signed.
Option B: [ ] This is an amendment and restatement of an existing
profit sharing plan (a Prior Plan). The Prior Plan was initially
effective on _____________. The Effective Date of this amendment
and restatement is ________________. NOTE: The effective date
is usually the first day of the Plan Year in which this Adoption
Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
Part A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan after
completing _______ (enter 0, 1 or 2) Years of Eligibility Service. NOTE:
If more than 1 year is selected, the immediate 100% vesting schedule of
Section 5, Option C will automatically apply. If left blank, the Years of
Eligibility Service required will be deemed to be 0.
Part B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan after
attaining age ____________ (no more than 21). NOTE: If left blank, it
will be deemed there is no age requirement for eligibility.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Part C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except the following (if checked):
[ ] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
representatives (the term "Employee representatives" does not
include any organization more than half of whose members are
Employees who are owners, officers or executives of the Employer)
and the Employer under which retirement benefits were the subject
of good faith bargaining unless the agreement provides that such
Employees are to be included in the Plan, and except those
Employees who are non-resident aliens pursuant to Section 410(b)
(3)(C) of the Code and who received no earned income from the
Employer which constitutes income from sources within the United
States.
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
<PAGE>
Part A. Contribution Formula
For each Plan Year the Employer will contribute an amount to be
determined from year to year.
Part B. Allocation Formula: (Check Option 1 or 2)
Option 1: [ ] Pro Rata Formula. Employer Contributions and Forfeitures
shall be allocated to the Individual Accounts of qualifying
Participants in the ratio that each qualifying Participant's
Compensation for the Plan Year bears to the total Compensation
of all qualifying Participants for the Plan Year.
Option 2: [ ] Integrated Formula: Employer Contributions and
Forfeitures shall be allocated as follows (Start with Step 3 if
this Plan is not a Top-Heavy Plan):
Step 1. Employer Contributions and Forfeitures shall first be
allocated pro rata to qualifying Participants in the
manner described in Section 4, Part B, Option 1. The
percent so allocated shall not exceed 3% of each
qualifying Participant's Compensation.
Step 2. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 1 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that each qualifying Participant's Compensation for the
Plan Year in excess of the integration level bears to all
qualifying Participants' Compensation in excess of the
integration level, but not in excess of 3%.
Step 3. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 2 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that the sum of each qualifying Participant's total
Compensation and Compensation in excess of the
integration level bears to the sum of all qualifying
Participants' total Compensation and Compensation in
excess of the integration level, but not in excess of the
profit sharing maximum disparity rate as described in
Section 3.01(B)(3) of the Plan.
Step 4. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 3 shall be allocated pro rata
to qualifying Participants in the manner described in
Section 4, Part B, Option 1.
<PAGE>
The integration level shall be (Choose one):
Option 1: [ ] The Taxable Wage Base
Option 2: [ ] $______ (a dollar amount less than the Taxable Wage Base)
Option 3: [ ] ______% of the Taxable Wage Base
NOTE: If no box is checked, the integration level shall be the Taxable
Wage Base.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SECTION 5. VESTING
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows
(Choose one):
- ---------------------------------------------------------------------
- -----------
YEARS OF VESTED PERCENTAGE
VESTING SERVICE
Option A [ ] Option B [ ] Option C [ ] Option D [ ] (Complete if Chosen)
- ---------------------------------------------------------------------
- ----------
1 0% 0% 100% ____%
2 0% 20% 100% ____%
3 100% 40% 100% ____% (not less than 20%)
4 100% 60% 100% ____% (not less than 40%)
5 100% 80% 100% ____% (not less than 60%)
6 100% 100% 100% ____% (not less than 80%)
- ---------------------------------------------------------------------
- ---------
NOTE: If left blank, Option C, 100% vesting, will be deemed to be selected.
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age _____ (not to exceed 65).
NOTE: If left blank, the Normal Retirement Age will be deemed to be age
59 1/2.
SECTION 7. HOURS REQUIRED Complete Parts A and B
Part A. ________ Hours of Service (no more than 1,000) shall be
required to constitute a Year of Vesting Service or a Year of
Eligibility Service.
<PAGE>
Part B. ________ Hours of Service (no more than 500) must be exceeded to
avoid a Break in Vesting Service or a Break in Eligibility
Service.
NOTE: The number of hours in Part A must be greater than the
number of hours in Part B.
SECTION 8. OTHER OPTIONS Answer "Yes" or "No" to each of the following
questions by checking the appropriate box. If a box is not
checked for a question, the answer will be deemed to be "No."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the
Plan be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will Participants be permitted
to direct the investment of their Individual Accounts pursuant to
Section 5.14 of the Plan? [ ] Yes [ ] No
C. In-Service Withdrawals: Will Participants be permitted to make
withdrawals during service pursuant to Section 6.01(A)(3) of the
Plan? [ ] Yes [ ] No
NOTE: If the Plan is being adopted to amend and replace a Prior Plan
which permitted in-service withdrawals you must answer "Yes."
Check here if such withdrawals will be permitted only on account of
hardship. [ ]
SECTION 9. JOINT AND SURVIVOR ANNUITY
Part A. Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the Plan
apply (Choose only one Option)?
Option 1: [ ] Yes
Option 2: [ ] No
NOTE: You must select "No" if you are adopting this Plan as an
amendment and restatement of a Prior Plan that was subject to the
joint and survivor annuity requirements.
Part B. Survivor Annuity Percentage: (Complete only if your answer in
Section 9, Part A is "No.")
The survivor annuity portion of the Joint and Survivor Annuity
shall be a percentage equal to _____ (at least 50% but no more
than 100%) of the amount paid to the Participant prior to his or
her death.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
<PAGE>
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who 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(1)(2) of the Code) in addition to this Plan (other than a paired
standardized profit sharing plan using Basic Plan Document No. 03) may
not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under
Section 401 of the Code. If the Employer who adopts or maintains
multiple plans wishes to obtain reliance that the Employer's plan(s)
are qualified, application for a determination letter should be made
to the appropriate Key District Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer_____________________________Date
Signed_______________
Type
Name________________________________________________________________
- ----
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one option
Option A. [ ] Financial Organization as Trustee or Custodian
Check One: [ ] Custodian, [ ] Trustee without full trust powers,
or [ ] Trustee with full trust powers
<PAGE>
NOTE: Custodian will be deemed selected if no box is checked.
Financial Organization
- --------------------------------------------------
Signature_____________________________________________________________
- ----
Type
Name________________________________________________________________
Option B. [ ] Individual Trustee(s)
Signature _____________________________
Signature_________________________
Type Name _____________________________ Type
Name_________________________
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype Sponsor
Address_______________________________________________________________
- ---
Telephone
Number_________________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - More Than One Plan If you maintain or
ever maintained another qualified plan (other than a paired standardized
money purchase pension plan using Basic Plan Document No. 03) in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, you must complete this section. You must also complete this
section if you maintain a welfare benefit fund, as defined in Section
419(e) of the Code, or an individual medical account, as defined in
Section 415(l)(2) of the Code, under which amounts are treated as annual
additions with respect to any Participant in this Plan.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master or
prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
<PAGE>
2. [ ] Other method. (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.) ________________
------------------------------------------------------------
Part B. If the Participant is or has ever been a participant in a
defined benefit plan maintained by the Employer, the Employer will
provide below the language which will satisfy the 1.0 limitation of
Section 415(e) of the Code. Such language must preclude Employer
discretion. (Complete)____________________________________________
Part C. Compensation will mean all of each Participant's (Choose one):
Option 1: [ ] Section 3121(a) wages
Option 2: [ ] Section 3401(a) wages
Option 3: 415 safe-harbor compensation
NOTE: If no box is checked, Option 2 will be deemed to be selected.
Part D. The limitation year is the following 12-consecutive month period:
---------------------------------------
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
QUALIFIED RETIREMENT PLAN AND TRUST
Defined Contribution Basic Plan Document 03
- ---------------------------------------------------------------------
- ----------
SECTION ONE DEFINITIONS
The following words and phrases when used in the Plan with initial capital
letters shall, for the purpose of this Plan, have the meanings set forth
below unless the context indicates that other meanings are intended:
1.01 ADOPTION AGREEMENT
Means the document executed by the Employer through which it adopts
the Plan and Trust and thereby agrees to be bound by all terms and
conditions of the Plan and Trust.
1.02 BASIC PLAN DOCUMENT
Means this prototype Plan and Trust document.
<PAGE>
1.03 BREAK IN ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an
Eligibility Computation Period during which an Employee fails to
complete more than 500 Hours of Service (or such lesser number of
Hours of Service specified in the Adoption Agreement for this
purpose).
1.04 BREAK IN VESTING SERVICE
Means a Plan Year during which an Employee fails to complete more than
500 Hours of Service (or such lesser number of Hours of Service
specified in the Adoption Agreement for this purpose).
1.05 CODE
Means the Internal Revenue Code of 1986 as amended from time-to-time.
1.06 COMPENSATION
For Plan Years beginning on or after January 1, 1989, the following
definition of Compensation shall apply:
Compensation will mean Compensation as that term is defined in Section
3.05(E)(2) of the Plan. For any Self-Employed Individual covered under the
Plan, Compensation will mean Earned Income. Compensation shall include only
that Compensation which is actually paid to the Participant during the
applicable period. Except as provided elsewhere in this Plan, the applicable
period shall be the Plan Year unless the Employer has selected another
period in the Adoption Agreement.
Unless otherwise indicated in the Adoption Agreement, Compensation shall
include any amount which is contributed by the Employer pursuant to a salary
reduction agreement and which is not includible in the gross income of the
Employee under Sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
For years beginning after December 31, 1988, the annual Compensation of each
Participant taken into account under the Plan for any year shall not exceed
$200,000. This limitation shall be adjusted by the Secretary at the same
time and in the same manner as under Section 415(d) of the Code, except that
the dollar increase in effect on January 1 of any calendar year is effective
for years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected 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.
<PAGE>
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 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 (except for purposes of determining the portion
of Compensation up to the integration level if this Plan provides for
permitted disparity), the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation as
determined under this Section prior to the application of this limitation.
If Compensation for any prior Plan Year is taken into account in determining
an Employee's contributions or benefits for the current year, the
Compensation for such prior year is subject to the applicable annual
Compensation limit in effect for that prior year. For this purpose, for
years beginning before January 1, 1990, the applicable annual Compensation
limit is $200,000.
Unless otherwise indicated in the Adoption Agreement, where an Employee
enters the Plan (and thus becomes a Participant) on an Entry Date other than
the Entry Date in a Plan Year, his Compensation will include any such
earnings paid to him during the whole of such Plan Year.
Where this Plan is being adopted as an amendment and restatement to bring a
Prior Plan into compliance with the Tax Reform Act of 1986, such Prior
Plan's definition of Compensation shall apply for Plan Years beginning
before January 1, 1989.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of each
Employee taken into account under the Plan shall not exceed the OBRA '93
annual Compensation limit. The OBRA '93 annual Compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies to
any period, not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual Compensation
limit will be multiplied by a fraction, the numerator of which is the number
of months in the determination period, and the denominator of which is 12.
<PAGE>
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the
OBRA '93 annual Compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual Compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of
the first Plan Year beginning on or after January 1, 1994 the OBRA '93
annual Compensation limit is $150,000.
<PAGE>
1.07 CUSTODIAN
Means an entity specified in the Adoption Agreement as Custodian or
any duly appointed successor as provided in Section 5.09.
1.08 DISABILITY
Means the inability to engage in any substantial, gainful activity by
reason of any medically determinable physical or mental impairment
that can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12 months.
The permanence and degree of such impairment shall be supported by
medical evidence.
1.09 EARNED INCOME
Means the net earnings from self-employment in the trade or business
with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in
gross income and the deductions allocable to such items. Net earnings
are reduced by contributions by the Employer to a qualified plan to
the extent deductible under Section 404 of the Code.
1.09 EARNED INCOME
Means the net earnings from self-employment in the trade or business
with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in
gross income and the deductions allocable to such items. Net earnings
are reduced by contributions 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.
<PAGE>
1.10 EFFECTIVE DATE
Means the date the Plan becomes effective as indicated in the Adoption
Agreement. However, where a separate date is stated in the Plan as of
which a particular Plan provision becomes effective, such date will
control with respect to that provision.
1.11 ELIGIBILITY COMPUTATION PERIOD
An Employee's initial Eligibility Computation Period shall be the 12
consecutive month period commencing with the date such Employee first
performs an Hour of Service (employment commencement date). His
subsequent Eligibility Computation Periods shall be the 12 consecutive
month periods commencing on the anniversaries of his employment
commencement date; provided, however, if pursuant to the Adoption
Agreement, an Employee is required to complete one or less Years of
Eligibility Service to become a Participant, then his subsequent
Eligibility Computation Periods shall be the Plan Years commencing
with the Plan Year beginning during his initial Eligibility
Computation Period.
1.12 EMPLOYEE
Means any person employed by an Employer maintaining the Plan or of
any other employer required to be aggregated with such Employer under
Sections 414(b), (c), (m) or (o) or the Code.
The term Employee shall also include any Leased Employee deemed to be
an Employee of any Employer described in the previous paragraph as
provided in Section 414(n) or (o) of the Code.
1.13 EMPLOYER
Means any corporation, partnership, sole-proprietorship or other
entity named in the Adoption Agreement and any successor who by
merger, consolidation, purchase or otherwise assumes the obligations
of the Plan. A partnership is considered to be the Employer of each of
the partners and a sole-proprietorship is considered to be the
Employer of a sole proprietor.
1.14 EMPLOYER CONTRIBUTION
Means the amount contributed by the Employer each year as determined
under this Plan.
1.15 ENTRY DATES
Means the first day of the Plan Year and the first day of the seventh
month of the Plan Year, unless the Employer has specified more
frequent dates in the Adoption Agreement.
<PAGE>
1.16 ERISA
Means the Employee Retirement Income Security Act of 1974 as amended
from time-to-time.
1.17 FORFEITURE
Means that portion of a Participant's Individual Account as derived
from Employer Contributions which he or she is not entitled to receive
(i.e., the nonvested portion).
1.18 FUND
Means the Plan assets held by the Trustee for the Participants'
exclusive benefit.
1.19 HIGHLY COMPENSATED EMPLOYEE
The term Highly Compensated Employee includes highly compensated
active employees and highly compensated former employees.
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: (a) received Compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code); (b) 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 (c) was an officer of
the Employer and received Compensation during such year that is
greater than 50% of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also
includes: (a) 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 100 Employees who
received the most Compensation from the Employer during the
determination year; and (b) Employees who are 5% owners at any time
during the look-back year or determination year.
If no officer has satisfied the Compensation requirement of (c) above
during either a determination year or look-back year, the highest paid
officer for such year shall be treated as a Highly Compensated
Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the 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
<PAGE>
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 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a 5% owner who is an active or former Employee
or a Highly Compensated Employee who is one of the 10 most
<PAGE>
Highly Compensated Employees ranked on the basis of Compensation paid
by the Employer during such year, then the family member and the 5%
owner or top 10 Highly Compensated Employee shall be aggregated. In
such case, the family member and 5% owner or top 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 5%
owner or top 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 100 Employees, the number of Employees treated as
officers and the Compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations there-
under.
1.20 HOURS 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 will
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 duty or leave
of absence. No more than 501 Hours of Service will 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 is
incorporated herein by this reference;
<PAGE>
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 will not be credited both under paragraph (A) or
paragraph (B), as the case may be, and under this paragraph (C).
These hours will be credited to the Employee for the computation
period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement, or
payment is made.
D. Solely for purposes of determining whether a Break in Eligibility
Service or a Break in Vesting Service has occurred in a computation
period (the computation period for purposes of determining whether
a Break in Vesting Service has occurred is the Plan Year), 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, 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 (1) by reason of the pregnancy of the individual,
(2) by reason of a birth of a child of the individual, (3) by
reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or
(4) 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 (1) in the
Eligibility Computation Period or Plan Year in which the absence
begins if the crediting is necessary to prevent a Break in
Eligibility Service or a Break in Vesting Service in the applicable
period, or (2) in all other cases, in the following Eligibility
Computation Period or Plan Year.
E. 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) of the
Code), or a group of trades or businesses under common control
(under Section 414(c) of the Code) of which the adopting Employer
is a member, and any other entity required to be aggregated with
the Employer pursuant to Section 414(o) of the Code and the
regulations thereunder.
Hours of Service will also be credited for any individual
considered an Employee for purposes of this Plan under Code
<PAGE>
Sections 414(n) or 414(o) and the regulations thereunder.
F. Where the Employer maintains the plan of a predecessor employer,
service for such predecessor employer shall be treated as service
for the Employer.
G. The above method for determining Hours of Service may be altered
as specified in the Adoption Agreement.
1.21 INDIVIDUAL ACCOUNT
Means the account established and maintained under this Plan for each
Participant in accordance with Section 4.01.
1.22 INVESTMENT FUND
Means a subdivision of the Fund established pursuant to Section 5.05.
1.23 KEY EMPLOYEE
Means any person who is determined to be a Key Employee under Section
10.08.
1.24 LEASED EMPLOYEE
Means any person (other than an Employee of the recipient) who
pursuant to an agreement between the recipient and any other person
("leasing organization") has performed services for the recipient (or
for the recipient and related persons determined in accordance with
Section 414(n)(6) of the Code) on a substantially full time basis for
a period of at least one year, and such services are of a type
historically performed by Employees in the business field of the
recipient Employer. Contributions or benefits provided a Leased
Employee by the leasing organization which are attributable to
services performed for the recipient Employer shall be treated as
provided by the recipient Employer.
A Leased Employee shall not be considered an Employee of the recipient
if: (1) such employee is covered by a money purchase pension plan
providing: (a) a nonintegrated employer contribution rate of at least
10% of compensation, as defined in Section 415(c)(3) of the Code, but
including amounts contributed pursuant to a salary reduction agreement
which are excludable from the employee's gross income under Section
125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code,
(b) immediate participation, and (c) full and immediate vesting; and
(2) Leased Employees do not constitute more than 20% of the
recipient's nonhighly compensated work force.
1.25 NORMAL RETIREMENT AGE
<PAGE>
Means the age specified in the Adoption Agreement. However, if the
Employer enforces a mandatory retirement age which is less than the
Normal Retirement Age, such mandatory age is deemed to be the Normal
Retirement Age. If no age is specified in the Adoption Agreement, the
Normal Retirement Age shall be age 59 1/2.
1.26 OWNER - EMPLOYEE
Means an individual who is a sole proprietor, or who is a partner
owning more than 10% of either the capital or profits interest of the
partnership.
<PAGE>
1.27 PARTICIPANT
Means any Employee or former Employee of the Employer who has met the
Plan's eligibility requirements, has entered the Plan and who is or
may become eligible to receive a benefit of any type from this Plan or
whose Beneficiary may be eligible to receive any such benefit.
1.28 PLAN
Means the prototype defined contribution plan adopted by the Employer.
The Plan consists of this Basic Plan Document plus the corresponding
Adoption Agreement as completed and signed by the Employer.
1.29 PLAN ADMINISTRATOR
Means the person or persons determined to be the Plan Administrator in
accordance with Section 8.01.
1.30 PLAN YEAR
Means the 12 consecutive month period which coincides with the
Employer's tax year or such other 12 consecutive month period as is
designated in the Adoption Agreement.
1.31 PRIOR PLAN
Means a plan which was amended or replaced by adoption of this Plan
document as indicated in the Adoption Agreement.
1.32 PROTOTYPE SPONSOR
Means the entity specified in the Adoption Agreement. Such entity must
meet the definition of a sponsoring organization set forth in Section
3.07 of Revenue Procedure 89-13.
1.33 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; also, an
individual who would have had Earned Income but for the fact that the
<PAGE>
trade or business had no net profits for the taxable year.
1.34 SEPARATE FUND
Means a subdivision of the Fund held in the name of a particular
Participant representing certain assets held for that Participant. The
assets which comprise a Participant's Separate Fund are those assets
earmarked for him and those assets subject to the Participant's
individual direction pursuant to Section 5.14.
1.35 TAXABLE WAGE BASE
Means, with respect to any taxable year, the maximum amount of
earnings which may be considered wages for such year under Section
3121(a)(1) of the Code.
1.36 TERMINATION OF EMPLOYMENT
A Termination of Employment of an Employee of an Employer shall occur
whenever his status as an Employee of such Employer ceases for any
reason other than his death. An Employee who does not return to work
for the Employer on or before the expiration of an authorized leave of
absence from such Employer shall be deemed to have incurred a
Termination of Employment when such leave ends.
1.37 TOP-HEAVY PLAN
This Plan is a Top-Heavy Plan for any Plan Year if it is determined to
be such pursuant to Section 10.08.
1.38 TRUSTEE
Means an individual, individuals or corporation specified in the
Adoption Agreement as Trustee or any duly appointed successor as
provided in Section 5.09. Trustee shall mean Custodian in the event
the financial organization named as Trustee does not have full trust
powers.
1.39 VALUATION DATE
Means the last day of the Plan Year and each other date designated by
the Plan Administrator which is selected in a uniform and
non-discriminatory manner when the assets of the Fund are valued at
their then fair market value.
1.40 VESTED
Means nonforfeitable, that is, a claim which is unconditional and
legally enforceable against the Plan obtained by a Participant or his
Beneficiary to that part of an immediate or deferred benefit under the
Plan which arises from a Participant's Years of Vesting Service.
<PAGE>
1.41 YEAR OF ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an
Eligibility Computation period during which an Employee completes at
least 1,000 Hours of Service (or such lesser number of Hours of
Service specified in the Adoption Agreement for this purpose).
1.42 YEAR OF VESTING SERVICE
Means a Plan Year during which an Employee completes at least 1,000
Hours of Service (or such lesser number of Hours of Service specified
in the Adoption Agreement for this purpose).
In the case of a Participant who has 5 or more consecutive Breaks in
Vesting Service, all Years of Vesting Service after such Breaks in
Vesting Service will be disregarded for the purpose of determining the
Vested portion of his Individual Account derived from Employer
Contributions that accrued before such breaks. Such Participant's
prebreak service will count in vesting the postbreak Individual
Account derived from Employer Contributions only if either:
(A) such Participant had any Vested right to any portion of his
Individual Account derived from Employer Contributions at the
time of his Termination of Employment; or
(B) upon returning to service, the number of consecutive Breaks in
Vesting Service is less than his number of Years of Vesting
Service before such breaks.
Separate subaccounts will be maintained for the Participant's
<PAGE>
prebreak and postbreak portions of his Individual Account derived from
Employer Contributions. Both subaccounts will share in the gains and
losses of the Fund.
Years of Vesting Service shall not include any period of time excluded
from Years of Vesting Service in the Adoption Agreement.
In the event the Plan Year is changed to a new 12-month period,
Employees shall receive credit for Years of Vesting Service, in
accordance with the preceding provisions of this definition, for each
of the Plan Years (the old and new Plan Years) which overlap as a
result of such change.
SECTION TWO ELIGIBILITY AND PARTICIPATION
<PAGE>
2.01 ELIGIBILITY TO PARTICIPATE
Each Employee of the Employer, except those Employees who belong to a
class of Employees which is excluded from participation as indicated
in the Adoption Agreement, shall be eligible to participate in this
Plan upon the satisfaction of the age and Years of Eligibility Service
requirements specified in the Adoption Agreementment.
2.02 PLAN ENTRY
A. If this Plan is a replacement of a Prior Plan by amendment or
restatement, each Employee of the Employer who was a Participant in
said Prior Plan before the Effective Date shall continue to be a
Participant in this Plan.
B. An Employee will become a Participant in the Plan as of the
Effective Date if he has met the eligibility requirements of
Section 2.01 as of such date. After the Effective Date, each
Employee shall become a Participant on the first Entry Date
following the date the Employee satisfies the eligibility
requirements of Section 2.01.
C. The Plan Administrator shall notify each Employee who becomes
eligible to be a Participant under this Plan and shall furnish him
with the application form, enrollment forms or other documents
which are required of Participants. The eligible Employee shall
execute such forms or documents and make available such information
as may be required in the administration of the Plan.
2.03 TRANSFER TO OR FROM INELIGIBLE CLASS
If an Employee who had been a Participant becomes ineligible to
participate because he is no longer a member of an eligible class of
Employees, but has not incurred a Break in Eligibility Service, such
Employee shall participate immediately upon his return to an eligible
class of Employees. If such Employee incurs a Break in Eligibility
Service, his eligibility to participate shall be determined by Section
2.04.
An Employee who is not a member of the eligible class of Employees
will become a Participant immediately upon becoming a member of the
eligible class provided such Employee has satisfied the age and Years
of Eligibility Service requirements. If such Employee has not
satisfied the age and Years of Eligibility Service requirements as of
the date he becomes a member of the eligible class, he shall become a
Participant on the first Entry Date following the date he satisfies
said requirements.
<PAGE>
2.04 RETURN AS A PARTICIPANT AFTER BREAK IN ELIGIBILITY SERVICE
A. Employee Not Participant Before Break - If an Employee incurs a
Break in Eligibility Service before satisfying the Plan's
eligibility requirements, such Employee's Years of Eligibility
Service before such Break in Eligibility Service will not be taken
into account.
B. Nonvested Participants - In the case of a Participant who does not
have a Vested interest in his Individual Account derived from
Employer Contributions, Years of Eligibility Service before a
period of consecutive Breaks in Eligibility Service will not be
taken into account for eligibility purposes if the number of
consecutive Breaks in Eligibility Service in such period equals or
exceeds the greater of 5 or the aggregate number of Years of
Eligibility Service before such break. Such aggregate number of
Years of Eligibility Service will not include any Years of
Eligibility Service disregarded under the preceding sentence by
reason of prior breaks.
If a Participant's Years of Eligibility Service are disregarded
pursuant to the preceding paragraph, such Participant will be
treated as a new Employee for eligibility purposes. If a Par-
ticipant's Years of Eligibility Service may not be disregarded
pursuant to the preceding paragraph, such Participant shall
continue to participate in the Plan, or, if terminated, shall
participate immediately upon reemployment.
C. Vested Participants - A Participant who has sustained a Break in
Eligibility Service and who had a Vested interest in all or a
portion of his Individual Account derived from Employer
Contributions shall continue to participate in the Plan, or, if
terminated, shall participate immediately upon reemployment.
2.05 DETERMINATIONS UNDER THIS SECTION
The Plan Administrator shall determine the eligibility of each
Employee to be a Participant. This determination shall be conclusive
and binding upon all persons except as otherwise provided herein or by
law.
2.06 TERMS OF EMPLOYMENT
Neither the fact of the establishment of the Plan nor the fact that a
common law Employee has become a Participant shall give to that common
law Employee any right to continued employment; nor shall
<PAGE>
either fact limit the right of the Employer to discharge or to deal
otherwise with a common law Employee without regard to the effect such
treatment may have upon the Employee's rights under the Plan.
SECTION THREE CONTRIBUTIONS
3.01 EMPLOYER CONTRIBUTIONS
A. Obligation to Contribute - The Employer shall make contributions to
the Plan in accordance with the contribution formula specified in
the Adoption Agreement. If this Plan is a profit sharing plan, the
Employer shall, in its sole discretion, make contributions without
regard to current or accumulated earnings or profits.
B. Allocation Formula and the Right to Share in the Employer Profit
Sharing Contribution -
1. General - The Employer Contribution for any Plan Year will be
allocated or contributed to the Individual Accounts of
qualifying Participants in accordance with the allocation or
contribution formula specified in the Adoption Agreement. The
Employer Contribution for any Plan Year will be allocated to
each Participant's Individual Account as of the last day of that
Plan Year.
<PAGE>
Any Employer Contribution for a Plan Year must satisfy Section
401(a)(4) and the regulations thereunder for such Plan Year.
2. Qualifying Participants - A Participant is a qualifying
Participant and is entitled to share in the Employer
Contribution for any Plan Year if (1) he was a Participant on at
least one day during the Plan Year, (2) if this Plan is a
nonstandardized plan, he completes a Year of Vesting Service
during the Plan Year and (3) where the Employer has selected the
"last day requirement" in the Adoption Agreement, he is an
Employee of the Employer on the last day of Plan Year (except
that this last requirement (3) shall not apply if the
Participant has died during the Plan Year or incurred a
Termination of Employment during the Plan Year after having
reached his Normal Retirement Age or having incurred a
Disability). Notwithstanding anything in this paragraph to the
contrary, a Participant will not be a qualifying Participant for
a Plan Year if he incurs a Termination of Employment during such
Plan Year with not more than 500 Hours of Service if he is not
an Employee on the last day of the Plan Year. The determination
of whether a Participant
<PAGE>
is entitled to share in the Employer Contribution shall be made
as of the last day of each Plan Year.
3. Special Rules for Integrated Plans - If the Employer has
selected the integrated contribution or allocation formula in
the Adoption Agreement, then the maximum disparity rate shall be
determined in accordance with the following table.
MAXIMUM DISPARITY RATE
Top-Heavy Nontop-Heavy
Integration Level Money Purchase Profit Sharing Profit Sharing
- ---------------------------------------------------------------------
- ----------
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not more
than X* 5.7% 2.7% 5.7%
More than X* of TWB but
not more than 80% of TWB 4.3% 1.3% 4.3%
More than 80% of TWB but
not more than TWB 5.4% 2.4% 5.4%
* X means the greater of $10, 000 or 20% of TWB.
C. Allocation of Forfeitures - Forfeitures for a Plan Year which arise
as a result of the application of Section 6.01(D) shall be allo-
cated as follows:
1. Profit Sharing Plan - If this is a profit sharing plan,
Forfeitures shall be allocated in the manner provided in Section
3.01 (B) (for Employer Contributions) to the Individual Accounts
of Participants who are entitled to share in the Employer
Contribution for such Plan Year.
2. Money Purchase Pension and Target Benefit Plan - If this Plan is
a money purchase plan or a target benefit plan, Forfeitures shall
be applied towards the reduction of Employer Contributions to the
Plan. However, if the Employer has indicated in the Adoption
Agreement that Forfeitures shall be allocated to the Individual
Accounts of Participants, then Forfeitures shall be allocated in
the manner provided in Section 3.01(B) (for
<PAGE>
Employer Contributions) to the Individual Accounts of
Participants who are entitled to share in the Employer
Contributions for such Plan Year.
D. Timing of Employer Profit Sharing Contribution - The Employer
Contribution for each Plan Year shall be delivered to the Trustee
(or Custodian, if applicable) not later than the due date for filing
the Employer's income tax return for its fiscal year in which the
Plan Year ends, including extensions thereof.
E. Minimum Allocation for Top-Heavy Plans - The contribution and
allocation provisions of this Section 3.01(E) shall apply for any
Plan Year with respect to which this Plan is a Top-Heavy Plan.
1. Except as otherwise provided in (3) and (4) below, the Employer
Contributions and Forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the
lesser of 3% of such Participant's Compensation or (in the case
where the Employer has no defined benefit plan which designates
this Plan to satisfy Section 401 of the Code) the largest
percentage of Employer Contributions and Forfeitures, as a
percentage of the first $200,000 (increased by any cost of living
adjustment made by the Secretary of Treasury or his delegate) of
the Key Employee's Compensation, allocated on behalf of any Key
Employee for that year. The minimum allocation is determined
without regard to any Social Security contribution. This minimum
allocation shall be made even though under other Plan provisions,
the Participant would not otherwise be entitled to receive an
allocation, or would have received a lesser allocation for the
year because of (a) the Participant's failure to complete 1,000
Hours of Service (or any equivalent provided in the Plan), or (b)
the Participant's failure to make mandatory Employee
Contributions to the Plan, or (c) Compensation less than a stated
amount.
2. For purposes of computing the minimum allocation, Compensation
shall mean Compensation as defined in Section 1.06 of the Plan.
3. The provision in (1) above shall not apply to any Participant
who was not employed by the Employer on the last day of the Plan
Year.
4. The provision in (1) above shall not apply to any Participant to
the extent the Participant is covered under any other plan or
plans of the Employer and the Employer has provided in the adop-
<PAGE>
tion agreement that the minimum allocation or benefit requirement
applicable to Top-Heavy Plans will be met in the other plan or
plans.
5. The minimum allocation required under this Section 3.01(E) and
Section 3.01(F)(1) (to the extent required to be nonforfeitable
under Code Section 416(b)) may not be forfeited under Code
Section 411(a)(3)(B) or 411(a)(3)(D).
F. Special Requirements for Paired Plans - The Employer maintains
paired plans if the Employer has adopted both a standardized profit
sharing plan and a standardized money purchase pension plan using
this Basic Plan Document.
<PAGE>
1. Minimum Allocation - The mandatory minimum allocation provision
of Section 3.01(E) shall not apply to any Participant if the
Employer maintains paired plans. Rather, for each Plan Year, the
Employer will provide a minimum contribution equal to 3% of
Compensation for each non-Key Employee who is entitled to a
minimum contribution. Such minimum contribution will only be made
to one of the Plans. If an Employee is a Participant in only one
of the Plans, the minimum contribution shall be made to that
Plan. If the Employee is a Participant in both Plans, the minimum
contribution shall be made to the money purchase plan.
2. Only One Plan Can Be Integrated - If the Employer maintains
paired plans, only one of the Plans may provide for the disparity
in contributions which is permitted under Section 401(l) of the
Code. In the event that both Adoption Agreements provide for such
integration, only the money purchase pension plan shall be deemed
to be integrated.
G. Return of the Employer Contribution to the Employer Under Special
Circumstances - Any contribution made by the Employer because of a
mistake of fact must be returned to the Employer within one year of
the contribution.
In the event that the Commissioner of Internal Revenue determines
that the Plan is not initially qualified under the Code, any
contributions made incident to that initial qualification by the
Employer must be returned to the Employer within one year after the
date the initial qualification is denied., but only if the
application for qualification is made by the time prescribed by law
for filing the Employer's return for the taxable year in which the
Plan is adopted, or such later date as the Secretary of the Treasury
may
<PAGE>
prescribe.
In the event that a contribution made by the Employer under this
Plan is conditioned on deductibility and is not deductible under
Code Section 404, the contribution, to the extent of the amount
disallowed, must be returned to the Employer within one year after
the deduction is disallowed.
H. Omission of Participant
1. If the Plan is a money purchase plan or a target benefit plan
and, if in any Plan Year, any Employee who should be included as
a Participant is erroneously omitted and discovery of such
omission is not made until after a contribution by the Employer
for the year has been made and allocated, the Employer shall make
a subsequent contribution with respect to the omitted Employee in
the amount which the Employer would have contributed with respect
to that Employee had he not been omitted.
2. If the Plan is a profit sharing plan, and if in any Plan Year,
any Employee who should be included as a Participant is
erroneously omitted and discovery of such omission is not made
until after the Employer Contribution has been made and
allocated, then the Plan Administrator must re-do the allocation
(if a correction can be made) and inform the Employee.
Alternatively, the Employer may choose to contribute for the
omitted Employee the amount which the Employer would have
contributed for him.
3.02 EMPLOYEE CONTRIBUTIONS
This Plan will not accept nondeductible employee contributions and
matching 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, together with any
matching contributions as defined in Section 401(m) of the Code, will
be limited so as to meet the nondiscrimination test of Section 401(m)
of the Code.
A separate account will be maintained by the Plan Administrator for the
nondeductible employee contributions of each Participant.
A Participant may, upon a written request submitted to the Plan
Administrator withdraw the lesser of the portion of his Individual
Account attributable to his nondeductible employee contributions or the
amount he contributed as nondeductible employee contributions.
<PAGE>
Employee contributions and earnings thereon will be nonforfeitable at
all times. No Forfeiture will occur solely as a result of an Employee's
withdrawal of employee contributions.
The Plan Administrator will not accept deductible employee
contributions which are made for a taxable year beginning after
December 31, 1986. Contributions made prior to that date will be
maintained in a separate account which will be nonforfeitable at all
times. The account will share in the gains and losses of the Fund in
the same manner as described in Section 4.03 of the Plan. No part of
the deductible employee contribution account will be used to purchase
life insurance. Subject to Section 6.05, joint and survivor annuity
requirements (if applicable), the Participant may withdraw any part of
the deductible employee contribution account by making a written
application to the Plan Administrator.
3.03 ROLLOVER CONTRIBUTIONS
If the Plan Administrator so permits in a uniform and nondiscriminatory
manner, an Employee may contribute a rollover contribution to the Plan;
provided that such Employee submits a written certification,
satisfactory to the Trustee (or Custodian), that the contribution
qualifies as a rollover contribution.
A separate account shall be maintained by the Plan Administrator for
each Employee's rollover contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses
of the Fund in the manner described in Section 4.03 and shall be
subject to the Plan's provisions governing distributions.
For purposes of this Section 3.03, "rollover contribution" means a
contribution described in Sections 402(a)(5), 403(a)(4) or 408(d)(3) of
the Code or in any other provision which may be added to the Code which
may authorize rollovers to the Plan.
3.04 TRANSFER CONTRIBUTIONS
If the Plan Administrator so permits in a uniform and nondiscriminatory
manner, the Trustee (or Custodian, if applicable) may receive any
amounts transferred to it from the trustee or custodian of another plan
qualified under Code Section 401(a).
A separate account shall be maintained by the Plan Administrator for
each Employee's transfer contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses
of the Fund in the manner described in Section 4.03 and shall be
<PAGE>
subject to the Plan's provisions governing distributions.
3.05 LIMITATION ON ALLOCATIONS
A. If the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer
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
3.08(E)(1), the following rules shall apply:
<PAGE>
1. The amount of annual additions which may be credited to the Par-
ticipant's Individual 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 Contribution
that would otherwise be contributed or allocated to the Partici-
pant's Individual 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.
2. 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.
3. 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.
4. If pursuant to Section 3.08(A)(3) or as a result of the
allocation of Forfeitures there is an excess amount, the excess
will be disposed of as follows:
a. Any nondeductible voluntary employee contributions, to the
extent they would reduce the excess amount, will be returned
to the Participant;
b. If after the application of paragraph (a) 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
<PAGE>
Participant's Individual 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.
c. If after the application of paragraph (b) 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 Contri-
butions (including allocation of any Forfeitures) for all
remaining Participants in the next limitation year, and each
succeeding limitation year if necessary;
d. If a suspense account is in existence at any time during a
limitation year pursuant to this Section, it will not par-
ticipate in the allocation of the Fund's investment gains
and losses. If a suspense account is in existence at any
time during a particular limitation year, all amounts in the
suspense account must be allocated and reallocated to Par-
ticipants' Individual Accounts before any Employer Contribu-
tions or any Employee contributions may be made to the Plan
for that limitation year. Excess amounts may not be distri-
buted to Participants or former Participants.
B. If, in addition to this Plan, the Participant is covered under
another qualified master or prototype defined contribution plan
maintained by the Employer, a welfare benefit fund, as defined in
Section 419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in Section 415(l)(2) of the
Code, maintained by the Employer, which provides an annual addition
as defined in Section 3.05(E)(1), during any limitation year, the
following rules apply:
1. The annual additions which may be credited to a Participant's
Individual 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 Individual Account
under the other plans and welfare benefit funds for the same
limitation year. If the annual additions with respect to the
Participant under other defined contribution plans and welfare
benefit funds maintained by the employer are less than the maximum
permissible amount and the Employer Contribution that would
otherwise be contributed or allocated to the Participant's
Individual Account under this Plan would cause the annual
additions for the limitation year to exceed this limitation, the
amount contributed
<PAGE>
or allocated will be reduced so that the annual additions under
all such plans and funds for the limitation year will equal the
maximum permissible amount. If the annual additions with respect
to the Participant under such other defined contribution plans and
welfare benefit funds in the aggregate are equal to or greater
than the maximum permissible amount, no amount will be contributed
or allocated to the Participant's Individual Account under this
Plan for the limitation year.
2. 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 3.05(A)(2).
3. 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.
4. If, pursuant to Section 3.05(B)(3) 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.
5. 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,
a. the total excess amount allocated as of such date, times
b. the ration of (i) the annual additions allocated to the Parti-
cipant for the limitation year as of such date under this Plan
to (ii) the total annual additions allocated to the
Participant for the limitation year as of such date under this
and all the other qualified prototype defined contribution
plans.
6. Any excess amount attributed to this Plan will be disposed in the
manner described in Section 3.05(A)(4).
C. If the Participant is covered under another qualified defined contri-
bution plan maintained by the Employer which is not a master or pro-
<PAGE>
totype plan, annual additions which may be credited to the Partici-
pant's Individual Account under this Plan for any limitation year
will be limited in accordance with Sections 3.05(B)(1) through
3.08(B)(6) as though the other plan were a master or prototype plan
unless the Employer provides other limitations in the Section of the
Adoption Agreement titled "Limitation on Allocation - More Than One
Plan."
<PAGE>
D. 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 1.0 in any limitation
year. The annual additions which may be credited to the Participant's
Individual Account under this Plan for any limitation year will be
limited in accordance with the Section of the Adoption Agreement
titled "Limitation on Allocation - More Than One Plan."
E. The following terms shall have the following meanings when used in
this Section 3.05:
1. Annual additions: The sum of the following amounts credited to a
Participant's Individual Account for the limitation year:
a. Employer Contributions,
b. Employee contributions,
c. Forfeitures, and
d. amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Section 415(l)(2) of the Code,
which is part of a pension or annuity plan maintained by the
Employer are treated as annual additions to a defined contri-
bution plan. Also amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending after
such date, which are attributable to post-retirement medical
benefits, allocated to the separate account of a key employee,
as defined in Section 419A(d)(3) of the Code, under a welfare
benefit fund, as defined in Section 419(e) of the Code, main-
tained by the Employer are treated as annual additions to a
defined contribution plan.
For this purpose, any excess amount applied under Section
3.05(A)(4) or 3.05(B)(6) in the limitation year to reduce
Employer Contributions will be considered annual additions for
<PAGE>
such limitation year.
2. Compensation: As elected by the Employer in the Adoption Agreem-
ent (and if no election is made, Section 3401(a) wages will be
deemed to have been selected), Compensation shall mean all of a
Participant's:
a. Section 3121 wages. Wages as defined in Section 3121(a) of
the Code, for purposes of calculating Social Security taxes,
but determined without regard to the wage base limitation in
Section 3121(a)(1), the special rules in Section 3121(v), any
rules that limit covered employment based on the type or loca-
tion of an Employee's Employer, and any rules that limit the
remuneration included in wages based on familial relationship
or based on the nature or location of the employment or the
services performed (such as the exceptions to the definition
of employment in Section 3121(b)(1) through (2)).
b. Section 3401(a) wages. Wages as defined in Section 3401(a) of
the Code, for the purposes of income tax withholding at the
source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or
location of the employment or the services performed (such as
the exception for agricultural labor in Section 3401(a)(2)).
c. 415 safe-harbor 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 per-
sonal services actually rendered in the course of employment
with the Employer maintaining the Plan to the extent that the
amounts are includable in gross income (including, but not
limited to, commissions paid salesmen, compensation for ser-
vices on the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits, reimburse-
ments, and expense allowances), and excluding the following:
1. 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 plan to
the extent such contributions are deductible by the
Employee, or any distributions from a plan of deferred
compensation;
2. Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
<PAGE>
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
3. Amounts realized from the sale, exchange or other disposit-
ion of stock acquired under a qualified stock option; and
4. Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an
annuity 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 Decem-
ber 31, 1991, for purposes of applying the limitations of
this Section 3.05, 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 in a defined contribution plan 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 (as
defined in Section 414(q) of the Code) and contributions
made on behalf of such Participant are nonforfeitable when
made.
3. 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
125% of the dollar limitation determined for the limitation year
under Section 415(b) and (d) of the Code or 140% of the highest
average compensation, including any adjustments under Section
415(b) of the Code.
Notwithstanding the above, if the Participant was a Participant as
of the first day of the first limitation year beginning after
<PAGE>
<PAGE>
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 125% of the sum
of the annual benefits under such plans which the participant had
accrued as of the close of the last limitation year beginning
before January 1, 1987, disregarding any 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.
4. Defined contribution dollar limitation: $30,000 or if greater,
one-fourth of the defined benefit dollar limitation set forth in
Section 415(b)(1) of the Code as in effect for the limitation
year.
5. 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 employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Section
419(e) of the Code, and individual medical accounts, as defined in
Section 415(l)(2) of the Code, maintained by the Employer), and
the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior limitation years of service
with the Employer (regardless of whether a defined contribution
plan was maintained by the Employer). The maximum aggregate amount
in any limitation year is the lesser of 125% of the dollar
limitation determined under Section 415(b) and (d) of the Code in
effect under Section 415(c)(1)(A) of the Code or 35% of the
Participant's compensation for such year.
If the Employee was a participant as of the end of the first day
of the first limitation year beginning after December 31, 1986, in
one or more defined contribution plans maintained by the Employer
which were in existence on May 6, 1986, the numerator of this
fraction will be adjusted if the sum of this fraction and the
defined benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the
product of (1) the excess of the sum of the fractions over 1.0
times (2) the denominator of this fraction, will be permanently
subtracted from the numerator of this fraction. The adjustment is
<PAGE>
calculated using the fractions as they would be computed as of the
end of the last limitation year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the Section 415 limitation
applicable to the first limitation year beginning on or after
January 1, 1987.
The annual addition for any limitation year beginning before Jan-
uary 1, 1987, shall not be recomputed to treat all employee
contributions as annual additions.
6. Employer: For purposes of this Section 3.05, Employer shall mean
the Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in Section 414(b) of
the Code as modified by Section 415(h)), all commonly controlled
trades or businesses (as defined in Section 414(c) as modified by
Section 415(h)) or affiliated service groups (as defined in
Section 414(m)) 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.
7. Excess amount: The excess of the Participant's annual additions
for the limitation year over the maximum permissible amount.
8. Highest average compensation: The average compensation for the
three consecutive years of service with the Employer that produces
the highest average.
9. Limitation year: A calendar year, or the 12-consecutive month
period elected by the Employer in the Section of the Adoption
Agreement titled "Limitation on Allocation - More Than One Plan."
All qualified plans maintained by the Employer must use the same
limitation year. If the limitation year is amended to a different
12-consecutive month period, the new limitation year must begin on
a date within the limitation year in which the amendment is made.
10. Master or prototype plan: A plan the form of which is the subject
of a favorable notification letter from the Internal Revenue
Service.
11. Maximum permissible amount: The maximum annual addition that may
be contributed or allocated to a Participant's Individual Account
under the Plan for any limitation year shall not exceed the lesser
of:
<PAGE>
a. the defined contribution dollar limitation, or
b. 25% of the Participant's compensation for the limitation year.
The compensation limitation referred to in (b) shall not apply to
any contribution for medical benefits (within the meaning of
Section 401(h) or Section 419A(f)(2) of the Code) which is
otherwise treated as an annual addition under Section 415(l)(1) or
419A(d)(2) of the Code.
If a short limitation year is created because of an amendment
changing the limitation year to a different 12-consecutive month
period, the maximum permissible amount will not exceed the defined
contribution dollar limitation multiplied by the following
fraction:
Number of months in the short limitation year / 12
12. 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:
a. the Participant will continue employment until normal retire-
ment age under the Plan (or current age, if later), and
b. 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.
<PAGE>
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 INDIVIDUAL ACCOUNTS
A. The Plan Administrator shall establish and maintain an Individual
Account in the name of each Participant to reflect the total
value of his interest in the Fund. Each Individual Account
established hereunder shall consist of such subaccounts as may be
needed for each Participant including:
1. a subaccount to reflect Employer Contributions and Forfeitures
allocated on behalf of a Participant;
2. a subaccount to reflect a Participant's rollover contributions;
<PAGE>
3. a subaccount to reflect a Participant's transfer contributions;
4. a subaccount to reflect a Participant's nondeductible employee
contributions; and
5. a subaccount to reflect a Participant's deductible employee
contributions.
B. The Plan Administrator may establish additional accounts as it may
deem necessary for the proper administration of the Plan, including,
but not limited to, a suspense account for Forfeitures as required
pursuant to Section 6.01(D).
4.02 VALUATION OF FUND
The Fund will be valued each Valuation Date at fair market value.
4.03 VALUATION OF INDIVIDUAL ACCOUNTS
A. Where all or a portion of the assets of a Participant's Individual
Account are invested in a Separate Fund for the Participant, then
the value of that portion of such Participant's Individual Account
at any relevant time equals the sum of the fair market values of
the assets in such Separate Fund, less any applicable charges or
penalties.
B. The fair market value of the remainder of each Individual Account
is determined in the following manner:
1. First, the portion of the Individual Account invested in each
Investment Fund as of the previous Valuation Date is
determined. Each such portion is reduced by any withdrawal made
from the applicable Investment Fund to or for the benefit of a
Participant or his Beneficiary, further reduced by any amounts
forfeited by the Participant pursuant to Section 6.01(D) and
further reduced by any transfer to another Investment Fund
since the previous Valuation Date and is increased by any
amount transferred from another Investment Fund since the
previous Valuation Date. The resulting amounts are the net
Individual Account portions invested in the Investment Funds.
2. Secondly, the net Individual Account portions invested in each
Investment Fund are adjusted upwards or downwards, pro rata
(i.e., ratio of each net Individual Account portion to the sum
of all net Individual Account portions) so that the sum of all
the net Individual Account portions invested in an Investment
Fund will equal the then fair market value of the Investment
<PAGE>
Fund. Notwithstanding the previous sentence, for the first Plan
Year only, the net Individual Account portions shall be the sum
of all contributions made to each Participant's Individual
Account during the first Plan Year.
3. Thirdly, any contributions to the Plan and Forfeitures are
allocated in accordance with the appropriate allocation
provisions of Section 3. For purposes of Section 4,
contributions made by the Employer for any Plan Year but after
that Plan Year will be considered to have been made on the last
day of that Plan Year regardless of when paid to the Trustee
(or Custodian, if applicable).
Amounts contributed between Valuation Dates will not be
credited with investment gains or losses until the next
following Valuation Date.
4. Finally, the portions of the Individual Account invested in
each Investment Fund (determined in accordance with (1), (2)
and (3) above) are added together.
4.04 SEGREGATION OF ASSETS
If a Participant elects a mode of distribution other than a lump sum,
the Plan Administrator may place that Participant's account balance
into a segregated Investment Fund for the purpose of maintaining the
necessary liquidity to provide benefit installments on a periodic
basis.
4.05 STATEMENT OF INDIVIDUAL ACCOUNTS
No later than 270 days after the close of each Plan Year, the Plan
Administrator shall furnish a statement to each Participant
indicating the Individual Account balances of such Participant as of
the last Valuation Date in such Plan Year.
4.06 MODIFICATION OF METHOD FOR VALUING INDIVIDUAL ACCOUNTS If necessary
or appropriate, the Plan Administrator may establish different or
additional procedures (which shall be uniform and non-discriminatory)
for determining the fair market value of the Individual Accounts.
SECTION FIVE TRUSTEE OR CUSTODIAN
<PAGE>
5.01 CREATION OF FUND
By adopting this Plan, the Employer establishes the Fund which shall
consist of the assets of the Plan held by the Trustee (or Custodian,
if applicable) pursuant to this Section 5. Assets within the Fund may
be pooled on behalf of all Participants, earmarked on behalf of each
Participant or be a combination of pooled and earmarked. To the
extent that assets are earmarked for a particular Participant, they
will be held in a Separate Fund for that Participant.
No part of the corpus or income of the Fund may be used for, or
diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries.
5.02 INVESTMENT AUTHORITY
Except as provided in Section 5.14 (relating to individual direction
of investments by Participants), the Employer, not the Trustee (or
<PAGE>
Custodian, if applicable), shall have exclusive management and
control over the investment of the Fund into any permitted
investment. Notwithstanding the preceding sentence, a Trustee with
full trust powers (under applicable law) may make an agreement with
the Employer whereby the Trustee will manage the investment of all or
a portion of the Fund. Any such agreement shall be in writing and set
forth such matters as the Trustee deems necessary or desirable.
5.03 FINANCIAL ORGANIZATION CUSTODIAN OR TRUSTEE WITHOUT FULL
TRUST POWERS
This Section 5.03 applies where a financial organization has
indicated in the Adoption Agreement that it will serve, with respect
to this Plan, as Custodian or as Trustee without full trust powers
(under applicable law). Hereinafter, a financial organization Trustee
without full trust powers (under applicable law) shall be referred to
as a Custodian.
A. Permissible Investments - The assets of the Plan shall be invested
only in those investments which are available through the
Custodian in the ordinary course of business which the Custodian
may legally hold in a qualified plan and which the Custodian
chooses to make available to Employers for qualified plan
investments.
B. Responsibilities of the Custodian - The responsibilities of the
Custodian shall be limited to the following:
1. To receive Plan contributions and to hold, invest and reinvest
the Fund without distinction between principal and interest;
<PAGE>
provided, however, that nothing in this Plan shall require the
Custodian to maintain physical custody of stock certificates
(or other indicia of ownership of any type of asset)
representing assets within the Fund;
2. To maintain accurate records of contributions, earnings, with-
drawals and other information the Custodian deems relevant with
respect to the Plan;
3. To make disbursements from the Fund to Participants or Benefic-
iaries upon the proper authorization of the Plan Administrator;
and
4. To furnish to the Plan Administrator a statement which reflects
the value of the investments in the hands of the Custodian as
of the end of each Plan Year.
C. Powers of the Custodian - Except as otherwise provided in this Plan,
the Custodian shall have the power to take any action with respect to
the Fund which it deems necessary or advisable to discharge its
responsibilities under this Plan including, but not limited to, the
following powers:
1. To invest all or a portion of the Fund (including idle cash
balances) in time deposits, savings accounts, money market
accounts or similar investments bearing a reasonable rate of
interest in the Custodian's own savings department or the savings
department of another financial organization;
2. To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges or
subscription rights and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate in,
corporate reorganizations or other changes affecting corporate
securities, and to pay any assessment or charges in connection
therewith; and generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities or other property;
3. To hold securities or other property of the Fund in its own name,
in the name of its nominee or in bearer form; and
4. To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that
may be necessary or appropriate to carry out the powers herein
<PAGE>
granted.
5.04 FINANCIAL ORGANIZATION TRUSTEE WITH FULL TRUST POWERS AND
INDIVIDUAL
TRUSTEE
This Section 5.04 applies where a financial organization has
indicated in the Adoption Agreement that it will serve as Trustee
with full trust powers. This Section also applies where one or more
individuals are named in the Adoption Agreement to serve as
Trustee(s).
A. Permissible Investments - The Trustee may invest the assets of the
Plan in property of any character, real or personal, including,
but not limited to the following: stocks, including shares of
open-end investment companies (mutual funds); bonds; notes;
debentures; options; limited partnership interests; mortgages;
real estate or any interests therein; unit investment trusts;
Treasury Bills, and other U.S. Government obligations; common
trust funds, combined investment trusts, collective trust funds or
commingled funds maintained by a bank or similar financial
organization (whether or not the Trustee hereunder); savings
accounts, time deposits or money market accounts of a bank or
similar financial organization (whether or not the Trustee
hereunder); annuity contracts; life insurance policies; or in such
other investments as is deemed proper without regard to
investments authorized by statute or rule of law governing the
investment of trust funds but with regard to ERISA and this Plan.
Notwithstanding the preceding sentence, the Prototype Sponsor may,
as a condition of making the Plan available to the Employer for
adoption, limit the types of property in which the Trustee (other
than a financial organization Trustee with full trust powers), is
permitted to invest.
B. Responsibilities of the Trustee - The responsibilities of the Trustee
shall be limited to the following:
1. To receive Plan contributions and to hold, invest and reinvest the
Fund without distinction between physical and interest; provided,
however, that nothing in this Plan shall require the Trustee to
maintain physical custody of stock certificates (or other indicia
of ownership) representing assets within the Fund;
2. To maintain accurate records of contributions, earnings, with-
drawals and other information the Trustee deems relevant with re-
<PAGE>
spect to the Plan;
3. To make disbursements from the Fund to Participants or Beneficiar-
ies upon the proper authorization of the Plan Administrator; and
4. To furnish to the Plan Administrator a statement which reflects
the value of the investments in the hands of the Trustee as of the
end of each Plan Year.
C. Powers of the Trustee - Except as otherwise provided in this Plan,
the Trustee shall have the power to take any action with respect to
the Fund which it deems necessary or advisable to discharge its
responsibilities under this Plan including, but not limited to, the
following powers:
<PAGE>
1. To hold any securities or other property of the Fund in its own
name, in the name of its nominee or in bearer form;
2. To purchase or subscribe for securities issued, or real property
owned, by the Employer or any trade or business under common
control with the Employer but only if the prudent investment and
diversification requirements of ERISA are satisfied;
3. To sell, exchange, convey, transfer or otherwise dispose of any
securities or other property held by the Trustee, by private
contract or at public auction. No person dealing with the Trustee
shall be bound to see to the application of the purchase money or
to inquire into the validity, expediency, or propriety of any such
sale or other disposition, with or without advertisement;
4. To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges or
subscription rights and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate in,
corporate reorganizations or other changes affecting corporate
securities, and to delegate discretionary powers, and to pay any
assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks,
bonds, securities or other property;
5. To invest any part or all of the Fund (including idle cash
balances) in certificates of deposit, demand or time deposits,
savings accounts, money market accounts or similar investments of
the Trustee (if the Trustee is a bank or similar financial
organiza-
<PAGE>
tion), the Prototype Sponsor or any affiliate of such Trustee or
Prototype Sponsor, which bear a reasonable rate of interest;
6. To provide sweep services without the receipt by the Trustee of
additional compensation or other consideration (other than
reimbursement of direct expenses properly and actually incurred in
the performance of such services);
7. To hold in the form of cash for distribution or investment such
portion of the Fund as, at any time and from time-to-time, the
Trustee shall deem prudent and deposit such cash in interest
bearing or noninterest bearing accounts.;
8. To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that
may be necessary or appropriate to carry out the powers herein
granted;
9. To settle, compromise, or submit to arbitration any claims, debts,
or damages due or owing to or from the Plan, to commence or defend
suits or legal or administrative proceedings, and to represent the
Plan in all suits and legal and administrative proceedings;
10. To employ suitable agents and counsel, to contract with agents to
perform administrative and recordkeeping duties and to pay their
reasonable expenses, fees and compensation, and such agent or
counsel may or may not be agent or counsel for the Employer;
11. To cause any part or all of the Fund, without limitation as to
amount, to be commingled with the funds of other trusts (including
trusts for qualified employee benefit plans) by causing such money
to be invested as a part of any pooled, common, collective or
commingled trust fund heretofore or hereafter created by any
trustee (if the Trustee is a bank), by the Prototype Sponsor, by
any affiliate bank of such a Trustee or by such a Trustee or the
Prototype Sponsor, or by such an affiliate in participation with
others; the instrument or instruments establishing such trust fund
or funds, as amended, being made part of this Plan and trust so
long as any portion of the Fund shall be invested through the
medium thereof.
12. Generally to do all such acts, execute all such instruments,
initiate such proceedings, and exercise all such rights and
privileges with relation to property constituting the Fund as if
the Trustee were the absolute owner thereof.
<PAGE>
5.05 DIVISION OF FUND INTO INVESTMENT FUNDS
The Employer may direct the Trustee (or Custodian) from time-to-time
to divide and redivide the Fund into one or more Investment Funds.
Such Investment Funds may include, but not be limited to, Investment
Funds representing the assets under the control of an investment
manager pursuant to Section 5.12 and Investment Funds representing
investment options available for individual direction by Participants
pursuant to Section 5.14. Upon each division or redivision, the
Employer may specify the part of the Fund to be allocated to each
such Investment Fund and the terms and conditions, if any, under
which the assets in such Investment Fund shall be invested.
5.06 COMPENSATION AND EXPENSES
The Trustee (or Custodian, if applicable) shall receive such
reasonable compensation as may be agreed upon by the Trustee (or
Custodian) and the Employer. The Trustee (or Custodian) shall be
entitled to reimbursement by the Employer for all proper expenses
incurred in carrying out his duties under this Plan, including
reasonable legal, accounting and actuarial expenses. If not paid by
the Employer, such compensation and expenses may be charged against
the Fund.
All taxes of any kind that may be levied or assessed under existing
or future laws upon, or in respect of, the Fund or the income thereof
shall be paid from the Fund.
5.07 NOT OBLIGATED TO QUESTION DATA
The Employer shall furnish the Trustee (or Custodian, if applicable)
and Plan Administrator the information which each party deems
necessary for the administration of the Plan including, but not
limited to, changes in a Participant's status, eligibility, mailing
addresses and other such data as may be required. The Trustee (or
Custodian) and Plan Administrator shall be entitled to act on such
information as is supplied them and shall have no duty or
responsibility to further verify or question such information.
5.08 LIABILITY FOR WITHHOLDING ON DISTRIBUTIONS
The Plan Administrator shall be responsible for withholding federal
income taxes from distributions from the Plan, unless the Participant
(or Beneficiary, where applicable) elects not to have such taxes
withheld. However, the Trustee (or Custodian) shall act as agent for
the Plan Administrator to withhold such taxes and to make the
appropriate distribution reports, subject to the Plan Administrator's
obligation to furnish all the necessary information to so withhold to
the Trustee (or Custodian).
<PAGE>
5.09 RESIGNATION OR REMOVAL OF TRUSTEE (OR CUSTODIAN) The Trustee (or
Custodian, if applicable) may resign at any time by giving 30 days
advance written notice to the Employer. The resignation shall become
effective 30 days after receipt of such notice unless a shorter
period is agreed upon.
The Employer may remove any Trustee (or Custodian) at any time by
giving written notice to such Trustee (or Custodian) and such removal
shall be effective 30 days after receipt of such notice unless a
shorter period is agreed upon. The Employer shall have the power to
appoint a successor Trustee (or Custodian).
Upon such resignation or removal, if the resigning or removed Trustee
(or Custodian) is the sole Trustee (or Custodian), he shall transfer
all of the assets of the Fund then held by him as expeditiously as
possible to the successor Trustee (or Custodian) after paying or
reserving such reasonable amount as he shall deem necessary to
provide for the expense in the settlement of the accounts and the
amount of any compensation due him and any sums chargeable against
the Fund for which he may be liable. If the Funds as reserved are not
sufficient for such purpose, then he shall be entitled to
reimbursement from the successor Trustee (or Custodian) out of the
assets in the successor Trustee's (or Custodian's) hands under this
Plan. If the amount reserved shall be in excess of the amount
actually needed, the former Trustee (or Custodian) shall return such
excess to the successor Trustee (or Custodian).
Upon receipt of such assets, the successor Trustee (or Custodian)
shall thereupon succeed to all of the powers and responsibilities
given to the Trustee (or Custodian) by this Plan.
The resigning or removed Trustee (or Custodian) shall render an
accounting to the Employer and unless objected to by the Employer
within 30 days of its receipt, the accounting shall be deemed to have
been approved and the resigning or removed Trustee (or Custodian)
<PAGE>
shall be released and discharged as to all matters set forth in the
accounting. Where a financial organization is serving as Trustee (or
Custodian) and it is merged with or bought by another organization
(or comes under the control of any federal or state agency), that
organization shall serve as the successor Trustee (or Custodian) of
this Plan, but only if it is the type of organization that can so
serve under applicable law.
Where the Trustee or Custodian is serving as a nonbank trustee or
<PAGE>
custodian pursuant to Section 1.401-12(n) of the Income Tax
Regulations, the Employer will appoint a successor Trustee (or
Custodian) upon notification by the Commissioner of Internal Revenue
that such substitution is required because the Trustee (or Custodian)
has failed to comply with the requirements of Section 1.401-12(n) or
is not keeping such records or making such returns or rendering such
statements as are required by forms or regulations.
5.10 DEGREE OF CARE
Limitations of Liability - The Trustee (or Custodian) shall not be
liable for any losses incurred by the Fund by any lawful direction to
invest communicated by the Employer, Plan Administrator or any
Participant or Beneficiary. The Trustee (or Custodian) shall be under
no liability for distributions made or other action taken or not
taken at the written direction of the Plan Administrator. It is
specifically understood that the Trustee (or Custodian) shall have no
duty or responsibility with respect to the determination of matters
pertaining to the eligibility of any Employee to become a Participant
or remain a Participant hereunder, the amount of benefit to which a
Participant or Beneficiary shall be entitled to receive hereunder,
whether a distribution to Participant or Beneficiary is appropriate
under the terms of the Plan or the size and type of any policy to be
purchased from any insurer for any Participant hereunder or similar
matters; it being understood that all such responsibilities under the
Plan are vested in the Plan Administrator.
5.11 INDEMNIFICATION OF PROTOTYPE SPONSOR AND TRUSTEE (OR
CUSTODIAN)
Notwithstanding any other provision herein, and except as may be
otherwise provided by ERISA, the Employer shall indemnify and hold
harmless the Trustee (or Custodian, if applicable) and the Prototype
Sponsor, their officers, directors, employees, agents, their heirs,
executors, successors and assigns, from and against any and all
liabilities, damages, judgments, settlements, losses, costs, charges,
or expenses (including legal expenses) at any time arising out of or
incurred in connection with any action taken by such parties in the
performance of their duties with respect to this Plan, unless there
has been a final adjudication of gross negligence or willful
misconduct in the performance of such duties.
Further, except as may be otherwise provided by ERISA, the Employer
will indemnify the Trustee (or custodian) and Prototype Sponsor from
any liability, claim or expense (including legal expense) which the
Trustee (or Custodian) and Prototype Sponsor shall incur by reason of
or which results, in whole or in part, from the Trustee's (or Custo-
<PAGE>
dian's) or Prototype Sponsor's reliance on the facts and other
directions and elections the Employer communicates or fails to
communicate.
5.12 INVESTMENT MANAGERS
A. Definition of Investment Manager - The Employer may appoint one or
more investment managers to make investment decisions with respect
to all or a portion of the Fund. The investment manager shall be
any firm or individual registered as an investment adviser under
the Investment Advisers Act of 1940, a bank as defined in said Act
or an insurance company qualified under the laws of more than one
state to perform services consisting of the management,
acquisition or disposition of any assets of the Plan.
B. Investment Manager's Authority - A separate Investment Fund shall
be established representing the assets of the Fund invested at the
direction of the investment manager. The investment manager so
appointed shall direct the Trustee (or Custodian, if applicable )
with respect to the investment of such Investment Fund. The
investments which may be acquired at the direction of the
investment manager are those described in Section 5.03(A) (for
Custodians) or Section 5.04(A) (for Trustees).
C. Written Agreement - The appointment of any investment manager
shall be by written agreement between the Employer and the
investment manager and a copy of such agreement (and any
modification or termination thereof) must be given to the Trustee
(or Custodian).
The agreement shall set forth, among other matters, the effective
date of the investment manager's appointment and an
acknowledgement by the investment manager that it is a fiduciary
of the Plan under ERISA.
D. Concerning the Trustee (or Custodian) - Written notice of each
appointment of an investment manager shall be given to the Trustee
(or Custodian) in advance of the effective date of such
appointment. Such notice shall specify which portion of the Fund
will constitute the Investment Fund subject to the investment
manager's direction. The Trustee (or Custodian) shall comply with
the investment direction given to it by the investment manager and
will not be liable for any loss which may result by reason of any
action (or inaction) it takes at the direction of the investment
manager.
<PAGE>
5.13 MATTERS RELATING TO INSURANCE
A. If a life insurance policy is to be purchased for a Participant,
the aggregate premium for certain life insurance for each
Participant must be less than a certain percentage of the
aggregate Employer Contributions and Forfeitures allocated to a
Partici- pant's Individual Account at any particular time as
follows:
<PAGE>
1. Ordinary Life Insurance - For purposes of these incidental
insurance provisions, ordinary life insurance contracts are
contracts with both nondecreasing death benefits and
nonincreasing premiums. If such contracts are purchased, less
than 50% of the aggregate Employer Contributions and
Forfeitures allocated to any Participant's Individual Account
will be used to pay the premiums attributable to them.
2. Term and Universal Life Insurance - No more than 25% of the
aggregate Employer Contributions and Forfeitures allocated to
any Participant's Individual Account will be used to pay the
premiums on term life insurance contracts, universal life
insurance contracts, and all other life insurance contracts
which are not ordinary life.
3. Combination - The sum of 50% of the ordinary life insurance
premiums and all other life insurance premiums will not exceed
25% of the aggregate Employer Contributions and Forfeitures
allocated to any Participant's Individual Account.
B. Any dividends or credits earned on insurance contracts for a Partici-
pant shall be allocated to such Participant's Individual Account.
C. Subject to Section 6.05, the contracts on a Participant's life will
be converted to cash or an annuity or distributed to the Participant
upon commencement of benefits.
D. The Trustee (or Custodian, if applicable) shall apply for and will be
the owner of any insurance contract(s) purchased under the terms of
this Plan. The insurance contract(s) must provide that proceeds will
be payable to the Trustee (or Custodian), however, the Trustee (or
Custodian) shall be required to pay over all proceeds of the
contract(s) to the Participant's designated Beneficiary in accordance
with the distribution provisions of this Plan. A Participant's spouse
will be the designated Beneficiary of the proceeds in all
circumstances unless a qualified election has been made in accordance
with Section 6.05. Under no circumstances shall the Fund retain any
<PAGE>
part of the proceeds. In the event of any conflict between the terms
of this Plan and the terms of any insurance contract purchased
hereunder, the Plan provisions shall control.
E. The Plan Administrator may direct the Trustee (or Custodian) to sell
and distribute insurance or annuity contracts to a Participant (or
other party as may be permitted) in accordance with applicable law or
regulations.
5.14 DIRECTION OF INVESTMENTS BY PARTICIPANT
If so indicated in the Adoption Agreement, each Participant may
individually direct the Trustee (or Custodian, if applicable)
regarding the investment of part or all of his Individual Account. To
the extent so directed, the Employer, Plan Administrator, Trustee (or
Custodian) and all other fiduciaries are relieved of their fiduciary
responsibility under Section 404 of ERISA.
The Plan Administrator shall direct that a Separate Fund be
established in the name of each Participant who directs the
investment of part or all of his Individual Account. Each Separate
Fund shall be charged or credited (as appropriate) with the earnings,
gains, losses or expenses attributable to such Separate Fund. No
fiduciary shall be liable for any loss which results from a
Participant's individual direction. The assets subject to individual
direction shall not be invested in collectibles as that term is
defined in Section 408(m) of the Code.
The Plan Administrator shall establish such uniform and
nondiscriminatory rules relating to individual direction as it deems
necessary or advisable including, but not limited to, rules
describing (1) which portions of Participant's Individual Account can
be individually directed; (2) the frequency of investment changes;
(3) the forms and procedures for making investment changes; and (4)
the effect of a Participant's failure to make a valid direction.
Subject to the approval of the Prototype Sponsor, the Plan
Administrator may, in a uniform and nondiscriminatory manner, limit
the available investments for Participants' individual direction to
certain specified investment options (including, but not limited to,
certain mutual funds, investment contracts, deposit accounts and
group trusts). The Plan Administrator may permit, in a uniform and
nondiscriminatory manner, a Beneficiary of a deceased Participant to
individually direct in accordance with this Section.
<PAGE>
SECTION SIX VESTING AND DISTRIBUTION
6.01 DISTRIBUTION TO PARTICIPANT
A. When Distributable
1. Entitlement to Distribution - The Vested portion of a Partici-
pant's Individual Account shall be distributable to the
Participant upon the occurrence of any of the following events:
a. the Participant's Termination of Employment;
b. the Participant's attainment of Normal Retirement Age;
c. the Participant's Disability;
d. the termination of the Plan;
2. Written Request: When Distributed - A Participant entitled to
distribution who wishes to receive a distribution must submit a
written request to the Plan Administrator. Such request shall be
made upon a form provided by the Plan Administrator. Upon a valid
request, the Plan Administrator shall direct the Trustee (or
Custodian, if applicable) to commence distribution no later than
90 days following the later of:
a. the close of the Plan Year within which the event occurs which
entitles the Participant to distribution; or
b. the close of the Plan Year in which the request is received.
3. Special Rules for Withdrawals During Service - If this is a profit
sharing plan and the Adoption Agreement so provides, a Participant
who is not otherwise entitled to a distribution under Section 6.01
<PAGE>
(A)(1) may elect to receive a distribution of all or part of the
Vested portion of his Individual Account, subject to the
requirements of Section 6.05 and further subject to the following
limits:
a. Participant for 5 or more years. An Employee who has been a
Participant in the Plan for 5 or more years may withdraw up to
his entire Vested portion of his Individual Account.
b. Participant for less than 5 years. An Employee who has been a
Participant in the Plan for less than 5 years may withdraw
only the amount which has been in his Vested Individual
Account attributable to Employer Contributions for at least 2
<PAGE>
full Plan Years.
However, if the distribution is on account of hardship, the
Participant may withdraw up to his entire Vested portion of
his Individual Account. For purposes of the preceding
sentence, hardship is defined as an immediate and heavy
financial need of the Participant where such Participant lacks
other available resources. The following are the only
financial needs considered immediate and heavy: expenses
incurred or necessary for medical care, described in Section
213(d) of the Code, of the Employee, the Employee's spouse or
dependents; the purchase (excluding mortgage payments) of a
principal residence for the Employee; payment of tuition and
related educational fees for the next 12 months of
post-secondary education for the Employee, the Employee's
spouse, children or dependents; or the need to prevent the
eviction of the Employee from, or a foreclosure on the
mortgage of, the Employee's principal residence.
A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
1) The employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under
all plan maintained by the Employer;
2) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts
necessary to pay any federal, state or local income taxes
or penalties reasonably anticipated to result from the
distribution)
4. Commencement of Benefits - Notwithstanding any other
provision, unless the Participant elects otherwise,
distribution of benefits will begin no later than the 60th day
after the latest of the close of the Plan Year in which:
a. the Participant attains Normal Retirement Age;
b. occurs the 10th anniversary of the year in which the Par-
ticipant commenced participation in the Plan; or
c. the Participant incurs a Termination of Employment.
B. Determining the Vested Portion - In determining the Vested portion of
<PAGE>
a Participant's Individual Account, the following rules apply:
1. Employer Contributions and Forfeitures - The Vested portion of
a Participant's Individual Account derived from Employer
Contributions and Forfeitures is determined by applying the
vesting schedule selected in the Adoption Agreement (or the
vesting schedule described in Section 6.01(C) if the Plan is a
Top-Heavy Plan).
2. Rollover and Transfer Contributions - A Participant is fully
Vested in his rollover contributions and transfer
contributions.
3. Fully Vested Under Certain Circumstances - A Participant is
fully Vested in his Individual Account if any of the following
occurs:
a. the Participant reaches Normal Retirement Age;
b. the Participant incurs a Disability;
c. the Participant dies;
d. the Plan is terminated or partially terminated; or
e. there exists a complete discontinuance of contributions
under the Plan.
4. Participants in a Prior Plan - If a Participant was a
participant in a Prior Plan on the Effective Date, his Vested
percentage shall not be less than it would have been under
such Prior Plan as computed on the Effective Date.
C. Minimum Vesting Schedule for Top-Heavy Plans - The following vesting
provisions apply for any Plan Year in which this Plan is a Top-Heavy
Plan.
Notwithstanding the other provisions of this Section 6.01 or the
vesting schedule selected in the Adoption Agreement (unless those
provisions or that schedule provide for more rapid vesting), a
Participant's Vested portion of his Individual Account attributable
to Employer Contributions and Forfeitures shall be determined in
accordance with the following minimum vesting schedule:
Years of Vesting Service Vested Percentage
1 0
2 20
3 40
4 60
<PAGE>
5 80
6 100
<PAGE>
This minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code, except those attributable
to employee contributions including benefits accrued before the
effective date of Section 416 of the Code and benefits accrued
before the Plan became a Top-Heavy Plan. Further, no decrease in a
Participant's Vested percentage may occur in the event the Plan's
status as a Top-Heavy Plan changes for any Plan Year. However, this
Section 6.01(C) does not apply to the Individual Account of any
Employee who does not have an Hour of Service after the Plan has
initially become a Top-Heavy Plan and such Employee's Individual
Account attributable to Employer Contributions and Forfeitures will
be determined without regard to this Section.
If this Plan ceases to be a Top-Heavy Plan, then in accordance with
the above restrictions, the vesting schedule as selected in the
Adoption Agreement will govern. If the vesting schedule under the
Plan shifts in or out of top-heavy status, such shift is an
amendment to the vesting schedule and the election in Section 9.04
applies.
D. Break in Vesting Service and Forfeitures - If a Participant incurs a
Termination of Employment, any portion of his Individual Account
which is not Vested shall be held in a suspense account. Such
suspense account shall share in any increase or decrease in the fair
market value of the assets of the Fund in accordance with Section 4
of the Plan. The disposition of such suspense account shall be as
follows:
1. No Breaks in Vesting Service - If a Participant neither receives
nor is deemed to receive a distribution pursuant to Section 6.01
(D)(2) or (3) and the Participant returns to the service of the
Employer before incurring 5 consecutive Breaks in Vesting Service,
there shall be no Forfeiture and the amount in such suspense
account shall be recredited to such Participant's Individual
Account.
2. Cash-out of Certain Participants - If the value of the Vested
portion of such Participant's Individual Account derived from
Employee and Employer Contributions does not exceed $3,500, the
Participant shall receive a distribution of the entire Vested
portion of such Individual Account and the portion which is not
Vested shall be treated as a Forfeiture and allocated in the year
of the cash-
<PAGE>
out. For purposes of this Section, if the value of the Vested
portion of a Participant's Individual Account is zero, the
Participant shall be deemed to have received a distribution of
such Vested Individual Account. A Participant's Vested Individual
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.
3. Participants Who Elect to Receive Distributions - If such
Participant elects to receive a distribution, in accordance with
Section 6.02(B), of the value of the Vested portion of his
Individual Account derived from Employee and Employer
Contributions, the portion which is not Vested shall be treated as
a Forfeiture.
4. Re-employed Participants - If a Participant receives or is deemed
to receive a distribution pursuant to Section 6.01(D)(2) or (3)
above and the Participant resumes employment covered under this
Plan, the Participant's Employer-derived Individual Account
balance will be restored to the amount on the date of distribution
if the Participant repays to the Plan the full amount of the
distribution attributable to Employer Contributions before the
earlier of 5 years after the first date on which the Participant
is subsequently re-employed by the Employer, or the date the
Participant incurs 5 consecutive Breaks in Vesting Service
following the date of the distribution.
Amounts forfeited under Section 6.01(D) shall be allocated in
accordance with Section 3.01(C) as of the last day of the Plan
Year during which the Forfeiture arises. Any restoration of a
Participant's Individual Account pursuant to Section 6.01(D)(4)
shall be made from other Forfeitures, income or gain to the Fund
or contributions made by the Employer.
E. Distribution Prior to Full Vesting - If a distribution is made to a
Participant who was not then fully Vested in his Individual Account
derived from Employer Contributions and the Participant may increase
his Vested percentage in his Individual Account, then the following
rules shall apply:
1. a separate account will be established for the Participant's in-
terest in the Plan as of the time of the distribution, and
2. at any relevant time the Participant's Vested portion of the sep-
arate account will be equal to an amount ("X") determined by the
formula: X=P (AB + (R x D)) - (R x D) where "P" is the Vested
<PAGE>
percentage at the relevant time, "AB" is the separate account
balance at the relevant time; "D" is the amount of the
distribution; and "R" is the ratio of the separate account balance
at the relevant time to the separate account balance after
distribution.
6.02 FORM OF DISTRIBUTION TO A PARTICIPANT
A. Value of Individual Account Does Not Exceed $3,500 - If the value of
the Vested portion of a Participant's Individual Account derived from
Employee and Employer Contributions does not exceed $3,500,
distribution from the Plan shall be made to the Participant in a
single lump sum in lieu of all other forms of distribution from the
Plan.
B. Value of Individual Account Exceeds $3,500
1. If the value of the Vested portion of a Participant's Individual
Account derived from Employee and Employer Contributions exceeds
(or at the time of any prior distribution exceeded) $3,500, and
the Individual Account is immediately distributable, the
Participant and the Participants spouse (or where either the
Participant or the spouse died, the survivor) must consent to any
distribution of such Individual Account. The consent of the
Participant and the Participant's spouse shall be obtained in
writing within the 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 Individual Account is no longer immediately
distributable. Such notification shall include a general
description of the material features, and an explanation of the
relative values of, the optional forms of benefit available under
the Plan in a manner that would satisfy the notice requirements of
Section 417(a)(3) of the Code, and shall be provided no less than
30 days and no more than 90 days prior to the annuity starting
date. If a distribution is one to which Sections 401(a)(11) and
417 of the Internal Revenue Code do not apply, such distribution
may commence less than 30 days after the notice required under
Section 1.411(a)- 11(c) of the Income Tax Regulations is given,
provided that:
a. the Plan Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular
distribution option), and
<PAGE>
b. the Participant, after receiving the notice, affirmatively
elects a distribution.
<PAGE>
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 Individual Account is
immediately distributable. Neither the consent of the Participant
nor the Participant's spouse shall be required to the extent that
a distribution is required to satisfy Section 401(a)(9) or Section
415 of the Code. In addition, upon termination of this Plan if the
Plan does not offer an annuity option (purchased from a commercial
provider), the Participant's Individual Account may, without the
Participant's consent, be distributed to the Participant or
transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975 (e)(7) of
the Code) within the same controlled group.
An Individual Account is immediately distributable if any part of
the Individual Account 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 62.
2. 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
Vested portion of a Participant's Individual Account shall not
include amounts attributable to accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) o the
Code.
C. Other Forms of Distribution to Participant - If the value of the
Vested portion of a Participant's Individual Account exceeds $3,500
and the Participant has properly waived the joint and survivor
annuity, as described in Section 6.05, the Participant may request in
writing that the Vested portion of his Individual Account be paid to
him in one or more of the following forms of payment: 91) in a lump
sum; (2) in installment payments over a period not to exceed the life
expectancy of the Participant or the joint and last survivor life
expectancy of the Participant and his designated Beneficiary; or (3)
applied to the purchase of an annuity contract.
Notwithstanding anything in this Section 6.02 to the contrary, a
Participant cannot elect payments in the form of an annuity if the
safe harbor rules of Section 6.05(F) apply.
<PAGE>
6.03 DISTRIBUTIONS UPON THE DEATH OF A PARTICIPANT
A. Designation of Beneficiary - Spousal Consent - Each Participant may
designate, upon a form provided by and delivered to the Plan
Administrator, one or more primary and contingent Beneficiaries to
receive all or a specified portion of his Individual Account in the
event of his death. A Participant may change or revoke such
Beneficiary designation from time to time by completing and
delivering the proper form to the Plan Administrator.
In the event that a Participant wishes to designate a primary
Beneficiary who is not his spouse, his spouse must consent in writing
to such designation, and the spouse's consent must acknowledge the
effect of such designation and be witnessed by a notary public.
Notwithstanding this consent requirement, if the Participant
establishes to the satisfaction of the Plan Administrator that such
written consent may not be obtained because there is no spouse or the
spouse cannot be located, no consent shall be required. Any change of
Beneficiary will require a new spousal consent.
B. Payment to Beneficiary - If a Participant dies before his entire
Individual Account has been paid to him, such deceased Participant's
Individual Account shall be payable to any surviving Beneficiary
designated by the Participant, or, if no Beneficiary survives the
Participant, to the Participant's estate.
C. Written Request: When Distributed - A Beneficiary of a deceased
Participant entitled to a distribution who wishes to receive a
distribution must submit a written request to the Plan Administrator.
Such request shall be made upon a form provided by the Plan
Administrator. Upon a valid request, the Plan Administrator shall
direct the Trustee (or Custodian) to commence distribution no later
than 90 days following the later of:
1. the close of the Plan Year within which the Participant dies; or
2. the close of the Plan Year in which the request is received.
D. Location of Participant or Beneficiary Unknown - In the event that
all, or any portion, of the distribution payable to a Participant or
his Beneficiary hereunder shall, at the expiration of 5 years after
it becomes payable, remain unpaid solely by reason of the inability
of the Plan Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after further
diligent effort, to ascertain the whereabouts of such Participant or
his
<PAGE>
Beneficiary, the amount so distributable shall be forfeited and
allocated in accordance with the terms of the Plan. In the event a
Participant or Beneficiary is located subsequent to his benefit being
forfeited, such benefit shall be restored; provided, however, if all
or a portion of such amount has been lost by reason of escheat under
state law, the Participant or Beneficiary shall cease to be entitled
to the portion so lost.
6.04 FORM OF DISTRIBUTION TO BENEFICIARY
A. Value of Individual Account Does Not Exceed $3,500 - If the value of
the Participant's Individual Account derived from Employee and
Employer Contributions does not exceed $3,500, the Plan Administrator
shall direct the Trustee (or Custodian, if applicable) to make a
distribution to the Beneficiary in a single lump sum in lieu of all
other forms of distribution from the Plan.
B. Value of Individual Account Exceeds $3,500 - If the value of a Par-
ticipant's Individual Account derived from Employee and Employer
Contributions exceeds $3,500 the preretirement survivor annuity
requirements of Section 6.05 shall apply unless waived in accordance
with that Section or unless the safe harbor rules of Section 6.05(F)
apply.
C. Other Forms of Distribution to Beneficiary - If the value of a Par-
ticipant's Individual Account exceeds $3,500 and the Participant has
properly waived the preretirement survivor annuity, as described in
Section 6.05 (if applicable), the Beneficiary may, subject to the
requirements of Section 6.06, request in writing that the
Participant's Individual Account be paid to him as follows: (1) in a
lump sum; or (2) in installment payments over a period not to exceed
the life expectancy of such Beneficiary.
6.05 JOINT AND SURVIVOR ANNUITY REQUIREMENTS
A. The provisions of this Section shall apply to any Participant who is
credited with at least one Hour of Eligibility Service with the
Employer on or after August 23, 1984, and such other participants as
provided in Section 6.05(G).
<PAGE>
B. Qualified Joint and Survivor Annuity - Unless an optional form of
benefit is selected pursuant to a qualified election within the 90-
day period ending on the annuity starting date, a married Partici-
pant's Vested account balance will be paid in the form of a qualified
joint and survivor annuity and an unmarried Participant's Vested
<PAGE>
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.
C. Qualified Preretirement Survivor Annuity - Unless an option 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.
D. Definitions
1. Election Period - The period which begins on the first day of the
Plan Year in which the Participant attains age 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 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.
Pre-age 35 waiver - A Participant who will not yet attain age 35
as of the end of any current Plan Year may make special qualified
election to waive the qualified preretirement survivor annuity for
the period beginning on the date of such election and ending on
the first day of the Plan Year in which the Participant will
attain age 35. Such election shall not be valid unless the
Participant receives a written explanation of the qualified prere-
tirement survivor annuity in such terms as are comparable to the
explanation required under Section 6.05(E)(1). Qualified prere-
tirement survivor annuity coverage will be automatically
reinstated as of the first day of the Plan Year in which the
Participant attains age 35. Any new waiver on or after such date
shall be subject to the full requirements of this Section 6.05.
2. Earliest Retirement Age - The earliest date on which, under the
Plan, the Participant could elect to receive retirement benefits.
3. 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 prere-
tirement 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
<PAGE>
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse expressly permits
designations by the Participant without any further spousal
consent); (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 6.05(E) below.
4. 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 50% and not more than 100% of
the amount of the annuity which is payable during the joint lives
of the Participant and the spouse and which is the amount of
beneficiary which can be purchased with the Participant's vested
account balance. The percentage of the survivor annuity under the
Plan shall be 50% (unless a different percentage is elected by the
Employer in the Adoption Agreement).
5. 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
<PAGE>
414(p) of the Code.
6. Annuity Starting Date - The first day of the first period for
which an amount is paid as an annuity or any other form.
7. 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 Section 6.05 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.
E. Notice Requirements
1. In the case of a qualified joint and survivor annuity, the Plan
Administrator shall no less than 30 days and not more than 90 days
prior to the annuity starting date provide each Participant a
written explanation of: (a) the terms and conditions of a
qualified joint and survivor annuity; (b) the Participant's right
to make and the effect of an election to waive the qualified joint
and survivor annuity form of benefit; (c) the rights of a Partici-
pant's spouse; and (d) the right to make, and the effect of, a
revocation of a previous election to waive the qualified joint and
survivor annuity.
2. In the case of a qualified preretirement annuity as described in
Section 6.05(C), 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
6.05(E)(1) applicable to a qualified joint and survivor annuity.
<PAGE>
The applicable period for a Participant is whichever of the
following periods ends last: (a) the period beginning with the
first day of the Plan Year in which the Participant attains age 32
and ending with the close of the Plan Year preceding the Plan Year
in which the Participant attains age 35; (b) a reasonable period
ending after the individual becomes a Participant; (c) a
reasonable period ending after Section 6.05(E)(3) ceases to apply
to the Participant; (d) a reasonable period ending after this
Section 6.05 first applies to the Participant. Notwithstanding the
foregoing, notice must be provided within a reasonable period
ending
<PAGE>
after separation from service in the case of a Participant who
separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (b), (c)
and (d) is the end of the two-year period beginning one year prior
to the date the applicable event occurs, and ending one year after
that date. In the case of a Participant who separates from service
before the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year prior to
separation and ending one year after separation. If such a
Participant thereafter returns to employment with the Employer,
the applicable period for such Participant shall be redetermined.
3. Notwithstanding the other requirements of this Section 6.05(E),
the respective notices prescribed by this Section 6.05(E), need
not be given to a Participant if (a) the Plan "fully subsidizes"
the costs of a qualified joint and survivor annuity or qualified
preretirement survivor annuity, and (b) 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 6.05(E)(3), 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 Participants failure to
elect another benefit.
F. Safe Harbor Rules
1. If the Employer so indicates in the Adoption Agreement, this
Section 6.05(F) shall apply to a Participant in a profit sharing
plan, and shall always apply to any distribution, made on or after
the first day of the first Plan Year beginning after December 31,
1988, from or under a separate account attributable solely to
accumulated deductible employee contributions, as defined in
Section 72(o)(5)(B) of the Code, and maintained on behalf of a
Participant in a money purchase pension plan, (including a target
benefit plan) if the following conditions are satisfied:
a. the Participant does not or cannot elect payments in the form
of a life annuity; and
b. on the death of a participant, the Participant's Vested
account balance will be paid to the Participant's surviving
spouse, but if there is no surviving spouse, or if the sur-
<PAGE>
viving 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 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 6.05(F) shall not be operative with respect to a
Participant in a profit sharing plan if the plan is a direct
or indirect transferee of a defined benefit plan, money
purchase plan, a target benefit plan, stock bonus, or profit
sharing plan which is subject to the survivor annuity
requirements of Section 401(a)(11) and Section 417 of the
code. If this Section 6.05(F) is operative, then the
provisions of this Section 6.05 other than Section 6.05(G)
shall be inoperative.
2. The Participant may waive the spousal death benefit described in
this Section 6.05(F) at any time provided that no such waiver
shall be effective unless it satisfies the conditions of Section
6.05(D)(3) (other than the notification requirement referred to
therein) that would apply to the Participant's waiver of the
qualified preretirement survivor annuity.
3. For purposes of this Section 6.05(F), 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 6.05(D)(7).
G. Transitional Rules
1. Any living Participant not receiving benefits on August 23, 1984,
who would otherwise not receive the benefits prescribed by the
previous subsections of this Section 6.05 must be given the
opportunity to elect to have the prior subsections of this Section
apply if such Participant is credited with at least one 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 10 Years of Vesting Service when he or she separated from
service.
<PAGE>
2. Any living Participant not receiving benefits on August 23, 1984,
who was credited with at least one 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 6.05(G)(4).
3. The respective opportunities to elect (as described in Section
6.05(G)(1) and (2) 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.
4. Any Participant who has elected pursuant to Section 6.05(G)(2) and
any Participant who does not elect under Section 6.05(G)(1) or who
meets the requirements of Section 6.05(G)(1) except that such
Participant does not have at least 10 Years of Vesting Service
when he or she separates from service, shall have his or her
benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of a
life annuity:
a. 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
<PAGE>
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 6 months
before the Participant attains qualified early retirement
age and ends not more than 90 days before the commencement
of
<PAGE>
benefits. Any election hereunder will be in writing and may
be changed by the Participant at any time.
b. 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 retirement on the day before
his or her death. Any election under this provision will be in
writing and may be changed by the Participant at any time. The
election period begins on the later of (1) the 90th day before
the Participant attains the qualified early retirement age, or
92) the date on which participation begins, and ends on the
date the Participant terminates employment.
c. For purposes of Section 6.05(G)(4):
1. Qualified early retirement age is the latest of:
a. the earliest date, under the Plan, on which the Parti-
cipant may elect to receive retirement benefits,
b. the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age, or
c. 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 6.05(D)(4) of
this Plan.
6.06 DISTRIBUTION REQUIREMENTS
A. General Rules
1. Subject to Section 6.05 Joint and Survivor Annuity Requirements, the
requirements of this Section 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 Section 6.06 apply to calendar years
beginning after December 31, 1984.
2. All distributions required under this Section 6.06 shall be deter-
<PAGE>
mined and made in accordance with the Income Tax Regulations under
Section 401(a)(9), including the minimum distribution incidental
benefit requirement of Section 1.401(a)(9)-2 of the regulations.
B. 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.
C. 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):
1. the life of the Participant,
2. the life of the Participant and a designated Beneficiary,
3. a period certain not extending beyond the life expectancy of the
Participant, or
4. a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated Beneficiary.
D. Determination of Amount to be Distributed Each Year - If the Partici-
pant'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:
1. Individual Account
a. If a Participant's benefit is to be distributed over (1) a per-
iod not extending beyond the life expectancy of the Participant
or the joint life and last survivor expectancy of the Partici-
pant and the Participant's designated Beneficiary or (2) a per-
iod 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 dis-
tribution calendar year, must at least equal the quotient ob-
tained by dividing the Participant's benefit by the applicable
life expectancy.
b. For calendar years beginning before January 1, 1989, if the Par-
ticipant's spouse is not the designated Beneficiary, the method
of distribution selected must assure that at least 50% of the
present value of the amount available for distribution is paid
within the life expectancy of the Participant.
c. For calendar years beginning after December 31, 1988, the amount
to be distributed each year, beginning with distributions for
<PAGE>
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 Par-
ticipant'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 Income Tax Regulations.
Distributions after the death of the Participant shall be
distributed using the applicable life expectancy in Section
6.05(D)(1)(a) above as the relevant divisor without regard to
regulations 1.401(a)(9)-2.
<PAGE>
d. The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Parti-
cipant's required beginning date. The minimum distribution for
other calendar years, including the minimum distribution for the
distribution calendar year in which the Employee's required
beginning date occurs, must be made on or before December 31 of
that distribution calendar year.
2. 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 regulations thereunder.
E. Death Distribution Provisions
1. 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 Partici-
pant's death.
2. Distribution Beginning After Death - If the Participant dies before
distribution of his or her interest begins, distribution of the Par-
ticipant's entire interest shall be completed by December 31 of the
calendar year containing the fifth anniversary of the Participant's
death except to the extent that an election is made to receive
distributions in accordance with (a) or (b) below:
a. 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;
<PAGE>
b. if the designated Beneficiary is the Participant's surviving
spouse, the date distributions are required to begin in
accordance with (a) 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 dies or (2) December 31
of the calendar year in which the Participant would have
attained age 70 1/2.
If the Participant has not made an election pursuant to this
Section 6.05(E)(2) by the time of his or her death, the Par-
ticipant'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 6.05(E)(2), or (2) December 31 of the
calendar year which contains the fifth anniversary of the date
of death of the Participant. If the Participant has no
designated Beneficiary, or if the designated Beneficiary does
not elect a method of distribution, distribution of the
Participant's entire interest must be completed by December 31
of the calendar year containing the fifth anniversary of the
Participant's death.
3. For purposes of Section 6.06(E)(2) above, if the surviving spouse
dies after the Participant, but before payments to such spouse begin,
the provisions of Section 6.06(E)(2), with the exception of paragraph
(b) therein, shall be applied as if the surviving spouse were the
Participant.
4. For purposes of this Section 6.06(E), 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.
5. For purposes of this Section 6.06(E), distribution of a Participant's
interest is considered to begin on the Participant's required
beginning date (or, if Section 6.06(E)(3) above is applicable, the
date distribution is required to begin to the surviving spouse
pursuant to Section 6.06(E)(2) 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.
F. Definitions
1. Applicable Life Expectancy - The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Parti-
<PAGE>
cipant (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.
2. Designated Beneficiary - The individual who is designated as the
Beneficiary under the Plan in accordance with Section 401(a)(9) of
the Code and the regulations thereunder.
3. Distribution Calendar Year - A calendar year for which a minimum
distribution is required. For distributions beginning before the Par-
ticipant'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 6.05(E) above.
4. 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 6.05(E)(2)(b) above) by the
time distributions are required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The
life expectancy of a nonspouse Beneficiary may not be recalculated.
5. Participant's Benefit
a. The account balance as of the last valuation date in the
valuation calendar year (the calendar year immediately preceding
the distribution 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.
<PAGE>
b. Exception for second distribution calendar year. For purposes
<PAGE>
of paragraph (a) 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.
6. Required Beginning Date
a. General Rule - The required beginning date of a Participant is
the first day of April of the calendar year following the
calendar year in which the Participant attains age 70 1/2.
b. Transitional Rules - The required beginning date of a
Participant who attains age 70 1/2 before January 1, 1988, shall
be determined in accordance with (1) or (2) below:
(1) Non 5% Owners - The required beginning date of a
Participant who is not a 5% owner is the first day of April
of the calendar year following the calendar year in which
the later of retirement or attainment of age 70 1/2 occurs.
(2) 5% Owners - The required beginning date of a Participant
who is a 5% owner during any year beginning after December
31, 1979, is the first day of April following the later of:
(a) the calendar year in which the Participant attains age
70 1/2, or
(b) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a
5% owner, or the calendar year in which the Participant
retires.
The required beginning date of a Participant who is not
a 5% owner who attains age 70 1/2 during 1988 and who
has not retired as of January 1, 1989, is April 1,
1990.
(c) 5% Owner - A Participant is treated as a 5% owner for
purposes of this Section 6.06(F)(6) if such Participant
is a 5% owner as defined in Section 416(i) of the Code
(determined in accordance with Section 416 but without
regard to whether the Plan is top-heavy) at any time
<PAGE>
during the Plan Year ending with or within the calendar
year in which such owner attains age 66 1/2 or any
subsequent Plan Year.
(d) Once distributions have begun to a 5% owner under this
Section 6.06(F)(6) they must continue to be
distributed, even if the Participant ceases to be a 5%
owner in a subsequent year.
G. Transitional Rule
1. Notwithstanding the other requirements of this Section 6.06 and
subject to the requirements of Section 6.05, Joint and Survivor
Annuity Requirements, distribution on behalf of any Employee,
including a 5% owner, may be made in accordance with all of the
following requirements (regardless of when such distribution
commences):
a. The distribution by the Fund is one which would not have
disqualified such Fund under Section 401(a)(9) of the Code as in
effect prior to amendment by the Deficit Reduction Act of 1984.
b. The distribution is in accordance with a method of distribution
designated by the Employee whose interest in the Fund is being
distributed or, if the Employee is deceased, by a Beneficiary of
such Employee.
c. Such designation was in writing, was signed by the Employee or the
Beneficiary, and was made before January 1, 1984.
d. The Employee had accrued a benefit under the Plan as of December
31, 1983.
e. The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and in
the case of any distribution upon the Employee's death, the
Beneficiaries of the Employee listed in order of priority.
2. A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be
made upon the death of the Employee.
3. For any distribution which commences before January 1, 1984, but con-
tinues after December 31, 1983, the Employee, or the Beneficiary, to
<PAGE>
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 Sections 6.06(G)(1)(a)
and (e).
4. If a designation is revoked, any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code and the regulations
thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Plan must distribute by the
end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would
have been required to have been distributed to satisfy Section
401(a)(9) of the Code and the regulations thereunder, but for the
Section 242 (b)(2) election. For calendar years beginning after
December 31, 1988, such distributions must meet the minimum
distribution incidental benefit requirements in Section 1.401(a)(9)-2
of the Income Tax Regulations. Any changes in the designation will be
considered to be a revocation of the designation. However, the mere
substitution or addition of another Beneficiary (one not named in the
designation) under the designation will not be considered to be a
revocation of the designation, so long as such substitution or
addition does not alter the period over which distributions are to be
made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount
is transferred or rolled over from one plan to another plan, the
rules in Q&A J-2 and Q&A J-3 shall apply.
6.07 ANNUITY CONTRACTS
Any annuity contract distributed under the Plan (if permitted or required
by this Section 6) must be nontransferable. The terms of any annuity
contract purchased and distributed by the Plan to a Participant or spouse
shall comply with the requirements of the Plan.
<PAGE>
6.08 LOANS TO PARTICIPANTS
If the Adoption Agreement so indicates, a Participant may receive a loan
from the Fund, subject to the following rules:
A. Loans shall be made available to all Participants on a reasonably
equivalent basis.
B. Loans shall not be made available to Highly Compensated Employees (as
defined in Section 414(q) of the Code) in an amount greater than the
amount made available to other Employees.
<PAGE>
C. Loans must be adequately secured and bear a reasonable interest rate.
D. No Participant loan shall exceed the present value of the Vested por-
tion of a Participant's Individual Account.
E. A Participant must obtain the consent of his or her spouse, if any, to
the use of the Individual Account as security for the loan. Spousal
consent shall be obtained no earlier than the beginning of the 90 day
period that ends on the date on which the loan is to be so secured. The
consent must be in writing, must acknowledge the effect of the loan,
and must be witnessed by a plan representative or notary public. Such
consent shall thereafter be binding with respect to the consenting
spouse or any subsequent spouse with respect to that loan. A new
consent shall be required if the account balance is used for
renegotiation, extension, renewal, or other revision of the loan.
F. In the event of default, foreclosure on the note and attachment of se-
curity will not occur until a distributable event occurs in the Plan.
G. No loans will be made to any shareholder-employee or Owner-Employee.
For purposes of this requirement, a shareholder-employee means an
employee or officer of an electing small business (Subchapter S)
corporation who owns (or is considered as owning within the meaning of
Section 318(a)(1) of the Code), on any day during the taxable year of
such corporation, more than 5% of the outstanding stock of the
corporation.
If a valid spousal consent has been obtained in accordance with
6.08(E), then, notwithstanding any other provisions of this Plan, the
portion of the Participant's Vested Individual Account used as a
security interest held by the Plan by reason of a loan outstanding to
the Participant shall be taken into account for purposes of determining
the amount of the account balance payable at the time of death or
distribution, but only if the reduction is used as repayment of the
loan. If less than 100% of the Participant's Vested Individual Account
(determined without regard to the preceding sentence) is payable to the
surviving spouse, then the account balance shall be adjusted by first
reducing the Vested Individual Account by the amount of the security
used as repayment of the loan, and then determining the benefit payable
to the surviving spouse.
No loan to any Participant can be made to the extent that such loan
when added to the outstanding balance of all other loans to the
Participant would exceed the lesser of (a) $50,000 reduced by the
excess (if any) of the highest outstanding balance of loans during the
one year
<PAGE>
period ending on the day before the loan is made, over the outstanding
balance of loans from the Plan on the date the loan is made, or (b) 50%
of the present value of the nonforfeitable Individual Account of the
Participant or, if greater, the total Individual Account up to $10,000.
For the purpose of the above limitation, all loans from all plans of
the Employer and other members of a group of employers described in
Sections 414(b), 414(c), and 414(m) of the Code are aggregated.
Furthermore, any loan shall by its terms require that repayment
(principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond 5 years
from the date of the loan, unless such loan is used to acquire a
dwelling unit which within a reasonable time (determined at the time
the loan is made) will be used as the principal residence of the
Participant. An assignment or pledge of any portion of the
Participant's interest in the Plan and a loan, pledge, or assignment
with respect to any insurance contract purchased under the Plan, will
be treated as a loan under this paragraph.
The Plan Administrator shall administer the loan program in accordance
with a written document. Such written document shall include, at a
minimum, the following: (i) the identity of the person or positions
authorized to administer the Participant loan program; (ii) the
procedure for applying for loans; (iii) the basis on which loans will
be approved or denied; (iv) limitations (if any) on the types and
amounts of loans offered; (v) the procedure under the program for
determining a reasonable rate of interest; (vi) the types of collateral
which may secure a Participant loan; and (vii) the events constituting
default and the steps that will be taken to preserve Plan assets in the
event of such default.
6.09 DISTRIBUTION IN KIND
The Plan Administrator may cause any distribution under this Plan to be
made either in a form actually held in the Fund, or in cash by converting
assets other than cash into cash, or in any combination of the two
foregoing ways.
6.10 DIRECT ROLLOVERS OF ELIGIBLE ROLLOVER DISTRIBUTIONS
A. Direct Rollover Option - 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.
<PAGE>
B. Definitions
1. 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:
a. any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period
of ten years or more;
b. any distribution to the extent such distribution is required un-
der Section 401(a)(9) of the Code; and
c. the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrea-
lized appreciation with respect to employer securities).
2. 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
<PAGE>
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.
3. Distributee - A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in Section 414(p) of the Code, are distributees with regard
to the interest of the spouse or former spouse.
4. Direct rollover - A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
SECTION SEVEN CLAIMS PROCEDURE
7.01 FILING A CLAIM FOR PLAN DISTRIBUTIONS
<PAGE>
A Participant or Beneficiary who desires to make a claim for the Vested
portion of the Participant's Individual Account shall file a written
request with the Plan Administrator on a form to be furnished to him by
the Plan Administrator for such purpose. The request shall set forth the
basis of the claim. The Plan Administrator is authorized to conduct such
examinations as may be necessary to facilitate the payment of any benefits
to which the Participant or Beneficiary may be entitled under the terms of
the Plan.
7.02 DENIAL OF CLAIM
Whenever a claim for a Plan distribution by any Participant or Beneficiary
has been wholly or partially denied, the Plan Administrator must furnish
such Participant or Beneficiary written notice of the denial within 60
days of the date the original claim was filed. This notice shall set forth
the specific reasons for the denial, specific reference to pertinent Plan
provisions on which the denial is based, a description of any additional
information or material needed to perfect the claim, an explanation of why
such additional information or material is necessary and an explanation of
the procedures for appeal.
7.03 REMEDIES AVAILABLE
The Participant or Beneficiary shall have 60 days from receipt of the
denial notice in which to make written application for review by the Plan
Administrator. The Participant or Beneficiary may request that the review
be in the nature of a hearing. The Participant or Beneficiary shall have
the right to representation, to review pertinent documents and to submit
comments in writing. The Plan Administrator shall issue a decision on such
review within 60 days after receipt of an application for review as
provided for in Section 7.02. Upon a decision unfavorable to the
Participant or Beneficiary, such Participant or Beneficiary shall be
entitled to bring such actions in law or equity as may be necessary or
appropriate to protect or clarify his right to benefits under this Plan.
SECTION EIGHT PLAN ADMINISTRATOR
8.01 EMPLOYER IS PLAN ADMINISTRATOR
A. The Employer shall be the Plan Administrator unless the managing body
of the Employer designates a person or persons other than the Employer
as the Plan Administrator and so notifies the Prototype Sponsor and the
Trustee (or Custodian, if applicable). The Employer shall also be the
Plan Administrator if the person or persons so designated cease to be
the Plan Administrator.
B. If the managing body of the Employer designates a person or persons
other than the Employer as Plan Administrator, such person or persons
<PAGE>
shall serve at the pleasure of the Employer and shall serve pursuant to
such procedures as such managing body may provide. Each such person
shall be bonded as may be required by law.
8.02 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR
A. The Plan Administrator may, by appointment, allocate the duties of the
Plan Administrator among several individuals or entities. Such
appointments shall not be effective until the party designated accepts
such appointment in writing.
B. The Plan Administrator shall have the authority to control and manage
the operation and administration of the Plan. The Plan Administrator
shall administer the Plan for the exclusive benefit of the Participants
and their Beneficiaries in accordance with the specific terms of the
Plan.
C. The Plan Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the follow-
ing:
1. To determine all questions of interpretation or policy in a manner
consistent with the Plan's documents and the Plan Administrator's
construction or determination in good faith shall be conclusive and
binding on all persons except as otherwise provided herein or by
law. Any interpretation or construction shall be done in a
nondiscriminatory manner and shall be consistent with the intent
that the Plan shall continue to be deemed a qualified plan under the
terms of Section 401(a) of the Code, as amended from time-to-time,
and shall comply with the terms of ERISA, as amended from
time-to-time;
2. To determine all questions relating to the eligibility of Employees
to become or remain Participants hereunder;
3. To compute the amounts necessary or desirable to be contributed to
the Plan;
4. To compute the amount and kind of benefits to which a Participant or
Beneficiary shall be entitled under the Plan and to direct the
Trustee (or Custodian, if applicable) with respect to all
disbursements under the Plan, and, when requested by the Trustee (or
Custodian), to furnish the Trustee (or Custodian) with instructions,
in writing, on matters pertaining to the Plan and the Trustee (or
Custodian) may rely and act thereon;
<PAGE>
5. To maintain all records necessary for the administration of the
Plan;
6. To be responsible for preparing and filing such disclosure and tax
forms as may be required from time-to-time by the Secretary of Labor
or the Secretary of the Treasury; and
<PAGE>
7. To furnish each Employee, Participant or Beneficiary such notices,
information and reports under such circumstances as may be required
by law.
D. The Plan Administrator shall have all of the powers necessary or
appropriate to accomplish his duties under the Plan, including, but not
limited to, the following:
1. To appoint and retain such persons as may be necessary to carry out
the functions of the Plan Administrator;
2. To appoint and retain counsel, specialists or other persons as the
Plan Administrator deems necessary or advisable in the administra-
tion of the Plan;
3. To resolve all questions of administration of the Plan;
4. To establish such uniform and nondiscriminatory rules which it deems
necessary to carry out the terms of the Plan;
5. To make any adjustments in a uniform and nondiscriminatory manner
which it deems necessary to correct any arithmetical or accounting
errors which may have been made for any Plan Year; and
6. To correct any defect, supply any omission or reconcile any
inconsistency in such manner and to such extent as shall be deemed
necessary or advisable to carry out the purpose of the Plan.
8.03 EXPENSES AND COMPENSATION
All reasonable expenses of administration including, but not limited to,
those involved in retaining necessary professional assistance may be paid
from the assets of the Fund. Alternatively, the Employer may, in its
discretion, pay such expenses. The Employer shall furnish the Plan
Administrator with such clerical and other assistance as the Plan
Administrator may need in the performance of his duties.
8.04 INFORMATION FROM EMPLOYER
To enable the Plan Administrator to perform his duties, the Employer shall
<PAGE>
supply full and timely information to the Plan Administrator (or his
designated agents) on all matters relating to the Compensation of all
Participants, their regular employment, retirement, death, Disability or
Termination of Employment, and such other pertinent facts as the Plan
Administrator (or his agents) may require. The Plan Administrator shall
advise the Trustee (or Custodian, if applicable) of such of the foregoing
facts as may be pertinent to the Trustee's (or Custodian's) duties under
the Plan. The Plan Administrator (or his agents) is entitled to rely on
such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
SECTION NINE AMENDMENT AND TERMINATION
9.01 RIGHT OF PROTOTYPE SPONSOR TO AMEND THE PLAN
A. The Employer, by adopting the Plan, expressly delegates to the
Prototype Sponsor the power, but no the duty, to amend the Plan
without any further action or consent of the Employer as the Prototype
Sponsor deems necessary for the purpose of adjusting the Plan to
comply with all laws and regulations governing pension or profit
sharing plans. Specifically, it is understood that the amendments may
be made unilaterally by the Prototype Sponsor. However, it shall be
understood that the Prototype Sponsor shall be under no obligation to
amend the Plan documents and the Employer expressly waives any rights
or claims against the Prototype Sponsor for not exercising this power
to amend. For purposes of Prototype Sponsor amendments, the mass sub-
mitter shall be recognized as the agent of the Prototype Sponsor. If
the Prototype Sponsor does not adopt the amendments made by the mass
submitter, it will no longer be identical to or a minor modifier of
the mass submitter plan.
B. An amendment by the Prototype Sponsor shall be accomplished by giving
written notice to the Employer of the amendment to be made. The notice
shall set forth the text of such amendment and the date such amendment
is to be effective. Such amendment shall take effect unless within the
30 day period after such notice is provided, or within such shorter
period as the notice may specify, the Employer gives the Prototype
Sponsor written notice of refusal to consent to the amendment. Such
written notice of refusal shall have the effect of withdrawing the Plan
as a prototype plan and shall cause the Plan to be considered an
individually designed plan. The right of the Prototype Sponsor to cause
the Plan to be amended shall terminate should the Plan cease to conform
as a prototype plan as provided in this or any other section.
9.02 RIGHT OF EMPLOYER TO AMEND THE PLAN
<PAGE>
The Employer may (1) change the choice of options in the Adoption
Agreement, (2) add overriding language in the Adoption Agreement when such
language is necessary to satisfy Section 415 or Section 416 of the Code
because of the required aggregation of multiple plans, and (3) add certain
model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as individually designed. An Employer that amends the Plan for any
other reason, including a waiver of the minimum funding requirement under
Section 412(d) of the Code, will no longer participate in this prototype
plan and will be considered to have an individually designed plan.
An Employer who wishes to amend the Plan to change the options it has
chosen in the Adoption Agreement must complete and deliver a new Adoption
Agreement to the Prototype Sponsor and Trustee (or Custodian, if
applicable). Such amendment shall become effective upon execution by the
Employer and Trustee (or Custodian).
The Employer further reserves the right to replace the Plan in its
entirety by adopting another retirement plan which the Employer designates
as a replacement plan.
9.03 LIMITATION ON POWER TO AMEND
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 Individual Account may be reduced to
the extent permitted under Section 412(c)(8) of the Code. For purposes of
this paragraph, a plan amendment which has the effect of decreasing a Par-
ticipant's Individual Account or eliminating an optional form of benefit
with respect to benefits attributable to service before the amendment
shall be treated as reducing an accrued benefit. Furthermore, if the
vesting schedule of a Plan is amended, in the case of an Employee who is a
Participant as of the later of the date such amendment is adopted or the
date it becomes effective, the Vested percentage (determined as of such
date) of such Employee's Individual Account derived from Employer
Contributions will not be less than the percentage computed under the Plan
without regard to such amendment.
<PAGE>
9.04 AMENDMENT OF VESTING SCHEDULE
If the Plan's vesting schedule is amended, or the Plan is amended in any
way that directly or indirectly affects the computation of the Partici-
pant's Vested percentage, or if the Plan is deemed amended by an automatic
change to or from a top-heavy vesting schedule, each Participant with at
least 3 Years of Vesting Service with the Employer may elect, within the
time set forth below, to have the Vested percentage computed under the
Plan without regard to such amendment.
<PAGE>
For Participants who do not have at least 1 Hour of Service in any Plan
Year beginning after December 31, 1988, the preceding sentence shall be
applied by substituting "5 Years of Vesting Service" for "3 Years of
Vesting Service" where such language appears.
The Period during which the election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end the later
of:
A. 60 days after the amendment is adopted;
B. 60 days after the amendment becomes effective; or
C. 60 days after the Participant is issued written notice of the amendment
by the Employer or Plan Administrator.
9.05 PERMANENCY
The Employer expects to continue this Plan and make the necessary
contributions thereto indefinitely, but such continuance and payment is
not assumed as a contractual obligation. Neither the Adoption Agreement
nor the Plan nor any amendment or modification thereof nor the making of
contributions hereunder shall be construed as giving any Participant or
any person whomsoever any legal or equitable right against the Employer,
the Trustee (or Custodian, if applicable) the Plan Administrator or the
Prototype Sponsor except as specifically provided herein, or as provided
by law.
9.06 METHOD AND PROCEDURE FOR TERMINATION
The Plan may be terminated by the Employer at any time by appropriate
action of its managing body. Such termination shall be effective on the
date specified by the Employer. The Plan shall terminate if the Employer
shall be dissolved, terminated, or declared bankrupt. Written notice of
the termination and effective date thereof shall be given to the Trustee
(or Custodian), Plan Administrator, Prototype Sponsor, Participants and
Beneficiaries of deceased Participants, and the required filings (such as
the Form 5500 series and others) must be made with the Internal Revenue
Service and any other regulatory body as required by current laws and
regulations. Until all of the assets have been distributed from the Fund,
the Employer must keep the Plan in compliance with current laws and
regulations by (a) making appropriate amendments to the Plan and (b)
taking such other measures as may be required.
9.07 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER
Notwithstanding the preceding Section 9.06, a successor of the Employer
may continue the Plan and be substituted in the place of the present
Employer. The successor and the present Employer (or, if deceased, the
executor of the estate of a deceased Self-Employed Individual who was the
<PAGE>
Employer) must execute a written instrument authorizing such substitution
and the successor must complete and sign a new plan document.
9.08 FAILURE OF PLAN QUALIFICATION
If the Plan fails to retain its qualified status, the Plan will no longer
be considered to be part of a prototype plan, and such Employer can no
longer participate under this prototype. In such event, the Plan will be
considered an individually designed plan.
SECTION TEN MISCELLANEOUS
10.01 STATE COMMUNITY PROPERTY LAWS
The terms and conditions of this Plan shall be applicable without regard
to the community property laws of any state.
10.02 HEADINGS
The headings of the Plan have been inserted for convenience of reference
only and are to be ignored in any construction of the provisions hereof.
10.03 GENDER AND NUMBER
Whenever any words are used herein in the masculine gender they shall be
construed as though they were also used in the feminine gender in all
cases where they would so apply, and whenever any words are used herein in
the singular form they shall be construed as though they were also used in
the plural form in all cases where they would so apply.
10.04 PLAN MERGER OR CONSOLIDATION
In the case of any merger or consolidation of the Plan with, or transfer
of assets or liabilities of such Plan to, any other plan, each Participant
shall be entitled to receive benefits immediately after the merger,
consolidation, or transfer (if the Plan had then terminated) which are
equal to or greater than the benefits he would have been entitled to
receive immediately before the merger, consolidation, or transfer (if the
Plan had then terminated). The Trustee (or Custodian) has the authority to
enter into merger agreements or agreements to directly transfer the assets
of this Plan but only if such agreements are made with trustees or
custodians of other retirement plans described in Section 401(a) of the
Code.
10.05 STANDARD OF FIDUCIARY CONDUCT
The Employer, Plan Administrator, Trustee and any other fiduciary under
this Plan shall discharge their duties with respect to this Plan solely in
the interests of Participants and their Beneficiaries and with the care,
skill, prudence and diligence under the circumstances then prevailing that
a prudent man acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like
<PAGE>
aims. No fiduciary shall cause the Plan to engage in any transaction
known as a "prohibited transaction" under ERISA.
10.06 GENERAL UNDERTAKING OF ALL PARTIES
All parties to this Plan and all persons claiming any interest whatsoever
hereunder agree to perform any and all acts and execute any and all
documents and papers which may be necessary or desirable for the carrying
out of this Plan and any of its provisions.
<PAGE>
10.07 AGREEMENT BINDS HEIRS, ETC.
This Plan shall be binding upon the heirs, executors, administrators,
successors and assigns, as those terms shall apply to any and all parties
hereto, present and future.
10.08 DETERMINATION OF TOP-HEAVY STATUS
A. For any Plan Year beginning after December 31, 1983, this Plan is a
Top-Heavy Plan if any of the following conditions exist:
1. If the top-heavy ratio for this Plan exceeds 60% and this Plan is
not part of any required aggregation group or permissive aggregation
group of plans.
2. If this Plan is part of a required aggregation group of plans but
not part of a permissive aggregation group and the top-heavy ratio
for the group of plans exceeds 60%.
3. If this Plan is a part of a required aggregation group and part of a
permissive aggregation group of plans and the top-heavy ratio for
the permissive aggregation group exceeds 60%.
For purposes of this Section 10.08, the following terms shall have
the meanings indicated below:
B. Key Employee - Any Employee or former Employee (and the beneficiaries
of such Employee) who at any time during the determination period was
an officer of the Employer if such individual's annual compensation
exceeds 50% of the dollar limitation under Section 415(b)(1)(A) of the
Code, an owner (or considered an owner under Section 318 of the Code)
of one of the 10 largest interests in the Employer if such individual's
compensation exceeds 100% of the dollar limitation under Section 415(c)
(1)(A) of the Code, a 5% owner of the Employer, or a 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
<PAGE>
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 4 preceding Plan Years.
The determination of who is a Key Employee will be made in accordance
with Section 416(i)(1) of the Code and the regulations thereunder.
C. Top-heavy ratio
1. If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the Employer
has not maintained any defined benefit plan which during the 5-year
period ending on the determination date(s) has or has had accrued
benefits, the top-heavy ratio for this Plan alone or for the
required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of the account balances
of all Key Employees as of the determination date(s) (including any
part of any account balance distributed in the 5-year period ending
on the determination date(s)), and the denominator of which is the
sum of all account balances (including any part of any account
balance distributed in the 5-year period ending on the determination
date(s)), both computed in accordance with Section 416 of the Code
and the regulations thereunder. Both the numerator and the
denominator of the top-heavy ratio are increased to reflect any
contribution not actually made as of the determination date, but
which is required to be taken into account on that date under
Section 416 of the Code and the regulations thereunder.
2. If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the Employer
maintains or has maintained one or more defined benefit plans which
during the 5-year period ending on the determination date(s) has or
has had any accrued benefits, the top-heavy ratio for any required
or permissive aggregation group as appropriate is a fraction, the
numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all Key Employees,
determined in accordance with (1) above, and the present value of
accrued benefits under the aggregated defined benefit plan or plans
for all Key Employees as of the determination date(s), and the
denominator of which is the sum of the account balances under the
aggregated defined contribution plan or plans for all Participants,
determined in accordance with (1) above, and the present value of
accrued benefits under the defined benefit plan or plans for all
Participants as of the determination date(s), all determined in
accordance with Section 416 of the Code and the regulations there-
<PAGE>
under. The accrued benefits under a defined benefit plan in both the
numerator and denominator of the top-heavy ratio are increased for
any distribution of an accrued benefit made in the 5-year period
ending on the determination date.
3. For purposes of (1) and (2) above, the value of account balances and
the present value of accrued benefits will be determined as of the
most recent valuation date that falls within or ends with the 12-
month period ending on the determination date, except as provided in
Section 416 of the Code and the regulations thereunder for the first
and second plan years of a defined benefit plan. The account
balances and accrued benefits of a Participant (a) who is not a Key
Employee but who was a Key Employee in a Prior Year, or (b) who has
not been credited with at least one Hour of Service with any
employer maintaining the plan at any time during the 5-year period
ending on the determination date will be disregarded. The
calculation of the top-heavy ratio, and the extent to which
distributions, rollovers, and transfers are taken into account will
be made in accordance with Section 416 of the Code and the
regulations thereunder. Deductible employee contributions will not
be taken into account for purposes of computing the top-heavy ratio.
When aggregating plans the value of account balances and accrued
benefits will be calculated with reference to the determination
dates that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee shall
be determined under (a) the method, if any, that uniformly applies
for accrual purposes under all defined benefit plans maintained by
the Employer, or (b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted
under the fractional rule of Section 411(b)(1)(C) of the Code.
4. Permissive aggregation group: The required aggregation group of
plans plus any other plan or plans of the Employer which, when
considered as a group with the required aggregation group, would
continue to satisfy the requirements of Sections 401(a)(4) and 410
of the Code.
<PAGE>
5. Required aggregation group: (a) Each qualified plan of the Employer
in which at least one Key Employee participates or participated at
any time during the determination period (regardless of whether the
Plan has terminated), and (b) any other qualified plan of the
Employer which enables a plan described in (a) to meet the
requirements of Sections 401(a)(4) or 410 of the Code.
<PAGE>
6. Determination date: For any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that year.
7. Valuation date: For purposes of calculating the top-heavy ratio,
the valuation date shall be the last day of each Plan Year.
8. Present value: For purposes of establishing the "present value" of
benefits under a defined benefit plan to compute the top-heavy
ratio, any benefit shall be discounted only for mortality and
interest based on the interest rate and mortality table specified
for this purpose in the defined benefit plan.
10.09 SPECIAL LIMITATIONS FOR OWNER-EMPLOYEES
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 those trades or businesses.
If the Plan provides contributions or benefits for one or more Owner-
Employees who control one or more other trades or businesses, the
employees of 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.
If an individual is covered as an Owner-Employee under the plans of two or
more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits of the
employees under the plan of the trade or business which is controlled must
be as favorable as those provided for him under the most favorable plan of
the trade or business which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or two or
more Owner-Employees, will be considered to control a trade or business if
the Owner-Employee, or two or more Owner-Employees, together:
A. own the entire interest in a unincorporated trade or business, or
B. in the case of a partnership, own more than 50% of either the capital
interest or the profit interest in the partnership. For purposes of
the preceding sentence, an Owner-Employee, or two or more Owner-Employ-
ees, shall be treated as owning any interest in a partnership which is
<PAGE>
owned, directly or indirectly, by a partnership which such Owner-
Employee, or such two or more Owner-Employees, are considered to
control within the meaning of the preceding sentence.
10.10 INALIENABILITY OF BENEFITS
No benefit or interest available hereunder will be subject to assignment
or alienation, either voluntarily or involuntarily. The preceding sentence
shall also apply to the creation, assignment, or recognition of a right to
any benefit payable with respect to a Participant pursuant to a domestic
relations order, unless such order is determined to be a qualified
domestic relations order, as defined in Section 414(p) of the Code.
Generally, a domestic relations order cannot be a qualified domestic
relations order until January 1, 1985. However, in the case of a domestic
relations order entered before such date, the Plan Administrator:
(1) shall treat such order as a qualified domestic relations order if
such Plan Administrator is paying benefits pursuant to such order on
such date, and
(2) may treat any other such order entered before such date as a
qualified domestic relations order even if such order does not meet
the requirements of Section 414(p) of the Code.
#709 (1/94) 1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
National Standardized Money Purchase Pension Plan
ADOPTION AGREEMENT
- ---------------------------------------------------------------------
- ----------
SECTION 1. EMPLOYER INFORMATION
Name of Employer:
- --------------------------------------------------------
Address:
- -----------------------------------------------------------------
City: __________________________ State:________________ Zip:
<PAGE>
- ------------
Telephone _______________ Federal Tax Identification Number _____________
Income Tax Year End
Type of Business (Check only one)
[ ] Sole Proprietorship [ ] Partnership [ ] Corporation [ ] Other
(Specify)____________________________________________________
Nature of Business
(Describe)_____________________________________________
Plan Sequence No. (Enter 001 if this is the first qualified plan
the Employer has ever maintained, enter 002 if it is the second, etc.)
For a plan which covers only the owner of the business, please provide the
following information about the owner:
Social Security No._________________Date Business
Established______________
Date of Birth_______________________Marital
Status________________________
Home
Address______________________________________________________________
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A: [ ] This is the initial adoption of a money purchase pension
plan by the Employer.
The Effective Date of this Plan is , 19 .
NOTE: The effective date is usually the first day of the
Plan Year in which this Adoption Agreement is signed.
Option B: [ ] This is an amendment and restatement of an existing
money purchase pension plan (a Prior Plan).
The Prior Plan was initially effective on ________, 19___. The
Effective Date of this amendment and restatement is ___, 19__.
NOTE: The effective date is usually the first day of the Plan Year
in which this Adoption Agreement is signed.
<PAGE>
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
Part A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan after
completing (enter 0, 1 or 2) Years of Eligibility Service. NOTE: If
more than 1 year is selected, the immediate 100% vesting schedule of
Section 5, Option C will automatically apply. If left blank, the Years
of Eligibility Service required will be deemed to be 0.
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Part B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan after
attaining age (no more than 21).
NOTE: If left blank, it will be deemed there is no age requirement
for eligibility.
Part C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except those checked below:
[ ] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
representatives (the term "Employee representatives" does not
include any organization more than half of whose members are
Employees who are owners, officers or executives of the
Employer) and the Employer under which retirement benefits were
the subject of good faith bargaining unless the agreement
provides that such Employees are to be included in the Plan, and
except those Employees who are non-resident aliens pursuant to
Section 410(b) (3)(C) of the Code and who received no earned
income from the Employer which constitutes income from sources
within the United States.
SECTION 4. EMPLOYER CONTRIBUTION FORMULA Check and Complete either
Option A or B
Option A: [ ] Nonintegrated Formula: For each Plan Year the
Employer will contribute for each qualifying Participant an
amount equal to __% (not to exceed 25%) of the qualifying
Participant's Compensation for the Plan Year.
Option B: [ ] Integrated Formula: For each Plan Year, the Employer
will contribute for each qualifying Participant an amount
equal to the sum of the amounts determined in Step 1 and
Step 2:
Step 1. An amount equal to ___% (the base contribution per-
centage) of the Participant's Compensation for the
<PAGE>
Plan Year up to the integration level, plus
Step 2. An amount equal to ___% (not to exceed the base
contribution percentage by more than the lesser of:
(1) the base contribution percentage, or (2) the
money purchase maximum disparity rate as described
in Section 3.01(b)(3) of the Plan) of such
Participant's Compensation for the Plan Year in
excess of the integration level.
The integration level shall be (Choose one):
Option 1: [ ] The Taxable Wage Base
Option 2: [ ] $________ (a dollar amount less than the Taxable Wage Base)
Option 3: [ ] ______% of the Taxable Wage Base
NOTE: If no box is checked, the integration level shall be the Taxable
Wage Base.
SECTION 5. VESTING Complete Parts A and B
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows (Choose
one):
- ---------------------------------------------------------------------
- ----------
YEARS OF VESTED PERCENTAGE (Complete VESTING SERVICE Option A [ ] Option B [
] Option C [ ] Option D [ ] if Chosen)
- ---------------------------------------------------------------------
- -----------
1 0% 0% 100% ____%
2 0% 20% 100% ____%
3 100% 40% 100% ____% (not less than 20%)
4 100% 60% 100% ____% (not less than 40%)
5 100% 80% 100% ____% (not less than 60%)
6 100% 100% 100% ____% (not less than 80%)
- ---------------------------------------------------------------------
- ----------
NOTE: If left blank, Option C, 100% vesting, will be deemed to be selected.
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age (not to exceed 65).
NOTE: If left blank, the Normal Retirement Age will be deemed to be age
59 1/2.
<PAGE>
SECTION 7. HOURS REQUIRED Complete Parts A and B
Part A. _____ Hours of Service (no more than 1,000) shall be required to
constitute a Year of Vesting Service or a Year of Eligibility
Service.
Part B. _____ Hours of Service (no more than 500) must be exceeded to avoid
a Break in Vesting Service or a Break in Eligibility Service.
NOTE: The number of hours in Part A must be greater than the number
of hours in Part B.
SECTION 8. OTHER OPTIONS Answer "Yes" or "No" to each of the following
questions by checking the appropriate box. If a box is not checked
for a question, the answer will be deemed to be "No."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the Plan
be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will Participants be permitted
to direct the investment of their Individual Accounts pursuant to Sec-
tion 5.14 of the Plan? [ ] Yes [ ] No
SECTION 9. JOINT AND SURVIVOR ANNUITY
The survivor annuity portion of the Joint and Survivor Annuity shall be
a percentage equal to ____% (at least 50% but no more than 100%) of the
amount paid to the Participant prior to his or her death.
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who 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(1)
(2) of the Code) in addition to this Plan (other than a paired
standardized profit sharing plan using Basic Plan Document No. 03) may
not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under
Section 401 of the Code. If the Employer who adopts or maintains
multiple plans wishes to obtain reliance that the Employer's plan(s)
are qualified, application for a determination letter should be made to
the appropriate Key District Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic Plan
Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing
<PAGE>
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding the
completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the corres-
ponding Basic Plan Document.
Signature for Employer___________________________Date
Signed__________
Type
Name_____________________________________________________________
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one option
Option A. [ ] Financial Organization as Trustee or Custodian
Check One: [ ] Custodian, [ ] Trustee without full trust powers, or
[ ] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is checked.
Financial
Organization____________________________________________________
Signature_____________________________________________________________
- -----
Type
Name________________________________________________________________
- --
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Option B. [ ] Individual Trustee(s)
Signature _______________________
Signature_____________________________
Type Name________________________ Type
Name_____________________________
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype
<PAGE>
Sponsor________________________________________________
Address_______________________________________________________________
- ---
Telephone
Number_________________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - More Than One Plan If you maintain or
ever maintained another qualified plan (other than a paired standardized
profit sharing plan using Basic Plan Document No. 03) in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, you must complete this section. You must also complete this
section if you maintain a welfare benefit fund, as defined in Section
419(e) of the Code, or an individual medical account, as defined in Section
415(l)(2) of the Code, under which amounts are treated as annual additions
with respect to any Participant in this Plan.
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a regional
prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (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.)_________________
- ---------------------------------------------------------------------
- ----------
Part B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide
below the language which will satisfy the 1.0 limitation of Section
415(e) of the Code. Such language must preclude Employer discretion.
(Complete)_________________________________________________________
Part C. Compensation will mean all of each Participant's (Choose one):
Option 1: [ ] Section 3121(a) wages
Option 2: [ ] Section 3401(a) wages
Option 3: 415 safe-harbor compensation
<PAGE>
NOTE: If no box is checked, Option 2 will be deemed to be selected.
Part D. The limitation year is the following 12-consecutive month period:
----------------------
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Standardized Profit Sharing Plan
ADOPTION AGREEMENT
- ---------------------------------------------------------------------
- ----------
SECTION 1. EMPLOYER INFORMATION
Name of Employer:
- -------------------------------------------------------
Address_______________________________________________________________
- -----
City: _______________________State:______________________ Zip:
- --------------
Telephone: _________________ Federal Tax Identification
Number_______________
Income Tax Year End __________________________
Type of Business (Check only one) [ ] Sole Proprietorship [ ] Partnership [ ]
Corporation [ ] Other (Specify)_______________
Nature of Business
(Describe)_______________________________________________
Plan Sequence No. __________ (Enter 001 if this is the first qualified plan
the Employer has ever maintained, enter 002 if it is the second, etc.)
For a plan which covers only the owner of the business, please provide the
following information about the owner:
<PAGE>
Social Security No._________________ Date Business Established ____________
Date of Birth________________________ Marital
Status_______________________
Home Address
- ---------------------------------------------------------------
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A: [ ] This is the initial adoption of a profit sharing plan by
the Employer. The Effective Date of this Plan is ________, 19 .
NOTE: The effective date is usually the first day of the Plan
Year in which this Adoption Agreement is signed.
Option B: [ ] This is an amendment and restatement of an existing
profit sharing plan (a Prior Plan). The Prior Plan was initially
effective on _____________. The Effective Date of this amendment
and restatement is ________________. NOTE: The effective date
is usually the first day of the Plan Year in which this Adoption
Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
Part A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan after
completing _______ (enter 0, 1 or 2) Years of Eligibility Service. NOTE:
If more than 1 year is selected, the immediate 100% vesting schedule of
Section 5, Option C will automatically apply. If left blank, the Years of
Eligibility Service required will be deemed to be 0.
Part B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan after
attaining age ____________ (no more than 21). NOTE: If left blank, it
will be deemed there is no age requirement for eligibility.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Part C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except the following (if checked):
[ ] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
representatives (the term "Employee representatives" does not
<PAGE>
include any organization more than half of whose members are
Employees who are owners, officers or executives of the Employer)
and the Employer under which retirement benefits were the subject
of good faith bargaining unless the agreement provides that such
Employees are to be included in the Plan, and except those
Employees who are non-resident aliens pursuant to Section 410(b)
(3)(C) of the Code and who received no earned income from the
Employer which constitutes income from sources within the United
States.
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
Part A. Contribution Formula
For each Plan Year the Employer will contribute an amount to be
determined from year to year.
Part B. Allocation Formula: (Check Option 1 or 2)
Option 1: [ ] Pro Rata Formula. Employer Contributions and Forfeitures
shall be allocated to the Individual Accounts of qualifying
Participants in the ratio that each qualifying Participant's
Compensation for the Plan Year bears to the total Compensation
of all qualifying Participants for the Plan Year.
Option 2: [ ] Integrated Formula: Employer Contributions and
Forfeitures shall be allocated as follows (Start with Step 3 if
this Plan is not a Top-Heavy Plan):
Step 1. Employer Contributions and Forfeitures shall first be
allocated pro rata to qualifying Participants in the
manner described in Section 4, Part B, Option 1. The
percent so allocated shall not exceed 3% of each
qualifying Participant's Compensation.
Step 2. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 1 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that each qualifying Participant's Compensation for the
Plan Year in excess of the integration level bears to all
qualifying Participants' Compensation in excess of the
integration level, but not in excess of 3%.
Step 3. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 2 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that the sum of each qualifying Participant's total
Compensation and Compensation in excess of the
<PAGE>
integration level bears to the sum of all qualifying
Participants' total Compensation and Compensation in
excess of the integration level, but not in excess of the
profit sharing maximum disparity rate as described in
Section 3.01(B)(3) of the Plan.
Step 4. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 3 shall be allocated pro rata
to qualifying Participants in the manner described in
Section 4, Part B, Option 1.
The integration level shall be (Choose one):
Option 1: [ ] The Taxable Wage Base
Option 2: [ ] $______ (a dollar amount less than the Taxable Wage Base)
Option 3: [ ] ______% of the Taxable Wage Base
NOTE: If no box is checked, the integration level shall be the Taxable
Wage Base.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SECTION 5. VESTING
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows
(Choose one):
- ---------------------------------------------------------------------
- -----------
YEARS OF VESTED PERCENTAGE
VESTING SERVICE
Option A [ ] Option B [ ] Option C [ ] Option D [ ] (Complete if Chosen)
- ---------------------------------------------------------------------
- ----------
1 0% 0% 100% ____%
2 0% 20% 100% ____%
3 100% 40% 100% ____% (not less than 20%)
4 100% 60% 100% ____% (not less than 40%)
5 100% 80% 100% ____% (not less than 60%)
6 100% 100% 100% ____% (not less than 80%)
- ---------------------------------------------------------------------
- ---------
NOTE: If left blank, Option C, 100% vesting, will be deemed to be selected.
<PAGE>
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age _____ (not to exceed 65).
NOTE: If left blank, the Normal Retirement Age will be deemed to be age
59 1/2.
SECTION 7. HOURS REQUIRED Complete Parts A and B
Part A. ________ Hours of Service (no more than 1,000) shall be
required to constitute a Year of Vesting Service or a Year of
Eligibility Service.
Part B. ________ Hours of Service (no more than 500) must be exceeded to
avoid a Break in Vesting Service or a Break in Eligibility
Service.
NOTE: The number of hours in Part A must be greater than the
number of hours in Part B.
SECTION 8. OTHER OPTIONS Answer "Yes" or "No" to each of the following
questions by checking the appropriate box. If a box is not
checked for a question, the answer will be deemed to be "No."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the
Plan be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will Participants be permitted
to direct the investment of their Individual Accounts pursuant to
Section 5.14 of the Plan? [ ] Yes [ ] No
C. In-Service Withdrawals: Will Participants be permitted to make
withdrawals during service pursuant to Section 6.01(A)(3) of the
Plan? [ ] Yes [ ] No
NOTE: If the Plan is being adopted to amend and replace a Prior Plan
which permitted in-service withdrawals you must answer "Yes."
Check here if such withdrawals will be permitted only on account of
hardship. [ ]
SECTION 9. JOINT AND SURVIVOR ANNUITY
Part A. Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the Plan
apply (Choose only one Option)?
Option 1: [ ] Yes
Option 2: [ ] No
NOTE: You must select "No" if you are adopting this Plan as an
amendment and restatement of a Prior Plan that was subject to the
joint and survivor annuity requirements.
<PAGE>
Part B. Survivor Annuity Percentage: (Complete only if your answer in
Section 9, Part A is "No.")
The survivor annuity portion of the Joint and Survivor Annuity
shall be a percentage equal to _____ (at least 50% but no more
than 100%) of the amount paid to the Participant prior to his or
her death.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who 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(1)(2) of the Code) in addition to this Plan (other than a paired
standardized profit sharing plan using Basic Plan Document No. 03) may
not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under
Section 401 of the Code. If the Employer who adopts or maintains
multiple plans wishes to obtain reliance that the Employer's plan(s)
are qualified, application for a determination letter should be made
to the appropriate Key District Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
<PAGE>
Signature for Employer_____________________________Date
Signed_______________
Type
Name________________________________________________________________
- ----
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one option
Option A. [ ] Financial Organization as Trustee or Custodian
Check One: [ ] Custodian, [ ] Trustee without full trust powers,
or [ ] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is checked.
Financial Organization
- --------------------------------------------------
Signature_____________________________________________________________
- ----
Type
Name________________________________________________________________
Option B. [ ] Individual Trustee(s)
Signature _____________________________
Signature_________________________
Type Name _____________________________ Type
Name_________________________
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype Sponsor
Address_______________________________________________________________
- ---
Telephone
Number_________________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - More Than One Plan If you maintain or
ever maintained another qualified plan (other than a paired standardized
money purchase pension plan using Basic Plan Document No. 03) in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, you must complete this section. You must also complete this
section if you maintain a welfare benefit fund, as defined in Section
419(e) of the Code, or an individual medical account, as defined in
Section 415(l)(2) of the Code, under which amounts are
<PAGE>
treated as annual additions with respect to any Participant in this Plan.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master or
prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (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.) ________________
------------------------------------------------------------
Part B. If the Participant is or has ever been a participant in a
defined benefit plan maintained by the Employer, the Employer will
provide below the language which will satisfy the 1.0 limitation of
Section 415(e) of the Code. Such language must preclude Employer
discretion. (Complete)____________________________________________
Part C. Compensation will mean all of each Participant's (Choose one):
Option 1: [ ] Section 3121(a) wages
Option 2: [ ] Section 3401(a) wages
Option 3: 415 safe-harbor compensation
NOTE: If no box is checked, Option 2 will be deemed to be selected.
Part D. The limitation year is the following 12-consecutive month period:
---------------------------------------
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Simplified Standardized Money Purchase Pension Plan
ADOPTION AGREEMENT
- ---------------------------------------------------------------------
- --------
EMPLOYER INFORMATION
<PAGE>
Name of
Employer_____________________________Telephone________________________
- --
Business
Address______________________________________________________________
City__________________________State________________________Zip_________
- --------
Federal Tax Identification Number_________________Income Tax Year
End_________
Type of Business (Check only one)
[ ] Sole Proprietorship [ ] Partnership [ ] Corporation [ ] Other
(Specify)__________________________________________
Plan Sequence No._________ Enter 001 if this is the first qualified plan the
Employer has ever maintained, enter 002 if it is the second, etc. For a Plan
which covers only the owner of the business, please provide the following
information about the owner:
Social Security No._________________Date Business
Established_________________
Date of Birth_______________________Marital
Status____________________________
Home
Address_______________________________________________________________
- ----
EFFECTIVE DATES Check and complete Option A or B
Option A. [ ] This is the initial adoption of a money purchase pension plan
by the Employer.
The Effective Date of this Plan is ______________________, 19____.
NOTE: The effective date is usually the first day of the Plan Year
in which this Adoption Agreement is signed.
Option B. [ ] This is an amendment and restatement of an existing
money purchase pension plan (a prior plan) NOTE: The effective
date is usually the first day of the Plan Year in which this
Adoption Agreement is signed.
The Prior Plan was initially effective on _________________, 19_____.
The Effective Date of this amendment and restatement is _____, 19___.
<PAGE>
PLAN PROVISIONS Complete Parts A through E
Part A. Service Requirement: An Employee will be eligible to become a Par-
ticipant in the Plan after completing _____ (enter 0, 1 or 2) Years
of Eligibility Service. NOTE: If left blank, the Years of Eligibil-
ity Service required will be deemed to be 0.
Part B. Age Requirement: An Employee will be eligible to become a Partici-
pant in the Plan after attaining age _____ (no more than 21).
NOTE: If left blank, it will be deemed there is no age requirement
for eligibility.
Part C. 100% Vesting: A Participant shall be fully Vested at all times in
his or her Individual Account.
Part D. Normal Retirement Age: The Normal Retirement Age under the Plan is
age 59 1/2.
Part E. Contribution Formula: For each Plan Year the Employer will
contribute for each qualifying Participant an amount equal to ______%
(not to exceed 25%) of the qualifying Participant's Compensation for
the Plan Year.
#726(12/90) 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I state the
following:
1. I acknowledge that I have relied upon my own advisors regarding the
completion of this Adoption Agreement and the legal and tax implications of
adopting this Plan.
2. I understand that my failure to properly complete this Adoption Agreement
may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any amendments made
to the Plan and will notify me should it discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the corresponding
Basic Plan Document.
Signature for Employer_____________________Date
Signed_________________________
<PAGE>
Type Name______________________________________________________
TRUSTEE OR CUSTODIAN
[ ] Check this box only if a financial organization is named as Trustee and
it has full trust powers.
Trustee or Custodian_______________________________________________
Signature________________________________________________________
Type Name______________________________________________________
PROTOTYPE SPONSOR
Name of Prototype Sponsor_________________________________________
Address____________________________Telephone
Number______________________
ADDITIONAL PLANS
An Employer who has ever maintained or who 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 a paired standardized profit sharing plan using Basic Plan Document
No. 03) may not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under Section
401 of the Code. If the Employer who adopts or maintains multiple plans wishes
to obtain reliance that the Employer's plan(s) are qualified, application for a
determination letter should be made to the appropriate Key District Director of
Internal Revenue. This Adoption agreement may be used only in conjunction with
Basic Plan Document No. 03.
LIMITATION ON ALLOCATIONS More Than One Plan
If you maintain or ever maintained another qualified plan (other than a paired
standardized profit sharing plan using Basic Plan Document No. 03) in which any
Participant in this Plan is (or was) a participant or could become a
participant, you must complete this section. You must also complete this section
if you maintain a welfare benefit fund, as defined in Section 419(e) of the
code, or an individual medical account, as defined in Section 415(l)(2) of the
Code, under which amounts are treated as annual additions with respect to any
Participant in this Plan.
#726(12/90) 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
<PAGE>
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master or prototype
plan:
1. [ ] The provisions of Sections 3.05(B)(1) through 3.05(b)(6) of the
Plan will apply as if the other plan were a master or prototype
plan.
2. [ ] Other method. (Provide the method under which the plans will lim-
it total annual additions to the maximum permissible amount, and
will properly reduce any excess amounts, in a manner that pre-
cludes Employer discretion.)____________________________________
Part B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide below the
language which will satisfy the 1.0 limitation of Section 415(e) of the Code.
Such language must preclude Employer discretion.
Part C. The limitation year is the following 12-consecutive month period:_____
- ---------------------------------------
#726(12/90) 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
PLAN OF DISTRIBUTION
WHEREAS THE ROCKWOOD GROWTH FUND, INC. (the "Fund") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and offers for public sale shares of common
stock; and
WHEREAS the Fund has entered into a Distribution Agreement ("Agreement")
with Investor Service Center, Inc. (the "Distributor") pursuant to which the
Distributor has agreed to serve as the principal distributor for the Fund;
NOW, THEREFORE, the Fund hereby adopts this plan of distribution ("Plan")
with respect to the Fund in accordance with Rule 12b-1 under the 1940 Act.
1. As Distributor for the Fund, the Distributor may spend such amounts
as it deems appropriate on any activities or expenses primarily intended to
result in the sale of the Fund's shares or the servicing and maintenance of
shareholder accounts, including, but not limited to: advertising, direct mail,
and promotional expenses; compensation to the Distributor and its employees;
compensation to and expenses, including overhead and telephone and other
communication expenses, of the Distributor, the Investment Manager, the Fund,
and selected broker/dealers and their affiliates who engage in or support the
distribution of shares or who service shareholder accounts; fulfillment
expenses, including the costs of printing and distributing prospectuses,
statements of additional information, and reports for other than existing
shareholders; the costs of preparing, printing and distributing sales literature
and advertising materials; and internal costs incurred by the Distributor and
allocated by the Distributor to its efforts to distribute shares of the Fund or
service shareholder accounts such as office rent and equipment, employee
salaries, employee bonuses and other overhead expenses.
2. A. The Fund is authorized to pay to the Distributor, as compensation
for the Distributor's distribution and service activities as defined in
paragraph 13 hereof with respect to its shareholders, a fee at the rate of 0.25%
on an annualized basis of its average daily net assets. All or a portion of such
fee may be designated by the Fund's board of directors ("Board") as a fee for
service activities or as a fee for distribution activities. Such fee shall be
calculated and accrued daily and paid monthly or at such other intervals as the
Board shall determine.
B. The Fund may pay fees to the Distributor at a lesser rate than the fees
specified in paragraph 2A of this Plan as mutually agreed to by the Board and
the Distributor.
3. This Plan shall not take effect until it has been approved by:
A. the vote of at least a majority of the outstanding voting securities of
the Fund;
and
B. the vote cast in person at a meeting called for the purpose of voting on
this Plan of a majority of both (i) those directors of the Fund who are not
interested persons of the Fund and have no direct or indirect financial interest
in the operation of this Plan or any agreement related to it (the "Plan
Directors"), and (ii) all of the directors then in office.
4. This Plan shall continue in effect for one year from its execution or
adoption and
<PAGE>
thereafter for so long as such continuance is specifically approved at least
annually in the manner provided for approval of this Plan in paragraph 3B.
5. The Distributor shall provide to the Board and the Board shall
review, at least quarterly, a written report of the amounts expended under this
Plan and the purposes for which such expenditures were made. A reasonable
allocation of overhead and other expenses of the Distributor related to its
distribution activities and service activities, including telephone and other
communication expenses, may be included in the information regarding amounts
expended for such activities.
6. This Plan may not be amended to increase materially the amount of
fees provided for in paragraphs 2A and 2B hereof unless such amendment is
approved by a vote of a majority of the outstanding voting securities of the
Fund, and no material amendment to this Plan shall be made unless approved by
the Board and the Plan Directors in the manner provided for approval of this
Plan in para graph 3B.
7. The amount of the fees payable by the Fund to the Distributor under
paragraphs 2A and 2B hereof is not related directly to expenses incurred by the
Distributor on behalf of the Fund in serving as distributor, and paragraph 2
hereof does not obligate the Fund to reimburse the Distributor for such
expenses. The fees set forth in paragraphs 2A and 2B hereof will be paid by the
Fund to the Distributor unless and until this Plan is terminated or not renewed.
If this Plan is terminated or not renewed, any expenses incurred by the
Distributor on behalf of the Fund in excess of payments of the fees specified in
paragraphs 2A and 2B hereof which the Distributor has received or accrued
through the termination date are the sole responsibility and liability of the
Distributor, and are not obligations of the Fund.
8. Any other agreements related to this Plan shall not take effect
until approved in the manner provided for approval of this Plan in paragraph 3B.
9. The Distributor shall use its best efforts in rendering services to
the Fund hereunder, but in the absence of willful misfeasance, bad faith or
gross negligence in the performance of its duties or reckless disregard of its
obligations and duties hereunder, the Distributor shall not be liable to the
Fund, the Fund or to any shareholder of the Fund for any act or failure to act
by the Distributor or any affiliated person of the Distributor or for any loss
sustained by the Fund, the Fund or the Fund's shareholders.
10. This Plan may be terminated at any time by vote of a majority of the
Plan Directors, or by vote of a majority of the outstanding voting securities of
the Fund.
11. While this Plan is in effect, the selection and nomination of
directors who are not interested persons of the Fund shall be committed to the
discretion of the directors who are not interested persons.
12. The Fund shall preserve copies of this Plan and any other
agreements related to this Plan and all reports made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of this Plan, or
the date of any such agreement or of any such report, as the case may be, the
first two years in an easily accessible place.
13. For purposes of this Plan, "distribution activities" shall mean any
activities in connection with the Distributor's performance of its services
under this Plan or the Agreement that are
<PAGE>
not deemed "service activities." "Service activities" shall mean activities
covered by the definition of "service fee" contained in amendments to Section
26(b) of the National Association of Securities Dealers, Inc.'s Rules of Fair
Practice.
14. As used in this Plan, the terms: "majority of the outstanding voting
securities" and "interested person" shall have the same meaning as those terms
have in the 1940 Act.
IN WITNESS WHEREOF, the Fund has executed this Plan on the day and year
set forth below in the City and State of New York.
DATE: August 16, 1996
ATTEST: THE ROCKWOOD GROWTH FUND,
INC.
_____________________________ By:______________________
<PAGE>
AGREEMENT BETWEEN
INVESTOR SERVICE CENTER, INC.
AND
HANOVER DIRECT ADVERTISING COMPANY, INC.
AGREEMENT made this ______________, 1996 by and between INVESTOR
SERVICE CENTER, INC., a corporation organized under the laws of the State of
Delaware (the "Distributor") and HANOVER DIRECT ADVERTISING COMPANY, INC., a
corporation organized under the laws of the State of Delaware ("HDAC").
WHEREAS, the Distributor and HDAC are affiliates of Rockwood
Advisers, Inc. (the "Investment Manager"), the investment manager
to The Rockwood Growth Fund, Inc. (the "Fund"); and
WHEREAS, pursuant to a Distribution Agreement between the Fund and the
Distributor, the Distributor acts as the Fund's principal agent for the sale of
Fund shares. The Fund has also adopted a plan of distribution (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, HDAC is an advertising agency and desires to provide
the Distributor with marketing services; and
WHEREAS, the Distributor desires to enter into an agreement
with HDAC related to the Plan;
NOW THEREFORE, in accordance with Rule 12b-1 of the 1940 Act, the
Distributor and HDAC hereby enter into this agreement (the "Agreement") on the
following terms and conditions:
1. HDAC will provide services to the Distributor on behalf of the
Fund and the other investment companies.
2. All expenses incurred hereunder shall be deemed expenses
incurred under the Plan.
3. HDAC shall bill the Distributor at standard industry rates,
which includes commissions. HDAC will absorb any of its costs
exceeding such commissions.
4. This Agreement shall not take effect until it has been
<PAGE>
approved by the vote of a majority of both (i) those directors of the Fund who
are not "interested persons" of the Fund (as defined in the 1940 Act) and have
no direct or indirect financial interest in the operation of this Agreement or
the Plan or any other agreement related to it (the "12b-1 Directors"), and (ii)
all of the directors then in office, cast in person at a meeting (or meetings)
called for the purpose of voting on this Agreement and such related Agreements.
5. This Agreement shall continue in effect for one year from its execution or
adoption and thereafter for so long as such continuance is specifically approved
at least annually in the manner provided for approval of the Plan.
6. HDAC shall provide to the Board of Directors of the Fund and the directors
shall review, at least quarterly, a written report of all expenditures made
pursuant to this Agreement, and the purposes for which such expenditures were
made.
7. HDAC shall use its best efforts in rendering services to the Distributor and
the Fund hereunder, but in the absence of willful misfeasance, bad faith, or
gross negligence in the performance of its duties or reckless disregard of its
obligations and duties hereunder, HDAC shall not be liable to the Distributor or
the Fund or to any shareholder of the Fund for any act or failure to act by HDAC
or any affiliated person of HDAC or for any loss sustained by the Fund or its
shareholders.
8. Nothing contained in this Agreement shall prevent HDAC or any affiliated
person of HDAC from performing services similar to those to be performed
hereunder for any other person, firm, corporation or for its or their own
accounts or for the accounts of others.
9. This Agreement may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding voting
securities of the Fund. This Agreement shall automatically terminate in the
event of its assignment, as defined in the 1940 Act.
10. This Agreement may not be modified in any manner which would materially
increase the amount of money to be spent pursuant to the Plan and no material
amendment to this Agreement shall be made unless approved in the manner provided
for approval and annual
<PAGE>
renewal above.
11. The Fund shall preserve copies of this Agreement and all reports made
pursuant to paragraph 6 hereof, for a period of not less than six years from the
date of this Agreement, the first two years in an easily accessible place.
12. This Agreement shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the 1940 Act. To the extent 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.
IN WITNESS WHEREOF, the Distributor and HDAC have executed this
Agreement on the day and year set forth above in the City and State of New York.
INVESTOR SERVICE CENTER, INC.
By: ________________________________
HANOVER DIRECT ADVERTISING COMPANY, INC.
By: ________________________________
<PAGE>
COMPUTATION OF PERFORMANCE QUOTATIONS
AVERAGE ANNUAL TOTAL RETURN
Average annual total return is computed by finding the average annual
compounded rates of return over the periods indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period.
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and other distributions are reinvested
at net asset value on the appropriate reinvestment dates as described in the
Prospectus, and includes all recurring fees, such as investment advisory and
management fees, charged to all shareholder accounts.
CUMULATIVE TOTAL RETURN
Cumulative total return is calculated by finding the cumulative
compounded rate of return over the period indicated in the advertisement that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
CTR=( ERV-P )100
P
CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a hypothetical $1,000
payment made at the beginning of such period
P = initial payment of $1,000
This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and other distributions are reinvested
at net asset value on the appropriate reinvestment dates as described in the
Prospectus, and includes all recurring fees, such as
<PAGE>
investment advisory and management fees, charged to all shareholder accounts.
The cumulative return for the Fund for the periods ending October 31,
1995 and beginning at the inception of the Fund (April 30, 1986), and for the
five year and one year periods is 160.37%, 108.82%, and 36.73%, respectively.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED OCTOBER 31, 1995
Since inception 8.13%
Five Years 14.59%
One Year 12.76%
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from Semi-
Annual Report and is qualified in its entirety by reference to such finanical
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Oct-31-1996
<PERIOD-START> Nov-1-1995
<PERIOD-END> Apr-30-1996
<INVESTMENTS-AT-COST> 705,551
<INVESTMENTS-AT-VALUE> 1,176,533
<RECEIVABLES> 439
<ASSETS-OTHER> 52,366
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,229,338
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,210
<TOTAL-LIABILITIES> 2,210
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 678,053
<SHARES-COMMON-STOCK> 42,711
<SHARES-COMMON-PRIOR> 41,308
<ACCUMULATED-NII-CURRENT> (58,989)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 132,966
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 475,098
<NET-ASSETS> 1,227,128
<DIVIDEND-INCOME> 930
<INTEREST-INCOME> 714
<OTHER-INCOME> 0
<EXPENSES-NET> 16,043
<NET-INVESTMENT-INCOME> (14,399)
<REALIZED-GAINS-CURRENT> 135,813
<APPREC-INCREASE-CURRENT> 291,957
<NET-CHANGE-FROM-OPS> 413,371
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,184
<NUMBER-OF-SHARES-REDEEMED> 781
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 453,257
<ACCUMULATED-NII-PRIOR> (44,589)
<ACCUMULATED-GAINS-PRIOR> (2,847)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,402
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 16,043
<AVERAGE-NET-ASSETS> 971,283
<PER-SHARE-NAV-BEGIN> 18.73
<PER-SHARE-NII> (.35)
<PER-SHARE-GAIN-APPREC> 10.35
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 28.73
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
