<PAGE> 1
As filed with the Securities and Exchange Commission
on February 1, 1996
- -------------------------------------------------------------------------------
1933 Act File No. 2-99752
1940 Act File No. 811-4384
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 11 x
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and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 x
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Amendment No. 11
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STRONG SCHAFER VALUE FUND, INC.
(Exact Name of Registrant as Specified in Charter)
645 Fifth Avenue
New York, New York 10022
(Address of Principal Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 644-1800
David K. Schafer
Strong Schafer Value Fund, Inc.
645 Fifth Avenue
New York, New York 10022
(Name and Address of Agent for Service)
Copy to:
Andrew H. Shaw, Esq.
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
It is proposed that this filing will become effective (check appropriate box)
x immediately upon filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)
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on (date) pursuant to paragraph (a) of rule 485
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-------------------------
Pursuant to the provision of Rule 24f-2 under the Investment Company Act of
1940, Registrant has registered an indefinite number of shares of capital stock
under the Securities Act of 1933. Registrant's Rule 24f-2 Notice for its most
recent fiscal year was filed on November 15, 1995.
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<PAGE> 2
CROSS REFERENCE SHEET
BETWEEN PROSPECTUS, TOGETHER WITH THE
STATEMENT OF ADDITIONAL INFORMATION, AND FORM N-1A
PART A
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Information Required in Prospectus Prospectus Caption
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<S> <C> <C>
Item 1. Cover Page. Cover Page.
Item 2. Synopsis. Expenses.
Item 3. Condensed Financial Financial Highlights;
Information. About The Fund.
Item 4. General Description of Cover page; About The Fund
Registrant. - Investment Objective and
Policies;
Item 5. Management of the Fund. About The Fund;
Shareholder Manual.
Item 5A. Management's Discussion of Included in Annual Report.
Fund Performance.
Item 6. Capital Stock and Other About the Fund;
Securities. Shareholder Manual.
Item 7. Purchase of Securities Cover Page; Shareholder
Being Offered. Manual -- How to Buy
Shares; Determining Your
Share Price.
Item 8. Redemption or Repurchase. Shareholder Manual --
How to Sell Shares.
Item 9. Pending Legal Proceedings. Not Applicable.
</TABLE>
2
<PAGE> 3
PART B
<TABLE>
<CAPTION>
Information Required in Statement of
Statement of Additional Additional Information
Information Caption
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<S> <C> <C>
Item 10. Cover Page. Cover Page.
Item 11. Table of Contents. Table of Contents.
Item 12. General Information Not Applicable.
and History.
Item 13. Investment Objectives Investment Objective
and Policies. and Policies;
Investment
Restrictions.
Item 14. Management of the Directors and Officers
Fund. of the Fund;
Investment Advisor and
Investment Advisory
Agreement.
Item 15. Control Persons and Directors and Officers
Principal Holders of of the Fund; Principal
Securities. Shareholders.
Item 16. Investment Advisory Investment Advisor and
and Other Services. Investment Advisory
Agreement; Custodian;
Transfer Agent;
Experts.
Item 17. Brokerage Allocation Brokerage.
and Other Practices.
Item 18. Capital Stock and Not Applicable.
Other Securities.
Item 19. Purchase, Redemption Purchase, Redemption
and Pricing of and Pricing of Shares.
Securities Being
Offered.
Item 20. Tax Status. Tax Status.
Item 21. Underwriters. Distributor.
Item 22. Calculation of Performance
Performance Data. Information.
Item 23. Financial Statements. Financial Statements
Incorporated by
Reference.
</TABLE>
PART C
3
<PAGE> 4
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
4
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
EXPENSES................................ I-3
FINANCIAL HIGHLIGHTS.................... I-4
INVESTMENT OBJECTIVE AND POLICIES....... I-5
ABOUT THE FUND.......................... I-7
SHAREHOLDER MANUAL...................... II-1
</TABLE>
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PROSPECTUS PAGE I-2
<PAGE> 6
EXPENSES
The expense summary format below was developed for use by all mutual funds to
help you make your investment decisions. Of course, you should consider this
expense information along with other important information in this Prospectus,
the Fund's investment objective and the Fund's past performance.
<TABLE>
<S> <C> <C>
A. Shareholder Transaction Expenses
Sales Load Imposed on Purchases......................... none
Sales Load Imposed on Reinvested Dividends.............. none
Deferred Sales Load Imposed on Redemptions.............. none
B. Annual Fund Operating Expenses (as a percent of average
net assets)
Management Fees......................................... 1.00%
12b-1 Fees.............................................. none
Other Expenses.......................................... .28%
-----
Total Fund Operating Expenses.................. 1.28%
=====
C. Example
You would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2)
redemption at the end of each period:
</TABLE>
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<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------- ------- --------
<S> <C> <C> <C>
$13 $41 $71 $155
</TABLE>
EXPLANATION OF TABLES AND EXAMPLE
A. Shareholder Transaction Expenses are charges you pay when you buy or sell
shares of a fund. There are none for the Fund.
B. Annual Fund Operating Expenses are based on amounts incurred during the
Fund's most recent fiscal year ended September 30, 1995. Management Fees are
paid by the Fund to Schafer Capital Management, Inc. (the "Advisor") for
managing its investments and business affairs. Other Expenses are principally
for maintaining shareholder records, furnishing shareholder statements and
reports, and certain other services. Management Fees and Other Expenses are
reflected in the Fund's share price and are not charged directly to individual
shareholder accounts. See "About the Fund" herein for further information.
C. Example of Expenses. The hypothetical example illustrates the expenses
associated with a $1,000 investment over periods of 1, 3, 5 and 10 years, based
on the expenses in the table above and an assumed annual rate of return of 5%.
The return of 5% and expenses should not be considered indications of past or
future Fund performance or expenses, both of which may vary.
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PROSPECTUS PAGE I-3
<PAGE> 7
FINANCIAL HIGHLIGHTS
(for a share of common stock outstanding throughout each period)
The following information regarding selected per share data and ratios of
the Fund for each of the five years in the period ended September 30, 1995 has
been audited by Price Waterhouse LLP, independent accountants, whose unqualified
report thereon is included in the Fund's Annual Report to Shareholders and is
incorporated by reference in the Statement of Additional Information. This
information should be read in conjunction with the financial statements and
notes thereto appearing in the Fund's Annual Report to Shareholders which is
incorporated by reference in the Statement of Additional Information. The Fund's
Annual Report to Shareholders, which may be obtained upon request from the Fund
without charge, contains further information about the performance of the Fund.
<TABLE>
<CAPTION>
For the Year ended September 30,
--------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
-------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $ 36.54 $ 36.21 $ 31.59 $ 32.21 $ 25.65 $ 32.23 $ 24.26 $ 30.49
-------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income................. .36 .26 .28 .42 .46 .45 .49 .56
Net gain (loss) on securities (both
realized and unrealized)............ 8.53 1.34 8.00 4.96 8.41 (5.87) 8.18 (5.39)
-------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations.... 8.89 1.60 8.28 5.38 8.87 (5.42) 8.67 (4.83)
-------- ------- ------- ------- ------- ------- ------- -------
Less:
Distributions from net realized
gains............................... (1.64) (1.08) (3.27) (5.48) (1.73) (.60) -- (1.18)
Dividends from net investment
income.............................. (.33) (.19) (.39) (.52) (.58) (.56) (.70) (.22)
-------- ------- ------- ------- ------- ------- ------- -------
Total dividends and distributions... (1.97) (1.27) (3.66) (6.00) (2.31) (1.16) (.70) (1.40)
-------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period......... $ 43.46 $ 36.54 $ 36.21 $ 31.59 $ 32.21 $ 25.65 $ 32.23 $ 24.26
======== ======= ======= ======= ======= ======= ======= =======
Total Return........................... 26.01% 4.42% 28.41% 18.80% 37.28% (17.34%) 36.56% (15.34%)
Ratios/Supplemental Data:
Net Assets, End of Period
(in thousands)...................... $163,269 $68,399 $21,403 $12,195 $ 9,811 $10,772 $13,794 $12,268
Ratio of expenses to average net
assets.............................. 1.28% 1.48% 1.74% 2.08% 2.00% 2.00% 2.09% 1.82%*
Ratio of net investment income to
average net assets.................. 1.18% .99% .79% 1.20% 1.26% 1.45% 1.81% 2.32%
Portfolio turnover rate............... 33.19% 28.45% 33.29% 53.03% 54.74% 35.95% 42.20% 42.82%
</TABLE>
<TABLE>
<CAPTION>
October 22, 1985
(commencement of
operations) to
1987 September 30, 1986
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<S> <C> <C>
Net Asset Value, Beginning of Period... $ 21.64 $ 20.00
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Income from Investment Operations:
Net investment income................. .32 .40
Net gain (loss) on securities (both
realized and unrealized)............ 8.84 1.24
------- -------
Total from Investment Operations.... 9.16 1.64
------- -------
Less:
Distributions from net realized
gains............................... -- --
Dividends from net investment
income.............................. (.31) --
------- -------
Total dividends and distributions... (.31) --
------- -------
Net Asset Value, End of Period......... $ 30.49 $ 21.64
======= ========
Total Return........................... 42.81% 8.20%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousand $19,854 $ 7,971
Ratio of expenses to average net
assets.............................. 1.96%* 2.05%*+
Ratio of net investment income to
average net assets.................. 1.20% 1.80%+
Portfolio turnover rate............... 46.52% 19.56%+
</TABLE>
- ---------------
* After expense reimbursement.
+ Annualized.
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PROSPECTUS PAGE I-4
<PAGE> 8
INVESTMENT OBJECTIVE AND POLICIES
The Fund's primary investment objective is long-term capital appreciation,
and portfolio securities are selected primarily with a view to achievement of
this objective. The Fund's primary objective is also a fundamental policy of the
Fund and may not be changed without shareholder approval. Current income is a
secondary objective in the selection of investments. Such secondary objective is
not a fundamental policy of the Fund and may be changed by a vote of a majority
of the Board of Directors without a vote of the shareholders.
The policy of the Fund is to invest in securities which are believed by the
Advisor to offer the possibility of increase in value, for the most part common
stocks of established companies having a strong financial position and a low
stock market valuation at the time of purchase (as measured by price/earnings
ratios as compared with average price/earnings ratios of major market indices,
e.g., Standard & Poor's 500 index) in relation to investment value (as measured
by prospective earnings and dividend growth rates as compared with market
averages of such rates). Investments are then monitored by the Fund's Advisor
for price movement and earnings developments. Once a security is purchased, it
will generally be held in the portfolio until it no longer meets the Fund's
financial or valuation criteria as determined by the Fund's Advisor.
The Fund expects to purchase and sell securities at such times as it deems to
be in the best interest of its shareholders. Although there may be some
short-term portfolio turnover, securities are generally purchased which the
Advisor believes will appreciate in value over the long term. The Fund
anticipates that its annual portfolio turnover rate should not significantly
exceed 50%. The Fund, however, has not placed any limit on its rate of portfolio
turnover and securities may be sold without regard to the time they have been
held when, in the opinion of the Advisor, investment considerations warrant such
action.
The Fund does not concentrate its investments in any particular industry or
group of industries, but diversifies its holdings among as many different
companies and industries as seems appropriate in the light of conditions
prevailing at any given time.
Other than as considered appropriate for cash reserves, the Fund will
generally maintain a fully invested position in common stocks of publicly-held
companies, primarily in stocks of companies listed on a national securities
exchange and other equity securities (common stocks or securities convertible
into common stocks). Investments may also be made in debt securities which are
convertible into equity securities and preferred stocks which are convertible
into common stock and in warrants or other rights to purchase common stock,
which in each case are considered equity securities by the Advisor. The Advisor
rarely engages in market timing by shifting the portfolio or a significant
portion thereof in or out of the market in anticipation of market fluctuations.
Although the Fund's portfolio will normally be fully invested in equity
---------------------
PROSPECTUS PAGE I-5
<PAGE> 9
securities as described above, a portion of its assets may be held from time to
time in cash or cash equivalents (e.g., short-term money market securities such
as U.S. Treasury bills, prime-rated commercial paper, certificates of deposit,
variable rate demand notes, or repurchase agreements) when portfolio securities
are sold and the Advisor is unable to then identify attractive equity
investments. Variable rate demand notes are non-negotiable instruments. The
instruments the Fund invests in are rated at least A1 by Standard & Poor's.
However, the Fund may be susceptible to credit risk with respect to these notes
to the extent the issuer defaults on its payment obligation. With regard to
repurchase agreements (which are agreements under which the seller of a security
agrees at the time of sale to repurchase it at an agreed time and price), in the
event of a bankruptcy or other default of the seller, the Fund could experience
both delays in liquidating the underlying securities and losses, including: (a)
possible decline in the value of the underlying security during the period while
the Fund seeks to enforce its rights thereto; (b) possible subnormal levels of
income or proceeds and lack of access to income and proceeds during this period;
and (c) expenses of enforcing its rights.
The above-described investment policies of the Fund will be applied in a
manner considered prudent by the Advisor to achieve the Fund's investment
objective of long-term capital appreciation. The Fund does not consider such
policies to be fundamental and such policies may be changed by the Board of
Directors without shareholder approval.
The Fund expects to invest primarily in the securities of U.S. issuers,
although it may also invest up to 20% of its assets in securities of foreign
issuers, or depository receipts for such securities, which are traded in a U.S.
market and which meet the criteria for investment selection set forth above.
Since 20% of the Fund's assets may consist of securities issued by foreign
issuers, the Fund may be subject to additional investment risks for these
securities that are different in some respects from those experienced by a fund
which invests only in securities of U.S. domestic issuers. Such risks include
future political and economic developments, the imposition of foreign
withholding taxes on dividend and interest income payable on the securities, the
possible establishment of exchange controls, the possible seizure or
nationalization of foreign investments, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such securities. Generally, the Fund will not purchase
securities which it believes, at the time of purchase, will be subject to
exchange controls; however, there can be no assurance that such laws may not
become applicable to certain of the Fund's investments. In addition, there may
be less publicly available information about a foreign issuer than about a
domestic issuer, and foreign issuers may not be subject to the same accounting,
auditing, financial record keeping and shareholder reporting standards and
requirements as domestic issuers.
---------------------
PROSPECTUS PAGE I-6
<PAGE> 10
There are market risks inherent in any investment, and there is no assurance
that the primary investment objective of the Fund will be realized or that any
income will be earned. Moreover, the application of investment policies is
basically dependent upon the judgment of the Advisor. A prospective purchaser of
shares of the Fund should realize that there are risks in any policy dependent
upon such judgment and that no representation is made that the objectives of the
Fund will be accomplished or that there may not be substantial losses in any
particular investment. At any time, the value of the Fund's shares may be more
or less than the cost of such shares to the investor.
ABOUT THE FUND
MANAGEMENT
THE FUND. The Fund's Board of Directors is responsible for managing its
business and affairs. The Fund is an open-end, diversified management investment
company as defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"). An investment company combines the investments of its
shareholders and purchases various securities. Through ownership of shares in
the investment company, shareholders participate in the investment performance
of such securities. As an open-end investment company, the Fund has an
obligation to redeem the shares of any shareholder by paying such shareholder
the net asset value next computed after receipt of a request in proper form for
a redemption of such shares. As a diversified investment company, the Fund's
investments are subject to certain limitations as to investing in individual
stocks and industry groups.
THE ADVISOR. Schafer Capital Management, Inc. (the "Advisor"), 645 Fifth
Avenue, New York, New York 10022, a Delaware corporation formed in 1984 and
registered under the Investment Advisers Act of 1940, serves as investment
advisor to the Fund pursuant to an Investment Advisory Agreement dated August
13, 1985 (the "Advisory Agreement"). The Advisor also serves as investment
advisor to other equity accounts. An affiliate of the Advisor, Schafer Cullen
Capital Management, Inc. serves as investment advisor to equity accounts for
individuals, tax-exempt equity accounts, charitable foundation accounts and
other equity accounts.
Under the Advisory Agreement, the Advisor furnishes continuous investment
advisory services and management to the Fund, subject to the authority of the
Fund's Board of Directors. The Advisor selects the securities to be purchased
and sold for, and administers the affairs of, the Fund. The Advisor also
furnishes office space, office facilities, equipment, personnel (other than the
services of directors of the Fund who are not interested persons of the
Advisor), and clerical, bookkeeping and administrative services for the Fund to
the extent not provided by Strong Capital Management, Inc. ("Strong"), the
Fund's transfer agent and dividend paying agent, and accounting services agent.
For its services, the Advisor receives a fee, payable monthly, at an annual rate
equal to 1% of the average daily net assets of the Fund. This fee is higher than
that paid by most other mutual funds. For the year ended Septem-
---------------------
PROSPECTUS PAGE I-7
<PAGE> 11
ber 30, 1995, the advisory fee paid by the Fund amounted to 1% of the Fund's
average daily net assets. The Fund's total expenses for the same period amounted
to 1.28% of the Fund's average daily net assets.
PORTFOLIO MANAGER. David K. Schafer, the Advisor's controlling person
(within the meaning of the Investment Company Act) and sole shareholder, has
been in the investment management business for more than twenty-five years. Mr.
Schafer is the President of the Advisor and has been primarily responsible for
the day-to-day management of the Fund's portfolio since October 1985, when the
Fund commenced operations. Mr. Schafer is also a minority shareholder of Schafer
Cullen Capital Management, Inc. Mr. Schafer was a securities analyst, first for
Arnold Bernhard & Co., Inc., publisher of The Value Line Investment Survey, from
June 1966 to June 1968, for J & W Seligman & Co. from June 1968 to December
1970, and for Fariston Management Corp., from January 1971 to November 1972. In
1972, he joined the treasury department of INCO Ltd. to supervise the investment
managers of that company's pension assets, and in 1974 he began managing a
portion of those assets himself. In 1981, Mr. Schafer left INCO Ltd. to found
Schafer Capital Management.
TRANSFER AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc. P.O. Box 2936, Milwaukee, Wisconsin 53201,
acts as dividend-disbursing agent and transfer agent for the Fund. Strong is
compensated for its services based on an annual fee per account plus certain
out-of-pocket expenses.
DISTRIBUTOR
Strong Funds Distributors, Inc., P.O. Box 2936, Milwaukee, Wisconsin 53201,
an indirect subsidiary of Strong, acts as distributor of the shares of the Fund.
ORGANIZATION
SHAREHOLDER RIGHTS. The Fund was incorporated under the laws of the State of
Maryland on August 12, 1985 and commenced operations on October 22, 1985. On
January 10, 1996, the Board of Directors approved a change in the name of the
Fund from Schafer Value Fund, Inc. to Strong Schafer Value Fund, Inc. The Fund's
address is 645 Fifth Avenue, New York, New York 10022. The Fund has an
authorized capital of 25 million shares consisting of only one class of
stock -- Common Stock, $.10 par value. Shareholders are entitled to one vote per
share, to such distributions as may be declared by the Fund's Board of Directors
out of funds legally available therefore, and upon liquidation to participate
ratably in the assets available for distribution. There are no conversion or
sinking fund provisions applicable to the shares, and shareholders have no
preemptive rights and may not cumulate their votes in the election of directors.
The shares are redeemable (as described under "How to Sell Shares" and
"Determining Your Share Price" in the Shareholder Manual section of this
Prospectus) and are transferable. All shares issued and sold by the Fund will be
fully paid and non-assessable.
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PROSPECTUS PAGE I-8
<PAGE> 12
The Fund is not required to hold annual meetings of shareholders. However,
special meetings may be called for such purposes as electing or removing
directors, terminating or reorganizing the Fund, changing fundamental policies
or voting on other matters when required by the Investment Company Act.
SHAREHOLDER PRIVILEGES. The shareholders of the Fund may benefit from the
privileges described in the "Shareholder Manual" (see Page II-1). However, the
Fund reserves the right, at any time and without prior notice, to suspend,
limit, modify or terminate any of these privileges or their use in any manner by
any person or class.
PRINCIPAL SHAREHOLDER. As of December 31, 1995, Charles Schwab & Co., Inc.
("Schwab") owned of record approximately 38% of the outstanding shares of the
Fund. Schwab's record ownership of greater than 25% of the Fund's shares may
result in it being deemed a controlling entity of the Fund.
DISTRIBUTIONS AND TAXES
PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund intends to distribute
its net investment income (i.e., net income and gains, exclusive of net capital
gains) and net capital gains (i.e., the excess of realized net long-term capital
gains over net short-term capital loss), if any, less any available capital loss
carryover, to shareholders annually. The Fund reserves the right, however, to
declare and pay distributions of net investment income quarterly. Unless you
choose otherwise, all distributions to you of net investment income and net
capital gains will be automatically reinvested in full and fractional shares of
the Fund or, you may elect to have your distributions automatically reinvested
in shares of another Strong Fund. Shares are purchased at the net asset value
next determined after the dividend payment and are credited to your account. As
in the case of normal purchases, stock certificates are not issued unless
requested. You will be advised of the number of shares purchased and the price
following each reinvestment.
You may withdraw from the dividend reinvestment program and elect to receive
income dividends or capital gain distributions or both in cash at any time. Any
shareholder who is not participating in the dividend reinvestment program may
elect to do so by giving written notice to the Fund. If you request in writing
that your dividends and other distributions be paid in cash, the Fund will
credit your bank account by Electronic Funds Transfer ("EFT") or issue a check
to you within five business days of the payment date. You may change your
election at any time by calling or writing Strong Funds. Strong Funds must
receive any such change 7 days (15 days for EFT) prior to a dividend or capital
gain distribution payment date in order for the change to be effective for that
payment.
TAX STATUS OF DIVIDENDS AND OTHER DISTRIBUTIONS. You will be subject to
federal income tax at ordinary income tax rates on any dividends that are
derived from net investment income, whether paid in cash or reinvested in
additional shares of the Fund or another Strong Fund. Such dividends will
---------------------
PROSPECTUS PAGE I-9
<PAGE> 13
qualify for the 70% dividends received deduction available to corporations only
to the extent the Fund's net investment income consists of qualifying dividend
income from U.S. corporations. Distributions of net capital gain, when
designated as such by the Fund, are taxable to you as long-term capital gains,
regardless of how long you have held your Fund shares. The Fund's distributions
are taxable in the year they are paid, whether they are taken in cash or
reinvested in additional shares, except that certain distributions declared in
the last three months of the year and paid in January are taxable as if paid on
the prior December 31.
If the Fund's distributions exceed its net investment income and net capital
gain in any year, as a result of currency-related losses or otherwise, all or a
portion of those distributions may be treated as a return of capital to
shareholders for tax purposes.
YEAR-END TAX REPORTING. After the end of each calendar year, you will receive
a statement (Form 1099) of the federal income tax status of all dividends and
other distributions paid (or deemed paid) during the year.
SHARES SOLD OR EXCHANGED. Your redemption of Fund shares may result in
taxable gain or loss to you, depending upon whether the redemption proceeds
payable to you are more or less than your adjusted cost basis for the redeemed
shares. Similar tax consequences generally will result from an exchange of Fund
shares for shares of another Strong Fund. Except as discussed below, any such
taxable gain or loss realized by a shareholder who is not a dealer in securities
will be treated as a long-term capital gain or loss if the shares have been held
for more than one year, and otherwise as a short-term capital gain or loss. If
you purchase shares of the Fund within thirty days before or after redeeming or
exchanging shares of the Fund at a loss, a portion or all of that loss will not
be deductible and will increase the cost basis of the newly purchased shares.
Any loss realized by you upon the redemption or exchange of Fund shares held for
six months or less will be treated as long-term capital loss to the extent of
any distributions of net capital gains received on such shares. If you redeem
shares out of a retirement account, you will be subject to withholding for
federal income tax purposes unless you transfer the distribution directly to an
"eligible retirement plan."
BUYING A DISTRIBUTION. A distribution paid shortly after you have purchased
shares in the Fund will reduce the net asset value of the shares by the amount
of the distribution, which nevertheless will be taxable to you as described
above even though it represents a return of a portion of your investment.
BACKUP WITHHOLDING. If you are an individual or certain other noncorporate
shareholder and do not furnish the Fund with a correct taxpayer
---------------------
PROSPECTUS PAGE I-10
<PAGE> 14
identification number, the Fund is required to withhold federal income tax at a
rate of 31% (backup withholding) from all income dividends, capital gain
distributions, and redemption proceeds payable to you. Withholding at that rate
from dividends and capital gain distributions payable to you also is required if
you otherwise are subject to backup withholding. To avoid backup withholding,
you must provide a taxpayer identification number and state that you are not
subject to backup withholding due to the underreporting of your income. This
certification is included as part of your application. Please complete it when
you open your account.
TAX STATUS OF THE FUND. The Fund has qualified, and intends to remain
qualified, as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended. As a regulated investment company,
the Fund is not subject to Federal income taxes on its income and gains
distributed to shareholders, provided the Fund distributes to its shareholders
at least 90% of its net investment income each year. The Fund intends to
distribute annually to its shareholders substantially all of its net investment
income and net capital gains, if any (computed after taking into account any
available capital loss carryover).
------------------------
The foregoing is only a summary of some of the important tax considerations
generally affecting the Fund and its shareholders. You are urged to consult your
own tax advisors for more detailed information.
PERFORMANCE INFORMATION
The Fund may advertise "average annual total return," "total return," and
"cumulative total return." Each of these figures is based upon historical
results and does not represent the future performance of the Fund. Average
annual total return and total return figures measure both the net investment
income generated by, and the effect of any realized and unrealized appreciation
or depreciation of, the underlying investments in the Fund assuming the
reinvestment of all dividends and distributions. Total return figures are not
annualized and simply represent the aggregate change of the Fund's investments
over a specified period of time.
Comparative performance information obtained from industry or financial
publications may also be used. The Fund may compare its performance to that of
other mutual funds with similar investment objectives and to stock or other
relevant indices. From time to time, articles about the Fund regarding its
performance or ranking may appear in national publications. Some of these
publications may publish their own rankings or performance reviews of mutual
funds, including the Fund. Reference to or reprints of such articles may be used
in the Fund's promotional literature.
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PROSPECTUS PAGE I-11
<PAGE> 15
This page has been left blank intentionally.
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PROSPECTUS PAGE I-12
<PAGE> 16
SHAREHOLDER MANUAL
<TABLE>
<S> <C>
HOW TO BUY SHARES...................... II-1
DETERMINING YOUR SHARE PRICE........... II-5
HOW TO SELL SHARES..................... II-6
SHAREHOLDER SERVICES................... II-9
REGULAR INVESTMENT PLANS............... II-10
SPECIAL SITUATIONS..................... II-12
</TABLE>
HOW TO BUY SHARES
All the Strong Funds are 100% no-load, meaning you may purchase, redeem, or
exchange shares directly at net asset value without paying a sales charge.
Because the Fund's net asset value changes daily, your purchase price will be
the next net asset value determined after Strong receives and accepts your
purchase order.
Whether you are opening a new account or adding to an existing one, Strong
provides you with several methods to buy the Fund's shares.
----------------------
PROSPECTUS PAGE II-1
<PAGE> 17
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<TABLE>
<S> <C>
TO OPEN A NEW ACCOUNT
- ------------------------------------------------------------------------------
MAIL BY CHECK
- Complete and sign the application. Make your check
or money order payable to "Strong Funds."
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to Strong Funds, 100 Heritage
Reserve, Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- Call 1-800-368-3863 for instructions on
establishing an account with an exchange by mail.
- ------------------------------------------------------------------------------
TELEPHONE BY EXCHANGE
- Call 1-800-368-3863 to establish a new account by
1-800-368-3863 exchanging funds from an existing Strong Funds
24 HOURS A DAY, account.
7 DAYS A WEEK - Sign up for telephone exchange services when you
open your account. To add the telephone exchange
option to your account, call 1-800-368-3863 for a
Telephone Exchange Form.
- Please note that your accounts must be identically
registered and that you must exchange enough into the
new account to meet the minimum initial investment.
- ------------------------------------------------------------------------------
IN PERSON - Stop by Strong's Investor Center in Menomonee
Falls, Wisconsin. Call 1-800-368-3863 for hours and
directions.
- The Investor Center can only accept checks or money
orders.
- ------------------------------------------------------------------------------
WIRE Call 1-800-368-3863 for instructions on opening an
account by
wire.
- ------------------------------------------------------------------------------
AUTOMATICALLY USE STRONG'S "NO-MINIMUM INVESTMENT PROGRAM."
- If you sign up for Strong's Automatic Investment
Plan when you open your account, the Fund will waive
its minimum initial investment (see chart on page
II-4).
- Complete the Automatic Investment Plan section on
the account application.
- Mail to the address indicated on the application.
- ------------------------------------------------------------------------------
BROKER-DEALER - You may purchase shares in the Fund through a
broker-dealer or other institution that may charge a
transaction fee.
- The Fund may only accept requests to purchase
shares into a broker-dealer street name account from
the broker-dealer.
</TABLE>
----------------------
PROSPECTUS PAGE II-2
<PAGE> 18
- ------------------------------------------------------------------------------
TO ADD TO AN EXISTING ACCOUNT
- --------------------------------------------------------------------------------
BY CHECK
- - Complete an Additional Investment Form provided at the bottom of your account
statement, or write a note indicating your fund account number and
registration. Make your check or money order payable to "Strong Funds."
- - Mail to Strong Funds, P.O. Box 2936, Milwaukee, Wisconsin 53201. If you're
using an express delivery service, send to Strong Funds, 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- - Call 1-800-368-3863 for instructions on exchanging by mail.
- --------------------------------------------------------------------------------
BY EXCHANGE
- - Add to an account by exchanging funds from another Strong Funds account.
- - Sign up for telephone exchange services when you open your account. To add the
telephone exchange option to your account, call 1-800-368-3863 for a Telephone
Exchange Form.
- - Please note that the accounts must be identically registered and that the
minimum exchange is $50 or the balance of your account, whichever is less.
BY TELEPHONE PURCHASE
- - Sign up for telephone purchase when you open your account to make additional
investments from $50 to $25,000 into your Strong Funds account by telephone.
To add this option to your account, call 1-800-368-3863 for a Telephone
Purchase Form.
Or use Strong DirectSM, Strong Funds' automated telephone response system. Call
1-800-368-3863 for details.
- --------------------------------------------------------------------------------
- - Stop by Strong's Investor Center in Menomonee Falls, Wisconsin. Call
1-800-368-3863 for hours and directions.
- - The Investor Center can only accept checks or money orders.
- --------------------------------------------------------------------------------
Call 1-800-368-3863 for instructions on adding to an account by wire.
- --------------------------------------------------------------------------------
USE ONE OF STRONG'S AUTOMATIC INVESTMENT PROGRAMS. Sign up for these services
when you open your account, or call 1-800-368-3863 for instructions on how to
add them to your existing account.
- - AUTOMATIC INVESTMENT PLAN. Make regular, systematic investments (minimum $50)
into your Strong Funds account from your bank checking or NOW account.
Complete the Automatic Investment Plan section on the account application.
- - AUTOMATIC EXCHANGE PLAN. Make regular, systematic exchanges (minimum $50) from
one Strong Funds account to another. Call 1-800-368-3863 for an application.
- - PAYROLL DIRECT DEPOSIT. Have a specified amount (minimum $50) regularly
deducted from your paycheck, social security check, military allotment, or
annuity payment invested directly into your Strong Funds account. Call
1-800-368-3863 for an application.
- - AUTOMATIC DIVIDEND REINVESTMENT. Unless you choose otherwise, all your
dividends and capital gain distributions will be automatically reinvested in
additional Fund shares. Or, you may elect to have your dividends and capital
gain distributions automatically reinvested in shares of another Strong Fund.
- --------------------------------------------------------------------------------
- - You may purchase additional shares in the Fund through a broker-dealer or
other institution that may charge a transaction fee.
- - Strong Funds may only accept requests to purchase additional shares into a
broker-dealer street name account from the broker-dealer.
----------------------
PROSPECTUS PAGE II-3
<PAGE> 19
WHAT YOU SHOULD KNOW ABOUT BUYING SHARES
- - Please make all checks or money orders payable to "Strong Funds."
- - Strong cannot accept third-party checks or checks drawn on banks outside the
U.S.
- - You will be charged a $20 service fee for each check, wire, or Electronic
Funds Transfer ("EFT") purchase that is returned unpaid, and you will be
responsible for any resulting losses suffered by the Fund.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.
- - The Fund may decline to accept your purchase order upon receipt when, in the
judgment of the Advisor, it would not be in the best interests of the existing
shareholders.
- - The exchange privileges are available in all 50 states because all Strong
Funds intend to continue to qualify their shares for sale in all 50 states.
- - Minimum Investment Requirements:
----------------------------------------------------------------------------
To open a regular account...........................................$2,500
To open an IRA or Defined Contribution account........................$250
To open an UGMA/UTMA account..........................................$250
To open a 401(k) or 403(b) retirement account...................No Minimum
To add to an existing account..........................................$50
----------------------------------------------------------------------------
The Fund offers a No-Minimum Investment Program that waives the minimum
initial investment requirements for investors who participate in the Strong
Automatic Investment Plan (described on page II-10). Unless you participate in
the Strong No-Minimum Investment Program, please ensure your purchases meet the
minimum investment requirements.
Under certain circumstances (for example, if you discontinue a No-Minimum
Investment Program before you reach the Fund's minimum initial investment), the
Fund reserves the right to close your account. Before taking such action, the
Fund will provide you with written notice and at least 60 days in which to
reinstate an investment program or otherwise reach the minimum initial
investment required.
WHAT YOU SHOULD KNOW ABOUT BUYING SHARES
THROUGH A BROKER-DEALER
- - If you purchase shares through a program of services offered or administered
by a broker-dealer, financial institution, or other service provider, you
should read the program's materials, including information relating to fees,
in connection with the Fund's Prospectus. Certain features of the Fund may
----------------------
PROSPECTUS PAGE II-4
<PAGE> 20
not be available or may be modified in connection with the program of services
provided.
- - Certain broker-dealers, financial institutions, or other service providers
that have entered into an agreement with the Distributor may enter purchase
orders on behalf of their customers by phone, with payment to follow within
several days as specified in the agreement. The Fund may effect such purchase
orders at the net asset value next determined after receipt of the telephone
purchase order. It is the responsibility of the broker-dealer, financial
institution, or other service provider to place the order with the Fund on a
timely basis. If payment is not received within the time specified in the
agreement, the broker-dealer, financial institution, or other service provider
could be held liable for any resulting fees or losses.
DETERMINING YOUR SHARE PRICE
Generally, when you make any purchases, sales or exchanges, the price of your
shares will be the net asset value ("NAV") next determined after Strong Funds
receives your request in proper form. If Strong Funds receives such request
prior to the close of regular trading on the New York Stock Exchange (the
"Exchange") on a day on which the Exchange is open, your share price will be the
NAV determined that day. The NAV for the Fund is normally determined as of 3:00
p.m. Central Time ("CT") each day the Exchange is open. The Fund reserves the
right to change the time at which purchases, redemptions and exchanges are
priced if the Exchange closes at a time other than 3:00 p.m. CT or if an
emergency exists. The Fund's NAV is calculated by taking the fair value of the
Fund's total assets, subtracting all its liabilities, and dividing by the total
number of shares outstanding. Expenses are accrued daily and applied when
determining the NAV.
The Fund's portfolio securities are valued based on market quotations or at
fair value as determined by the method selected by the Fund's Board of
Directors. Equity securities traded on a national securities exchange or NASDAQ
are valued at the last sales price on the national securities exchange or NASDAQ
on which such securities are primarily traded. Securities for which there were
no transactions on a given day or securities not listed on an exchange or NASDAQ
are valued at the average of the most recent bid and asked prices. Other
exchange traded securities (generally foreign securities) will be valued based
on market quotations. Debt securities are valued by a pricing service that
utilizes electronic data processing techniques to determine values for normal
institutional-sized trading units of debt securities without regard to sale or
bid prices when such techniques are believed to more accurately reflect the fair
market value for such securities. Otherwise, sale or bid prices are used. Any
securities or other assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Directors. Debt securities having remaining maturities of 60
days or less when purchased are valued by the amortized cost method. Under this
method of valuation, a security is initially valued at its acquisition cost, and
thereafter, amortization of any discount or
----------------------
PROSPECTUS PAGE II-5
<PAGE> 21
premium is assumed each day, regardless of the impact of the fluctuating rates
on the market value of the instrument.
Securities quoted in foreign currency, if any, are valued daily in U.S.
dollars at the foreign currency exchange rates that are prevailing at the time
the daily NAV per share is determined. Although the Fund values its foreign
assets in U.S. dollars on a daily basis, when necessary, it does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
Foreign currency exchange rates are generally determined prior to the close of
regular trading on the Exchange. Occasionally, events affecting the value of
foreign investments and such exchange rates occur between the time at which they
are determined and the close of trading on the Exchange. Such events would not
normally be reflected in a calculation of the Fund's NAV on that day. If events
that materially affect the value of the Fund's foreign investments or the
foreign currency exchange rates occur during such period, the investments will
be valued at their fair value as determined in good faith by or under the
direction of the Board of Directors.
HOW TO SELL SHARES
You can access the money in your account at any time by selling (redeeming)
some or all of your shares back to the Fund. Once your redemption request is
received in proper form, Strong will normally mail you the proceeds the next
business day and, in any event, no later than seven days thereafter.
To redeem shares, you may use any of the methods described in the following
chart. However, if you are selling shares in a retirement account, please call
1-800-368-3863 for instructions. Please note that there is a $10.00 fee for
closing an IRA or other retirement account or for transferring assets to another
custodian. For your protection, certain requests may require a signature
guarantee (see "Signature Guarantee" section in this Prospectus).
----------------------
PROSPECTUS PAGE II-6
<PAGE> 22
- -----------------------------------------------------------------------------
<TABLE>
<S> <C>
TO SELL SHARES
- -----------------------------------------------------------------------------
MAIL FOR INDIVIDUAL, JOINT TENANT, AND UGMA/UTMA ACCOUNTS
- Write a "letter of instruction" that includes the
following information: your account number, the
dollar amount or number of shares you wish to
redeem, each owner's name, your street address, and
the signature of each owner as it appears on the
account.
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to 100 Heritage Reserve, Menomonee
Falls, Wisconsin 53051.
FOR TRUST ACCOUNTS
- Same as above. Please ensure that all trustees sign
the letter of instruction.
FOR OTHER REGISTRATIONS
- Call 1-800-368-3863 for instructions.
- -----------------------------------------------------------------------------
TELEPHONE
Sign up for telephone redemption services when you
1-800-368-3863 open your account by checking the "Yes" box in the
24 HOURS A DAY, appropriate section of the account application. To
7 DAYS A WEEK add the telephone redemption option to your account,
call 1-800-368-3863 for a Telephone Redemption Form.
Once the telephone redemption option is in place, you
may sell shares ($500 minimum) by phone and arrange
to receive the proceeds in one of three ways:
TO RECEIVE A CHECK BY MAIL
- At no charge, we will mail a check to the address
to which your account is registered.
TO DEPOSIT BY EFT
- At no charge, we will transmit the proceeds by
Electronic Funds Transfer (EFT) to a pre-authorized
bank account. Usually, the funds will arrive at
your bank two banking days after we process your
redemption.
TO DEPOSIT BY WIRE
- For a $10 fee, we will transmit the proceeds by
wire to a pre-authorized bank account. Usually, the
funds will arrive at your bank the next banking day
after we process your redemption.
You may also use Strong DirectSM, Strong Funds'
automated telephone response system. Call
1-800-368-3863 for details.
- -----------------------------------------------------------------------------
AUTOMATICALLY
You can set up automatic withdrawals from your
account at regular intervals. To establish the
Systematic Withdrawal Plan, request a form by calling
1-800-368-3863.
- -----------------------------------------------------------------------------
BROKER-DEALER
You may also redeem shares through broker-dealers or
others who may charge a commission or other
transaction fee.
</TABLE>
----------------------
PROSPECTUS PAGE II-7
<PAGE> 23
WHAT YOU SHOULD KNOW ABOUT SELLING SHARES
- - If you have recently purchased shares, please be aware that your redemption
request may not be honored until the purchase check has cleared your bank,
which generally occurs within ten calendar days.
- - The right of redemption may be suspended during any period in which (i)
trading on the Exchange is restricted, as determined by the SEC, or the
Exchange is closed for other than weekends and holidays; (ii) the SEC has
permitted such suspension by order; or (iii) an emergency as determined by the
SEC exists, making disposal of portfolio securities or valuation of net assets
of the Fund not reasonably practicable.
- - If you are selling shares you hold in certificate form, you must submit the
certificates with your redemption request. Each registered owner must endorse
the certificates and all signatures must be guaranteed.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.
REDEMPTIONS IN KIND
The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates the Fund to redeem shares in cash, with respect to any one shareholder
during any 90-day period, up to the lesser of $250,000 or 1% of the assets of
the Fund. If the Advisor determines that existing conditions make cash payments
in excess of such minimum undesirable, redemption payments may be made in whole
or in part in securities or other financial assets, valued for this purpose as
they are valued in computing the NAV for the Fund's shares (a
"redemption-in-kind"). Shareholders receiving securities or other financial
assets in a redemption-in-kind may realize a gain or loss for tax purposes, and
will incur any costs of sale, as well as the associated inconveniences. If you
expect to make a redemption in excess of the lesser of $250,000 or 1% of the
Fund's assets during any 90-day period and would like to avoid any possibility
of being paid with securities in-kind, you may do so by providing the Fund with
an unconditional instruction to redeem at least 15 calendar days prior to the
date on which the redemption transaction is to occur, specifying the dollar
amount or number of shares to be redeemed and the date of the transaction
(please call 1-800-368-3863). This will provide the Fund with sufficient time to
raise the cash in an orderly manner to pay the redemption and thereby minimize
the effect of the redemption on the interests of the Fund's remaining
shareholders.
WHAT YOU SHOULD KNOW ABOUT TELEPHONE REDEMPTIONS
- - The Fund reserves the right to refuse a telephone redemption if the Fund
believes it advisable to do so.
----------------------
PROSPECTUS PAGE II-8
<PAGE> 24
- - Once you place your telephone redemption request, it cannot be canceled or
modified.
- - Investors will bear the risk of loss from fraudulent or unauthorized
instructions received over the telephone provided that the Fund's transfer
agent reasonably believes that such instructions are genuine. The Fund's
transfer agent employs reasonable procedures to confirm that instructions
communicated by telephone are genuine. The Fund's transfer agent may incur
liability if it does not follow these procedures.
- - Because of increased telephone volume, you may experience difficulty in
implementing a telephone redemption during periods of dramatic economic or
market changes.
SHAREHOLDER SERVICES
INFORMATION SERVICES
24-HOUR ASSISTANCE. Strong Funds has registered representatives available to
help you 24 hours a day, 7 days a week. Call 1-414-359-1400 or toll-free
1-800-368-3863. You may also write to Strong Funds at the address on the cover
of this Prospectus.
STRONG DIRECTSM AUTOMATED TELEPHONE SYSTEM. Also available 24 hours a day,
the Strong DirectSM automated response system enables you to use a touch-tone
phone to hear fund quotes and returns on any Strong Fund. You may also confirm
account balances, hear records of recent transactions and dividend activity, and
perform purchases, exchanges or redemptions among your existing Strong accounts.
Your account information is protected by a personal code that you establish. For
more information on this service, call 1-800-368-3863.
STATEMENTS AND REPORTS. At a minimum, the Fund will confirm all transactions
for your account on a quarterly basis. We recommend that you file each quarterly
statement - and, especially, each calendar year-end statement - with your other
important financial papers, since you may need to refer to them at a later date
for tax purposes. Should you need additional copies of previous statements, you
may order confirmation statements for the current and preceding year at no
charge. Statements for earlier years are available for $10 each. Call
1-800-368-3863 to order past statements.
Each year, you will also receive a statement confirming the tax status of any
distributions paid to you, as well as a semiannual report and an annual report
containing audited financial statements.
To reduce the volume of mail you receive, only one copy of certain materials,
such as prospectuses and shareholder reports, is mailed to your household. Call
1-800-368-3863 if you wish to receive additional copies, free of charge.
----------------------
PROSPECTUS PAGE II-9
<PAGE> 25
More complete information regarding the Fund's investment policies and
services is contained in its SAI, which you may request by calling or writing
Strong Funds at the phone number and address on the cover of this Prospectus.
CHANGING YOUR ACCOUNT INFORMATION. So that you continue receiving your
correspondence, including any dividend checks and statements, please notify us
in writing as soon as possible if your address changes. You may use the
Additional Investment Form at the bottom of your confirmation statement, or
simply write us a letter of instruction that contains the following information:
1. a written request to change the address,
2. the account number(s) for which the address is to be changed,
3. the new address, and
4. the signatures of all owners of the accounts.
Please send your request to the address on the cover of this Prospectus.
Changes to your accounts' registration - such as adding or removing a joint
owner, changing an owner's name, or changing the type of your account - must
also be submitted in writing. Please call 1-800-368-3863 for instructions. For
your protection, some requests may require a signature guarantee.
TRANSACTION SERVICES
FREE EXCHANGE PRIVILEGE. You may exchange shares between identically
registered Strong Funds accounts, either in writing or by telephone. By
establishing the telephone exchange services, you authorize the Fund and its
agents to act upon your instruction by telephone to exchange shares from any
account you specify. For tax purposes, an exchange is considered a sale and a
purchase. Please obtain and read the appropriate prospectus before investing in
any of the Strong Funds. Since an excessive number of exchanges may be
detrimental to the Fund, the Fund reserves the right to discontinue the exchange
privilege of any shareholder who makes more than five exchanges in a year or
three exchanges in a calendar quarter.
REGULAR INVESTMENT PLANS
Strong Funds' Automatic Investment Plan, Payroll Direct Deposit Plan, and
Automatic Exchange Plan, all discussed below, are methods of implementing DOLLAR
COST AVERAGING. Dollar cost averaging is an investment strategy that involves
investing a fixed amount of money at regular time intervals. By always investing
the same set amount, you will be purchasing more shares when the price is low
and fewer shares when the price is high. Ultimately, by using this principle in
conjunction with fluctuations in share price, your average cost per share may be
less than your average transaction price. A program of regular investment cannot
ensure a profit or protect against a loss during declining
-----------------------
PROSPECTUS PAGE II-10
<PAGE> 26
markets. Since such a program involves continuous investment regardless of
fluctuating share values, you should consider your ability to continue the
program through periods of both low and high share-price levels.
AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan allows you to make
regular, systematic investments in the Fund from your bank checking or NOW
account. You may choose to make investments on any day of the month in amounts
of $50 or more. You can set up the Automatic Investment Plan with any financial
institution that is a member of the Automated Clearing House. Because the Fund
has the right to close an investor's account for failure to reach the minimum
initial investment, please consider your ability to continue this Plan until you
reach the minimum initial investment. Such closing may occur in periods of
declining share prices. To establish the Plan, complete the Automatic Investment
Plan section on the account application, or call 1-800-368-3863 for an
application.
PAYROLL DIRECT DEPOSIT PLAN. Once you meet the Fund's minimum initial
investment requirement, you may purchase additional Fund shares through the
Payroll Direct Deposit Plan. Through this Plan, periodic investments (minimum
$50) are made automatically from your payroll check into your existing Fund
account. By enrolling in the Plan, you authorize your employer or its agents to
deposit a specified amount from your payroll check into the Fund's bank account.
In most cases, your Fund account will be credited the day after the amount is
received by the Fund's bank. In order to participate in the Plan, your employer
must have direct deposit capabilities through Automated Clearing House available
to its employees. The Plan may be used for other direct deposits, such as social
security checks, military allotments, and annuity payments.
To establish Direct Deposit for your account, call 1-800-368-3863 to obtain
an Authorization for Payroll Direct Deposit to a Strong Funds Account form. Once
the Plan is established, you may alter the amount of the deposit, alter the
frequency of the deposit, or terminate your participation in the program by
notifying your employer.
AUTOMATIC EXCHANGE PLAN. The Automatic Exchange Plan allows you to make
regular, systematic exchanges (minimum $50) from one Strong Funds account into
another Strong Funds account. By setting up the Plan, you authorize the Fund and
its agents to redeem a set dollar amount or number of shares from the first
account and purchase shares of a second Strong Fund. In addition, you authorize
the Fund and its agents to accept telephone instructions to change the dollar
amount and frequency of the exchange. An exchange transaction is a sale and
purchase of shares for federal income tax purposes and may result in a capital
gain or loss. To establish the Plan, request a form by calling 1-800-368-3863.
-----------------------
PROSPECTUS PAGE II-11
<PAGE> 27
To participate in the Automatic Exchange Plan, you must have an initial
account balance of $2,500 in the first account and at least the minimum initial
investment in the second account. Exchanges may be made on any day or days of
your choice. If the amount remaining in the first account is less than the
exchange amount you requested, then the remaining amount will be exchanged. At
such time as the first account has a zero balance, your participation in the
Plan will be terminated. You may also terminate the Plan at any time by calling
or writing to the Fund. Once participation in the Plan has been terminated for
any reason, to reinstate the Plan you must do so in writing; simply investing
additional funds will not reinstate the Plan.
SYSTEMATIC WITHDRAWAL PLAN. You can set up automatic withdrawals from your
account at regular intervals. To begin distributions, you must have an initial
balance of $5,000 in your account and withdraw at least $50 per payment. To
establish the Systematic Withdrawal Plan, request a form by calling
1-800-368-3863. Depending upon the size of the account and the withdrawals
requested (and fluctuations in net asset value of the shares redeemed),
redemptions for the purpose of satisfying such withdrawals may reduce or even
exhaust the account. If the amount remaining in the account is not sufficient to
meet a Plan payment, the remaining amount will be redeemed and the Plan will be
terminated.
SPECIAL SITUATIONS
POWER OF ATTORNEY. If you are investing as attorney-in-fact for another
person, please complete the account application in the name of such person and
sign the back of the application in the following form: "[applicant's name] by
[your name], attorney-in-fact." To avoid having to file an affidavit prior to
each transaction, please complete the Power of Attorney form available from
Strong Funds at 1-800-368-3863. However, if you would like to use your own power
of attorney form, please call the same number for instructions.
CORPORATIONS AND TRUSTS. If you are investing for a corporation, please
include with your account application a certified copy of your corporate
resolution indicating which officers are authorized to act on behalf of the
corporation. As an alternative, you may complete a Certification of Authorized
Individuals form, which can be obtained from the Fund. Until a valid corporate
resolution or Certification of Authorized Individuals form is received by the
Fund, services such as telephone and wire redemption will not be established.
If you are investing as a trustee, please include the date of the trust. All
trustees must sign the application. If they do not, services such as telephone
and wire redemption will not be established. All trustees must sign redemption
requests unless proper documentation to the contrary is provided to the Fund.
Failure to provide these documents or signatures as required when you invest may
result in delays in processing redemption requests.
-----------------------
PROSPECTUS PAGE II-12
<PAGE> 28
SIGNATURE GUARANTEES. A signature guarantee is designed to protect you and
the Funds against fraudulent transactions by unauthorized persons. In the
following instances, the Fund will require a signature guarantee for all
authorized owners of an account:
- - when you add the telephone redemption option to your existing account;
- - if you transfer the ownership of your account to another individual or
organization;
- - when you submit a written redemption request for more than $25,000;
- - when you request to redeem or redeposit shares that have been issued in
certificate form;
- - if you open an account and later decide that you want certificates;
- - when you request that redemption proceeds be sent to a different name or
address than is registered on your account;
- - if you add/change your name or add/remove an owner on your account; and
- - if you add/change the beneficiary on your transfer on death account.
A signature guarantee may be obtained from any eligible guarantor
institution, as defined by the SEC. These institutions include banks, savings
associations, credit unions, brokerage firms, and others. PLEASE NOTE THAT A
NOTARY PUBLIC STAMP OR SEAL IS NOT ACCEPTABLE.
-----------------------
PROSPECTUS PAGE II-13
<PAGE> 29
NOTES
<PAGE> 30
NOTES
<PAGE> 31
NOTES
<PAGE> 32
STRONG SCHAFER VALUE FUND, INC.
---------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------------
STRONG FUNDS
P. O. Box 2936
Milwaukee, Wisconsin 53201
Telephone: (414) 359-1400
Toll-Free: (800) 368-3863
Device for the Hearing-Impaired:
(800) 999-2780
February 1, 1996
This Statement of Additional Information is not a prospectus. A copy
of the Prospectus dated February 1, 1996 (the "Prospectus") of Strong Schafer
Value Fund, Inc. (the "Fund") may be obtained without charge by writing or
telephoning the Fund at the address and telephone number set forth above. The
Prospectus provides the basic information about the Fund. This Statement of
Additional information contains information in addition to and more detailed
than that set forth in the Prospectus, and should be read in conjunction with
the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . 2
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . 2
Directors and Officers of the Fund . . . . . . . . . . . . . . . . . . . . 5
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Advisor and Investment
Advisory Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purchase, Redemption and Pricing of Shares . . . . . . . . . . . . . . . . 11
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . 17
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Portfolio Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
1
<PAGE> 33
<TABLE>
<S> <C>
Shareholder Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
INVESTMENT OBJECTIVE AND POLICIES
(SEE ALSO "INVESTMENT OBJECTIVE AND POLICIES"
IN THE FUND'S PROSPECTUS)
The primary investment objective of the Fund is to seek long-term
capital appreciation. Current income is a secondary objective in the selection
of investments. The securities in which the Fund may invest are described
under "INVESTMENT OBJECTIVE AND POLICIES" in the Fund's Prospectus.
It is anticipated that the Fund will diversify its investments among
various issuers in different industries. The Fund may, however, from time to
time, invest up to 25% of the value of its total assets in securities of
issuers all of which conduct their principal business activities in the same
industry.
INVESTMENT RESTRICTIONS
The policies set forth below are fundamental policies of the Fund and
may not be changed without approval of the holders of the lesser of: (i) 67% of
the Fund's shares present or represented at a shareholders meeting at which the
holders of more than 50% of such shares are present or represented, or (ii)
more than 50% of the outstanding shares of the Fund. The Fund may not:
1. Purchase securities on margin, participate in a joint-trading
account (the bunching of securities transaction orders with orders of
other accounts managed by the advisor not being considered participation
in a joint-trading account for this purpose), sell securities short, act
as an underwriter or distributor of securities other than shares of the
Fund, lend money (except by purchasing publicly distributed debt
securities or entering into repurchase agreements) or purchase or sell
commodities, commodities futures or real estate (marketable securities of
companies whose business involves the purchase or sale of real estate not
being considered real estate for this purpose).
2. Borrow money or issue senior securities except for temporary bank
borrowings (not in excess of 5% of the value of its total assets) for
emergency or extraordinary
2
<PAGE> 34
purposes, or pledge, mortgage or hypothecate any of its assets to secure
such borrowings to an extent greater than 10% of the value of the Fund's
net assets.
3. Make investments for the purposes of exercising control or
management of any company.
4. Purchase securities of any issuer (other than the United States
or an instrumentality of the United States), if as a result of such
purchase, the Fund would hold more than 10% of the voting securities of
any class of such issuer or more than 5% of the Fund's total assets would
be invested in securities of such issuer.
5. Concentrate more than 25% of the value of its total assets,
exclusive of U.S. government securities, in securities issued by companies
primarily engaged in the same industry.
6. Enter into repurchase agreements with maturities of more than
seven days or invest in securities for which there is no readily available
market if, as a result thereof, such repurchase agreements and securities
would constitute more than 10% of the value of the net assets of the Fund.
7. Invest in put or call options.
Additional investment restrictions adopted by the Fund, which may be
changed by the Board of Directors without a vote of the shareholders, provide
that the Fund may not:
1. Invest in the securities of a foreign issuer or depository
receipts for such securities, if at the time of acquisition more than 20%
of the value of the Fund's assets would be invested in such securities.
2. Invest more than 5% of the value of its total assets in companies
having a record, together with predecessors, of less than three years of
continuous operation.
3. Purchase securities of other investment companies, except on the
open market where no commission or profit results other than the broker's
commission, or as part of a plan of merger, consolidation or
reorganization approved by the shareholders of the Fund.
4. Acquire or retain any security issued by a company, an officer or
director of which is an officer or director of the Fund or an officer,
director or other affiliated person of its investment advisor.
3
<PAGE> 35
5. Acquire or retain any security issued by a company if any of the
directors or officers of the Fund or directors, officers or other
affiliated persons of its investment advisor beneficially own more than
1/2% of such company's securities and all of the above persons owning more
than 1/2% own together more than 5% of its securities.
6. Purchase any interest in any oil, gas or any other mineral
exploration or development program, including mineral leases.
7. Purchase any securities which are restricted from sale to the
public without registration under the Securities Act of 1933.
8. Invest more than 5% of its net assets in warrants (valued at the
lower of cost or market value) or more than 2% of its net assets in
warrants not listed on the New York Stock Exchange or the American Stock
Exchange (warrants acquired by the Fund in units or attached to securities
to be considered without value for these purposes).
9. Loan portfolio securities except where collateral values are
continuously maintained at no less than 100% by "marking to market" daily
and the practice is fair, just and equitable.
4
<PAGE> 36
DIRECTORS AND OFFICERS OF THE FUND
Set forth below is information about the directors and officers of
the Fund. Directors deemed to be "interested persons" of the Fund for purposes
of the Investment Company Act of 1940, as amended (the "Investment Company
Act"), are indicated by an asterisk (*).
<TABLE>
<CAPTION>
Name and Business Position(s) Held Principal Occupation(s)
Address with Fund and Other Affiliations
- ---------------- ------------------ -----------------------
<S> <C> <C>
David K. Schafer* Director and Sole Director and
645 Fifth Avenue President President, Schafer
New York, NY 10022 Capital Management, Inc., a registered investment
advisor, since June 1985; President, Chubb Equity
Managers Inc., a wholly-owned subsidiary of The
Chubb Corporation, an insurance and financial
services company, since October 1992; Chairman of
the Board of Schafer Cullen Capital Management,
Inc., a registered investment advisor, since
January 1983; President, INCO Capital Management
Inc., a registered investment advisor, from June
1978 to December 1981.
James P. Cullen* Director and Vice President, Schafer
645 Fifth Avenue Vice President Capital Management, Inc.
New York, NY 10022 since June 1985;
President, Schafer Cullen Capital Management, Inc.,
since January 1983; Vice President, Donaldson,
Lufkin & Jenrette, registered broker/dealers, from
January 1979 to December 1982.
</TABLE>
5
<PAGE> 37
<TABLE>
<CAPTION>
Name and Business Position(s) Held Principal Occupation(s)
Address with Fund and Other Affiliations
- ----------------- ------------------ -----------------------
<S> <C> <C>
Eugene W. Potter, Jr. Director Currently retired;
43 Elm Lane President of Investment
Bronxville, NY 10708 Management Services, a
division of INCO Ltd, from July 1981 to November
1986; Chairman, Management Investment Committee,
INCO Ltd. prior thereto; Trustee, Capstone
International Series Trust (formerly Investors
International Series Trust), since May 1986.
Brendan J. Spillane Secretary and Secretary and Treasurer,
645 Fifth Avenue Treasurer Schafer Capital Management,
New York, NY 10022 Inc. since May, 1989; Treasurer and Equity Research
Analyst, Schafer Cullen Capital Management, Inc.
since May 1989; Senior Accountant, Price
Water-house, independent accountants, from August
1985 to April 1989; Certified Public Accountant
since November 1988.
</TABLE>
As of December 31, 1995, officers and directors of the Fund as a
group owned an aggregate of 48780 shares of the Fund. Each director of the
Fund, other than Messrs. Schafer and Cullen, is paid a director's fee of $1,000
during each calendar quarter plus $500 for each meeting attended and is
reimbursed for the expenses of attendance at such meetings.
The Fund does not pay any fees to its directors who are considered
"interested persons" of the Fund or its investment advisor, as defined in the
Investment Company Act. The aggregate compensation paid by the Fund to its
sole director who is not an interested person of the Fund or its investment
advisor (as defined in the Investment Company Act) during its fiscal year ended
September 30, 1995 is set forth below. The Fund's investment advisor does not
provide investment advisory services to any other registered investment
company, and therefore the Fund's directors receive compensation only from the
Fund. The Fund does not maintain any deferred compensation, pension or
retirement plans, and no pension or retirement benefits are accrued as part of
Fund expenses.
6
<PAGE> 38
<TABLE>
<CAPTION>
Aggregate
Name of Non-Interested Compensation
Director of the Fund from the Fund
---------------------- -------------
<S> <C>
Eugene W. Potter $3,000
</TABLE>
PRINCIPAL SHAREHOLDERS
At December 31, 1995, the following persons were known to the Fund to
be the owners of record of 5% or more of the outstanding shares of the Fund:
<TABLE>
<CAPTION>
Amount of % of
Name Record Ownership Outstanding Shares
- ---- ---------------- ------------------
<S> <C> <C>
Charles Schwab & Co., Inc. $1,664,444 38.2
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
INVESTMENT ADVISOR AND INVESTMENT ADVISORY AGREEMENT
On July 26, 1995, the Board of Directors of the Fund, including the
sole director who is not an interested person of the Fund (as defined in the
Investment Company Act), last approved the continuation of the appointment of
Schafer Capital Management, Inc. (the "Advisor"), 645 Fifth Avenue, New York,
New York 10022, to furnish continuous investment advisory services and
management to the Fund pursuant to an Investment Advisory Agreement dated
August 13, 1985 (the "Advisory Agreement"). The Advisory Agreement was
approved by the Fund's shareholders on January 21, 1987.
Mr. Schafer, President and a Director of the Fund, is also President
and sole Director of the Advisor. Mr. Cullen, Vice President and a Director of
the Fund, is also Vice President of the Advisor. Mr. Spillane, Secretary and
Treasurer of the Fund, is also Secretary and Treasurer of the Advisor. All of
the outstanding stock of the Advisor is owned by Mr. Schafer.
A discussion of the advisory fee payable to the Advisor is included
under the caption "ABOUT THE FUND -- THE ADVISOR" in the Prospectus. For the
years ended September 30, 1995, 1994 and 1993, the Fund paid the Advisor
$964,453, $417,749 and $166,205, respectively.
Under the Advisory Agreement and subject to the general supervision
of the Fund's Board of Directors, the Advisor is
7
<PAGE> 39
responsible for making and implementing investment decisions for the Fund. In
addition, the Advisor furnishes office space, office facilities, equipment,
personnel (other than the services of directors of the Fund who are not
interested persons of the Advisor), and clerical and bookkeeping services for
the Fund to the extent not provided by the Fund's custodian, transfer agent and
dividend paying agent, and accounting services agent. The Fund pays all other
expenses of its operation, including, without limitation, interest, taxes and
any governmental filing fees; brokerage commissions and other costs incurred in
connection with the purchase or sale of securities; compensation and expenses
of its directors, other than those who are interested persons of the Advisor;
legal and audit expenses; the fees and expenses of the Fund's custodian,
transfer agent and dividend paying agent, and accounting services agent;
expenses relating to the redemption of shares; expenses of servicing
shareholder accounts; fees and expenses related to the registration and
qualification of the Fund and its shares under Federal and state securities
laws; expenses of printing and mailing reports, notices and proxy material to
shareholders; insurance premiums for fidelity and other insurance coverage;
expenses of preparing prospectuses and statements of additional information and
of printing and distributing them to existing shareholders; and any
nonrecurring expenses, including actions, suits or proceedings to which the
Fund is a party and any obligation which the Fund may incur to indemnify
others. The Advisor has agreed to reimburse the Fund on a monthly basis for
all expenses incurred in any fiscal year (exclusive of taxes, interest,
brokerage fees and extraordinary expenses) which in the aggregate exceed the
lowest applicable percentage limitation prescribed by any state in which the
Fund's securities are qualified for sale. The lowest percentage limitation to
which the Fund believes it is subject at December 31, 1995 is 2 1/2% of the
first $30 million of the Fund's average annual net assets, 2% of the next $70
million of the Fund's average annual net assets and 1 1/2% of the remaining
average annual net assets.
The Advisory Agreement provides that the Advisor shall have no
liability to the Fund or its shareholders in the absence of wilful misfeasance,
bad faith, gross negligence, or reckless disregard of its obligations under the
Agreement.
The Advisory Agreement is not assignable and may be terminated by
either party, without penalty, on 60 days' notice. The Advisory Agreement will
continue in effect until August 14, 1996 (unless sooner terminated) and
thereafter for successive one-year periods so long as it is approved annually
(a) by a majority of the directors who are not interested persons of the Fund
or of the Advisor, as defined in the Investment Company Act, cast in person at
a meeting called for the purpose of voting on such approval, and (b) either by
the Board of Directors of the Fund or by the vote of shareholders described
under "Investment Restrictions."
8
<PAGE> 40
Certain of the Advisor's clients may have investment objectives
similar to the Fund and certain investments may be appropriate for the Fund and
for other clients advised by the Advisor. From time to time, a particular
security may be bought or sold for only one client or in different amounts and
at different times for more than one but less than all such clients. In
addition, a particular security may be bought for one or more clients when one
or more clients are selling such security, or purchases or sales of the same
security may be made for two or more clients on the same day. In any such
event, such transactions will be averaged as to price and allocated as to
amount in accordance with the daily purchase or sale orders actually placed for
each client. In some cases, this procedure could have a detrimental effect on
the price or amount of the securities purchased by or sold by the Fund. In
other cases, however, it is believed that the ability of the Fund to
participate, to the extent permitted by law, in volume transactions will
produce better results for the Fund. The sale of the Fund's shares is not a
determining factor in these transactions.
The Fund has no proprietary or exclusive rights in the names "Strong"
or "Schafer" or any logo or service mark furnished by Strong (as hereinafter
defined) or the Advisor, and may use such names and any such logos or service
marks only so long as the arrangements with Strong referred to in the following
paragraph and the Advisory Agreement with the Advisor, respectively, remain in
effect.
On January 10, 1996, the Advisor entered into a non-binding letter of
intent with Strong Capital Management, Inc. ("Strong") which provides for,
among other things, the Advisor and Strong to negotiate agreements (i)
designating Strong to assume certain responsibilities relating to the marketing
of the Fund's shares and calling for the Advisor to compensate Strong for such
activities and (ii) providing Strong the right to acquire, in the future, an
interest in the Advisor in a form yet to be negotiated, subject to the
satisfaction of certain substantive conditions (and subject to satisfaction of
applicable regulatory requirements). Strong is located in Milwaukee, Wisconsin
and currently manages approximately $17 billion in equity and fixed income
assets, including the Strong Family of Funds, a family of more than 25
diversified and non-diversified no-load mutual funds. Strong has recently
begun marketing the Fund as part of the Strong Family of Funds. These
arrangements are not expected to result in any material changes in the
investment management of the Fund's portfolio.
9
<PAGE> 41
DISTRIBUTOR
Pursuant to a distribution agreement dated as of January 10, 1996,
Strong Funds Distributors, Inc., an affiliate of Strong, has agreed to act at
the request of the Fund and the Advisor as the Fund's agent to effect the
distribution of the Fund's shares in certain jurisdictions in which the Fund is
not authorized to distribute its shares directly. Strong Funds Distributors,
Inc. is not entitled to receive any compensation from the Fund for its services
under the agreement. The agreement may be terminated at any time (a) by the
Board of Directors of the Fund or by a vote of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to Strong Funds
Distributors, Inc. and the Advisor or (b) by Strong Funds Distributors, Inc. on
60 days' written notice to the Fund and the Advisor. The agreement shall
terminate in the event of its assignment by Strong Funds Distributors, Inc. If
not so terminated, the agreement shall continue in effect from year to year
only so long as such continuance is approved annually by the Board of Directors
or stockholders of the Fund, and, in either event, by a majority of those
directors who are not interested persons of any party to the agreement.
From time to time, the Distributor may hold in-house sales incentive
programs for its associated persons under which these persons may receive
non-cash compensation awards in connection with the sale and distribution of a
Fund's shares. These awards may include items such as, but not limited to,
gifts, merchandise, gift certificates, and payment of travel expenses, meals
and lodging. As required by the National Association of Securities Dealers,
Inc. or NASD's proposed rule amendments in this area, any in-house sales
incentive program will be multi-product oriented, i.e., any incentive will be
based on an associated person's gross production of all securities within a
product type and will not be based on the sales of shares of any specifically
designated mutual fund.
The Fund's distributor for the years ended September 30, 1995, 1994
and 1993 was Lazard Freres & Co. For the years ended September 30, 1995, 1994
and 1993, the Fund paid brokerage commissions of $26,838, $11,151 and $3,346,
respectively, to Lazard Freres & Co.
10
<PAGE> 42
BROKERAGE
The Advisor is responsible for selecting brokers and dealers to
effect purchases or sales of securities for the account of the Fund. In
selecting such brokers, it is the policy of the Advisor to seek the best
execution of orders at the most favorable price in light of the overall quality
of brokerage and research services provided, as described in this and the
following paragraph. In selecting brokers to effect portfolio transactions,
the determination of what is expected to result in best execution at the most
favorable price involves a number of largely judgmental considerations. Among
these are the Advisor's evaluation of the broker's efficiency in executing and
clearing transactions, block trading capability (including the broker's
willingness to position securities), the broker's familiarity with the security
and the broker's financial strength and stability. The most favorable price to
the Fund means the best net price without regard to the mix between purchase or
sale price and commission, if any. For the years ended September 30, 1995,
1994 and 1993, the Fund paid total brokerage commissions of $331,297, $141,926
and $43,113, respectively. The Fund's annual portfolio turnover rate is set
forth in the Prospectus under "FINANCIAL HIGHLIGHTS."
In allocating the Fund's brokerage, the Advisor will also take into
consideration the research, analytical, statistical and other information and
services provided by the broker, such as general economic reports and
information, reports or analyses of particular companies or industry groups and
technical information and the availability of the brokerage firm's analysts for
consultation. While the Advisor believes these services have substantial
value, they are considered supplemental to the Advisor's own efforts in the
performance of its duties under the Advisory Agreement. As permitted by the
Advisory Agreement and in accordance with Section 28(e) of the Securities
Exchange Act of 1934, as amended, the Advisor may pay brokers higher brokerage
commissions than might be available from other brokers if the Advisor
determines in good faith that such amount paid is reasonable in relation to the
value of the overall quality of the brokerage, research and other services
provided. Other clients of the Advisor may indirectly benefit from the
availability of these services to the Advisor, and the Fund may indirectly
benefit from services available to the Advisor as a result of transactions for
other clients.
PURCHASE, REDEMPTION AND PRICING OF SHARES
For a general discussion of how shares of the Fund are purchased and
redeemed and how the Fund values such shares for such purposes, see "HOW TO BUY
SHARES", "HOW TO SELL SHARES" AND "DETERMINING YOUR SHARE PRICE" in the
Shareholder Manual section of
11
<PAGE> 43
the Prospectus. Such discussions are incorporated herein by reference.
The Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents. Therefore, deposit in the mail
or with such services, or receipt at Strong's post office box, of purchase
applications or redemption requests does not constitute receipt by Strong or
the Fund.
Broker-dealers which effect purchases or sales of shares of the Fund
on behalf of their customers may impose a transaction charge on such customers
for performing such services. No such transaction charge is imposed if shares
are purchased directly from the Fund, without the employment of the services of
a broker-dealer.
From time to time, the Fund, directly or indirectly through
arrangements with the Advisor, and/or the Advisor may pay amounts to third
parties that provide transfer agent and other administrative services relating
to the Fund to persons who beneficially own interests in the Fund, such as
participants in 401(k) plans. These services may include, among other things,
sub-accounting services, answering inquiries relating to the Fund,
transmitting, on behalf of the Fund, proxy statements, annual reports, updated
Prospectuses, other communications regarding the Fund, and related services as
the Fund or beneficial owners may reasonably request. In such cases, the Fund
will not pay fees at a rate that is greater than the rate the Fund is currently
paying Strong for providing these services to Fund shareholders. See also
"Investment Advisor and Investment Advisory Agreement" for a description of an
arrangement expected to be entered into between the Advisor and Strong.
Retirement Programs
The Fund makes available a Defined Contribution Plan with options
including a profit-sharing plan, a money purchase pension plan and a paired
plan (a combination of a profit-sharing plan and a money purchase pension
plan), a so-called 403(b)(7) Plan, IRAs and Simplified Employee Pension Plans
("SEPs") (including Salary Reduction SEPs). The Fund may also be made an
investment election under 401(k) Plans. Contributions to each are invested,
and dividends and distributions are automatically reinvested, in shares of the
Fund.
12
<PAGE> 44
Generally, the maximum contribution allowable each year to an IRA is
the lesser of $2,000 and 100% of compensation includible in gross income for
the year. Under certain circumstances, a contribution to an IRA will be
tax-deductible. The maximum annual contribution allowable to a Defined
Contribution Plan is the lesser of (i) $30,000 and (ii) 25% of an employee's
compensation or a self-employed individual's earned income (net earnings
reduced by Defined Contribution Plan contributions) for the year.
Additionally, the maximum deduction allowable each year for contribution to the
profit sharing plan option of a Defined Contribution Plan is, generally, 15% of
an employee's compensation or a self-employed individual's earned income (net
earnings reduced by Defined Contribution Plan contributions) for the year.
Under a SEP, an employer, or self-employed individual, is permitted to
contribute a discretionary amount each year up to the lesser of $30,000 and 15%
of an employee's compensation for the year or a self-employed individual's
earned income (i.e., net earnings reduced by SEP contributions) for the year,
into an individual IRA for each employee or self-employed individual. The
annual compensation of each employee and the earned income of each
self-employed individual which can be taken into account under the Defined
Contribution Plan and a SEP for any year cannot exceed $150,000 as increased by
the cost-of-living adjustments for the calendar years after 1994 as determined
by the Internal Revenue Service. A self-employed individual may contribute to
either a Defined Contribution Plan or a SEP and, in either case, may also
contribute to an IRA.
The custodial agreements for the Defined Contribution Plan and IRAs
provide that Firstar Trust Company, Milwaukee, Wisconsin, will provide the
custodial service unless a different custodian is specified. The annual
maintenance fee payable to Firstar Trust Company with respect to each
participant in the Defined Contribution Plan and an IRA is at present $10.00
and, in the case of an IRA, will automatically be deducted from each IRA
account in September, unless paid prior thereto. These fees may be changed at
any time. If a custodian other than Firstar Trust Company is specified, fees
will be determined by such custodian.
13
<PAGE> 45
The Defined Contribution Plan has been approved by the Internal
Revenue Service for use by self-employed persons as a plan qualified under
Section 401 of the Internal Revenue Code. The Internal Revenue Service has
also approved the money purchase pension plan and profit sharing plan options
of the Defined Contribution Plan as a paired plan with the result that
self-employed persons may adopt either or both of such plans. Copies of the
Defined Contribution Plan may be obtained from the Fund. The IRA Custodial
Agreement has not been submitted to the IRS for approval because it
incorporates IRS Form 5305-A which makes such submission unnecessary.
The Fund makes available IRS Forms 5305-SEP and 5305A-SEP for
employers or self-employed persons who want to establish a SEP.
The employer or individual, as the case may be, should consult his
tax advisor or attorney as to the applicability of the Defined Benefit Plan,
403(b)(7) Plan, SEP or IRA to his particular circumstances. Additionally,
since these retirement programs involve commitments covering future years, the
investment objectives of the Fund, as described in the Prospectus and in this
Statement of Additional Information, should be carefully considered.
For a discussion of income tax withholding on certain distributions
from qualified retirement plans or tax-sheltered annuity plans, see "Tax
Status" below.
TAX STATUS
The Fund has qualified, and intends to remain qualified, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. To so qualify, the Fund must, among other things, (i)
derive in each taxable year at least 90% of its gross income from dividends,
interest, gains from the sale or other disposition of stock or securities or
foreign currencies or other income derived with respect to its business of
investing in such stock, securities or currencies, (ii) derive in each taxable
year less than 30% of its gross income from the sale or other disposition of
stock, securities or other specified instruments held for less than three
months and (iii) diversify its holdings so that, at the end of each quarter of
its taxable year, (a) at least 50% of the value of its assets is represented by
cash, cash items, U.S. Government securities, and other securities limited, in
respect of any one issuer, to a value not greater than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities of such issuer
and (b) not more than
14
<PAGE> 46
25% of the value of its assets is invested in the securities of any one issuer
(other than the U.S. Government).
As a regulated investment company, the Fund is generally not subject
to U.S. Federal income tax on its income and gains distributed to shareholders,
provided the Fund distributes to its shareholders at least 90% of its net
investment income (i.e., net income exclusive of net long-term capital gains)
each year.
If the Fund purchases shares in a foreign corporation treated as a
"passive foreign investment company" ("PFIC") for U.S. Federal income tax
purposes, however, the Fund may be subject to U.S. Federal income tax, and an
additional charge in the nature of interest, on a portion of distributions from
such foreign corporation and on gain from the disposition of such shares
(collectively referred to as "excess distributions"), even if such excess
distributions are paid by the Fund as a dividend to its shareholders. In
certain limited circumstances, the Fund may be eligible to make a qualified
electing fund election with respect to certain PFICs in which it owns shares.
Such an election would enable the Fund to avoid the taxes on excess
distributions by including in income each year the Fund's pro rata share of the
PFIC's income and gains for that year (whether or not the Fund's share of such
income and gains are distributed to the Fund). Alternatively, pursuant to
Proposed Treasury regulations (which are not yet effective), the Fund may be
eligible to elect under certain circumstances to treat its stock in certain
PFICs as having been sold on the last business day of each taxable year of the
Fund for the stock's fair market value, in which case the Fund would (subject
to certain exceptions) generally avoid the taxes on excess distributions.
These elections, therefore, may cause the Fund to recognize income in a
particular year in excess of the distributions it receives in that year from
the PFIC.
A non-deductible 4% excise tax will be imposed on the Fund to the
extent the Fund does not distribute during each calendar year (i) 98% of its
ordinary income for such calendar year, (ii) 98% of its capital gain net income
for the one-year period ending on October 31 of such calendar year and (iii)
certain other amounts not distributed in previous years. The Fund intends to
distribute its income and gains in a manner so as to avoid the imposition of
such 4% excise tax.
For purposes of applying the distribution requirements described
above, and for purposes of determining the taxable income of shareholders each
year, dividends declared by the Fund in October, November or December of a
year, payable to shareholders as of a record date in such a month, and paid
during the following January, will be treated for Federal income tax purposes
as paid by the Fund and received by shareholders as of December 31 of the
calendar year declared.
15
<PAGE> 47
If the net asset value of shares is reduced below a shareholder's
cost by a distribution, such distribution would be taxable as described in the
Prospectus, even though the distribution might be viewed in economic terms as a
return of capital. For Federal income tax purposes the shareholder's original
cost continues as his tax basis and on redemption his gain or loss is the
difference between such basis and the redemption price.
Income tax withholding at a rate of 20% is applicable to any
distribution from a qualified retirement plan, such as the Defined Contribution
Plan, or a tax-sheltered annuity plan where the distribution is eligible for
tax-free rollover treatment but is not transferred directly to a specified
retirement vehicle such as another qualified plan or an IRA. Also, all
qualified plans must provide participants and certain other distributees with
an election to have an eligible rollover distribution transferred directly to
certain specified retirement vehicles. If a shareholder receives a
distribution which is subject to the 20% withholding requirement and wishes to
roll the distribution into another vehicle such as an IRA within 60 days, the
shareholder will have to contribute to the IRA the amount of the distribution
(after withholding) plus an amount equal to the amount withheld. The amount
withheld can be applied to reduce the shareholder's Federal income tax
liability and may be refunded to the shareholder upon filing a Federal income
tax return if it exceeds such tax liability. If the amount withheld is not
rolled over into the IRA, it will be subject to income tax plus, if the
shareholder has not attained age 59-1/2, an additional 10% penalty tax.
The rules broadly define distributions which qualify for rollover
treatment. Shareholders who expect to receive distributions which may qualify
for rollover treatment and therefore may be subject to 20% withholding should
consult their own tax advisers for a complete discussion on the impact of these
rules on such distributions.
The foregoing is only a general summary of certain provisions of the
Internal Revenue Code and current Treasury regulations applicable to the Fund
and its shareholders. The Internal Revenue Code and such regulations are
subject to change by legislative or administrative action.
The tax consequences to a foreign shareholder of the Fund may be
different from those described herein. Foreign shareholders are advised to
consult their own tax advisors with respect to the particular tax consequences
to them of an investment in the Fund.
Distributions to shareholders may also be subject to state and local
taxes. Investors are urged to consult their own tax advisors regarding the
application of Federal, state and local tax laws.
16
<PAGE> 48
PERFORMANCE INFORMATION
The annual rate of return of the Fund varies and during the five year
period ended December 31, 1995 ranged from -4.28% in 1994 to 40.92% in 1991.
The compounded annual rates of return of the Fund for the one, five and ten
year periods ended December 31, 1995 were 34.15%, 21.65% and 14.95%,
respectively, computed in accordance with the rules for standardized
computation of performance as established by the Securities and Exchange
Commission. Such rules for standardized computation of performance provide for
determining percentage changes, carried out to two decimal places, based on
changes in net asset value as described under "ABOUT THE FUND -- PERFORMANCE
INFORMATION" in the Prospectus.
The Fund's performance will vary from time to time and an investor's
shares, when redeemed, may be worth more or less than their original cost.
Past results should not be considered representative of future performance.
Factors affecting the Fund's performance include, among other things, general
market conditions, the composition of its portfolio, and operating expenses.
No adjustment is made in reporting performance for taxes payable by
shareholders on reinvested income dividends and capital gains distributions.
GENERAL INFORMATION
Portfolio Characteristics
In order to present a more complete picture of a Fund's portfolio,
marketing materials may include various actual or estimated portfolio
characteristics, including but not limited to median market capitalizations,
earnings per share, alphas, betas price/earnings ratios, returns on equity,
dividend yields, capitalization ranges, growth rates, price/book ratios, top
holdings, sector breakdowns, asset allocations, quality breakdowns and
breakdowns by geographic region.
Measures of Volatility and Relative Performance
Occasionally, statistics may be used to specify Fund volatility or
risk. The general premise is that greater volatility connotes greater risk
undertaken in achieving performance. Measures of volatility or risk are
generally used to compare the Fund's net asset value or performance relative to
a market Index. One measure of volatility is beta. Beta is the volatility of
a fund relative to the total market as represented by the Standard & Poor's 500
Index. A beta of more than 1.00 indicates volatility greater than the
17
<PAGE> 49
market and a beta of less than 1.00 indicates volatility less than the market.
Another measure of volatility or risk is standard deviation. Standard
deviation is a statistical tool that measures the degree to which a fund's
performance has varied from its average performance during a particular time
period.
Standard deviation is calculated using the following formula:
2
Standard deviation = the square root of [SIGMA](xi - xa)
-----------------
n-1
where: [SIGMA] = "the sum of",
x = each individual return during the time period.
i
x = the average return over the time period, and
a
n = the number of individual returns during the time period.
Statistics may also be used to discuss the Fund's relative
performance. One such measure is alpha. Alpha measures the actual return of
the fund compared to the expected return of a fund given its risk (as measured
by beta). The expected return is based on how the market as a whole performed,
and how the particular fund has historically performed against the market.
Specifically, alpha is the actual return less the expected return. The
expected return is computed by multiplying the advance or decline in a market
representation by the fund's beta. A positive alpha quantifies the value that
the fund manager has added and a negative alpha quantifies the value that the
fund manager has lost.
Other measures of volatility and relative performance may be used as
appropriate. However, all such measures will fluctuate and do not represent
future results.
Investment Environment
Discussions of economic, social and political conditions and their
impact on the Fund may be used in advertisements and sales materials. Such
factors that may impact the Fund include but are not limited to changes in
interest rates, political developments, the competitive environment, customer
behavior, industry trends, technological advances, macroeconomic trends and the
supply and demand of various financial instruments. In addition, marketing
materials may cite the portfolio management's various interpretations of such
factors.
Eight Basic Principles For Successful Mutual Fund Investing
These common sense rules are followed by many successful investors.
They make sense for beginners, too. If you have a question on these
principles, or would like to discuss them, please contact Strong at
1-800-368-3863.
18
<PAGE> 50
1. Have a plan - even a simple plan can help you take control of your
financial future. Review your plan once a year, or if your circumstances
change.
2. Start investing as soon as possible. Make time a valuable ally. Let it
put the power of compounding to work for you, while helping to reduce your
potential investment risk.
3. Diversify your portfolio. By investing in different asset classes -
stocks, bonds, and cash - you help protect against poor performance in one
type of investment while building investments most likely to help you
achieve your important goals.
4. Invest regularly. Investing is a process, not a one-time event. By
investing regularly over the long term, you reduce the impact of
short-term market gyrations, and you attend to your long-term plan before
you are tempted to spend those assets on short-term needs.
5. Maintain a long-term perspective. For most individuals, the best
discipline is staying invested as market conditions change. Reactive,
emotional investment decisions are all too often a source of regret - and
principal loss.
6. Consider stocks to help achieve major long term goals. Over time, stocks
have provided the more powerful returns needed to help the value of your
investments stay well ahead of inflation.
7. Keep a comfortable amount of cash in your portfolio. To meet current
needs, including emergencies, use a money market fund or a bank account -
not your long-term investment assets.
8. Know what you're buying. Make sure you understand the potential risks and
rewards associated with each of your investments. Ask questions. ..
request information. . . make up your own mind. And choose a fund company
that helps you make informed investment decisions.
Strong Retirement Plan Services
Strong Retirement Plan Services offers a full menu of high quality,
affordable retirement plan options, including traditional money purchase
pension and profit sharing plans, 401(k) plans, simplified employee pension
plans, salary reduction plans, Keoghs, and 403(b) plans. Strong's retirement
plan specialists are available to help companies determine which type of
retirement plan may be appropriate for their particular situation.
Markets:
19
<PAGE> 51
The retirement plan services offered by Strong focus on four distinct
markets, based on the belief that a retirement plan should fit the customer's
needs, not the other way around.
1. Small company plans. Small company plans are designed for companies with
1-50 plan participants. The objective is to incorporate the features and
benefits typically reserved for large companies, such as sophisticated
recordkeeping systems, outstanding service and investment expertise, into
a small company plan without administrative hassles or undue expense.
Small company plan sponsors receive a comprehensive plan administration
manual as well as toll-free telephone support.
2. Large company plans. Large company plans are designed for companies with
between 51 and 1,000 plan participants. Each large company plan is
assigned a team of professionals consisting of an account manager, who is
typically an attorney, CPA, or holds a graduate degree in business,
acquisition specialist (if applicable), an accounting manager, a
legal/technical manager and an education/communications educator.
3. Women-owned businesses.
4. Non-profit and educational organizations (the 403(b) market).
Turnkey approach:
The retirement plans offered by Strong are designed to be streamlined
and simple to administer. To this end, Strong has invested heavily in the
equipment, systems and people necessary to adopt or convert a plan and to keep
it running smoothly. Strong provides all aspects of the plan, including plan
design, administration, recordkeeping and investment management. To streamline
plan design, Strong provides customizable IRS-approved prototype documents.
Strong services also include annual government reporting and testing as well as
daily valuation of each participant's account. This structure is intended to
eliminate the confusion and complication often associated with dealing with
multiple vendors. It is also designed to save plan sponsors time and expense.
The Fund strives to provide one-stop retirement savings programs that
combine the advantages of proven investment management, flexible plan design
and a wide range of investment options. The open architecture design of the
plans allow for the use of the Strong family of mutual funds as well as a
stable asset value option. Large company plans may supplement these options
with their company stock (if publicly traded) or funds from other well-known
mutual fund families.
Education:
20
<PAGE> 52
Participant education and communication is key to the success of any
retirement program, and therefore is one of the most important services that
Strong provides. Strong's goal is twofold: to make sure that plan participants
fully understand their options and to educate them about the lifelong
investment process. To this end, Strong provides attractive, readable print
materials that are supplemented with audio and video tapes, and retirement
education programs.
Service:
Strong's goal is to provide a world class level of service. One
aspect of that service is an experienced, knowledgeable team that provides
ongoing support for plan sponsors, both at adoption or conversion and
throughout the life of a plan. Strong is committed to delivering accurate and
timely information, evidenced by straightforward, complete and understandable
reports, participant account statements and plan summaries.
Strong has designed both "high-tech" and "high-touch" systems,
providing an automated telephone system as well as personal contact.
Participants can access daily account information, conduct transactions or
leave questions answered in the way that is most comfortable for them.
Strong Financial Advisors Group
The Strong Financial Advisors Group is dedicated to helping financial
advisors better serve their clients. Financial advisors receive regular
updates on the Fund, access to its portfolio manager through special conference
calls, consolidated mailings of duplicate confirmation statements, access to
Strong's network of regional representatives and other specialized services.
For more information on the Strong Financial Advisors Group, call
1-800-368-1683.
PORTFOLIO MANAGEMENT
The Fund's portfolio manager works with analysts, traders and
administrative personnel. From time to time, marketing materials may discuss
various members of the team, including their education, investment experience
and other credentials.
The Advisor's investment philosophy includes the following basic beliefs:
21
<PAGE> 53
- Stocks with lower P/E ratios and higher growth rates than the
Standard & Poor's 500 Index are attractive investment candidates for
value-oriented investors.
- Market timing is rarely successful. Instead, the Advisor maintains a
long-term perspective, normally remaining fully invested regardless
of market conditions.
- Allocating relatively equal weighting to portfolio holdings ensures a
disciplined, rational approach to the investment process.
- Since the Advisor invests in a limited number of stocks, its
selection of holdings typically requires a judicious buy and sell
discipline.
The Advisor employs a disciplined, value-oriented management style that focuses
on mid-to large-cap stocks. The investment process generally includes equally
weighting each issue and holding a relatively limited number of stocks in the
portfolio. The Advisor generally utilizes a "buy and hold" strategy, but
remains acutely aware of the Status of each individual holding. As a result of
this long-term approach, the Fund typically has a low annual turnover rate (50%
or less). As the Advisor identifies attractive new investments, current Fund
holdings are evaluated to determine sell candidates.
SHAREHOLDER REPORTS
An annual report will be issued to shareholders after the close of
each fiscal year, which ends September 30. This report will include financial
statements for the Fund audited by the Fund's independent accountants, Price
Waterhouse LLP. A semi-annual report will also be issued to the Fund's
shareholders. The Fund's financial statements appearing in its Annual Report
to Shareholders dated September 30, 1995, together with the report of Price
Waterhouse LLP thereon, are incorporated by reference in this Statement of
Additional Information.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin, acts as custodian of the cash and securities of the Fund. The
custodian holds all cash and, directly or through a book entry system or an
agent, securities of the Fund, delivers and receives payment for securities
sold by the Fund, collects income from investments of the Fund and performs
other duties, all as directed by officers of the Fund. The custodian does not
22
<PAGE> 54
exercise any supervisory function over the management of, or the purchase and
sale of securities by, the Fund.
TRANSFER AGENT
Strong acts as the Fund's transfer agent, shareholder servicing agent
and fund accounting services agent.
EXPERTS
Price Waterhouse LLP has been selected as the independent accountants
of the Fund. As such, they are responsible for auditing the financial
statements of the Fund. The financial statements of the Fund included in the
1995 Annual Report, incorporated herein by reference, have been audited by
Price Waterhouse LLP.
ADDITIONAL INFORMATION
The Fund's Prospectus and this Statement of Additional Information
omit certain information contained in the Registration Statement which the Fund
has filed with the Securities and Exchange Commission under the Securities Act
of 1933, and reference is hereby made to the Registration Statement for further
information with respect to the Fund and the securities offered hereby. This
Registration Statement is available for inspection by the public at the
Securities and Exchange Commission in Washington, D.C.
23
<PAGE> 55
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
Included in Part A of this Registration Statement:
Financial Highlights
Included in Part B of this Registration Statement:
Report of Independent Accountants*
Statement of Assets and Liabilities as of September 30, 1995*
Schedule of Investments as of September 30, 1995*
Statement of Operations for the Year Ended September 30, 1995*
Statement of Changes in Net Assets for the Year Ended September 30, 1995
and the Year Ended September 30, 1994*
Statements, schedules and historical information other than those listed above
have been omitted since they are either not applicable or are not required.
(b) Exhibits.
1.1 Articles of Incorporation
1.2 Certificate of Correction of Articles of Incorporation
1.3 Change of Resident Agent and Address and Principal office
1.4 Articles of Amendment
2. By-Laws of the Registrant, as amended (Filed in electronic format
solely to comply with Rule 102 of Regulation S-T)
3. Not Applicable
4. Specimen stock certificate**
5. Investment Advisory Agreement between the Registrant and Schafer
Capital Management, Inc. (Filed in electronic format solely to
comply with Rule 102 of Regulation S-T)
6. Distribution Agreement between the Registrant and Strong Funds
Distributors, Inc.
7. Not Applicable
8. Custodian Agreement between the Registrant and First Wisconsin Trust
Company (now Firstar Trust Company)***;
and the Schedule of Remuneration****
9.1 Shareholder Servicing and Transfer Agent Agreement between the
Registrant and Strong and Shareholder Servicing Fee Schedule
C-1
<PAGE> 56
9.2 Fund Accounting Servicing Agreement between the Registrant and
Strong and Fund Valuation and Accounting Annual Fee Schedule
10. Opinion and Consent of Whitman and Ransom**
11. Consent of Independent Accountants
12. Not Applicable
13. Not Applicable
14.1 Amended Prototype Defined Contribution Retirement Plan with
Standardized Adoption Agreements
14.2 Amended Individual Retirement Custodial Account
14.3 Amended Section 403(b)(7) Retirement Plan
15. Not Applicable
16. Schedule for Computation of Performance Quotations
17. Not Applicable
- ---------------
* Incorporated by reference from the Annual Report to Shareholders for
the year ended September 30, 1995.
** Previously filed in Pre-Effective Amendment No. 1 on October 17, 1985
and hereby incorporated by reference.
*** Previously filed in Post-Effective Amendment No. 5 on January 31,
1990 and hereby incorporated by reference.
**** Previously filed in Post-Effective Amendment No. 10 on
February 1,1995 and hereby incorporated by reference.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
As of December 31, 1995, the number of record holders of each class
of securities of the Registrant was as follows:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Common Stock, $.10 par value...... 4,386
</TABLE>
Item 27. Indemnification.
Article XII of the Registrant's By-Laws provides for indemnification
of the Registrant's directors and officers under certain circumstances. A copy
of such By-Laws are incorporated by reference herein.
C-2
<PAGE> 57
Item 28. Business and Other Connections of Investment Adviser.
Schafer Capital Management, Inc., registrant's investment adviser,
also acts as investment adviser to certain other clients.
David K. Schafer, a director and officer of Schafer Capital
Management, Inc., is also Chairman of the Board of Schafer Cullen Capital
Management, Inc., 645 Fifth Avenue, New York, New York 10022 and President of
Chubb Equity Managers, Inc., a wholly-owned subsidiary of The Chubb
Corporation.
James P. Cullen, an officer of Schafer Capital Management, Inc., is
also President of Schafer Cullen Capital Management, Inc.
Schafer Cullen Capital Management, Inc. is a registered investment
adviser under the Investment Advisers Act of 1940, as amended.
Item 29. Principal Underwriters.
Not Applicable.
Item 30. Location of Accounts and Records
Such records are located at:
1. Strong Schafer Value Fund, Inc.
645 Fifth Avenue
New York, New York 10022
2. Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
3. Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
4. Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
C-3
<PAGE> 58
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted 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.
The Registrant has also been advised that in the opinion of the
Securities and Exchange Commission it may, under the Investment Company of
1940, advance attorney's fees or other expenses incurred by its directors,
officers or investment adviser in defending a proceeding, upon the undertaking
by or on behalf of the indemnitee to repay the advance unless it is ultimately
determined that he is entitled to indemnification, so long as least one of the
following conditions is met prior to the advance: (1) the indemnitee shall
provide a security for his undertaking, (2) the Registrant shall be insured
against losses arising by reason of any lawful advances, or (3) a majority of a
quorum of the disinterested, non-party directors of the Registrant, or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be bound
entitled to indemnification.
C-4
<PAGE> 59
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and State of New York on the 31st day
of January, 1996.
SCHAFER VALUE FUND, INC.
By: /s/ David K. Schafer
---------------------------
David K. Schafer,
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on January 31, 1996 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ David K. Schafer Director and President
- ----------------------------
David K. Schafer
/s/ Brendan Spillane
- ---------------------------- Secretary and Treasurer and
Brendan Spillane Principal Financial and
Accounting Officer
*
- ---------------------------- Director and Executive
James P. Cullen Vice President
*
- ---------------------------- Director
Eugene W. Potter, Jr.
*By: /s/ David K. Schafer
------------------------
David K. Schafer
(Attorney-in-fact)
</TABLE>
S-1
<PAGE> 60
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED WITH
FORM N-1A
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
AND
REGISTRATION STATEMENT
UNDER THE
INVESTMENT COMPANY ACT OF 1940
STRONG SCHAFER VALUE FUND, INC.
(Exact name of Registrant as specified in Charter)
<TABLE>
<CAPTION>
EDGAR
Exhibit
Exhibit Number Description of Exhibit Number
- -------------- ---------------------- --------
<S> <C>
1.1 Articles of Incorporation
1.2 Certificate of Correction of
Articles of Incorporation
1.3 Change of Resident Agent and
Address and Principal office
1.4 Articles of Amendment
2 By-Laws of the Registrant, as amended
5 Investment Advisory Agreement
between the Registrant and
Schafer Capital Management, Inc.
6 Distribution Agreement between
the Registrant and Strong
Funds Distributors, Inc.
9.1 Shareholder Servicing and Transfer Agent Agreement
between the Registrant and Strong and Shareholder
Servicing Fee Schedule
9.2 Fund Accounting Servicing Agreement between the
Registrant and Strong and Fund Valuation and
Accounting Annual Fee Schedule
</TABLE>
<PAGE> 61
11 Consent of Price Waterhouse LLP
14.1 Amended Prototype Defined Contribution Retirement Plan with
Standardized Adoption Agreements
14.2 Amended Individual Retirement Custodial Account
14.3 Amended Section 403(b)(7) Retirement Plan
16 Schedule for Computation of
Performance Quotations
<PAGE> 1
ARTICLES OF INCORPORATION
OF
SCHAFER VALUE FUND, INC.
APPROVED AND RECEIVED FOR RECORD BY THE STATE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF MARYLAND AUGUST 13, 1985 AT 3:56 O'CLOCK P.M. AS IN CONFORMITY WITH
LAW AND ORDERED RECORDED.
10
RECORDED IN LIBER 2741, FOLIO 001250, OF THE RECORDS OF THE STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION OF MARYLAND.
---------------
<TABLE>
<CAPTION>
BONUS TAX PAID: RECORDING FEE PAID: SPECIAL FEE PAID:
<S> <C> <C>
$ 315 $ 28 $
- --------------- ------------------- -----------------
</TABLE>
____________
D1983892
TO THE CLERK OF THE COURT OF
IT IS HEREBY CERTIFIED, THAT THE WITHIN INSTRUMENT, TOGETHER WITH ALL
ENDORSEMENTS THEREON, HAS BEEN RECEIVED, APPROVED AND RECORDED BY THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND
<PAGE> 2
SCHAFER VALUE FUND, INC.
ARTICLES OF INCORPORATION
ARTICLE FIRST: Incorporator. The undersigned, David K. Schafer, whose
post office address is 645 Fifth Avenue, New York, New York, 10022, being at
least eighteen years of age, does hereby form a corporation under and by virtue
of the General Laws of the State of Maryland.
ARTICLE SECOND: Name. The name of the Corporation (which is hereafter
called the "Corporation") is Schafer Value Fund, Inc.
ARTICLE THIRD: Purposes. The purposes for which the Corporation is
formed are to engage in the business of a management investment company; to buy,
own, hold, sell, exchange, pledge and otherwise deal, invest, reinvest or trade
in notes, stock, bonds, options or other securities of whatsoever nature; and to
do any and all acts and things necessary or incidental hereto to the extent
permitted business corporations under the provisions of the laws of the State of
Maryland as from time to time amended.
ARTICLE FOURTH: Address and Resident Agent. The post office address of
the principal office of the Corporation in the State of Maryland is
300 East Lombard Street
Baltimore, Maryland 21202
The name and post office address of the resident agent of the Corporation in the
State of Maryland is
United States Corporation Company
300 East Lombard Street
Baltimore, Maryland 21202
Such resident agent is a Maryland corporation.
ARTICLE FIFTH: Authorized Capital Stock. The total number of shares of
capital stock which the Corporation, by resolution or resolutions of the Board
of Directors, shall have authority to issue is 25,000,000 millions shares, par
value $.10 per share, all of which shall be of a single class classified as
Common Stock, such shares having an aggregate par value of $2,500, 000.
ARTICLE SIXTH: Issuance of Capital Stock.
-2-
<PAGE> 3
6.1. General. The Board of Directors may from time to time issue,
reissue and sell or cause to be issued, reissued and sold any of the
Corporation's authorized shares of capital stock, including any additional
shares hereafter authorized and any shares redeemed and retired or repurchased
by the Corporation, for a consideration determined in accordance with Section
6.2 but not less than the par value; except that only shares previously
contracted to be sold may be issued during any period when the redemption of the
Corporation's shares has been suspended pursuant to the provisions of Section
7.4. All shares of such authorized capital stock, when issued in accordance with
the terms of this Article Sixth, shall be full paid and nonassessable.
6.2. Price. No shares of capital stock shall be issued or sold by the
Corporation, except as a stock dividend distributed to stockholders, for less
than an amount which would result in proceeds to the Corporation, in connection
with such transaction, or at least the net asset value per share, determined as
set forth in Article Eighth. The net asset value per share applicable to any
such transaction shall be the net asset value per share next determined after
receipt and acceptance of an unconditional application for purchase of shares.
The criteria for determining what constitutes an unconditional application for
purchase of shares and the receipt and acceptance of such an application shall
be prescribed by the Board of Directors.
6.3. Fractional Shares. The Corporation may issue and sell or cause to
be issued and sold fractions of shares having pro rata all the rights of full
shares, including, without limitation, the right to vote and receive dividends
and distributions, provided, however, no holder of a fractional share shall be
entitled to receive a certificate representing any fractional share.
6.4. No Preemptive Rights. No holder of any of the shares of the
Corporation whether now or hereafter authorized or created shall be entitled as
of right to subscribe for, purchase, or otherwise acquire any shares of the
Corporation which the Corporation proposes to issue; and any and all of such
shares of the Corporation, whether now or hereafter authorized or created, may
be issued, or may be reissued or transferred if the same have been redeemed and
retired or repurchased and have treasury status, to such persons, firms,
corporations, and associations, and for such lawful consideration, and on such
terms as the Board of Directors in its discretion may determine, without first
offering such shares, or any of such shares, to any such holder.
-3-
<PAGE> 4
ARTICLE SEVENTH: Redemption of Shares.
7.1. Redemption of Shares. All shares of capital stock of the
Corporation now or hereafter authorized shall be "redeemable" in the sense used
in the General Laws of the State of Maryland authorizing the formation of
corporations, at the option of the holder of such shares and, to the extent
permitted in Section 7.6, at the option of the Corporation, at the redemption
price thereof determined in the manner provided in Section 7.2. The Corporation
shall redeem shares of its capital stock subject to the conditions and at the
price determined as hereinafter set forth. Redeemed shares shall be retired,
shall revert to the status of authorized but unissued shares and may be reissued
as provided in Article Sixth.
7.2. Price. Subject to a contingent redemption charge, shares shall be
redeemed at their net asset value, determined as set forth in Article Eighth.
The net asset value per share applicable to any such redemption of shares shall
be the net asset value per share next determined after receipt of a request for
redemption of such shares in proper form. The criteria for determining what
constitutes a proper request for redemption and the receipt of such request for
redemption shall be prescribed by the Board of Directors.
7.3. Payment. Subject to the provisions of Section 7.4, payment for
shares redeemed shall be made in cash, except as hereinafter provided, to, or
upon the direction of, the stockholder of record within 7 days after the date of
receipt by the Corporation or its designated agent of (a) a written
unconditional and irrevocable instruction of the stockholder to redeem in form
acceptable to the Corporation or its designated agent together with any
certificates which may have been issued therefor, endorsed or accompanied by
proper instrument of transfer, and such other documents as the Corporation or
its designated agent may require or (b) such other direction or authorization of
redemption by the stockholder as the Board of Directors may authorize. The
Corporation may pay the redemption price in whole or in part by a distribution
in kind of securities from the portfolio of the Corporation, in lieu of cash,
valuing such securities at their value employed for determining the net asset
value governing such redemption price, and selecting the securities in such
manner as the Board of Directors may determine as fair and equitable.
7.4. Suspension of Determination of Right to Redeem Shares. The Board
of Directors may declare a suspension of the right to redeem shares of the
Corporation's capital stock (a) for any period during which the New York Stock
Exchange is closed (other than customary week end and holiday closings); (b) for
any period during which an emergency exists as a result of which disposal of the
Corporation's investments or determination of net
-4-
<PAGE> 5
asset value per share is not reasonably practicable; or (c) for such periods as
the Securities and Exchange Commission by order may permit for the protection of
the Corporation's investors. Such suspension shall take effect at such time as
the Board of Directors shall specify and thereafter, the rights of stock holders
(including those who shall have requested redemption pursuant to this Article
Seventh but who shall not yet have received payment) to have shares redeemed and
paid for by the Corporation shall be suspended until the Board of Directors
shall declare the suspension at an end, except that the suspension shall
terminate in any event on the first day on which (1) the condition giving rise
to the suspension shall have ceased to exist and (2) no other condition exists
under which suspension is authorized under this Section 7.4. Any record holder
who shall have his redemption right suspended may, during the period of such
suspension, by appropriate written notice of revocation at the office or agency
where request for redemption was made, revoke any request for redemption not
honored (even if such request if by its terms irrevocable) and withdraw any
certif icates tendered for redemption. The redemption price of shares for which
redemption requests have been made and not revoked shall be the net asset value
of such shares next determined as set forth in Article Eighth after the
termination of such suspension, and payment shall be made within 7 days after
the date upon which the requirements of Section 7.3 were met plus the period
during which the redemption right was suspended. Each declaration by the Board
of Directors pursuant to this Section 7.4 shall be consistent with such
applicable rules, regulations or orders, if any, relating to the subject matter
thereof as shall have been promulgated by the Securities and Exchange Commission
(or any other governmental body having similar jurisdiction over the
Corporation). To the extent not inconsistent with such rules and regulations,
the determination of the Board of Directors shall be conclusive.
7.5. Repurchase by Agreement. The Corporation may repurchase shares of
the Corporation directly, or through a principal underwriter, if any, or another
agent designated for the purpose, by agreement with the owner thereof at a price
not exceeding the net asset value per share next determined after the time when
the purchase or contract of purchase is made or the net asset value as of any
time which may be later determined pursuant to Article Eighth, provided payment
is not made for the shares prior to the time as of which such net asset value is
determined. Repurchased shares may be resold by the Corporation.
7.6. Redemption of Stockholder's Interest. Subject to such terms and
conditions as may be established by the Board of Directors, the Corporation
shall have the right at any time without prior notice to the stockholder to
redeem share of any stockholder for their then current net asset value per share
if at such time the stockholder owns less than such numbers of
-5-
<PAGE> 6
shares, or shares having an aggregate net asset value of less than such amount,
as the Board of Directors may approve.
ARTICLE EIGHTH: Net Asset Value of Shares
8.1. By Whom Determined. Subject to the provisions of Section 8.4 of
this Article Eighth, net asset value per share of the outstanding shares of
capital stock of the Corporation shall be determined from time to time by or
under the supervision of the Board of Directors and any such determination shall
be binding on all parties.
8.2 When Determined. The net asset value per share shall be determined
at such times and at such frequency as the Board of Directors, subject to
applicable rules and regulations, if any, of the Securities and Exchange
Commission (or any other governmental body having similar jurisdiction over the
Corporation), shall prescribe by resolution, provided that such net asset value
per share shall be determined at least once each week. In the absence of a
resolution of the Board of Directors prescribing a different frequency and time
of day of such determinations, the net asset value per share shall be determined
as of the close of trading on the New York Stock Exchange on each day such
Exchange is open for trading.
8.3 Suspension of Determination of Net Asset Value. Determination of
net asset value per share shall be suspended during any period which, pursuant
to Section 7.4, the Board of Directors has declared a suspension of the right to
redeem shares of the Corporation's capital stock.
8.4 Computation of Net Asset Value Per Share.
a. Net Asset Value Per Share. The net asset value of each share of the
capital stock of the Corporation as of any particular time shall be the quotient
(rounded to the nearest cent) obtained by dividing the value of the net assets
of the Corporation (i.e., the value of the assets of the Corporation, less its
liabilities exclusive of capital and surplus) by the total number of shares
outstanding (rounded to the nearest thousandth of a share).
b. Value of Corporation's Assets. The value of the Corporation's
assets as of any particular time shall be deter mined in such manner as the
Board of Directors, subject to applicable rules and regulations, if any, of the
Securities and Exchange Commission (or any other governmental body having
similar jurisdiction over the Corporation), shall prescribe by resolution. In
the absence of a resolution of the Board of Directors prescribing a different
method or basis for such determination, the value of the Corporation's assets
shall be determined as follows:
-6-
<PAGE> 7
(1) Cash and Prepaid Expenses. The value of any cash on
hand and of any prepaid expenses shall be deemed to be their face
amount.
(2) Other Current Assets. The value of any cash on deposit,
accounts receivable, and divi dends and interest declared or accrued
and not yet received shall be deemed to be the face amount thereof,
unless the Board of Directors shall determine that any such Item is
not worth its face amount, in which case the value of the item shall
be deemed to be its reasonable value, as determined by the Board of
Directors.
(3) 60 Day or Less Paper. Short-term investments with
remaining maturities of 60 days or less shall be valued at amortized
cost, such amortization to be based on the market value or fair value
on the 61st day prior to maturity with respect to such investments
originally acquired by the Corporation with maturities in excess of 60
days.
(4) Exchange-traded and NASDAQ National Market Securities.
The value of all securities traded on any stock exchange or listed in
the NASDAQ National Market System shall be the latest sale price prior
to the time of determination of net asset value per share or, in the
absence of any sale on that date, the latest reported bid price.
(5) Other Securities. The value of securities not traded on
a stock exchange or listed in the NASDAQ National Market System shall
be the latest reported bid price prior to the time of determination of
net asset value if market quotations are readily available.
(6) Other Assets. The value of all other assets shall be
the fair value determined by the Board of Directors.
The Board of Directors may appoint persons to assist it in the determination of
the value of assets, liabilities and net asset value per share and to make the
actual calculations pursuant to the direction of the Board of Directors.
8.5. Determination of Outstanding Shares. For the purposes of this
Article Eighth:
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<PAGE> 8
(a) Shares of the Corporation issued and sold shall be deemed to
be outstanding as of the time immediately after the time for
determination of net asset value per share applicable to such issuance
and sale, pursuant to Section 6.2, and the net sale price thereof
shall thereupon be deemed an asset of the Corporation.
(b) Shares of the Corporation for which a request for redemption
has been made in proper form or which are being repurchased by the
Corporation shall be deemed to be outstanding up to and including the
time as of which the redemption or repurchase price is determined.
After such time, they shall be deemed to be no longer outstanding and
the price until paid shall be deemed to be a liability of the
Corporation.
8.6. Authority of Board of Directors. Notwithstanding any of the
foregoing provisions of this Article Eighth, the Board of Directors may
prescribe such other method, bases and times for determining the per share net
asset value of the Corporation's capital stock as it shall deem necessary or
desirable, subject to the requirements of the Investment Company Act of 1940,
and the rules and regulations thereunder.
ARTICLE NINTH: Board of Directors. The number of directors of the
Corporation shall be three, which number may be increased or decreased pursuant
to the By-laws of the Corpora tion, but shall never be less than three; and the
names of the directors who shall act until the first annual meeting and until
their successors are duly chosen and qualified are:
David K. Schafer
James P. Cullen
Eugene W. Potter, Jr.
ARTICLE TENTH: Management of the Affairs of the Corporation.
10.1. Bylaws. The Board of Directors shall have the power to make,
alter, amend and repeal the By-laws of the Corporation except to the extent that
the By-laws otherwise provide.
10.2. Compensation of Directors. The Board of Directors shall have
power from time to time to authorize payment of compensation to the directors
for services to the Corporation, including fees and expenses for attendance at
meetings of the Board of Directors and of committees, if any.
-8-
<PAGE> 9
10.3. Majority of Votes. Notwithstanding any provision of the General
Corporation Laws of the State of Maryland requiring a greater proportion than a
majority of the votes entitled to be cast in order to take or authorize any
action, any such action may be taken or authorized upon the concurrence of at
least a majority of the aggregate number of votes entitled to be cast thereon.
ARTICLE ELEVENTH. Investment Advisors, etc. The Corporation reserves
the right to enter into from time to time investment advisory agreements
providing for the management and supervision of the investments of the
Corporation, the furnishing of advice to the Corporation with respect to the
desirability of investing in, purchasing or selling securities or other
property. Such agreements shall contain such other terms, provisions and
conditions as the Board of Directors of the Corporation may deem advisable. The
Corporation may designate or appoint custodians, securities depositories,
transfer agents, registrars and/or disbursing agents for the stock and assets of
the Corporation and employ and fix the powers, rights, duties, responsibilities
and compensation of each such custodian, securities depository, transfer agent,
registrar and/or disbursing agent.
ARTICLE TWELFTH: Reservation of Right to Amend. The Corporation
reserves the right from time to time to make any amendment of its charter, now
or hereafter authorized by law, including any amendment which alters the
contract rights, as expressly set forth in its charter, of any outstanding
stock.
ARTICLE THIRTEEN: Name. The Corporation acknowledges that it is
adopting its corporate name through permission of Schafer Capital Management,
Inc., and agrees that Schafer Capital Management, Inc., reserves to itself and
any successor to its business the right to use itself and to grant the
non-exclusive right to use the name "Schafer", or any similar name to any other
corporation or entity, including but not limited to any investment company of
which Schafer Capital Management, Inc. or any subsidiary or affiliate thereof or
any successor to the business thereof shall be the investment advisor.
IN WITNESS WHEREOF, I have signed these articles of incorporation and
have acknowledged the same to be my act on this 9th day of August, 1985.
/s/ DAVID K. SCHAFER
-------------------------
David K. Schafer
The undersigned, being the sole incorporator of Schafer Value Fund,
Inc., who executed the foregoing articles of
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<PAGE> 10
incorporation, of which this certificate is a part, hereby acknowledges the
execution of the foregoing articles of incorporation, and the foregoing articles
of incorporation, to be the individual act of the undersigned and further
certifies that (a) he is the sole incorporator of the Corporation, (b) the
Corporation has no stock outstanding or subscribed for entitled to be voted and
(c) the Corporation has had no organizational meeting of its Board of Directors.
/s/ DAVID K. SCHAFER
-----------------------
David K. Schafer
-10-
<PAGE> 1
CERTIFICATE OF CORRECTION
OF
ARTICLES OF INCORPORATION
SCHAFER VALUE FUND, INC.
APPROVED AND RECEIVED FOR RECORD BY THE STATE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF MARYLAND ________________________ AT __________ O'CLOCK P.M. AS IN
CONFORMITY WITH LAW AND ORDERED RECORDED.
---------------
<TABLE>
<CAPTION>
RECORDING SPECIAL
_______________ FEE PAID: FEE PAID:
<S> <C>
$ $ $
- --------- ---------- --------
</TABLE>
_________________
D1983892
TO THE CLERK OF THE COURT OF BALTIMORE CITY
IT IS HEREBY CERTIFIED, THAT THE WITHIN INSTRUMENT, TOGETHER WITH ALL
ENDORSEMENTS THEREON, HAS BEEN RECEIVED, APPROVED AND RECORDED BY THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND
<PAGE> 2
SCHAFER VALUE FUND, INC.
ARTICLES OF INCORPORATION
THIS IS TO CERTIFY THAT:
FIRST: The undersigned, David K. Schafer, whose address is 645 Fifth
Avenue, New York, New York, is the sole incorporator of Schafer Value Fund, Inc.
(the "Corporation").
SECOND: The title of the document being corrected hereby is Articles
of Incorporation.
THIRD: The Articles of Incorporation were filed on August 12, 1985.
FOURTH: The first provision of the Articles of Incorporation which is
to be corrected is ARTICLE FIFTH, WHICH currently reads as follows:
"ARTICLE FIFTH: Authorized Capital Stock. The total number of shares
of capital stock which the Corporation, by resolution or resolutions of the
Board of Directors, shall have authority to issue is 25,000,000 million shares,
per value $.10 per share, all of which shall be of a single class classified as
Common Stock, such shares having an aggregate par value of $2,500,000."
FIFTH: The corrected provision of the Articles of Incorporation is as
follows:
"ARTICLE FIFTH: Authorized Capital Stock. The total number of shares
of capital stock which the Corporation, by resolution or resolutions of the
Board of Directors, shall have authority to issue is 25,000,000 shares, per
value $.10 per share, all of which shall be of a single class classified as
Common Stock, such shares having an aggregate par value of $2,500,000."
SIXTH: The second provision of the Articles of Incorporation which is
to be corrected is the third sentence of ARTICLE SEVENTH, Section 7.4, which
currently reads as follows:
"Any record holder who shall have his redemption right suspended may,
during the period of such suspension, by appropriate written notice of
revocation at the office or agency where request for redemption was made, revoke
any request for redemption not honored (even if such request if by it terms
irrevocable) and withdraw any certificates tendered for redemption."
SEVENTH: The corrected provision of the Articles of Incorporation is
as follows:
<PAGE> 3
"Any record holder who shall have his redemption right suspended may,
during the period of such suspension, by appropriate written notice of
revocation at the office or agency where request for redemption was made, revoke
any request for redemption not honored (even if such request is by its terms
irrevocable) and withdraw any certificate tendered for redemption."
EIGHTH: The third provision of the Articles of incorporation which is
to be corrected is the first sentence of ARTICLE ELEVENTH, which currently
reads as follows:
"The Corporation reserves the right to enter into from time to time
investment advisory agreements providing for the management and supervision of
the investments of the Corporation, the furnishing of advice to the Corporation
with respect to the desirability of investing in, purchasing or selling
securities or other property."
NINTH: The corrected provision of the Articles of Incorporation is as
follows:
"The Corporation reserves the right to enter into from time to time
investment advisory agreements providing for the management and supervision of
the investments of the Corporation, and the furnishing of advice to the
Corporation with respect to the desirability of investing in, purchasing or
selling securities or other property."
The undersigned acknowledges this Certificate of Correction as his act
and states, as to all matters and facts required to be verified under oath,
that, to the best of his knowledge, information and belief, these matters and
facts are true in all material respects and this statement is made under the
penalties of perjury.
IN WITNESS WHEREOF, I have signed this Certificate of Correction, and
I acknowledge the same to be my act of this ____ day of January, 1993.
/s/ DAVID K. SCHAFER
___________________________
David K. Schafer
-3-
<PAGE> 1
CHANGE OF RESIDENT AGENT AND ADDRESS AND PRINCIPAL OFFICE
OF
SCHAFER VALUE FUND, INC.
APPROVED AND RECEIVED FOR RECORD BY THE STATE DEPARTMENT OF ASSESSMENTS AND
TAXATION OF MARYLAND JANUARY 28, 1993 AT 2:35 O'CLOCK P.M. AS IN CONFORMITY WITH
LAW AND ORDERED RECORDED.
---------------
<TABLE>
<CAPTION>
RECORDING SPECIAL
_______________ FEE PAID: FEE PAID:
<S> <C> <C>
$ $ 10.00 $
- ------- ------- -------
</TABLE>
______________
D1983892
TO THE CLERK OF THE COURT OF BALTIMORE CITY
IT IS HEREBY CERTIFIED, THAT THE WITHIN INSTRUMENT, TOGETHER WITH ALL
ENDORSEMENTS THEREON, HAS BEEN RECEIVED, APPROVED AND RECORDED BY THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND
RETURN TO:
WEINBERG & GREEN
ATTN: ANDREA BARP
100 SOUTH CHARLES STREET
BALTIMORE, MD 21201
<PAGE> 2
SCHAFER VALUE FUND, INC.
CERTIFICATE OF SECRETARY
The undersigned, Secretary of Schafer Value Fund, Inc., a Maryland
corporation (the "Corporation"), hereby certifies that the following is a true
and complete copy of resolutions duly adopted by the board of directors of the
Corporation on February 6, 1992, and that these resolutions are in full force
and effect on the date hereof:
"RESOLVED: That the name and address of the resident agent
of the Corporation have hereby changed as follows:
Old: United States Corporation Company
1123 North Eutaw Street
Baltimore, Maryland 21201
New: James J. Hanks, Jr.
c/o Weinberg and Green
100 South Charles Street
Baltimore, Maryland 21201
and it is,
"FURTHER RESOLVED: That the address of the principal office
of the Corporation is hereby changed as follows:
Old: 1123 North Eutaw Street
Baltimore, Maryland 21201
New: c/o James J. Hanks, Jr.
Weinberg and Green
100 South Charles Street
Baltimore, Maryland 21201"
IN WITNESS WHEREOF, I have hereunto affixed my hand as
Secretary of the Corporation this 6th day of February, 1992.
/s/ BRENDAN J. SPILLANE
______________________________
Brendan J. Spillane, Secretary
<PAGE> 1
SCHAFER VALUE FUND, INC.
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The charter of Schafer Value Fund, Inc., a Maryland corporation
(the "Corporation"), is hereby amended by deleting existing ARTICLE SECOND in
its entirety and adding a new article to read as follows:
"ARTICLE SECOND: Name. The name of the corporation (which is hereafter
called the "Corporation") is Strong Schafer Value Fund, Inc."
SECOND: The amendement to the charter of the Corporation as set forth
above has been duly approved by the Board of Directors. Pursuant to Section
2-605(a)(4) of the Maryland General Corporation Law the approval of the
stockholders of the Corporation is not required.
THIRD: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FOURTH: The undersigned President acknowledges these Articles of
Amendment to be the corporate act of the Corporation and as to all matters or
facts required to be verified under oath, the undersigned President acknowledges
that to the best of his knowledge, information and belief, these matters and
facts are true in all materials respects and that this statment is made under
the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to be
signed in its name and on its behalf by its President and attested to by its
Secretary on this 12th day of January, 1996.
ATTEST: SCHAFER VALUE FUND, INC.
/s/ BRENDAN J. SPILLANE By: /s/ DAVID K. SCHAFER (SEAL)
________________________ _______________________
Brendan J. Spillane David K. Schafer
Secretary President
<PAGE> 1
BY-LAWS
OF
SCHAFER VALUE FUND, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of the Corporation
shall be held at such date, time and place during the month of April of each
year, either within or without the State of Maryland, as may be designated by
resolution of the Board of Directors from time to time, for the purposes of
electing directors and for transacting such other business as may properly be
brought before the meeting. Only such business, in addition to that prescribed
by law, by the Articles of Incorporation and by these By-Laws, may be brought
before such meeting as may be specified by resolution of the Board of Directors,
or by a writing filed with the Secretary of the Corporation and signed by the
Chairman of the Board or the President or a majority of the directors or by
stockholders holding at least 25% of the stock of the Corporation outstanding
and entitled to vote at the meeting. No annual meeting of the stockholders of
the Corporation shall be held unless required by applicable law or by the Board
of Directors of the Corporation.
SECTION 2. Special meetings of the stockholders for any purpose or
purposes may be held upon call by the Chairman of the Board or the President or
by a majority of the Board of Directors, and shall be called by the Chairman of
the Board, the President, a Vice President, the Secretary or any director at the
request in writing of a majority of the Board of Directors or of stockholders
holding at least 25% of the stock of the Corporation outstanding and entitled to
vote at the meeting, at such time and at such place within or without the State
of Maryland as may be fixed by the Chairman of the Board or the President or the
Board of Directors or by the stockholders holding at least 25% of the stock of
the Corporation outstanding and so entitled to vote, as the case may be, and as
may be stated in the notice setting forth such call. Such request shall state
the purpose or purposes of the proposed meeting and only such purpose or
purposes so specified may properly be brought before such meeting.
SECTION 3. Written or printed notice of every annual or special
meeting of stockholders stating the time and place thereof and the general
nature of the business proposed to be transacted at any such meeting, shall be
delivered personally or mailed at least ten days prior thereto to each
stockholder of record entitled to vote at the meeting at his address as the same
<PAGE> 2
appears on the books of the Corporation. Such further notice shall be given as
may be required by law. Meetings may be held without notice if all of the
stockholders entitled to vote are present or represented at the meeting, or if
notice is waived in writing, either before or after the meeting, by those not
present or represented at the meeting. No notice of an adjourned meeting of the
stockholders other than an announcement of the time and place thereof at the
preceding meeting shall be required.
SECTION 4. At every meeting of the stockholders, the holders of record
of one-third of the outstanding shares of the stock of the Corporation entitled
to vote at the meeting, whether present in person or represented by proxy, shall
constitute a quorum, except as otherwise provided by law. If at any meeting
there shall be no quorum, the holders of record, entitled to vote at the
meeting, of a majority of such shares so present or represented may adjourn the
meeting from time to time to a date not more than 120 days from the original
record date, without notice other than announcement at the meeting, until a
quorum shall have been obtained when any business may be transacted which might
have been transacted as first convened had there been a quorum.
SECTION 5. Meetings of the stockholders shall be presided over by the
Chairman of the Board, or, if he is not present, by the President or a Vice
President or, in their absence, by a chairman to be chosen at the meeting. The
Secretary of the Corporation or, if he is not present, an Assistant Secretary of
the Corporation or, if neither is present, a secretary to be chosen at the
meeting shall act as secretary of the meeting.
SECTION 6. Each stockholder entitled to vote at any meeting shall have
one vote in person or by proxy for each share of stock held by him, but no proxy
shall be voted on after 11 months from its date, unless such proxy provides for
a longer period. All elections of directors shall be had and all questions,
except as otherwise provided by law or by the Articles of Incorporation or by
these By-Laws, shall be decided by a majority vote of the stockholders present
or represented and entitled to vote thereat in person or by proxy. It shall be
the duty of the officer who shall have charge of the stock ledger of the
Corporation to prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at such
election, arranged in alphabetical order. Such list shall be open, at the place
where said election is to be held for said ten days, to the examination of any
stockholder and shall be produced and kept at the time and place of election
during the whole time thereof and subject to the inspection of any stockholder
who may be present.
-2-
<PAGE> 3
SECTION 7. The vote on the election of directors, and other questions
properly brought before any meeting, need not be by ballot except when so
demanded by a majority of the shareholders present and entitled to vote thereon,
or when so ordered by the chairman of such meeting. The chairman of each meeting
at which directors are to be elected by ballot or at which any question is to be
so voted on shall appoint two inspectors of election. No director or candidate
for the office of director shall be appointed as such inspector. Inspectors
shall first take and subscribe an oath or affirmation faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of their ability, and shall take charge of the polls and after the
balloting shall make a certificate of the result of the vote taken. Except when
the stock transfer books of the Corporation shall have been closed, or a date
shall have been fixed as a record date for the determination of its stockholders
entitled to vote, as hereinafter provided by Section 8 of this Article I, no
share of stock shall be voted on at any election for directors which shall have
been transferred on the books of the Corporation within twenty days next
preceding such election of directors.
SECTION 8. The Board of Directors may close the stock transfer books
of the Corporation for a period not exceeding twenty days preceding the date of
any meeting of stockholders, or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of stock shall go into effect; or, in lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date, not exceeding
sixty days preceding the date of any meeting of stockholders, or the date for
the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of stock shall go into effect, or
a date in connection with the obtaining of any consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at any such
meeting and at any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of stock, or to give such
consent, and in such case such stockholders, and only such stockholders, as
shall be stockholders of record on the date so fixed, shall be entitled to such
notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
-3-
<PAGE> 4
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. The Board of Directors of the Corporation shall consist of
not less than three nor more than fifteen persons, who need not be stockholders.
The number of Directors (within the above limits) shall be fixed from time to
time by a majority of the Board of Directors. The directors shall be elected
annually and shall hold office, unless sooner removed, until their respective
successors are elected and qualify. A majority of the whole Board, but in no
event less than two, shall constitute a quorum for the transaction of business,
but if at any meeting of the Board there shall be less than a quorum present, a
majority of the directors present may adjourn the meeting from time to time,
until a quorum shall have been obtained, when any business may be transacted
which might have been transacted at the meeting as first convened had there been
a quorum. No notice of an adjourned meeting of the directors other than an
announcement of the time and place thereof at the preceding meeting shall be
required. The acts of the majority of the directors present at any meeting at
which there is a quorum, shall, except as otherwise provided by law, by the
Articles of Incorporation or by these By-Laws, be the acts of the Board.
SECTION 2. Unless otherwise provided in the Articles of Incorporation
or these By-Laws, vacancies and newly created directorships resulting from any
increase in the authorized number of directors or from any other cause may be
filled by a majority of the directors then in office. In the case of a vacancy
resulting from any cause other than an increase in the authorized number of
directors, such action shall be deemed to be duly taken even if a majority of
such directors is less than a quorum. A director so chosen shall hold office
until the next annual meeting of stockholders and until his respective successor
is elected and shall have qualified. The stockholders, at any meeting called for
the purpose, may remove, with or without cause, any director and, at any meeting
called for the purpose, fill the vacancy in the Board thus caused.
SECTION 3. Meetings of the Board of Directors shall be held at such
place, within or without the State of Maryland, as may from time to time be
fixed by resolution of the Board or as may be specified in the call of any
meeting. Regular meetings of the Board of Directors shall be held at such times
as may from time to time be fixed by resolution of the Board and special
meetings may be held at any time upon the call of a majority of the persons
constituting the Board of Directors or the Chairman of the Board or the
President or the Secretary, by oral, telephonic, telegraphic or written notice,
duly served on or sent or mailed to each director at least twenty-four hours
before the meeting. The notice of any special meeting shall specify the
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<PAGE> 5
purposes thereof. A meeting of the Board may be held without notice immediately
after the annual meeting of the stockholders at the same place at which such
meeting is held. Notice need not be given of regular meetings of the Board held
at times fixed by resolution of the Board. Meetings may be held at any time
without notice if all of the directors are present or if notice is waived in
writing, either before or after the meeting, by those not present.
SECTION 4. Meetings of the Board of Directors shall be presided over
by the Chairman of the Board or the President or, if neither is present, by a
Vice President or, if none of the above are present, by a chairman to be chosen
at the meeting, and the Secretary or, if he is not present, an Assistant
Secretary of the Corporation or, if neither is present, a secretary to be chosen
at the meeting shall act as secretary of the meeting.
SECTION 5. The directors shall receive such fees or compensation for
services to the Corporation (including attendance at meetings of the Board or of
committees designated by the Board pursuant to Section 7 of this Article II) as
may be fixed by the Board of Directors from time to time by resolution or
resolutions.
SECTION 6. The Board of Directors may, by resolution or resolutions,
passed by a majority of the whole Board, designate one or more committees, each
such committee to consist of two or more of the directors of the Corporation,
which to the extent provided in said resolution or resolutions and subject to
the General Laws of the State of Maryland, shall have and may exercise the
powers of the Board in the management of the business and affairs of the
Corporation, and may have power to authorize the seal of the Corporation to be
affixed to all papers which may require it. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. A majority of the members of any such
committee may determine its action and fix the time and place of its meetings
unless the Board of Directors shall otherwise provide. The Board of Directors
shall have power at any time to change the membership of, to fill vacancies in,
or to dissolve any such committee.
SECTION 7. Any action required or permitted to be taken at any meeting
of the Board of Directors or by any committee thereof may be taken without a
meeting if a unanimous written consent which sets forth the action is signed by
each member of the Board or committee and is filled with the minutes of
proceedings of the Board or committee. Members of the Board or a committee
thereof may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time.
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ARTICLE III
OFFICERS
SECTION 1. The Board of Directors, as soon as practicable after the
election of directors at the annual meeting of the stockholders held in each
year, shall appoint from among their members a Chairman of the Board and a
President of the Corporation and shall appoint one or more Vice Presidents, a
Secretary and a Treasurer, Assistant Secretaries and Assistant Treasurers and,
from time to time, any other officers and agents as it may deem proper. Any two
of the above-mentioned offices, except those of the President and a Vice
President, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity if such
instrument be required by law, or by these By-Laws to be executed, acknowledged
or verified by any two or more officers.
SECTION 2. The term of office of all officers shall be one year or
until their respective successors are chosen; but any officer or agent chosen or
appointed by the Board of Directors may be removed, if the Board of Directors
finds, in its judgement, that the best interests of the Corporation will be
served, at any time by the affirmative vote of a majority of the members of the
Board then in office.
SECTION 3. Subject to such limitations as the Board of Directors may
from time to time prescribe, the officers of the Corporation shall each have
such powers and duties as generally appertain to their respective offices, as
well as such powers and duties as from time to time may be conferred by the
Board of Directors. Any officer, agent or employee of the Corporation may be
required by the Board of Directors to give bond for the faithful discharge of
his duties, in such sum and of such character as the Board may from time to time
prescribe.
ARTICLE IV
CERTIFICATE OF STOCK
SECTION 1. The interest of each stockholder of the Corporation shall
be evidenced by a certificate or certificates for shares of stock of the
Corporation, in such form as the Board of Directors may from time to time
prescribe. The certificates for shares of stock of the Corporation shall be
signed by the Chairman of the Board, the President or a Vice President, and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
and shall be countersigned and registered in such manner, if any, as the Board
may by resolution prescribe, provided, however, that, where any such certificate
is signed (1)
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by a transfer agent or by an assistant transfer agent or (2) by a transfer clerk
acting on behalf of the Corporation and a registrar, the signature of any such
Chairman of the Board, President, Vice President, Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary, may be facsimile, engraved or
printed. In case any officer or officers whose manual or facsimile signatures
appear on any certificate or certificates of this Corporation shall cease to be
such officer or officers, whether because of death, resignation, or otherwise,
before such certificate or certificates of stock may have been actually
countersigned and issued, such certificate or certificates may be countersigned
and issued as though such person or persons whose manual facsimile signatures
appear thereon had not ceased to be such officer or officers of the Corporation
unless, prior to issuance, written instructions to the contrary shall have been
received by the transfer agent, assigned any an officer of the Corporation, and
they shall be recognized by this Corporation as valid and binding certificates
of stock of this Corporation for all purposes and in all respects.
SECTION 2. The shares of stock of the Corporation shall be
transferable on the books of the Corporation by the holder thereof in person or
by a duly authorized attorney, upon surrender for cancellation of a certificate
or certificates for a like number of shares, with a duly executed assignment and
power of transfer endorsed thereon or attached thereto, and with such proof of
the authenticity of the signatures as the Corporation or its agent may
reasonably require.
SECTION 3. No certificate for shares of stock of the Corporation shall
be issued in place of any certificates alleged to have been lost, stolen,
mutilated or destroyed except upon production of such evidence of the loss,
theft, mutilation or destruction and upon indemnification of the Corporation and
its agents to such extent and in such manner as the Board of directors may from
time to time prescribe.
ARTICLE V
CORPORATE BOOKS
The books of the Corporation may be kept outside of the State of
Maryland at such place or places as the Board of Directors may from time to time
determine.
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ARTICLE VI
SIGNATURES
SECTION 1. Except as otherwise provided in these Bylaws or as the
Board of Directors may generally or in particular cases authorize the execution
thereof in some other manner, all deeds, leases, transfers, contracts, bonds,
notes, checks, drafts and other obligations made, accepted or endorsed by the
Corporation and all endorsements, assignments, transfers, stock powers or other
instruments of transfer of securities owned by or standing in the name of the
Corporation shall be signed or executed by two officers of the Corporation, who
shall be the Chairman of the Board, the President or a Vice President and a Vice
President, the Secretary or the Treasurer.
SECTION 2. The Chairman of the Board or the President of the
Corporation or, in their absence or disability or at their request, a Vice
President of the Corporation may authorize from time to time the signature and
issuance of proxies to vote upon shares of stock of other corporations owned by
the Corporation unless otherwise provided by the Board of Directors. All proxies
for shares held in the name of the Corporation by two officers of the
Corporation, who shall be the Chairman of the Board or the President or a Vice
President and a Vice President, the Secretary or the Treasurer.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the Board of
Directors.
ARTICLE VIII
CORPORATE SEAL
The corporate seal of the Corporation shall consist of a flat faced
circular die with the word "Maryland", together with the name of the
Corporation, the year of its organization, and such other appropriate legend as
the Board of Directors may from time to time determine, cut or engraved thereon.
In lieu of the corporate seal, when so authorized by the Board of Directors or a
duly empowered committee thereof, a facsimile thereof may be impressed or
affixed or reproduced. Notwithstanding the foregoing, if the Corporation is
required to place its corporate seal to a document, it is sufficient to meet the
requirements of any law, rule or regulation relating to a corporate seal to
place
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<PAGE> 9
the word "(seal") adjacent to the signature of the authorized officer of the
Corporation.
ARTICLE IX
OFFICES
The Corporation and the stockholders and the directors may have
offices outside the State of Maryland at such places as shall be determined from
time to time by the Board of Directors.
ARTICLE X
AMENDMENTS
The By-Laws of the Corporation may be amended, added to, rescinded or
repealed at any meeting of the stockholders, or by vote of a majority of the
directors then in office at any meeting of the Board of Directors; except that
after the initial issue of any shares of capital stock of the Corporation, the
provisions of this Article X may be altered, amended or repealed only upon the
affirmative vote of the holders of a majority of all shares of capital stock of
the Corporation at the time outstanding and entitled to vote.
ARTICLE XI
ADDITIONAL PROVISIONS
SECTION 1. The books of account of the corporation shall be examined
by an independent firm of public accountants, selected as required by law, at
the close of each fiscal year of the Corporation and at such other times, if
any, as may be directed by the Board of Directors of the Corporation. A report
to the stockholders based upon each such examination shall be mailed to each
stockholder of the Corporation, of record on such date with respect to each
report as may be determined by the Board of Directors, at his address as the
same appears on the books of the Corporation. Each such report shall show the
assets and liabilities of the Corporation as of the close of the year covered by
the report, its income and expenses, the net asset value of its outstanding
shares, the securities in which the funds of the Corporation were then invested
and such other matters as the Board of Directors shall determine.
SECTION 2. In any case where an officer or director of the Corporation
or of any investment adviser of the Corporation, or a member of any committee of
the Corporation, is also an officer or director of another corporation and the
purchase or
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sale of the securities issued by such other corporation is under consideration,
the officer, director or committee member concerned will abstain from
participating in any decision made on behalf of the Corporation to purchase or
sell any securities issued by such other corporation.
SECTION 3. The Corporation shall have as custodian or custodians one
or more trust companies or banks of good standing, each having a capital,
surplus and undivided profits aggregating not less than ten million dollars
($10,000,000), and the funds and securities held by the Corporation shall be
kept in the custody of one or more such custodians, provided such custodians can
be found ready and willing to act, and further provided that the Corporation may
use as sub-custodians, for the purpose of holding any foreign securities and
related funds of the Corporation, such foreign banks as the Board of Directors
may approve and as shall be permitted by law. Upon the resignation or inability
to serve of any custodians, the Corporation will use its best efforts to obtain
a successor custodian or custodians and will require that the cash and
securities owned by the Corporation be delivered directly to such successor
custodian or custodians. In the event, however, that no successor custodian or
custodians can be found, the Corporation will submit to its stockholders, before
permitting delivery of the cash and securities owned by the Corporation to other
than a successor custodian or custodians, the question of whether the
Corporation shall be liquidated or shall function without any custodian.
ARTICLE XII
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND EMPLOYEES
(a) The Corporation shall indemnify each officer and director made
party to a proceeding, by reason of service in such capacity, to the fullest
extent, and in the manner provided, under section 2-418 of the Maryland General
Corporation law; (i) unless it is proved that the person seeking indemnification
did not meet the standard of conduct set forth in subsection (b)(1) of such
section; and (ii) provided, that the Corporation shall not indemnify any officer
or director for any liability to the Corporation or its security holders arising
from the willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such person's office.
(b) The provisions of clause (i) of paragraph (a) herein
notwithstanding, the Corporation shall indemnify each officer and director
against reasonable expenses incurred in connection with the successful defense
of any proceeding to which
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<PAGE> 11
such officer or director is a party by reason of service in such capacity.
(c) The Corporation, in the manner and to the extent provided by
applicable law, shall advance to each officer and director who is made party to
a proceeding by reason of service in such capacity the reasonable expenses
incurred by such person in connection therewith.
(d) The Corporation shall, to the fullest extent and in the manner
provided under applicable law, indemnify each of its employees made a party to a
proceeding, by reason of service in such capacity, and advance to each such
employee the reasonable expenses incurred by such person in connection
therewith; provided, however, that the Corporation shall not indemnify any
employee for any liability to the Corporation or its security holders arising
from the willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such person's duties on behalf of the
Corporation.
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<PAGE> 1
INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated August 13, 1985 between Schafer Value Fund, Inc., a
Maryland corporation (the "Fund"), and Schafer Capital Management, Inc. (the
"Adviser").
RECITALS
A. The Fund is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), and authorized to issue its shares of capital stock, $.10 par value
(the "Shares").
B. The Fund desires to retain the Adviser to render the services
described herein for the Fund and the Adviser is willing to so render such
services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Appointment of Adviser. The Fund hereby appoints the Adviser to
act as investment adviser to the Fund for the periods and on the terms herein
set forth. The Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Duties of Adviser.
(a) Subject to the general supervision of the Board of Directors of
the Fund, the Adviser shall manage the operations of the Fund and provide the
additional services and facilities hereinafter described. In this regard, the
Adviser shall
(i) provide supervision of the Fund's assets, furnish a continuous
investment program, determine from time to time what investments or
securities will be purchased, retained or sold by it and what portion of
its assets will be invested or held uninvested as cash, and, subject to
paragraph 3, place orders for the purchase and sale of securities for the
account of the Fund with brokers or dealers selected by the Adviser; and
(ii) furnish office space, office facilities, equipment, personnel
(other than the services of directors of the Fund who are not interested
persons of the Adviser), and clerical, bookkeeping and administrative
services for managing the Fund, except such services as are provided by a
custodian or transfer, dividend disbursing or shareholder servicing agent
of the Fund.
<PAGE> 2
(b) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations or duties hereunder, the
Adviser shall not be liable to the Fund or to any of its shareholders or to any
creditor of the Fund for any error of judgment, act or omission or for any loss
that may be sustained by the Fund.
(c) The Adviser agrees that all records which it maintains for the
Fund are the property of the Fund and it will surrender promptly to the Fund any
of such records upon the Fund's request.
3. Brokerage. In placing orders for the purchase or sale of
securities for the account of the Fund the Adviser is authorized, to the fullest
extent now and hereafter permitted by law, to cause the Fund to pay a member of
a securities exchange, broker, or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker, or dealer would have charged for effecting that
transaction, if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services (within the meaning of Section 28(e) of the Securities Exchange Act of
1934) provided by such member, broker, or dealer, viewed in terms either of that
particular transaction or the overall responsibilities of the Adviser with
respect to the accounts as to which the Adviser exercises investment discretion
(within the meaning of Section 3(a)(35) of the Securities Exchange Act of 1934).
4. Expenses. The Adviser shall bear the expenses incurred by it in
the performance of its duties hereunder without reimbursement from the Fund. In
addition to the compensation payable to the Adviser hereunder, the Fund will pay
all other expenses of its operations including, without limitation, (i)
interest, taxes and any governmental filing fees; (ii) brokerage commissions and
other costs incurred in connection with the purchase or sale of securities;
(iii) compensation and expenses of its directors, other than those who are
interested persons of the Adviser; (iv) legal and audit expenses; (v) the fees
and expenses of the Fund's custodian and transfer, dividend disbursing and
shareholder servicing agents; (vi) expenses relating to the repurchase or
redemption of Shares; (vii) expenses of servicing shareholder accounts; (viii)
fees and expenses related to the registration and qualification of the Fund and
its Shares under Federal and state securities laws; (ix) expenses of printing
and mailing reports, notices and proxy material to shareholders and the expenses
incidental to meetings of shareholders; (x) insurance premiums for fidelity and
other insurance coverage; (xi) the expenses of preparing prospectuses and
statements of additional information and of printing and distributing them to
existing shareholders; (xii) expenses
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<PAGE> 3
incurred pursuant to any plan adopted by the Fund pursuant to Rule 12b-1 under
the 1940 Act and (xiii) any nonrecurring expenses, including actions, suits or
proceedings to which the Fund is a party and any obligation which the Fund may
incur to indemnify others. Notwithstanding the foregoing provisions, the Adviser
agrees to reimburse the Fund in any amount necessary to prevent the annual
expenses of the Fund from exceeding in any year the most restrictive annual
expenses limitation imposed by any state in which the Shares of the Fund are
qualified for sale.
5. Compensation. For the services to be rendered and the charges and
expenses to be assumed by the Adviser hereunder, the Fund shall pay to the
Adviser a fee, payable in monthly installments, equal to 1% per annum of the
average daily net asset value of the Fund. For purposes of computing the fees
payable hereunder, the net asset value of the Fund shall be determined in the
same manner as for the purchase and redemption of Fund shares as described in
the current Prospectus. Such fee shall be prorated for any monthly period in
which this Agreement is not in effect for the entire period.
6. Status of Adviser; Services not Exclusive.
(a) The Adviser 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. However, one or more shareholders,
directors, officers or employees of the Adviser may serve as directors and/or
officers of the Fund, but without compensation or reimbursement of expenses for
such services from the Fund. Nothing herein contained shall be deemed to require
the Fund to take any action contrary to its Articles of Incorporation or any
applicable statute or regulation, or to relieve or deprive the Board of
Directors of the Fund of its responsibility for and control of the conduct of
the affairs of the Fund.
(b) The services of the Adviser hereunder are not exclusive, and the
Adviser shall be free to render similar services to others (including other
investment companies) so long as its services under this Agreement are not
impaired thereby.
7. Duration and Termination. This Agreement shall become effective
on the date hereof and shall continue in effect, unless sooner terminated as
provided herein, until the second anniversary of its effective date. Thereafter,
this Agreement shall continue in effect automatically for periods of one year so
long as each such latter continuance is approved at least annually (a) by the
vote of a majority of the directors of the Fund who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval, and (b) by the Board of
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<PAGE> 4
Directors of the Fund or by vote of the holders of a majority of the outstanding
Shares of the Fund. Notwithstanding the foregoing provisions, (i) the
continuance of this Agreement for the two-year period referred to in the first
sentence of this paragraph 7 is, in addition to the requirements set forth
above, subject to the approval of this Agreement by the holders of a majority of
the outstanding Shares of the Fund on or before the first anniversary of the
effective date of this Agreement, and (ii) this Agreement may be terminated at
any time, without the payment of any penalty, (x) by the Fund's Board of
Directors or by vote of the holders of a majority of the outstanding Shares of
the Fund on 60 days' written notice to the Adviser, or (y) by the Adviser on 60
days' written notice to the Fund. This Agreement will terminate automatically in
the event of its assignment (as defined in the 1940 Act).
8. Amendment of Agreement. This Agreement may be amended by mutual
consent, but the consent of the Fund must be approved (a) by vote of a majority
of those directors of the Fund who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such amendment, and (b) by vote of the holders of a
majority of the outstanding Shares of the Fund.
9. Name of Fund. The parties agree that the Fund may use the name
"Schafer", and any logos or service marks which the Adviser may furnish, only so
long as this Agreement remains in effect, and that any such use shall be royalty
free. Upon termination of this Agreement, the Fund shall discontinue the use of
such name and any such logos or service marks at the request of the Adviser. The
Fund acknowledges that (i) it has no proprietary or exclusive rights in the name
"Schafer", or any logo or service mark furnished by the Adviser, and (ii) the
Adviser reserves to itself the right to grant the nonexclusive right to use such
name and any such logo or service mark to other persons (including other
investment companies).
10. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. The term
"interested person" is used herein as defined in the 1940 Act, and the term
"majority of the outstanding Shares" is used herein as defined in the 1940 Act
with respect to voting securities. 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
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<PAGE> 5
not be affected thereby. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of New York and shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors (subject to the last sentence of paragraph 7).
SCHAFER VALUE FUND, INC.
By /s/ DAVID K. SCHAFER
--------------------------------
SCHAFER CAPITAL MANAGEMENT, INC.
By /s/ DAVID K. SCHAFER
--------------------------------
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<PAGE> 1
DISTRIBUTION AGREEMENT
January 10, 1996
Strong Funds Distributors, Inc.
Milwaukee, Wisconsin
Dear Sirs:
Strong Schafer Value Fund, Inc. ("Fund"), a Maryland Corporation, is
registered as an investment company under the Investment Company Act of 1940
("Act"), and an indefinite number of shares of its capital stock have been
registered under the Securities Act of 1933 ("Securities Act"), pursuant to a
Registration Statement on Form N-1A, to be offered continuously for sale to the
public in accordance with terms and conditions set forth in the Prospectus
included in such Registration Statement as it may be amended from time to time.
In this connection, the Fund and SCHAFER CAPITAL MANAGEMENT, INC., the
Fund's investment adviser ("Management"), desire that your firm act as
distributor ("Distributor") with respect to shares of the Fund that have been or
may be registered as described above during the term of this Agreement to the
extent set forth in, and subject to the terms of, this Agreement. You have
advised the Fund and Management that you are willing so to act as Distributor,
and it is, accordingly, agreed between us as follows:
<PAGE> 2
1. The Fund hereby appoints you Distributor for the sale of its
shares, pursuant to the aforesaid continuous public offering, for the limited
purpose of facilitating the distribution of shares of the Fund to investors in
any states or jurisdictions in which (a) the Fund's shares are or shall from
time to time be qualified for offering and sale, (b) you are or shall from time
to time become qualified as a broker/dealer, and (c) the Fund may not distribute
its shares without itself qualifying as an issuer dealer or broker/dealer (any
such state or jurisdiction being hereinafter referred to as a "State").
2. You hereby accept such appointment and agree, as agent for and at
the request of the Fund, to distribute the Fund's current Prospectus and
supplemental sales literature authorized by the fund in any State in which you
are then qualified to make such distribution. You shall have the right to review
and approve any disclosure relating to you in the Fund's Registration Statement
and Prospectus and any supplemental sales literature, prior to its use. It is
understood that you do not undertake to sell all or any specific portion of the
shares of the Fund.
3. You agree that only the Fund shall have the right to accept or
reject orders for the purchase of shares of the Fund resulting from your acting
as Distributor hereunder and that you
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<PAGE> 3
are not authorized to accept orders on behalf of the Fund or deliver any shares
of the Fund except as directed by the Fund.
4. The Fund has delivered to you a copy of its current Prospectus
and agrees that it will use its best efforts to continue the effectiveness of
the Registration Statement under the Securities Act. The Fund further agrees to
prepare and file any amendments to its Registration Statement as may be
necessary and any supplemental data in order to comply with the Securities Act.
5. The Fund is registered under the Act as an investment company,
and it will use its best efforts to maintain such registration and to comply
with the requirements of the Act.
6. You agree:
(a) That neither you nor any of your partners will take any
short position in the shares of the Fund.
(b) To furnish to the Fund any pertinent information required to
be included with respect to you as Distributor within the meaning of the
Securities Act in any reports or registration required to be filed with any
governmental authority.
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<PAGE> 4
(c) You will not give any information or make any
representations other than as contained in the Registration Statement or
Prospectus filed under the Securities Act, as in effect from time to time, or in
any supplemental sales literature authorized by the Fund for use in connection
with the sale of shares.
7. (a) The Fund will pay or cause to be paid the expenses (including
the fees and disbursements of its own counsel) of any registration of the Fund's
shares under the Securities Act, expenses of qualifying or continuing the
qualification of the Fund's shares for sale, and expenses incident to the
issuance of the Fund's shares, such as the cost of share certificates, issue
taxes and fees of the transfer agent. The Distributor will pay all other
expenses incident to the sale and distribution of the Fund's shares issued or
sold hereunder, including, without limiting the generality of the foregoing, all
(i) expenses of printing and distributing or disseminating any other literature,
advertising and selling aids in connection with such offering of the Fund's
shares for sale ((except that such expenses shall not include expenses incurred
by the Fund in connection with the preparation, printing, and distribution of
any report or other communication to holders of the Fund's shares in their
capacity as such); and (ii) expenses of advertising in connection with such
offering. The management
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<PAGE> 5
shall reimburse the Distributor for any such expenses the Distributor incurs.
(b) Management shall pay you a fee of $1.00 per annum for your
services hereunder, payable quarterly in advance on the first day of January,
April, July and October, commencing January 10, 1996, and agrees to reimburse
you for all reasonable expenses of distribution, including the costs of printing
and mailing the Prospectus and any supplemental sales literature, upon your
submission of invoices from time to time. If the term of this Agreement
commences other than at the beginning of a calendar quarter or is terminated by
any of the parties pursuant to paragraph ((b) other than at the end of a
quarter, such fee will be prorated for the portion of such quarter during which
this Agreement is in effect.
8. The Fund and Management agree, jointly and severally, to
indemnify and hold the Distributor, its partners and employees, and any person
who controls the Distributor within the meaning of Section 15 of the Securities
Act, free and harmless from and against any and all claims, 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 partners, employees or any such controlling person
may incur under the Securities Act, the Act, any state securities laws or
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<PAGE> 6
under common law or otherwise, arising out of or based upon (a) any untrue
statement or alleged untrue statement of a material fact contained in the Fund's
Registration Statement, Prospectus or any supplemental sales literature
authorized by the Fund (such Prospectus, Registration Statement and supplemental
sales literature being referred to collectively herein as "Offering Material"),
(b) any omission or alleged omission to state a material fact required to be
stated in any Offering Material or necessary to make the statements in any
Offering Material not misleading, or (c) any violations of any state securities
laws arising out of or based upon the Distributor's activities hereunder, except
as occasioned solely by the Distributor's failure to be qualified as a
broker/dealer in any state in which the Distributor has distributed Offering
Materials for the Fund; provided, however, that in the event that for any reason
such indemnification is not available or is insufficient to hold the Distributor
harmless, the Fund and Management, agree, jointly and severally, to contribute
to the amounts paid or payable by the Distributor, as a result of any loss,
claim, damage, liability or expense in such proportion as appropriately reflects
the relative benefits received herefrom by the Fund and Management on the one
hand and by the Distributor on the other, or if such allocation is not permitted
by applicable law, then in such proportion as appropriately reflects not only
the foregoing relative benefits but also the relative fault of the Fund and
Management on the one hand and the Distributor on the other in connection with
the
-6-
<PAGE> 7
statements, actions or omissions that resulted in such loss, claim, damage,
liability or expense, as well as any other relative equitable considerations;
and further provided, that in no event shall anything contained herein be so
construed as to protect the Distributor, through indemnification or contribution
of the Fund, but not of Management, against any liability to the Fund or to its
security holders 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's and Management's agreements to indemnify the Distributor,
its partners and employees and any such controlling person as aforesaid are
expressly conditioned upon the Fund's and Management's being promptly notified
of any action brought against the Distributor, its partners or employees, or any
such controlling person, such notification to be given by letter or telegram
addressed to the Fund and Management at their principal business offices. The
Fund and Management agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against the Fund, Management or
any of their officers or directors in connection with the issue and sale of any
shares of the Fund's common stock.
9. (a) This Agreement shall remain in effect until January 10, 1998,
and shall continue in effect from year to year thereafter provided that such
continuation shall be specifically
-7-
<PAGE> 8
approved at least annually by the vote of a majority of the Directors of the
Fund who are not parties to this Agreement or "interested persons" (as defined
in the Act) of any such persons cast in person at a meeting called for the
purpose of voting on such approval and by a vote of the holders of a majority of
the outstanding voting securities of the Fund or the Board of Directors of the
Fund.
(b) Each of the parties hereto may terminate this Agreement at
any time without penalty upon at least 60 days' written notice to the other
parties.
(c) The agreements of the Fund and Management in paragraph 8
shall survive the expiration or earlier termination of this Agreement.
10. This Agreement may not be amended or changed except in writing
and shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors, but this Agreement shall not be assigned by any
party and shall automatically terminate upon its assignment as defined under the
Act.
If the foregoing is in accordance with your understanding, kindly so
indicate by signing in the space provided below.
-8-
<PAGE> 9
STRONG SCHAFER VALUE FUND, INC.
/s/ DAVID K. SCHAFER
------------------------------
By:
Its: President
SCHAFER CAPITAL MANAGEMENT, INC.
/s/ DAVID K. SCHAFER
------------------------------
By:
Its: Presicent
Accepted and Agreed to this ___ day of January 1996.
STRONG FUNDS DISTRIBUTORS, INC.
/s/ THOMAS P. LEMKE
- ------------------------------
By: Thomas P. Lemke
Its: President
-9-
<PAGE> 1
SHAREHOLDER SERVICING AND TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this ___ day of January,
1996, between STRONG SCHAFER VALUE FUND, INC., a Maryland corporation (the
"Fund"), and STRONG CAPITAL MANAGEMENT, INC., a Wisconsin corporation
("Strong").
W I T N E S S E T H
WHEREAS, the Fund is an open-end management investment company
registered under the Investment Company Act of 1940; and
WHEREAS, Strong is, among other things, in the business of
administering transfer and dividend disbursing agent functions.
NOW, THEREFORE, the Fund and Strong do mutually agree and promise as
follows:
1. Appointment. The Fund hereby appoints Strong to act as
Shareholder Servicing Agent for the Fund. Strong shall, at its own expense,
render the services and assume the obligations herein set forth subject to being
compensated therefor as herein provided.
2. Authority of Strong. Strong is hereby authorized by the Fund to
receive all cash which may from time to time be delivered to it by or for the
account of the Fund; to issue confirmations and/or certificates for shares of
the Fund upon receipt of payment; to redeem or repurchase on behalf of the Fund
shares of the Fund upon receipt of certificates properly endorsed or properly
executed written requests as described in the current prospectus of the Fund and
to act as dividend disbursing agent for the Fund.
3. Duties of Strong. Strong hereby agrees to:
A. Process new accounts.
B. Process purchases, both initial and subsequent, in
accordance with conditions set forth in the Fund's
prospectus as mutually agreed by the Fund and Strong.
C. Transfer shares of the Fund to an existing account or to a
new account upon receipt of required documentation in good
order.
D. Redeem uncertificated and/or certificated shares upon
receipt of required documentation in good order.
E. Issue and/or cancel certificates as instructed; replace
lost, stolen or destroyed certificates upon receipt of
satisfactory indemnification or bond.
<PAGE> 2
F. Distribute dividends and/or capital gain distributions. This
includes disbursement as cash or reinvestment and to change
the disbursement option at the request of shareholders.
G. Process exchanges between funds (process and direct
purchase/redemption and initiate new account or process to
existing account).
H. Make miscellaneous changes to records.
I. Prepare and mail a confirmation to shareholders as each
transaction is recorded in a shareholder account. Duplicate
confirmations to be available on request within current
year.
J. Handle phone calls and correspondence in reply to
shareholder requests except those items set forth in
Referrals to Fund, below.
K. Prepare Reports for the Fund:
i. Monthly analysis of transactions and accounts by types.
ii. Quarterly state sales analysis; sales by size; analysis
of systematic withdrawals, Keogh, IRA, and 403(b)(7)
plans; print-out of shareholder balances.
L. Perform daily control and reconciliation of Fund shares with
Strong's records and the Fund office records.
M. Prepare address labels or confirmations for shareholder
reports per year.
N. Mail and tabulate proxies for one Annual Meeting of
Shareholders, including preparation of certified shareholder
list and daily report to Fund management, if required.
O. Prepare and mail required Federal income taxation
information to shareholders to whom dividends or
distributions are paid, with a copy for the IRS and a copy
for the Fund if required.
P. Provide readily obtainable data which may from time to time
be requested for audit purposes.
Q. Replace lost or destroyed checks.
R. Continuously maintain all records for active and closed
accounts.
2
<PAGE> 3
S. Furnish shareholder data information for a current calendar
year in connection with IRA and Keogh Plans in a format
suitable for mailing to shareholders.
4. Referrals to Fund. Strong hereby agrees to refer to the Fund for
reply the following:
A. Requests for investment information, including performance
and outlook.
B. Requests for information about specific plans (i.e., IRA,
Keogh, Systematic Withdrawal).
C. Requests for information about exchanges between the funds.
D. Requests for historical fund prices.
E. Requests for information about the value and timing of
dividend payments.
F. Questions regarding correspondence from the Fund and
newspaper articles.
G. Any requests for information from non-shareholders.
H. Any other types of shareholder requests as the Fund may
request from Strong in writing.
5. Compensation to Strong. Strong shall be compensated for its
services hereunder in accordance with the Shareholder Servicing Fee Schedule
(the "Fee Schedule") attached hereto and as such Fee Schedule may from time to
time be amended in writing between the two parties. The Fund will reimburse
Strong for all out-of-pocket expenses, including, but not necessarily limited
to, postage, confirmation forms, etc. Special projects, not included in the Fee
Schedule and requested by proper instructions from the Fund, shall be completed
by Strong and invoiced to the Fund as mutually agreed upon.
6. Rights and Powers of Strong. Strong's rights and powers with
respect to acting for and on behalf of the Fund, including rights and powers of
Strong's officers and directors, shall be as follows:
A. No order, direction, approval, contract or obligation on
behalf of the Fund with or in any way affecting Strong shall
be deemed binding unless made in writing and signed on
behalf of the Fund by an officer or officers of the Fund who
have been duly authorized to so act on behalf of the Fund by
its Board of Directors.
3
<PAGE> 4
B. Directors, officers, agents and shareholders of the Fund are
or may at any time or times be interested in Strong as
officers, directors, agents, shareholders, or otherwise.
Correspondingly, directors, officers, agents and
shareholders of Strong are or may at any time or times be
interested in the Fund as directors, officers, agents,
shareholders or otherwise. Strong shall, if it so elects,
also have the right to be a shareholder of the Fund.
C. The services of Strong to the Fund are not to be deemed
exclusive and Strong shall be free to render similar
services to others as long as its services for others do not
in any manner or way hinder, preclude or prevent Strong from
performing its duties and obligations under this Agreement.
D. The Fund will indemnify Strong and hold it harmless from and
against all costs, losses, and expenses which may be
incurred by it and all claims or liabilities which may be
asserted or assessed against it as a result of any action
taken by it in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its
obligations or duties hereunder, and for any act, omission,
delay or refusal made by Strong in connection with this
agency in reliance upon or in accordance with any
instruction or advice of any duly authorized officer of the
Fund.
7. Effective Date. This Agreement shall become effective
as of the date hereof.
8. Termination of Agreement. This Agreement shall continue
in force and effect until terminated or amended to such an extent that a new
Agreement is deemed advisable by either party. Notwithstanding anything herein
to the contrary, this Agreement may be terminated at any time, without payment
of any penalty, by the Fund or Strong upon ninety (90) days' written notice to
the other party.
9. Amendment. This Agreement may be amended by the mutual
written consent of the parties. If, at any time during the existence of this
Agreement, the Fund deems it necessary or advisable in the best interests of
Fund that any amendment of this Agreement be made in order to comply with the
recommendations or requirements of the Securities and Exchange Commission or
state regulatory agencies or other governmental authority, or to obtain any
advantage under state or federal laws, the Fund shall notify Strong of the form
of amendment which it deems necessary or advisable and the reasons therefor, and
if Strong declines to assent to such amendment, the Fund may terminate this
Agreement forthwith.
10. Notice. Any notice that is required to be given by the
parties to each other under the terms of this Agreement shall be in writing,
addressed and delivered, or mailed postpaid to the other party at the principal
place of business of such party.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed as of the day and year first stated above.
Attest: STRONG CAPITAL MANAGEMENT, INC.
/s/ THOMAS P. LEMKE /s/ JOHN DRAGISIC
- ---------------------------- -------------------------------
By: Thomas P. Lemke By: John Dragisic
Its: Senior Vice President Its: President
Attest: STRONG SCHAFER VALUE FUND, INC.
/s/ BRENDAN J. SPILLANE /s/ DAVID K. SCHAFER
- ---------------------------- -------------------------------
By: Brendan J. Spillane By: David K. Schafer
Its: Secretary and Treasurer Its: President
2
<PAGE> 6
STRONG SCHAFER VALUE FUND, INC.
SHAREHOLDER SERVICING FEE SCHEDULE
Until such time that this schedule is replaced or modified, Strong
Schafer Value Fund, Inc. (the "Fund") agrees to compensate Strong Capital
Management, Inc. ("Strong") for performing as shareholder servicing agent at an
annual rate of $21.75 per open account plus out-of-pocket expenses. These
out-of-pocket expenses include, but are not limited to, the following:
1. All materials, paper and other costs associated with
necessary and ordinary shareholder correspondence.
2. Postage and printing of confirmations, statements, tax forms
and any other necessary shareholder correspondence. Printing
is to include the cost of printing account statements and
confirmations by third-party vendors as well as the cost of
printing the actual forms.
3. The cost of mailing (sorting, inserting, etc.) by
third-party vendors.
4. All banking charges of the Fund, including deposit slips and
stamps, checks and share drafts, wire fees not paid by
shareholders, and any other deposit account or checking
account fees.
5. The cost of storage media for Fund records, including phone
recorder tapes, microfilm and microfiche, forms and paper.
6. Offsite storage costs for older Fund records.
7. Charges incurred in the delivery of Fund materials and mail.
8. Any costs for outside contractors used in providing
necessary and ordinary services to the Fund or its
shareholders, not contemplated to be performed by Strong.
9. Any costs associated with enhancing, correcting or
developing the record keeping system currently used by the
Fund, including the development of new statement or tax form
formats.
In addition, the Fund will pay a fee for closed accounts at an annual
rate of $4.20 per account. All fees will be billed to the Fund monthly based
upon the number of open and closed accounts existing on the last day of the
month plus any out-of-pocket expenses paid by Strong during the month. These
fees are in addition to any fees the Fund may pay Strong for providing
investment management services or for underwriting the sale of Fund shares.
6
<PAGE> 1
FUND ACCOUNTING SERVICING AGREEMENT
This contract between Strong Schafer Value Fund, Inc., a Maryland
corporation, hereinafter called the "Company," and Strong Capital Management,
Inc. ("Strong"), a Wisconsin corporation, hereinafter called "Strong," is
entered into on this 1st day of February, 1996.
WITNESSETH:
WHEREAS, the Company is an open-end investment company;
WHEREAS, Strong is in the business of providing, among other things,
accounting services to investment companies;
NOW, THEREFORE, the Company and Strong do mutually promise and agree
as follows:
1. Services. Strong agrees to provide the following administration
and accounting services to the Company:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date basis using
security trade information communicated from the Company's
investment manager on a timely basis.
(2) For each day on which the New York Stock Exchange is
open for trading, determine prices as of the close of such
trading of the Company's securities, apply those prices to the
portfolio positions, and compute the net asset value per share of
the outstanding shares of the common stock of the Company. For
those securities where market quotations are not readily
available, the Board of the Company shall approve, in good faith,
the method for determining the fair value for such securities.
(3) Identify interest and dividend accrual balances as of
each such valuation date and calculate gross earnings on
investments for the accounting period.
(4) Determine gain/loss on security sales and identify them
as to short-short, short-term or long-term status; account for
periodic distributions of gains or losses to shareholders and
maintain undistributed gain or loss balances as of each valuation
date.
<PAGE> 2
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Company as to methodology, rate or
dollar amount.
(2) Record payments for fund expenses upon receipt of
written authorization from the Company.
(3) Account for fund expenditures and maintain expense
accrual balances at the level of accounting detail, as agreed
upon by Strong and the Company.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting:
(1) Account for fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other fund share activity
as reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the
Company.
(3) Determine net investment income (earnings) for the
Company as of each valuation date. Account for periodic
distributions of earnings to shareholders and maintain
undistributed net investment income balances as of each valuation
date.
(4) Maintain a general ledger for the Company in the form
defined by the Company.
(5) For each day that the New York Stock Exchange is open
for trading, determine the net asset value of the Company
according to the accounting policies and procedures set forth in
the prospectus.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of fund
operation at such time as required by the nature and
characteristics of the Company.
(7) Communicate, at an agreed upon time, the per share
price for each valuation date to parties as agreed upon from time
to time.
- 2 -
<PAGE> 3
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain tax accounting records for the Company to
support the tax reporting required for IRS-defined regulated
investment companies.
(2) Maintain tax lot detail for the Company.
(3) Calculate taxable gain/loss on security sales using the
tax cost basis defined for the Company.
(4) Provide the necessary financial information to support
taxable components of income and capital gains distributions to
the transfer agent to support tax reporting to the shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the fund accounting
records available to the Company, the Securities and Exchange
Commission, and the outside auditors.
(2) Maintain accounting records according to the Investment
Company Act of 1940 and regulations provided thereunder.
2. Changes in Accounting Procedures. Any resolution passed by the
Board of the Company that affects accounting practices and procedures under this
Agreement shall be effective upon written receipt and acceptance by Strong.
3. Changes in Equipment, Systems, Service, Etc. Strong reserves the
right to make changes from time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules and equipment, so long
as such changes do not adversely affect the service provided to the Company
under this Agreement.
4. Compensation. Strong shall be compensated for providing the
services set forth in this Agreement in accordance with the Fee Schedule
attached hereto as Exhibit A and as mutually agreed upon and amended from time
to time.
- 3 -
<PAGE> 4
5. Performance of Service. Strong shall exercise reasonable care in
the performance of its duties under this Agreement. The Company agrees to
reimburse and make Strong whole for any loss or damages (including reasonable
fees and expenses of legal counsel) arising out of or in connection with its
actions under this Agreement so long as Strong acts in good faith and is not
negligent or guilty of any willful misconduct.
Strong shall not be liable or responsible for delays or errors
occurring by reason of circumstances beyond its control, including acts of civil
or military authority, natural or state emergencies, fire, mechanical breakdown,
flood or catastrophe, acts of God, insurrection, war, riots or failure of
transportation, communication or power supply.
In the event of a mechanical breakdown beyond its control, Strong
shall take all reasonable steps to minimize service interruptions for any period
that such interruption continues. Strong will make every reasonable effort to
restore any lost or damaged data and the correcting of any errors resulting from
such a breakdown will be at the expense of Strong. Strong agrees that it shall
at all times have reasonable contingency plans with appropriate parties, making
reasonable provision for emergency use of electrical data processing equipment
to the extent appropriate equipment is available. Representatives of the Company
shall be entitled to inspect Strong's premises and operating capabilities at any
time during regular business hours of Strong, upon reasonable notice to Strong.
This indemnification includes any act, omission to act, or delay by
Strong in reliance upon, or in accordance with, any written or oral instruction
it receives from any duly authorized officer of the Company.
Regardless of the above, Strong reserves the right to reprocess and
correct administrative errors at its own expense.
6. No Agency Relationship. Nothing herein contained shall be deemed
to authorize or empower Strong or the Company to act as agent for any other
party to this Agreement, or to conduct business in the name of, or for the
account of, any other party to this Agreement.
7. Ownership of Records. All records prepared or maintained by
Strong on behalf of the Company remain the property of the Company and will be
surrendered promptly to the Company on the written request of an authorized
officer of the Company.
8. Confidentiality. Strong shall handle in confidence all
information relating to the Company's business,
- 4 -
<PAGE> 5
which is received by Strong during the course of rendering any service
hereunder.
9. Data Necessary to Perform Services. The Company, either itself or
through Strong, shall furnish to Strong the data necessary to perform the
services described herein at times and in such form as mutually agreed upon.
10. Notification of Error. The Company will notify Strong of any
balancing or control error caused by Strong within three (3) business days after
discovery of any error or omission not covered in the balancing or control
procedure, or within three (3) business days of receiving notice from any
shareholder, whichever is earlier.
11. Term of Agreement. This Agreement may be terminated by either
party upon giving sixty (60) days' prior written notice to the other party or
such shorter period as is mutually agreed upon by the parties. However, this
Agreement may be replaced or modified by a subsequent agreement between the
parties.
12. Duties in the Event of Termination. In the event that in
connection with termination a Successor to any of Strong's duties or
responsibilities hereunder is designated by the Company by written notice to
Strong, Strong will promptly, upon such termination and at the expense of the
Company, transfer to such Successor all relevant books, records, correspondence
and other data established or maintained by Strong under this Agreement in a
form reasonably acceptable to the Company (if such form differs from the form in
which Strong has maintained the same, the Company shall pay any expenses
associated with transferring the same to such form), and will cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from Strong's personnel in the establishment of books, records and other data by
such successor.
13. Choice of Law. This Agreement shall be construed in accordance
with the laws of the State of Wisconsin.
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
ATTEST: Strong Schafer Value Fund, Inc.
__________________________ By___________________________
ATTEST: Strong Capital Management, Inc.
__________________________ By____________________________
- 6 -
<PAGE> 7
STRONG CAPITAL MANAGEMENT, INC.
MUTUAL FUND SERVICES
FUND VALUATION AND ACCOUNTING
ANNUAL FEE SCHEDULE
- - Annual fee per fund based on market value of assets:
$20,000 for first $40,000,000
1/100 of 1% (1 Basis Point) on the next $200,000,000
5/1000 of 1% (one-half Basis Point) on the balance
- - Out-of-Pocket Expenses
- - Fees are billed monthly
- 7 -
<PAGE> 1
Exhibit 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 11 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 27, 1995, relating to the financial
statements and financial highlights appearing in the September 30, 1995 Annual
Report to shareholders of Schafer Value Fund, Inc., which is also incorporated
by reference into the Registration Statement. We also consent to the
references to us under the headings "Shareholder Reports" and "Experts" in such
Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
January 29, 1996
<PAGE> 1
EXHIBIT 99.B14.1
STRONG FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
PROFIT SHARING PLAN AA - PLAN NO. 01-001
PENSION PLAN AA - PLAN NO. 01-002
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I INTRODUCTION................................................................................ 8
ARTICLE II DEFINITIONS................................................................................. 8
ARTICLE III PARTICIPATION
3.1 Participation at Effective Date............................................................ 10
3.2 Participation After Effective Date......................................................... 10
3.3 Reentry.................................................................................... 10
3.4 Participation by an Owner-Employee of More Than One Trade or Business...................... 10
ARTICLE IV CONTRIBUTIONS
4.1 Employer Profit Sharing Contributions...................................................... 11
4.2 Employer Pension Contributions............................................................. 11
4.3 Participant Voluntary Contributions........................................................ 12
4.4 Time for Making Contributions.............................................................. 12
4.5 Leased Employees........................................................................... 12
4.6 Rollovers and Transfers.................................................................... 12
ARTICLE V CASH OR DEFERRED ARRANGEMENT
(CODE SECTION 401(k))
5.1 Cash or Deferred Arrangement (Code Section 401(k))......................................... 12
5.2 Elective Deferrals......................................................................... 12
5.3 Matching Contributions..................................................................... 14
5.4 Qualified Matching Contributions and Qualified Non-Elective Contributions ................. 16
5.5 Special Distribution Rules................................................................. 16
5.6 Definitions................................................................................ 16
ARTICLE VI SECTION 415 LIMITATIONS
6.1 Employers Maintaining Only this Plan....................................................... 18
6.2 Employers Maintaining Other Master or Prototype Defined Contribution Plans................. 18
6.3 Employers Maintaining Other Defined Contribution Plans .................................... 19
6.4 Employers Maintaining Defined Benefit Plans................................................ 19
6.5 Definitions................................................................................ 19
ARTICLE VII PARTICIPANTS' ACCOUNTS
7.1 Separate Accounts.......................................................................... 20
7.2 Vesting.................................................................................... 20
7.3 Computation of Vesting Service............................................................. 20
7.4 Allocation of Forfeitures.................................................................. 21
ARTICLE VIII PAYMENT OF BENEFITS
8.1 Benefits Payable Under the Plan............................................................ 21
8.2 Manner of Distributions.................................................................... 21
8.3 Commencement of Payments................................................................... 23
8.4 Payment of Small Amounts................................................................... 25
8.5 Persons under Legal or Other Disability.................................................... 25
8.6 Withdrawals from Profit Sharing Plan....................................................... 25
ARTICLE IX ESTABLISHMENT OF CUSTODIAL ACCOUNT; INVESTMENTS
9.1 Custodial Account.......................................................................... 26
9.2 Receipt of Contributions................................................................... 26
9.3 Investment of Account Assets............................................................... 26
9.4 Exclusive Benefit.......................................................................... 26
9.5 Expenses................................................................................... 26
9.6 Voting..................................................................................... 26
9.7 Reports of the Custodian and Administrator................................................. 26
9.8 Limitation of Custodian's Duties and Liability............................................. 27
ARTICLE X AMENDMENT AND TERMINATION
10.1 Amendment.................................................................................. 27
10.2 Termination................................................................................ 28
ARTICLE XI FIDUCIARY RESPONSIBILITIES
11.1 Administrator.............................................................................. 28
11.2 Powers of Administrator.................................................................... 28
11.3 Records and Reports........................................................................ 28
11.4 Other Administrative Provisions............................................................ 28
11.5 Claims Procedure........................................................................... 28
11.6 Claims Review Procedure.................................................................... 28
ARTICLE XII AMENDMENT AND CONTINUATION OF ORIGINAL PLAN................................................. 28
ARTICLE XIII TOP-HEAVY PROVISIONS
13.1 Effect of Top-Heavy Status................................................................. 29
13.2 Additional Definitions..................................................................... 29
13.3 Minimum Allocations........................................................................ 30
13.4 Benefit Limit Change....................................................................... 30
ARTICLE XIV MISCELLANEOUS
14.1 Rights of Employees and Participants....................................................... 30
14.2 Merger with Other Plans.................................................................... 30
14.3 Non-Alienation of Benefits................................................................. 31
14.4 Failure to Qualify......................................................................... 31
14.5 Mistake of Fact: Disallowance of Deduction................................................. 31
14.6 Participation under Prototype Plan......................................................... 31
14.7 Gender..................................................................................... 31
14.8 Headings................................................................................... 31
14.9 Governing Law.............................................................................. 31
</TABLE>
7
<PAGE> 2
STRONG FUNDS
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
ARTICLE I
INTRODUCTION
This Plan, which is made available by Strong/Cornelison Capital Management,
Inc. has been adopted by the Employer named in the Adoption Agreement(s) as a
qualified money purchase pension and/or profit sharing plan for its eligible
employees which is intended to qualify under Code Section 401(a). The Employer's
Plan shall consist of the following provisions, together with the Adoption
Agreement(s).
ARTICLE II
Definitions
2.1 ACCOUNT means the account or accounts maintained by the Custodian for a
Participant, as described in Article VII.
2.2 ADMINISTRATOR means the plan administrator and fiduciary of the Plan with
authority and responsibility to control and manage the operation and
administration of the Plan in accordance with its terms and to comply with the
reporting, disclosure and other requirements of ERISA. Unless a different
Administrator is appointed by the Employer, the Administrator shall be the
Employer.
2.3 BENEFICIARY means the person or persons designated by a Participant or
otherwise entitled to receive benefits in the event of the Participant's
death as provided herein. Such designation shall be made in writing and in such
form as may be required by the Administrator, and shall be filed with the
Administrator. Any designation may include contingent or successive
Beneficiaries. Where such designation has been properly made, distribution of
benefits shall be made directly to such Beneficiary or Beneficiaries. The
Beneficiary or Beneficiaries designated by a Participant may be changed or
withdrawn at any time from time to time, by the Participant, but only by filing
with the Administrator a new designation, and revoking all prior designations.
The most recent valid designation on file with the Administrator at the time of
the Participant's death shall be the Beneficiary. Notwithstanding the
foregoing, in the event the Participant is married at the time of his death,
the Beneficiary shall be the Participant's surviving spouse unless such spouse
consented in writing to the designation of an alternative Beneficiary after
notice of the spouse's rights and such consent was witnessed by a Plan
representative appointed by the Administrator or a notary public as provided in
Section 8.2(a) hereof. In the event no valid designation of Beneficiary is on
file with the Administrator at the date of death or no designated Beneficiary
survives him, the Participant's spouse shall be deemed the Beneficiary; in the
further event the Participant is unmarried or his spouse does not survive him,
the Participant's estate shall be deemed to be his Beneficiary.
2.4 BREAK IN SERVICE means a Plan Year in which a Participant fails to complete
at least five hundred one (501) Hours of Service. Breaks in Service and Years of
Service will be measured on the same vesting computation period.
2.5 CODE means the Internal Revenue Code of 1986, as interpreted by applicable
regulations and rulings issued pursuant thereto, all as amended and in effect
from time to time. Reference to a Code Section shall include that Section, and
any comparable section or sections of any future legislation that amends,
supplements or supersedes that Section.
2.6 COMPENSATION means the wages actually paid by the Employer to an Employee
for the taxable year ending with or within the Plan Year as defined in Code
Section 3121(a) for purposes of calculating social security (FICA) taxes
without regard to the dollar limitation of Code Section 312(a)(1), the special
rules in Code Section 3121(v) (applicable to certain elective contributions and
nonqualified deferred compensation), any rules that limit covered employment
based on the type or location of the Employer, and any rules that limit
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 Code Section 3121 (b)(1) through
(20)), except as limited pursuant to item 5 of the Adoption Agreement. For any
Self-Employed Individual covered under the Plan. Compensation shall mean such
individual's Earned Income.
For Plan Years beginning after December 31, 1988, the maximum amount of
Compensation taken into account under the Plan for a Participant in any Plan
Year shall not exceed two hundred thousand dollars ($200,000) or such greater
amount as permitted by the Secretary of the Treasury, 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 effective on January 1, 1990. If the 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.
For purposes of this limitation, the family aggregation rules of Code Section
414(q)(6) shall apply, except that the term "family" shall include only the
spouse of the Participant and any lineal descendants of the Participant who
have not attained age nineteen (19) before the close of such year. If, as a
result of the application of such rules the adjusted two hundred thousand
dollars ($200,000) limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the integration level if the 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.
2.7 CUSTODIAL ACCOUNT means the account established by the Custodian, in
accordance with Article IX, in the name of the Employer or for each Participant
as elected in the Adoption Agreement.
2.8 CUSTODIAN means First Wisconsin Trust Company, or any successor thereto.
2.9 DISABILITY means a mental or physical condition of injury or sickness, as
determined by the Administrator based upon the report of a medical examiner
satisfactory to the Employer, which prevents a Participant from carrying out the
duties of his position and which is likely to be permanent. Any such
determination by the Administrator shall be made in a uniform and
nondiscriminatory manner.
2.10 EARNED INCOME means net earnings from self-employment in the trade or
business with respect to which the Plan is established for which the personal
services of the individual are a material income-producing factor. Net earnings
shall be determined without regard to items not included in gross income and
the deductions allocable to such items. Net earnings shall be reduced by
contributions by the Employer to a qualified plan to the extent deductible
under Code Section 404. Net earnings shall be determined with regard to the
deduction allowed to the Employer under Code Section 164(f) for taxable years
beginning after December 31, 1989.
2.11 EFFECTIVE DATE means the date as of which this Plan is initially effective
as indicated in item 3 of the Adoption Agreement.
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2.12 ELECTIVE DEFERRALS means any Employer contributions made to the Plan at
the election of a participating Employee, in lieu of payment of an equal amount
to the participating Employee in cash as Compensation pursuant to Section 5.2
hereof, and shall include contributions made pursuant to a salary reduction
agreement or other deferral method. With respect to any taxable year, a
participating Employee's Elective Deferrals are the sum of all employer
contributions made on behalf of such Employee pursuant to an election to defer
under any qualified CODA as described in Code Section 401(k), any simplified
employee pension cash or deferred arrangement as described in Code Section
402(h)(1)(B), any eligible deferred compensation plan under Code Section 457,
any plan as described under Code Section 501(c)(18), and any employer
contributions made on the behalf of a participating Employee for the purchase
of an annuity contract under Code Section 403(b) pursuant to a salary reduction
agreement.
2.13 EMPLOYEE means an individual employed by the Employer (including any
eligible Self-Employed Individual) or any Related Employer adopting this Plan
except as excluded pursuant to item 4 of the Adoption Agreement. The term
Employee shall also include any individual who is a Leased Employee, unless
excluded pursuant to item 4 of the Adoption Agreement.
2.14 EMPLOYER means any entity adopting the Plan.
2.15 EMPLOYER PENSION CONTRIBUTIONS means the contributions made by the
Employer pursuant to Section 4.2 hereof if elected in item 6 of the Adoption
Agreement (Pension Plan.)
2.16 EMPLOYER PROFIT SHARING CONTRIBUTIONS means the contributions made by the
Employer pursuant to Section 4.1 hereof if elected in item 6 of the Adoption
Agreement (Profit Sharing Plan).
2.17 ERISA means the Employee Retirement Income Security Act of 1974, as
interpreted and applied under regulations and rulings issued pursuant thereto,
all as amended and in effect from time to time.
2.18 HOUR OF SERVICE means:
(a) Each hour for which an Employee is paid, or entitled to payment for the
performance of duties for the Employer. These hours shall be credited to
the Employee for the compensation 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 five hundred one (501) Hours of service shall be credited under
this paragraph for any single continuous period (whether or not such
period occurs in a single computation period). Hours of Service under
this paragraph shall be calculated and credited pursuant to Section 2530.
200b-2 of the Department of Labor and Regulations which are incorporated
herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Employer. The same Hours of Service
shall not be credited both under subsection (a) or subsection (b), as
the case may be, and under this subsection (c). These hours shall be
credited to the Employee for the computation period or periods to which
the award or agreement pertains rather than the computation period in
which the award, agreement or payment is made.
(d) Solely for purposes of determining whether a Break in Service, as defined
in Section 2.4, for participation and vesting purposes has occurred in a
computation period, an individual who is absent from work for maternity
or paternity reasons shall receive credit for the Hours of Service which
would otherwise have been credited to such individual but for such
absence, or in any case in which such hours cannot be determined, eight
(8) hours of service per normal workday of such absence. For purposes of
this paragraph, an absence from work for maternity or paternity reasons
means an absence:
(i) by reason of the pregnancy of the individual;
(ii) by reason of a birth of a child of the individual;
(iii) by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual; or
(iv) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
The Hours of Service credited under this Section 2.18 shall be credited
(i) in the computation period in which the absence begins if the crediting
is necessary to prevent a Break in Service in that period, or (ii) in all
other cases the following computation period.
(e) Hours of Service shall be determined on the basis of actual hours for
which an Employee is paid or entitled to payment unless a different
method of determining Hours of Service is selected in item 4(A) of the
Adoption Agreement.
(f) In the event the Employer maintains the plan of a predecessor employer,
service for such predecessor employer shall be treated as service for the
Employer. Hours of Service will be credited for employment with
members of an affiliated service group under Code Section 414(m), a
controlled group of corporations under Code Section 414(b), or a group
of trades or businesses under common control under Code Section 414(c) of
which the Employer is a member and any other entity required to be
aggregated with the Employer pursuant to Code Section 414(o) and the
Regulations thereunder. Hours of Service will also be credited for any
Leased Employee for purposes of this Plan under Code Sections 414(n) or
(o) and the Regulations thereunder, unless excluded under item 4 of the
Adoption Agreement.
2.19 INVESTMENT ADVISOR means Strong/Corneliuson Capital Management, Inc.
2.20 INVESTMENT COMPANY means Strong Investment Fund, Inc., Strong Total Return
Fund, Inc., Strong Income Fund, Inc., Strong Money Market Fund, Inc., and any
other regulated investment company(ies) designated by the Investment Advisor.
2.21 INVESTMENT COMPANY SHARES means the shares of each Investment Company.
2.22 LEASED EMPLOYEE means any individual who is considered a leased employee
within the meaning of Code Sections 414(n) or (o). For purposes of this
Section, a Leased Employee means any person who, pursuant to an agreement
between the Employer and any other person (which may include the Leased
Employee), has performed services for the Employer (or for the Employer and any
Related Employer) in a capacity other than as a common law employee 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 Employer. Notwithstanding the foregoing, no individual shall be
considered to be a Leased Employee if (a) such individual is covered by a money
purchase pension plan providing: (i) a non-integrated employer contribution
rate of at least ten percent (10%) of compensation, as defined in Code Section
415(c)(3), but including amounts contributed pursuant to a salary reduction
agreement which are excludable from the individual's gross income under Code
Sections 125, 402(a)(8), 402(h) or 403(b), (ii) immediate participation, and
(iii) full and immediate vesting and (b) Leased Employees do not constitute
more than twenty percent (20%) of the Employer's nonhighly compensated work
force. Contributions or benefits provided to a Leased Employee by the leasing
organization which are attributable to services performed for the Employer
shall be treated as provided by the Employer.
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<PAGE> 4
2.23 MATCHING CONTRIBUTION means an Employer contribution made to the Plan or
any other defined contribution plan on behalf of a participating Employee on
account of a participating Employee's Elective Deferrals pursuant to Section
5.3 hereof or on account of any employee contributions or elective deferrals
made to any other plan.
2.24 NET PROFITS means the current or accumulated earnings of the Employer
before federal and state taxes and contributions to this or any other
qualified plan.
2.25 NORMAL RETIREMENT AGE means age 65 or such other age as selected in item
11 of the Adoption Agreement (Profit Sharing Plan) and item 9 of the Adoption
Agreement (Pension Plan). If the Employer enforces a mandatory retirement age,
the Normal Retirement Age shall be the lesser of such mandatory retirement age
or the age specified in the Adoption Agreement.
2.26 ORIGINAL PLAN means any defined contribution plan which meets the
requirements of Code Section 401 and referred to in Article XII of the Plan.
2.27 OWNER-EMPLOYEE means an individual who is a sole proprietor, or who is a
partner owning more than ten percent (10%) of either the capital or profits
interest of the partnership.
2.28 PARTICIPANT means each Employee (including any eligible Self-Employed
Individual) who has completed the requirements for eligibility specified in
Section 3.1 hereof. Each such Employee shall become a Participant as of the
earlier of: (i) the first day of the Plan Year or (ii) the first day of the
seventh month of the Plan Year beginning after he completes such requirements.
2.29 PARTICIPANT VOLUNTARY CONTRIBUTIONS means contributions by a Participant
under the Plan pursuant to Section 4.3, if elected in item 9 of the Adoption
Agreement (Profit Sharing Plan) and item 8 of the Adoption Agreement (Pension
Plan).
2.30 PENSION PLAN means the feature of the Plan pursuant to which the Employer
makes Employer Pension Contributions. Such feature applies only to the extent
elected in item 6 of the Adoption Agreement (Pension Plan).
2.31 PLAN means this prototype profit sharing plan and/or money purchase
pension plan, together with the appropriate Adoption Agreement(s), as set forth
herein and as may be amended from time to time. As used herein, the term Plan
shall mean either or both the money purchase pension plan and the
profit-sharing plan depending on whether the Employer has adopted one or both
plans.
2.32 PLAN YEAR means the twelve (12) consecutive month period designated in
item 2 of the Adoption Agreement. The first Plan Year shall commence on the
Effective Date.
2.33 PROFIT SHARING PLAN means the feaures of the Plan pursuant to which all
contributions, other than Employer Pension Contributions, are made to the Plan,
including any contributions pursuant to the cash or deferred arrangement
(Section 401(k)) described in Article V hereof. Such features apply only to
the extent elected in items 6 and/or 8 of the Adoption Agreement (Profit Sharing
Plan).
2.34 RELATED EMPLOYER means an organization which, together with the Employer,
constitutes (i) a controlled group of corporations as defined in Code Section
414(b); (ii) trades or businesses under common control as defined in Code
Section 414(c); (iii) an affiliated service group as defined in Code Section
414(m); or (iv) a group of employers required to be aggregated under Code
Section 414(o).
2.35 SELF-EMPLOYED INDIVIDUAL means an individual who has Earned Income for
the taxable year from the trade or business for which the Plan was established
or who would have had Earned Income but for the fact that the trade or business
had no Net Profits for the taxable year.
2.36 VALUATION DATE means the last day of each Plan Year and such other times
as shall be determined by the Administrator.
2.37 YEAR OF EMPLOYMENT means the twelve (12) consecutive month period,
beginning on the date the Employee first performs an Hour of Service or any
anniversary thereof, in which the Employee completes at least one thousand
(1,000) Hours of Service or such lesser number of Hours of Service as
selected in item 4 of the Adoption Agreement.
2.38 YEAR OF SERVICE means a Plan Year in which the Employee completes at
least one thousand (1,000) Hours of Service or such lesser number of Hours of
Service as selected in item 7 of the Adoption Agreement.
ARTICLE III
PARTICIPATION
3.1 PARTICIPATION AT EFFECTIVE DATE Each Employee shall become a Participant
on the Effective Date, if on the Effective Date such Employee has completed the
number of Years of Employment and has attained age 21 or such lesser age as
elected in item 4 of the Adoption Agreement.
3.2 PARTICIPATION AFTER EFFECTIVE DATE Each Employee who did not become a
Participant as of the Effective Date, including future Employees, shall be
entitled to become a Participant in accordance with Section 2.28 after such
Employee has completed the number of Years of Employment and has attained age
21 or such lesser age as elected in item 4 of the Adoption Agreement.
3.3 REENTRY A former Participant shall become a Participant immediately upon
his return to employment with the Employer or his return to an eligible class
of Employees, whichever is applicable. In the event an Employee who is not a
member of the eligible class of Employees becomes a member of the eligible
class, such Employee will become a Participant in accordance with Section 3.2
above; provided that if the Employee has previously satisfied the eligibility
requirements of Section 3.2, the Employee shall become a Participant
immediately upon becoming a member of the eligible class of Employees.
3.4 PARTICIPATION BY AN OWNER-EMPLOYEE OF MORE THAN ONE TRADE OR BUSINESS
(a) If this Plan provides contributions or benefits for one or more Owner-
Employees who control both the business with respect to which this Plan is
established, and one or more other trades or businesses, this Plan and the
plan established with respect to such other trades or businesses must,
when looked at as a single plan, satisfy Code Sections 401(a) and (d) with
respect to the employees of this and all such other trades or businesses.
(b) If this Plan provides contributions or benefits for one or more Owner-
Employees who control one or more other trades or businesses, the
employees of each such other trade or business must be included in a plan
which satisfies Code Section 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for such
Owner-Employees under this Plan.
(c) If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which he does not control, and such
individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trade or business which he
or she does control must be as favorable as those provided for him or her
under the most favorable plan of the trade or business which he or she
does not control.
(d) For purposes of the preceding subparagraphs, an Owner-Employee, or two or
more Owner-Employees, shall be considered to control a trade or business
if such Owner-Employee, or such two or more Owner-Employees together, own
the entire interest in an unincorporated trade or
10
<PAGE> 5
business, or, in the case of a partnership, own more than fifty percent
(50%) of either the capital interest or the profits interest in such
partnership. For purposes of the preceding sentence, an Owner-Employee, or
two or more Owner-Employees, shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership which
such Owner-Employee, or such two or more Owner-Employees, are considered to
control within the meaning of the preceding sentence.
(e) Employees and Owner-Employees of trades or businesses which are under common
control (within the meaning of Code Section 414(c)) and Employees and
Owner-Employees of the members of an affiliated service group (within the
meaning of Code Section 414(m)) or of a group of aggregated employers (under
Code Section 414(o)) will be treated as employed by a single Employer for
purposes of employee benefit requirements of Code Section 414(m)(4).
ARTICLE IV
CONTRIBUTIONS
4.1 EMPLOYER PROFIT SHARING CONTRIBUTIONS
(a) If elected in item 6 of the Adoption Agreement (Profit Sharing Plan), the
Employer shall make an Employer Profit Sharing Contribution for each
Plan Year ending on or after the Effective Date in the amount determined
under such Adoption Agreement.
(b) The total amount of such Employer Profit Sharing Contribution for a Plan
Year shall be allocated to the Account of each eligible Participant as
follows:
(i) Unless otherwise elected in item 6(C) of the Adoption
Agreement, the total amount of such Employer Profit Sharing
Contribution shall be allocated based on the ratio that such eligible
Participant's Compensation and/or Earned Income for the Plan Year bears
to the total Compensation and Earned Income of all eligible Participants
for the Plan Year.
(ii) If the Integration Formula is selected in item 6(C) of the Adoption
Agreement, the total amount of such Employer Profit Sharing
Contribution shall be allocated based on the ratio that such
eligible Participant's Compensation and/or Earned Income for the
Plan Year in excess of the integration level for the Plan Year
bears to the total Compensation and Earned Income for all eligible
Participants in excess of the integration level for the Plan Year;
provided, however, that contributions allocated to a Participant with
respect to Compensation and/or Earned Income in excess of the
integration level shall not represent a greater percentage of such
excess Compensation and/or Earned Income than the lesser
of (A) 200% of the base contribution percentage, or
(B) the base contribution percentage plus the greater of:
(I) 5.7%, or
(II) the rate of tax under Code Section 3111(a) which
is attributable to old-age insurance in effect
at the beginning of the Plan Year.
Any Employer Profit Sharing Contribution remaining after the allocation
in this subsection (ii) shall be allocated in accordance with
subsection (i) above. The "integration level" shall be the taxable
wage base or such lesser level of Compensation and/or Earned
Income selected in item 6(C) of the Adoption Agreement. The "base
contribution percentage" shall mean the percentage of Compensation
and/or Earned Income which is contributed under the Plan with respect to
each Participant's Compensation and/or Earned Income not in excess
of the integration level.
If the integration level exceeds the greater of ten thousand dollars
($10,000) or one-fifth (1/5) of the taxable wage base but is not
more than eighty percent (80%) of the taxable wage base, the
percentage referred to in (I) above shall be reduced to 4.3% and a
proportionate reduction shall be made to the rate described in (II)
above. If the integration level is more than eighty percent (80%) but
less than one hundred percent (100%) of the taxable wage base, the
percentage referred to in (I) above shall be reduced to 5.4% and a
proportionate reduction shall be made to the rate described in (II)
above. The "taxable wage base" shall be the maximum amount of earnings
which may be considered wages for a year under Code Section 3121(a)(I)
in effect as of the beginning of the applicable Plan Year.
Notwithstanding the above, for any Plan Year in which the Plan is
top-heavy (as defined in Section 13.1 hereof) the Employer Profit
Sharing Contribution shall be allocated
(A) first, to each eligible Participant based on the ratio that
such Participant's Compensation and/or Earned Income for the
Plan Year bears to the total Compensation and Earned Income of all
eligible Participants for the Plan Year, but not more than three
percent (3%) of such Participant's Compensation and/or Earned Income.
(B) second, to each eligible Participant based on the ratio that
such Participant's Compensation and/or Earned Income in excess
of the integration level for the Plan Year bears to the total
Compensation and Earned Income of all eligible Participants in
excess of the integration level for the Plan Year, but not
more than three percent (3%) of such Participant's excess
Compensation and/or Earned Income, and
(C) any remaining Employer Profit Sharing Contribution shall be allocated
pursuant to the provisions of this subsection (ii) above.
(c) A Participant will be considered eligible for an allocation of the
Employer Profit Sharing Contribution if the Participant (i) is employed
by the Employer on the last day of the Plan Year or (ii) has completed at
least Five Hundred One (501) Hours of Service during the Plan Year.
(d) If elected in item 6(B) of the Adoption Agreement, Employer Profit
Sharing Contributions for a Plan Year shall not exceed the Net
Profits of the Employer for such Plan Year.
4.2 EMPLOYER PENSION CONTRIBUTIONS
(a) If elected in item 6 of the Adoption Agreement (Pension Plan),
the Employer shall make an Employer Pension Contribution for each
eligible Participant for each Plan Year ending on or after the Effective
Date in an amount determined under such Adoption Agreement.
(b) The total amount of such Employer Pension Contribution for a Plan
Year shall be allocated to the Account of each eligible Participant
as follows:
(i) Unless otherwise elected in item 6(B) of the Adoption Agreement, each
eligible Participant shall be allocated an amount equal to the
percentage of such eligible Participant's Compensation and/or
Earned Income as specified in the Adoption Agreement.
(ii) If the Integration Formula is selected in item 6(B) of the
Adoption Agreement, the total amount of such Employer Pension
Contribution shall be allocated in accordance with the method
described in Section 4.1(b) (ii) above. Notwithstanding the
foregoing, if the Integration Formula is selected under the
Profit Sharing Plan, the Employer Pension Contribution shall
be allocated in accordance with subsection (b)(i) above.
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<PAGE> 6
(c) A Participant will be considered eligible for an Employer
Pension contribution if the Participant (i) is employed by the
Employer on the last day of the Plan Year or (ii) has completed at
least Five Hundred One (501) Hours of Service during the Plan Year.
4.3 PARTICIPANT VOLUNTARY CONTRIBUTIONS
(a) If elected in item 9 of the Adoption Agreement (Profit Sharing
Plan) or item 8 of the Adoption Agreement (Pension Plan), a
Participant may voluntarily contribute to the Plan an amount up to ten
percent (10%) of his aggregate Compensation for all years since
becoming a Participant under this Plan and all other qualified plans of
the Employer. Any Participant Voluntary Contributions shall be limited
in accordance with the provisions of Section 5.3, even if the Employer
does not elect the Cash or Deferred Arrangement (Section 401(k)) under
item 8 of the Adoption Agreement (Profit Sharing Plan). If the Profit
Sharing Plan is elected, all Participant Voluntary Contributions shall
be deemed made to such plan. Participant Voluntary Contributions shall
be limited to Participants who are not highly compensated employees
(within the meaning of Code Section 414(q)) if elected in the Adoption
Agreement.
(b) A Participant shall be entitled to withdraw from his appropriate
Account at any time upon thirty (30) days' notice from the
Administrator to the Custodian (which notice shall specify the amount
of the withdrawal), a sum not in excess of the capital amount
contributed by him as Participant Voluntary Contributions under the
provisions of this Section 4.3, or the value of such Account, whichever
is less, provided that no ordinary income or capital gains attributable
to such contributions shall be subject to withdrawal. Notwithstanding
anything to the contrary herein, (i) all withdrawals are subject to the
provisions of Article VIII, and (ii) no forfeiture shall occur solely
as a result of a Participant's withdrawal of all or any portion of his
Participant Voluntary Contributions.
(c) No deductible voluntary employee contributions may be made for
taxable years beginning after December 31, 1986. Such 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 or losses in the same manner as described in Section
9.3 of the Plan. Subject to Section 8.2, a Participant may withdraw
any part of the deductible voluntary contribution Account by making a
written application to the Administrator.
4.4 TIME FOR MAKING CONTRIBUTIONS Employer Pension Contributions and Employer
Profit Sharing Contributions must be made no later than the due date, including
extensions thereof, for filing the Employer's Federal income tax return for the
year coincident with or within which the Plan Year ends (or such later time as
authorized by Treasury Regulations). Participant Voluntary Contributions for
any Plan Year shall be made no later than thirty (30) days after the end of
such Plan Year. The Employer may establish a payroll deduction system or
other procedure to assist the making of Participant Voluntary Contributions and
shall transfer such contributions to the Custodian as soon as practicable
after collected.
4.5 LEASED EMPLOYEES Contributions or benefits provided to a Leased Employee
by the leasing organization (within the meaning of Code Section 414(n)) which
are attributable to services performed for the Employer shall be treated as
provided by the Employer for purposes of this Plan.
4.6 ROLLOVERS AND TRANSFERS In the discretion of the Administrator according
to such uniform and nondiscriminatory rules established by the Administrator,
and in accordance with Sections 402 and 408 of the Code, a Particpant may make
a rollover to the Plan or the Plan may accept a direct transfer (including
voluntary after-tax contributions) from another plan qualified under Section
401(a) of the Code or from an individual retirement account. If the Employer
has adopted the Profit Sharing Plan, any rollover or transfer shall be made to
such Plan.
ARTICLE V
CASH OR DEFERRED ARRANGEMENT
(CODE SECTION 401(k))
5.1 CASH OR DEFERRED ARRANGEMENT (CODE SECTION 401(k)) The provisions of this
Article shall be effective as of the first day of the Plan Year in which this
cash or deferred arrangement is elected in item 8 of the Adoption Agreement
(Profit Sharing Plan). Under no circumstances shall the provisions of this
Article apply prior to the time specified in the preceding sentence.
5.2 ELECTIVE DEFERRALS
(a) ELECTION
(i) An Employee who has satisfied the minimum age and
service requirements set forth in item 8(A) of the Adoption
Agreement (Profit Sharing Plan) may elect to have Elective Deferrals
made to the Plan pursuant to a salary reduction agreement to the
extent permitted in item 8(A) of the Adoption Agreement (Profit
Sharing Plan). Such an election shall be effective as of the time
specified in item 8(A) of the Adoption Agreement (Profit Sharing
Plan) and may not be made effective retroactively.
(ii) An eligible Employee may also base Elective Deferrals,
to the extent provided in item 8(A) of the Adoption Agreement
(Profit Sharing Plan), on cash bonuses that, at the Employee's
election, may be contributed to the Plan or received by the
Employee. Such an election shall be effective as of the time
specified in item 8(A) of the Adoption Agreement (Profit Sharing
Plan) and may not be made effective retroactively.
(b) CHANGE IN RATE The rate at which Elective Deferrals are made
shall remain in effect until modified in accordance with item 8(A) of the
Adoption Agreement (Profit Sharing Plan). Notwithstanding the foregoing,
Elective Deferrals may be suspended entirely by an Employee at any time by
written notice to the Administrator. Any such suspension shall be
effective as soon as administratively practicable following the
Administrator's receipt of such notice.
(c) VESTING A Particiapnt shall at all times have a fully vested and
nonforfeitable interest in his Elective Deferrals.
(d) EXCESS ELECTIVE DEFERRALS
(i) No Participating Employee shall be permitted to have
Elective Deferrals made under this Plan or any other qualified
plan maintained by the employer during any taxable year pursuant to
Code Sections 401(k), 408(k) or 403(b) in excess of the dollar
limitation contained in Code Section 402(g) in effect at the
beginning of such taxable year.
(ii) A Participating Employee may assign to the Plan any
Excess Elective Deferrals made during a taxable year of such
Employee by notifying the Administrator on or before the date
specified below of the Excess Elective Deferrals to be assigned to
the Plan. Notwithstanding any other provision of the Plan, Excess
Elective Deferrals, plus any income and minus any loss allocable
thereto, may be distributed no later than April 15 to any
Participating Employee to whose Accounts Excess Elective Deferrals
were assigned for the preceding year and who claims Excess Elective
Deferrals for such taxable year. A Participating Employee's claim
for Excess Elective Deferrals shall be made in writing and shall be
submitted to the Administrator not later than the March 1
immediately preceding the relevant April 15. Such claim shall
specify the amount of the Participating Employee's Excess Elective
Deferrals for the preceding taxable
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<PAGE> 7
year and shall be accompanied by the Participating Employee's written
statement that if such amounts are not distributed, such Excess Elective
Deferrals, when added to amounts deferred under other plans or
arrangements described in Code Sections 401(k), 408(k) or 403(b), exceed
the limit imposed on the Participating Employee by Code Section 402(g)
for the year of the deferral.
(iii) Excess Elective Deferrals shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to
Excess Elective Deferrals is the sum of:
(A) income or loss allocable to the participating Employee's Elective
Deferrals Account for the taxable year for which the Excess Elective
Deferrals occurred multiplied by a fraction, the numerator of
which is such Participating Employee's Excess Elective Deferrals for
such taxable year and the denominator of which is such Participating
Employee's Elective Deferrals Account balance as of the end of the
taxable year without regard to any income or loss occurring during
such taxable year; and
(B) income or loss allocable to the Participating Employee's
Elective Deferrals Account for the period between the end of such
taxable year and the date of distribution under (A) above; or, at
the option of the Employer, ten percent (10%) of the amount
determined under (A) above multiplied by the number of whole calendar
months between the end of such taxable year and the date of
distribution, counting the month of distribution if distribution
occurs after the fifteenth (15th) of such month.
The amount of Excess Elective Deferrals that may be distributed with
respect to a Participating Employee shall be reduced by any Excess
Contributions previously distributed or recharacterized with respect to
such Participating Employee for the Plan Year beginning with or within such
taxable year. In no event may the amount distributed exceed the
Participating Employee's total Elective Deferrals for such taxable year.
(e) ACTUAL DEFERRAL PERCENTAGE
(i) The Actual Deferral Percentage for Participating Employees who
are Highly Compensated Employees for each Plan Year and the Actual
Deferral Percentage for Participating Employees who are not Highly
Compensated Employees for the same Plan Year must satisfy one of the
following tests:
(A) The Actual Deferral Percentage for Participating Employees
who are Highly Compensated Employees for the Plan Year shall not
exceed the Actual Deferral Percentage for Participating Employees
who are not Highly Compensated Employees for the same Plan Year
multiplied by 1.25; or
(B) The Actual Deferral Percentage for Participating Employees
who are Highly Compensated Employees for the Plan Year shall not
exceed the Actual Deferral Percentage for Participating Employees
who are not Highly Compensated Employees for the same Plan Year
multiplied by 2.0, provided that the Actual Deferral Percentage for
Participating Employees who are Highly Compensated Employees does
not exceed the Actual Deferral Percentage for Participating
Employees who are not Highly Compensated Employees by more than two
(2) percentage points.
(ii) The Actual Deferral Percentage for any Participating
Employee who is a Highly Compensated Employee for the Plan Year and
who is eligible to have Elective Deferrals (and Qualified
Non-Elective Contributions or Qualified Matching Contributions, or
both) allocated to his Accounts under two or more arrangements
described in Code Section 401(k), that are maintained by the
Employer, shall be determined as if such Elective Deferrals (and, if
applicable, such Qualified Non-Elective Contributions or Qualified
Matching Contributions, or both) were made under a single
arrangement. If a Highly Compensated Employee participates in two
or more cash or deferred arrangements that have different Plan
Years, contributions for such employee shall be aggregated for
purposes of this subsection (e). Contributions which are required
to be aggregated are any contributions made under all cash or
deferred arrangements ending with or within the same calendar year.
(iii) In the event that the Plan satisfies the requirements
of Code Sections 401(k), 401(a)(4) or 410(b) only if aggregated with
one or more other plans, or if one or more other plans satisfy the
requirements of such Code Sections only if aggregated with this Plan,
then this subsection shall be applied by determining the Actual
Deferral Percentage of Participating Employees as if all such plans
were a single plan. For Plan Years beginning after December 31, 1989,
plans may be aggregated in order to satisfy Code Section 401(k) only
if they have the same Plan Year.
(iv) For purposes of determining the Actual Deferral Percentage of a
Participating Employee who is a five (5) percent owner or one of the
ten (10) most highly-paid Highly Compensated Employees, the Elective
Deferrals (and Qualified Non-Elective Contributions and Qualified
Matching Contributions, or both) and Compensation of such
Participating Employee shall include the Elective Deferrals (and,
if applicable, Qualified Non-Elective Contributions and Qualified
Matching Contributions, or both) and Compensation for the Plan Year
of Family Members. Family Members, with respect to such Highly
Compensated Employees, shall be disregarded as separate employees in
determining the Actual Deferral Percentage both for Participating
Employees who are not Highly Compensated Employees and for
Participating Employees who are Highly Compensated Employees.
(v) For purposes of determining the Actual Deferral Percentage test,
Elective Deferrals, Qualified Non-Elective Contributions and
Qualified Matching Contributions must be made before the last day of
the twelve-month period immediately following the Plan Year to which
such contributions relate.
(vi) The Employer shall maintain records sufficient to
demonstrate satisfaction of the Actual Deferral Percentage test and
the amount of Qualified Non-Elective Contributions or Qualified
Matching Contributions, or both, used in such test.
(vii) The determination and treatment of the Actual Deferral
Percentage amounts of any Participating Employee shall satisfy such
other requirements as may be prescribed by the Secretary of the
Treasury.
(f) DISTRIBUTION OF EXCESS CONTRIBUTIONS
(i) Notwithstanding any other provision of this Plan,
Excess Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each
Plan Year to Participating Employees to whose Accounts such Excess
Contributions were allocated for the preceding Plan Year. If
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<PAGE> 8
such excess amounts are distributed more than two and one-half
(2 1/2) months after the last day of the Plan Year in which such
excess amounts arose, a ten percent (10%) excise tax will be
imposed on the Employer with respect to such amounts. Such
distributions shall be made to Highly Compensated Employees on the
basis of the respective portions of the Excess Contributions
attributable to each of such Employees. Excess Contributions shall
be allocated to Participating Employees who are subject to the
family member aggregation rules of Code Section 414(q)(6) in the
manner prescribed by the regulations. Excess Contributions
(including any amounts recharacterized) shall be treated as Annual
Additions for purposes of Article VI of the Plan.
(ii) Excess Contributions shall be adjusted for any income or loss up to
the date of distribution. The income or loss allocable to Excess
Contributions is the sum of:
(A) income or loss allocable to the Participating Employee's
Elective Deferrals Account (and, if applicable, the Qualified
Non-Elective Contributions Account or the Qualified Matching
Contributions Account, or both) for the Plan Year for which
the Excess Contributions occurred multiplied by a fraction,
the numerator of which is such Participating Employee's Excess
Contributions for such Plan Year and the denominator of which
is such Participating Employee's Account balance(s)
attributable to Elective Deferrals (and Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both) as
of the end of the Plan Year without regard to any income or
loss occurring during such Plan Year; and
(B) income or loss allocable to the Participant's Elective
Deferrals Account (and, if applicable, the Qualified
Non-Elective Contribution Account or the Qualified Matching
Contribution Account, or both) for the period between the end
of such Plan Year and the date of distribution multiplied by
the fraction determined under (A) above; or, at the option of
the Employer, ten percent (10%) of the amount determined under
(A) above multiplied by the number of whole calendar months
between the end of such Plan Year and the date of
distribution, counting the month of distribution if
distribution occurs after the fifteenth (15th) of such month.
(iii) Excess Contributions shall be distributed from the Participating
Employee's Elective Deferrals Account and Qualified Matching
Contributions Account (if applicable) in proportion to the
Participating Employee's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the Actual Deferral Percentage
test) for the Plan Year. Excess Contributions shall be distributed
from the Participating Employee's Qualified Non-Elective
Contributions Account only to the extent that such Excess
Contributions exceed the balance in the Participating Employee's
Deferrals Account and Matching Contributions Account.
(g) RECHARACTERIZATION
(i) A Participating Employee may treat his Excess Contributions
as an amount distributed to the Participating Employee and
then contributed by the Participating Employee to the Plan.
Recharacterized amounts will remain nonforfeitable and
subject to the same distribution requirements as Elective
Deferrals. Amounts may not be recharacterized by a Highly
Compensated Employee to the extent that such amount in
combination with other Participant Voluntary Contributions
would exceed any stated limit under the Plan on Participant
Voluntary Contributions. Recharacterizing Excess
Contributions shall be limited to Participants who are not
Highly Compensated Employees if elected in the Adoption
Agreement.
(ii) Recharacterization must occur no later than two and one-half
(2 1/2) months after the end of the Plan Year in which such
Excess Contributions arose and is deemed to occur no
earlier than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and the
consequences thereof. Recharacterized amounts will be taxable
to the Participating Employee for such Participating
Employee's taxable year in which the Participating Employee
would have received them in cash.
5.3 MATCHING CONTRIBUTIONS
(a) The Employer shall make Employer Matching Contributions to the Plan to the
extent elected in item 8(B) of the Adoption Agreement (Profit Sharing
Plan).
(b) A Participant shall have a vested interest in his Matching Contributions
Account as determined under the vesting schedule elected in item 8(B) of
the Adoption Agreement (Profit Sharing Plan). Forfeitures derived from
Matching Contributions which become available because of the vesting
provisions above, shall be applied to reduce the Employer Matching
Contributions that would otherwise be due for the Plan Year, or
subsequent Plan Years.
(c) ACTUAL CONTRIBUTION PERCENTAGE
(i) The Actual Contribution Percentage for Participating Employees who
are Highly Compensated Employees for each Plan Year and the Actual
Contribution Percentage for Participating Employees who are not
Highly Compensated Employees for the same Plan Year must
satisfy one of the following tests:
(A) The Actual Contribution Percentage for Participating
Employees who are Highly Compensated Employees for the Plan
Year shall not exceed the Actual Contribution Percentage for
Participating Employees who are not Highly Compensated
Employees for the same Plan Year multiplied by 1.25; or
(B) The Actual Contribution Percentage for Participating
Employees who are Highly Compensated Employees for the Plan
Year shall not exceed the Actual Contribution Percentage for
Participating Employees who are not Highly Compensated
Employees for the same Plan Year multiplied by two (2),
provided that the Actual Contribution Percentage for
Participating Employees who are Highly Compensated Employees
does not exceed the Actual Contribution Percentage for
Participating Employees who are not Highly Compensated
Employees by more than two (2) percentage points.
(ii) If one or more Highly Compensated Employees participate in both a
cash or deferred arrangement and a plan subject to the Actual
Contribution Percentage test maintained by the Employer and the sum
of the Actual Deferral Percentage and the Actual Contribution
percentage of those Highly Compensated Employees subject to either
or both tests exceeds the Aggregate Limit, then the Actual
Contribution Percentage of those Highly Compensated Employees who
also participate in a cash or deferred arrangement will be reduced
(beginning with such Highly Compensated Employee whose Actual
Contribution Percentage is the highest) so that the limit is not
exceeded. The amount by which each Highly Compensated
14
<PAGE> 9
Employee's Contribution Percentage Amount is reduced shall be treated
as an Excess Aggregate Contribution. The Actual Deferral Percentage and
the Actual Contribution Percentage of the Highly Compensated Employees
are determined after any corrections required to meet the Actual
Deferral Percentage and the Actual Contribution Percentage tests.
Multiple use does not occur if both the Actual Deferral Percentage and
the Actual Contribution Percentage of the Highly Compensated Employees
does not exceed 1.25 multiplied by the Actual Deferral Percentage and
the Actual Contribution Percentage of the Participating Employees who
are not Highly Compensated Employees.
(iii) For purposes of this subsection, the Contribution Percentage for any
Participating Employee who is a Highly Compensated Employee and who is
eligible to have Contribution Percentage Amounts allocated to his
account under two or more plans described in Code Section 401(a), or
arrangements described in Code Section 401(k) that are maintained by
the Employer, shall be determined as if the total of such Contribution
Percentage Amounts was made under each plan. If a Highly Compensated
Employee participates in two or more cash or deferred arrangements that
have different plan years, all cash or deferred arrangements ending with
or within the same calendar year shall be treated as a single
arrangement.
(iv) In the event that this Plan satisfies the requirements of Code Sections
401(m), 401(a)(4) or 410(b) only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of such
Code Sections only if aggregated with this Plan, then this subsection
shall be applied by determining the Contribution Percentage of employees
as if all such plans were a single plan. For plan years beginning after
December 31, 1989, plans may be aggregated in order to satisfy Code
Section 401(m) only if they have the same plan year.
(v) For purposes of determining the Contribution Percentage of a
Participating Employee who is a five percent owner or one of the ten
(10) most highly-paid Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Participating Employee shall
include the Contribution Percentage Amounts and Compensation for the
Plan Year of Family Members. Family Members, with respect to Highly
Compensated Employees, shall be disregarded as separate employees in
determining the Contribution Percentage both for Participating Employees
who are not Highly Compensated Employees and for Participating
Employees who are Highly Compensated Employees.
(vi) For purposes of determining the Contribution Percentage test, Employee
Contributions are considered to have been made in the Plan Year in which
contributed to the trust. Matching Contributions and Qualified
Non-Elective Contributions shall be considered made for a Plan Year if
made no later than the end of the twelve-month period beginning on the
day after the close of the Plan Year.
(vii) The Employer shall maintain records sufficient to demonstrate
satisfaction of the Actual Contribution Percentage test and the amount
of Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(viii) The determination and treatment of the Contribution Percentage of any
Participating Employee shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(d) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS
(i) Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if forfeitable, or if not forfeitable,
distributed no later than the last day of each Plan Year to
Participating Employees to whose Accounts such Excess Aggregate
Contributions were allocated for the preceding Plan Year. Excess
Aggregate Contributions shall be allocated to Participating
Employees who are subject to the family member aggregation rules of
Code Section 414(q)(6) in the manner prescribed by the regulations.
If such Excess Aggregate Contributions are distributed more than two
and one-half (2 1/2) months after the last day of the Plan Year in
which such excess amounts arose, a ten percent (10%) excise tax will
be imposed on the Employer with respect to those amounts. Excess
Aggregate Contributions shall be treated as Annual Additions for
purposes of Article VI of the Plan.
(ii) Excess Aggregate Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to
Excess Aggregate Contributions is the sum of:
(A) income or loss allocable to the Participating Employee's
Participant Voluntary Contributions Account. Matching
Contributions Account, Qualified Matching Contribution Account
(if any, and if all amounts therein are not used in the Actual
Deferral Percentage test) and, if applicable, Qualified
Non-Elective Contributions Account and Elective Deferrals
Account for the Plan Year for which the Excess Aggregate
Contributions occurred multiplied by a fraction, the numerator
of which is such Participating Employee's Excess Aggregate
Contributions for such Plan Year and the denominator of which is
the Participating Employee's Account balance(s) attributable to
Contribution Percentage Amounts as of the end of the Plan Year
without regard to any income or loss occurring during such Plan
Year: and
(B) income or loss allocable to the Participating Employee's
Participant Voluntary Contribution Account. Matching
Contributions Account, Qualified Matching Contribution Account
(if any, and if all amounts therein are not used in the Actual
Deferral Percentage test) and, if applicable, Qualified
Non-Elective Contributions Account and Elective Deferrals
Account for the period between the end of such Plan Year and
the date of distribution multiplied by the fraction determined
under (A) above: or, at the election of the Employer, ten
percent (10%) of the amount determined under (A) above
multiplied by the number of whole calendar months between the
end of such Plan Year and the date of distribution, counting the
month of distribution if distribution occurs after the fifteenth
(15th) of such month.
(iii) Forfeitures of Excess Aggregate Contributions shall be applied to
reduce Employer contributions for subsequent Plan Years.
(iv) Excess Aggregate Contributions shall be forfeited, if forfeitable,
or distributed on a prorata basis from the Participating Employee's
Participant Voluntary Contributions Account. Matching Contributions
Account and Qualified Matching Contribution Account (and, if
applicable, the Participating Employee's Qualified Non-Elective
Contributions Account or Elective Deferrals Account, or both).
15
<PAGE> 10
5.4 QUALIFIED MATCHING CONTRIBUTIONS AND QUALIFIED NON-ELECTIVE CONTRIBUTIONS
(a) Qualified Matching Contributions. The Employer may elect to make
Qualified Matching Contributions under the Plan in item 8(C) of the
Adoption Agreement. Qualified Matching Contributions may be made in lieu
of distributing Excess Contributions as provided in Section 5.2(f) hereof.
Qualified Matching Contributions may be either (i) additional amounts
contributed to the Plan by the Employer and allocated to the Accounts of
Participating Employees who are not Highly Compensated Employees based on
such Employees' Elective Deferrals or (ii) Matching Contributions
otherwise made to the Plan pursuant to Section 5.3(a) hereof which the
Employer designates as Qualified Matching Contributions. The amount of
Qualified Matching Contributions (if any) shall be determined by the
Employer for each year. All Qualifying Matching Contributions shall be
used to satisfy the Actual Deferral Percentage test pursuant to regulations
under the Code.
(b) The Employer may elect to make Qualified Non-Elective Contributions under
the Plan in item 8(C) of the Adoption Agreement. Qualified Non-Elective
Contributions may be made in lieu of distributing Excess Contributions as
provided in Section 5.2(f) or Excess Aggregate Contributions as provided
in Section 5.3(d) hereof. Qualified Non-Elective Contributions may be
either (i) additional amounts contributed to the Plan by the Employer and
allocated to the Accounts of Participating Employees who are not Highly
Compensated Employees based on such Employees' Compensation or (ii)
Profit Sharing Contributions otherwise made to the Plan pursuant to Section
4.1(a) hereof which the Employer designates as Qualified Non-Elective
Contributions. The amount of Qualified Non-Elective Contributions (if
any) shall be determined by the Employer for each year. All Qualified
Non-Elective Contributions shall be used to satisfy either the Actual
Deferral Percentage test or the Average Contribution Percentage test, or
both, pursuant to regulations under the Code.
(c) Separate accounts for Qualified Non-Elective Contributions and Qualified
Matching Contributions will be maintained for each Participant consistent
with Section 7.1 hereof. Each account will be credited with the
applicable contributions and earnings thereon.
(d) For purposes of the special distribution rules in Section 5.5, Qualified
Matching Contributions and Qualified Non-Elective Contributions shall be
treated as Elective Deferrals.
(e) Qualified Matching Contributions and Qualified Non-Elective Contributions
shall be appropriately designated when contributed.
5.5 SPECIAL DISTRIBUTION RULES Except as provided below, Elective Deferrals,
Qualified Non-Elective Contributions and Qualified Matching Contributions, and
income allocable to each, are not distributable to a Participant or a
Beneficiary, in accordance with such Participant's or Beneficiary's election,
earlier than upon separation from service, death, or disability.
(a) FINANCIAL HARDSHIP
(i) If elected by the Employer in item 8(D) of the Adoption Agreement
(Profit Sharing Plan), a Participant may elect to withdraw all or
any portion of his Elective Deferrals (excluding net earnings
credited thereto after December 31, 1988) on account of financial
hardship. For purposes of this Section 5.5, a financial hardship
shall mean an immediate and heavy financial need of the Participant
which cannot be satisfied from other resources reasonably
available to such Participant. Hardship withdrawals are subject to
the spousal consent requirements of Code Sections 401(a)(11) and
417.
(ii) A withdrawal is made on account of an immediate and heavy financial
need of a Participant only if it is made on account of: (A)
unreimbursed medical expenses described in Code Section 213(d) of
the Participant or the Participant's spouse or dependents (as
defined in Code Section 152); (B) the purchase (excluding mortgage
payments) of a principal residence for the Participant; (C) payment
of tuition for the next term of post-secondary education for the
Participant or the Participant's spouse, children or dependents; or
(D) the need to prevent the Particpant's eviction from, or
foreclosure on the mortgage of, the Particpant's principal
residence or such other events as may be approved by the
Commissioner of Internal Revenue in rulings, notices or other
published documents.
(iii) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Participant only if: (A)
the Participant has obtained all distributions, other than hardship
distributions, and all nontaxable loans under all plans maintained
by the Employer; (B) all plans maintained by the Employer provide
that the Participant's Elective Deferrals and any other elective
contributions or employee contributions under this Plan and any
other plan maintained by the Employer (both qualified and
nonqualified) will be automatically suspended for twelve (12)
months after the receipt of the hardship distribution; (C) the
distribution is not in excess of the amount of an immediate and
heavy financial need; and (D) all plans maintained by the Employer
provide that the Participant may not make Elective Deferrals for
the Participant's taxable year immediately following the taxable
year of the hardship distribution in excess of the applicable limit
under Code Section 402(g) for such taxable year less the amount of
such Participant's Elective Deferrals for the taxable year of the
hardship distribution.
(iv) A request for a hardship distribution shall be made in writing and
in such form as may be prescribed by the Administrator. Processing
of applications and distributions of amounts under this Section, on
account of a bona fide financial hardship, shall be made as soon as
administratively feasible.
(b) ELECTIVE DEFERRALS AT AGE 59 1/2 Upon attaining age fifty-nine and
one-half (59 1/2), a Participant may elect to withdraw all or any portion
of his Elective Deferrals Account and/or Employer Matching Contributions
Account, as of the last day of any month, even if he is still employed.
5.6 DEFINITIONS For purposes of this Article, the following words and phrases
shall have the following meanings:
(a) ACTUAL DEFERRAL PERCENTAGE means, for a specified group of Participating
Employees for a Plan Year, the average of the ratios (calculated
separately for each Participating Employee in such group) of (i) the
amount of Employer contributions actually paid over to the trust on behalf
of such Participating Employee for the Plan Year to (ii) the Participating
Employee's Compensation for such Plan Year (whether or not the Employee was
a Participating Employee for the entire Plan Year). Employer
contributions on behalf of any Participating Employee shall include: (i)
any Elective Deferrals made pursuant to the Participating Employee's
deferral election, including Excess Elective Deferrals of Highly
Compensated Employees, but excluding Elective Deferrals that are taken
into account in the Contribution Percentage test (provided the Actual
Deferral Percentage test is satisfied both with and without exclusion of
these Elective Deferrals); and (ii) at the election of the Employer,
Qualified Non-Elective Contributions and Qualified Matching
Contributions. For purposes of computing Actual Deferral Percentages, an
employee who would be a Participating Employee but for
16
<PAGE> 11
the failure to make Elective Deferrals shall be treated as a Participating
Employee on whose behalf no Elective Deferrals are made.
(b) AGGREGATE LIMIT means the sum of (i) one hundred twenty-five percent
(125%) of the greater of the Actual Deferral Percentage of the
Participating Employees who are not Highly Compensated Employees for the
Plan Year or the Actual Contribution Percentage of Participating Employees
who are not Highly Compensated Employees under the Plan subject to Code
Section 401(m) for the Plan Year beginning with or within the Plan Year of
the cash or deferred arrangement and (ii) the lesser of two hundred
percent (200%) or two (2) plus the lesser of such Actual Deferral
Percentage or Actual Contribution Percentage. "Lesser" is substituted for
"greater" in (i) above and "greater" is substituted for "lesser" after
"two plus the" in (ii) above if it would result in a larger Aggregate
Limit.
(c) AVERAGE CONTRIBUTION PERCENTAGE means the average of the Contribution
Percentages of the Employees in a group who are eligible to make
Participant Voluntary Contributions, or Elective Deferrals (if the
Employer takes such contributions into account in the calculation of the
Contribution Percentage), or to receive Matching Contributions (including
forfeitures) or Qualified Matching Contributions.
(d) CONTRIBUTION PERCENTAGE means the ratio (expressed as a percentage) of the
Participating Employee's Contribution Percentage Amounts to the
Participating Employee's Compensation for the Plan Year (whether or not
the Employee was a Participating Employee for the entire Plan Year).
(e) CONTRIBUTION PERCENTAGE AMOUNTS means the sum of the Participant Voluntary
Contributions, Matching Contributions, and Qualified Matching
Contributions (to the extent not taken into account for purposes of the
Actual Deferral Percentage test) made under the Plan on behalf of the
Participating Employee for the Plan Year. Such Contribution Percentage
Amounts shall include forfeitures of Excess Aggregate Contributions or
Matching Contributions allocated to the Participating Employee's Accounts
which shall be taken into account in the year in which such forfeiture
is allocated. The Employer may elect to include Qualified Non-Elective
Contributions in the Contribution Percentage Amounts. The Employer
also may elect to use all or part of the Elective Deferrals for
the Plan Year in the Contribution Percentage Amounts so long as the Actual
Deferral Percentage test is satisfied both including and excluding the
Elective Deferrals that are included in the Contribution Percentage
Amounts.
(f) EXCESS AGGREGATE CONTRIBUTIONS means, with respect to any Plan Year, the
excess of:
(i) the aggregate Contribution Percentage Amounts taken into account in
computing the numerator of the Contribution Percentage actually
made on behalf of Highly Compensated Employees for such Plan
Year, over
(ii) the maximum Contribution Percentage Amounts permitted by the Actual
Contribution Percentage test (determined by reducing contributions
made on behalf of Highly Compensated Employees in order of their
Contribution Percentages beginning with the highest of such
percentages).
Such determination shall be made after first determining Excess Elective
Deferrals pursuant to Section 5.2(d) hereof and then determining Excess
Contributions pursuant to Section 5.2(f) hereof.
(g) EXCESS CONTRIBUTIONS means, with respect to any Plan Year, the excess of:
(i) the aggregate amount of Employer contributions actually taken into
account in computing the Actual Deferral Percentage of Highly
Compensated Employees for such Plan Year, over
(ii) the maximum amount of such contributions permitted by the Actual
Deferral Percentage test (determined by reducing contributions made
on behalf of Highly Compensated Employees in order of the Actual
Deferral Percentages, beginning with the highest of such
percentages).
(h) EXCESS ELECTIVE DEFERRALS means those Elective Deferrals that are
includible in a Participating Employee's gross income for a taxable year
under Code Section 402(g) because they exceed the limitation specified in
Section 5.2(d)(i) hereof. Excess Elective Deferrals shall be treated as
Annual Additions under the Plan.
(i) FAMILY MEMBER means the spouse, lineal ascendants and descendants of
the employee or former employee and the spouses of such lineal ascendants
and descendants, all within the meaning of Code Section 414(q)(6).
(j) HIGHLY COMPENSATED EMPLOYEE means both highly compensated active employees
and highly compensated former employees.
(i) A highly compensated active employee includes any Employee who
performs service for the Employer during the determination year and
who, during the look-back year; (i) received compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Code Section
415(d)); (ii) received compensation from the Employer in excess of
$50,000 (as adjusted pursuant to Code Section 415(d)) and was a
member of the top-paid group for such year; or (iii) was an officer
of the Employer and received compensaton during such year that is
greater than 50 percent of the dollar limitation in effect under
Code Section 415(b)(1)(A). The term Highly Compensated Employee
also includes: (i) employees who are both described in the
preceding sentence if the term "determination year" is substituted
for the term "look-back year" and the employee is one of the 100
employees who received the most compensation from the Employer
during the determination year; and (ii) employees who are 5 percent
owners at any time during the look-back year or determination year.
If no officer has satisfied the compensation requirement of (iii)
above during either a 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
twelve-month period immediately preceding the determination year.
(ii) A highly compensated former employee includes any Employee who
separated from service (or was deemed to have separated) prior to
the determination year, performs no service for the Employer during
the determination year, and was a highly compensated active
employee for either the separation year or any determination year
ending on or after the employee's fifty-fifth (55th) birthday.
(iii) If an employee is, during a determination year or look-back year, a
Family Member of either a five percent owner who is an active or
former employee or a Highly Compensated Employee who is one of the
ten (10) most highly compensated employees ranked on the basis of
Compensation paid by the Employer during such year, then the Family
Member and the five percent owner or top-ten Highly
Compensated Employee shall be aggregated. In such case, the Family
Member and five percent owner or top-ten Highly Compensated
Employee shall be treated as a single employee receiv-
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<PAGE> 12
ing Compensation and Plan contributions or benefits equal to
the sum of such Compensation and contributions or benefits of the
Family Member and five percent owner or top-ten Highly Compensated
Employee.
(iv) 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 Code Section 414(q).
(k) PARTICIPATING EMPLOYEE means an Employee who is eligible to make
Elective Deferrals or Participant Voluntary Contributions (if the Employer
takes such contributions into account in the calculation of the
Contribution Percentage), or to receive Matching Contributions (including
forfeitures) or Qualified Matching Contributions. If an Employee
contribution is required as a condition of participation in the Plan, any
Employee who would be a Participant in the Plan if such Employee made such
a contribution shall be treated as a Participating Employee on behalf of
whom no Employee contributions are made.
(l) QUALIFIED MATCHING CONTRIBUTIONS means Matching Contributions which
are one hundred percent (100%) vested and nonforfeitable at all times and
which are distributable only in accordance with the distribution provisions
applicable to Elective Deferrals.
(m) QUALIFIED NON-ELECTIVE CONTRIBUTIONS means contributions (other
than Matching Contributions or Qualified Matching Contributions) made by
the Employer and allocated to Participating Employees' Accounts that the
Participating Employees may not elect to receive in cash until distributed
from the Plan, are one hundred percent (100%) vested and nonforfeitable
when made, and are distributable only in accordance with the distribution
provisions applicable to Elective Deferrals.
ARTICLE VI
SECTION 415 LIMITATIONS
6.1 EMPLOYERS MAINTAINING ONLY THIS PLAN
(a) If the Participant does not participate in, and has never
participated in another qualified plan, a welfare benefit fund (as defined
in Code Section 419(e)) or an individual medical account (as defined in
Code Section 415(1)(2)) maintained by the Employer, the amount of Annual
Additions which may be credited to a Participant's Account, under this Plan
for a Limitation Year shall not exceed the lesser of the Maximum
Permissible Amount or any other limitation contained in this Plan. If the
Employer's contribution that would otherwise be contributed or allocated to
the Participant's Account would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the Annual Additions for
the Limitation Year will equal the maximum Permissible Amount.
(b) Prior to the determination of the Participant's actual compensation
for a Limitation Year, the Maximum Permissible Amount may be determined on
the basis of the Participant's estimated annual compensation for such
Limitation Year. Such estimated annual compensation shall be determined on
a reasonable basis and shall be uniformly determined for all Participants
similarly situated. Any Employer contributions based on estimated annual
compensation shall be reduced by any Excess Amounts carried over from prior
years.
(c) As soon as it is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation Year
shall be determined on the basis of the Participant's actual Compensation
for such Limitation Year.
(d) If, pursuant to Section 6.1(c) and notwithstanding the provisions
of Section 6.1(a) hereof which require a reduction of contributions so as
not to exceed the limitations of this Article VI, there is an Excess Amount
with respect to a Participant for a Limitation Year, such Excess Amount
shall be disposed of as follows:
(i) Any Participant Voluntary Contributions, to the extent that
the return would reduce the Excess Amount, shall be returned to the
Participant.
(ii) In the event that the Participant is covered by this Plan
at the end of the Limitation Year, remaining Excess Amounts after the
application of clause (i) shall be applied to reduce future Employer
contributions (including any allocation of forfeitures) for such
Participant under this Plan in the next Limitation Year (and each
succeeding year, as necessary).
(iii) In the event that the Participant is not covered by this
Plan at the end of the Limitation Year, remaining Excess Amounts after
the application of clause (i) shall not be distributed to the
Participant, but shall be held unallocated in a suspense account and
shall be applied to reduce future Employer contributions (including
any allocation of forfeitures) for all remaining Participants in the
next Limitation Year (and each succeeding year, as necessary).
(iv) If a suspense account is in existence at any time during
the Limitation Year pursuant to this Section, it will not participate
in the allocation of any investment gains and losses, and all amounts
in the suspense account must be allocated and reallocated to
Participants' Accounts before any Employer or Employee contributions
may be made to the Plan for such Limitation Year. Excess amounts may
not be distributed to Participants or former Participants.
6.2 EMPLOYERS MAINTAINING OTHER MASTER OR PROTOTYPE DEFINED CONTRIBUTION PLANS.
(a) If, in addition to this Plan, the Participant is covered under
another qualified defined contribution plan which qualifies as a Master or
Prototype Plan or a welfare benefit fund (as defined in Code Section
419(e)) or an individual medical account (as defined in Code Section
415(1)(2)) maintained by the Employer during any Limitation Year, the
amount of Annual Additions which may be allocated under this Plan on the
Participant's behalf for such Limitation Year, shall not exceed the Maximum
Permissible Amount reduced by the Annual Additions credited to a
Participant's account under such other plans, welfare benefit funds or
individual medical accounts 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 Account under
this Plan would cause the Annual Additions for the Limitation Year to
exceed this limitation, the amount contributed or allocated will be reduced
so that the Annual Additions under all such plans and funds for the
Limitation Year will equal the Maximum Permissible Amount. If the Annual
Additions with respect to the Participant under such other defined
contribution plans and welfare benefit funds in the aggregate are equal to
or greater than the Maximum Permissible Amount, no amount will be
contributed or allocated to the Participant's Account under this Plan for
the Limitation Year.
(b) Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the amounts referred to in subsection (a) above
may be determined on the Participant's estimated annual compensation for
such Limitation Year. Such estimated annual compensation shall be
determined on
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<PAGE> 13
a reasonable basis and shall be uniformly determined for all
Participants similarly situated. Any Employer contribution based on
estimated annual compensation shall be reduced by any Excess Amounts
carried over from prior years.
(c) As soon as it is administratively feasible after the end of the
Limitation Year, the amounts referred to in subsection (a) above shall be
determined on the basis of the Participant's actual Compensation for such
Limitation Year.
(d) If a Participant's Annual Additions under this Plan and all such
other plans result in an Excess Amount for a Limitation Year, such Excess
Amount shall be deemed to consist of the Annual Additions last allocated,
except that Annual Additions attributable to a welfare benefit fund or
individual medical account will be deemed to have been allocated first
regardless of the actual allocation date.
(e) If an Excess Amount was allocated to a Participant on an allocation
date of this Plan which coincides with an allocation date of another plan,
the Excess Amount attributed to this Plan will be the product of:
(i) the total Excess Amount allocated as of such date (including any
amount which would have been allocated but for the limitations of Code
Section 415), times
(ii) the ratio of (A) the amount allocated to the Participant as of
such date under this Plan, divided by (B) the total amount allocated
as of such date under all qualified master or prototype defined
contribution plans (determined without regard to the limitations of
Code Section 415).
(f) Any Excess Amount attributed to this Plan shall be disposed of as
provided in Section 6.1(d).
6.3 EMPLOYERS MAINTAINING OTHER DEFINED CONTRIBUTION PLANS. If the Participant
is covered under another plan which is a qualified defined contribution plan
which is not a Master or Prototype Plan maintained by the Employer, Annual
Additions allocated under this Plan on behalf of any Participant shall be
limited in accordance with the provisions of Section 6.2, as though the other
plan were a Master or Prototype Plan, unless the Employer provides other
limitations in the Adoption Agreement.
6.4 EMPLOYERS MAINTAINING DEFINED BENEFIT PLANS If the Participant is covered
or was covered at any time under a qualified defined benefit plan maintained by
the Employer, the projected annual benefit thereunder and the Annual Additions
credited to any such Participant's Account under this Plan and any other
qualified defined contribution plan in any Limitation Year will be limited so
that the sum of the Defined Contribution Fraction and the Defined Benefit
Fraction with respect to such Participant will not exceed 1.0 in any Limitation
Year. The Annual Additions which may be credited to the Participant's Account
under this Plan for any Limitation Year will be limited in accordance with the
Adoption Agreement.
6.5 DEFINITIONS For purposes of this Article VI, the following terms shall be
defined as follows:
(a) Annual Additions -- The sum of the following amounts allocated to a
Participant's Account for a Limitation Year: (i) all Employer
contributions; (ii) all Participant contributions (other than a qualified
rollover contribution as described in Code Section 402(a)(51); (iii) all
forfeitures; (iv) all amounts allocated, after March 31, 1984, to an
individual medical account (as defined in Code Section 415(1)(2)) which is
part of a defined benefit or annuity plan maintained by the Employer are
treated as Annual Additions to a defined contribution plan; and (v)
amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a
"key employee" (as defined in Code Section 419A(d)(3) under a welfare
benefit fund (as defined in Code Section 419(e)) maintained by the
Employer, are treated as Annual Additions to a defined contribution plan.
For the purposes of this Article VI, amounts reapplied under Sections
6.1(d) and 6.2(f) of the Plan to reduce Employer contributions shall also
be included as Annual Additions.
(b) Compensation -- A Participant's wages as defined in Code Section
3121(a), for purposes of calculating social security taxes, but determined
without regard to the wage base limitation in Code Section 3121(a)(1), the
limitations on the exclusions from wages in Code Section 3121(a)(5)(C) and
(D) for elective contributions and payments by reason of salary reduction
agreements, the special rules in Code Section 3121(v), any rules that
limit covered employment based on the type or location 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 Code Section 3121(b)(1) through (20)). For any
Self-Employed Individual Compensation means Earned Income.
For Limitation Years beginning after December 31, 1991, for purposes of
applying the limitations of this Article. 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 Code Section 22(e)(3)) 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 a disabled participant may be taken into account only if
the participant is not a highly compensated employee (as defined in Code
Section 414(q)) and contributions made on behalf of such participant are
nonforfeitable when made.
(c) Defined Benefit Fraction -- A fraction, the numerator of which is
the sum of a Participant's Projected Annual Benefits under all the
qualified defined benefit plans (whether or not terminated) maintained by
the Employer determined at the end of the Limitation Year, and the
denominator of which is the lesser of (i) one hundred and twenty-five
percent (125%) of the dollar limitation for such Limitation Year under
Code Sections 415(b) and (d) (or such higher amount determined by the
Commissioner of Internal Revenue applicable to the calendar year with
which or within which the Limitation Year ends) or (ii) one hundred and
forty percent (140%) of the Participant's average Compensation (or Earned
Income) for the three highest consecutive calendar years of service during
which the Participant was in the Plan including any adjustments under Code
Section 415(b). Notwithstanding the above, if the Participant was a
Participant as of the first limitation year beginning after December 31,
1986 in one or more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this fraction will
not be less than the product of 1.25 times the sum of the annual benefits
under such plans which the Participant had accrued as of the close of the
last Limitation Year beginning after 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 Code Section 415 for
all Limitation Years beginning before January 1, 1987.
(d) Employer -- The Employer that adopts this Plan and in the case of a
group of employers which constitutes (i) a
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<PAGE> 14
controlled group of corporations (as defined in Code Section 414(b) as
modified by Code Section 415(h)); (ii) trades or businesses (whether or not
incorporated) which are under common control (as defined in Section 414(c)
as modified by Code Section 415(h)); (iii) an affiliated service group (as
defined in Code Section 414(m)); or (iv) a group of entities required to
be aggregated (pursuant to Code Section 414(o)) all such employers shall
be considered a single employer for purposes of applying the limitations
of this Articles VI.
(e) Excess Amount -- The excess of the Participant's Annual Additions for
the Limitation Year over the Maximum Permissible Amount.
(f) Limitation Year -- A calendar year or any other twelve (12)
consecutive month period adopted by the Employer in item 12 of the
Adoption Agreement (Profit Sharing Plan) or item 10 of the Adoption
Agreement (Pension Plan). All qualified plans maintained by the Employer
shall use the same Limitation Year. If the Limitation Year is amended to a
different twelve (12) consecutive month period, the new Limitation Year
shall begin on the date within the Limitation Year in which the amendment
is made.
(g) Master or Prototype Plan -- A plan the form of which is the subject of
a favorable opinion letter from the Internal Revenue Service.
(h) Maximum Permissible Amount -- For a Limitation Year, the Maximum
Permissible Amount with respect to any Participant shall be the lesser of
(i) the Defined Contribution Dollar Limitation or (ii) twenty-five percent
(25%) of the Participant's Compensation for the Limitation Year. The
Compensation limitation described in (ii) shall not apply to any
contribution for medical benefits (within the meaning of Code Sections
401(h) or 419A(f)(2)) which is otherwise treated as an Annual Addition
under Code Sections 415(l)(1) or 419A(d)(2). If a short Limitation Year is
created because of an amendment changing the Limitation Year to a
different twelve (12) consecutive month period, the Maximum Permissible
Amount shall not exceed the defined contribution dollar limitation in Code
Section 415(c)(1)(A) multiplied by a fraction, the numerator of which is
the number of months in the short Limitation Year and the denominator of
which is twelve (12).
(i) Projected Annual Benefit -- A Participant's annual retirement benefit
(adjusted to the actuarial equivalent of a straight life annuity if
expressed in a form other than a straight life or qualified joint and
survivor annuity) under the Plan, assuming that the Participant will
continue employment until the later of current age or Normal Retirement
Age, and that the Participant's Compensation for the Limitation Year and
all other relevant factors used to determine benefits under the Plan will
remain constant for all future Limitation Years.
(j) Defined Contribution Fraction -- A fraction, the numerator of which
is the sum of the Annual Additions credited to the Participant's account
under this and all other qualified 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 non-deductible employee contributions to all qualified
defined benefit plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years and the Annual
Additions attributable to all welfare benefit funds (as defined in Code
Section 419(e)) and individual medical accounts (as defined in Code
Section 415(l)(2) 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 (i) one hundred
and twenty-five percent (125%) of the dollar limitation determined under
Code Sections 415(b) and (d) in effect under Code Section 415(c)(1)(A) or
(ii) thirty-five percent (35%) of the Participant's Compensation for such
Limitation 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 5, 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: (i) the excess of the sum of the
fractions over 1.0 times (ii) the denominator of this fraction, will be
permanently subtracted from the numerator of this fraction. The adjustment
is calculated using the fractions as they would be computed as of the end
of the last Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the Plan made
after May 5, 1986, but using the Code Section 415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987. The
annual addition for any Limitation Year beginning before January 1, 1987,
shall not be computed to treat all Employee contributions as Annual
Additions.
(k) Defined Contribution Dollar Limitation -- For a Limitation Year,
thirty thousand dollars ($30,000) or, if greater, one-fourth of the
defined benefit dollar limitation set forth in Code Section 415(b)(1) as
in effect for such Limitation Year.
(l) Highest Average Compensation -- The average compensation for the
three consecutive years of Service with the Employer which produces
the highest average.
ARTICLE VII
PARTICIPANTS' ACCOUNTS
7.1 SEPARATE ACCOUNTS Separate Accounts will be maintained for each
Participant for each of the following types of contributions, and the income,
expenses, gains and losses attributable thereto:
(a) Employer Profit Sharing contributions pursuant to Section 4.1 hereof;
(b) Employer Pension Contributions pursuant to Section 4.2 hereof;
(c) Participant Voluntary Contributions pursuant to Section 4.3 hereof;
(d) Elective Deferrals pursuant to Section 5.2 hereof;
(e) Matching Contributions pursuant to Section 5.3 hereof;
(f) Rollover Contributions pursuant to Section 4.6 hereof.
The Custodian shall establish such other separate Accounts as may be
necessary under the Plan. These Accounts shall be for accounting purposes
only and the Custodian shall not be required to establish separate
Custodial Accounts for these contributions.
7.2 VESTING
(a) A Participant shall at all times have a fully vested and nonforfeitable
interest in all his Accounts except his Employer Profit Sharing
Contributions Account and/or his Employer Pension Contributions Account.
(b) A Participant shall have a vested interest in his Employer Profit
Sharing Contributions Account and/or his Employer Pension Contributions
Account as determined under the vesting schedule elected in item 7 of the
Adoption Agreement.
7.3 COMPUTATION OF VESTING SERVICE All of a Participant's Years of Service
with the Employer shall be counted to determine the
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<PAGE> 15
nonforfeitable percentage of his Employer Profit Sharing Contributions Account
and/or his Employer Pension Contributions Account except those Years of Service
excluded under item 7 of the Adoption Agreement. A former Participant who had a
nonforfeitable right to all or a portion of his Account balance derived from
Employer contributions at the time of his termination shall receive credit for
Years of Service prior to his Break in Service upon completing a Year of
Service after his return to the employ of the Employer. A former Participant
who did not have a nonforfeitable right to any portion of his Account balance
derived from Employer contributions at the time of termination from service
will be considered a new employee for vesting purposes, if the number of
consecutive one year Breaks in Service equals or exceeds the greater of (i)
five (5) years or (ii) the aggregate number of Years of Service before such
Breaks in Service. If such a former Participant's Years of Service before
termination from service may not be disregarded pursuant to the preceding
sentence, such former Participant's prior Years of Service shall not be
cancelled hereunder.
7.4 ALLOCATION OF FORFEITURES
(a) As of the end of the Plan Year, forfeitures derived from Employer
Profit Sharing Contributions Accounts which become available for
reallocation during such Plan Year because of the operation of the vesting
provisions of Section 7.2(b), shall be allocated to the Employer Profit
Sharing Contribution Accounts of the Participants who are eligible to
share in an Employer Profit Sharing Contributions for the Plan Year. Such
amounts shall be allocated according to the ratio that each such
Participant's Compensation or Earned Income for the Plan Year bears to the
total Compensation and Earned Income of all such Participants for the Plan
Year. Forfeitures under this subsection (a) will be allocated only for the
benefit of Participants of the Employer adopting this Plan.
(b) Forfeitures derived from Employer Pension Contributions which become
available for reallocation during a Plan Year shall be applied to reduce
the Employer Pension Contributions that would otherwise be due for such
Plan Year under Section 4.2. Forfeitures under this subsection (b) will
only be used to reduce the Employer Pension Contributions of the Employer
adopting this Plan.
(c) If a benefit is forfeited because a Participant or Beneficiary
cannot be found, such benefit will be reinstated if a claim is made by
the Participant or Beneficiary.
(d) No forfeiture will occur solely as a result of a Participant's
withdrawal of any Employee contributions.
ARTICLE VIII
PAYMENT OF BENEFITS
8.1 BENEFITS PAYABLE UNDER THE PLAN
(a) NORMAL RETIREMENT A Participant's interest in all Employer
contributions allocated to his Accounts shall be fully vested and
nonforfeitable on and after his Normal Retirement Age. Such Participant
may retire at any time on or after that date and shall be entitled to
receive, in accordance with the provisions of Sections 8.2 and 8.3 hereof,
the total amount credited to his Accounts. Any Participant who is employed
beyond his Normal Retirement Age shall continue to share in Employer
contributions until his actual retirement.
(b) DEATH BENEFITS Upon the death of a Participant while employed by
the Employer, the total amount credited to such Participant's Accounts
(plus such Participant's share of the Employer contributions for the year
of his death), shall be payable to such Participant's Beneficiary in
accordance with Sections 8.2 and 8.3 hereof. Upon the death of a
Participant following his termination of employment with the Employer, the
vested portion of his Accounts which has not been distributed shall be
payable to such Participant's Beneficiary in accordance with Sections 8.2
and 8.3 hereof.
(c) OTHER TERMINATION OF EMPLOYMENT A Participant who terminates
employment with the Employer on account of Disability shall be entitled to
receive, in accordance with Sections 8.2 and 8.3 hereof, the total amount
credited to his Account. A Participant whose employment with the Employer
is terminated prior to his Normal Retirement Date for any reason other
than death or Disability shall be entitled to receive, in accordance with
the provisions of Sections 8.2 and 8.3 hereof, the portions of his
Accounts that have vested pursuant to Section 7.2 hereof.
(d) FORFEITURES Any amounts in a Participant's Accounts which are not
payable under subsection (c) above when his employment with the Employer
is terminated shall remain in such Accounts and shall continue to share in
profits or losses on investments under Section 9.3 hereof until such
former Participant incurs five (5) consecutive Breaks in Service,
whereupon they shall be forfeited and administered in accordance with
Section 7.4 hereof. In the event a former Participant is reemployed by the
Employer before incurring five (5) consecutive Breaks in Service his
Accounts shall continue to vest in accordance with the vesting schedule
specified in the applicable Adoption Agreement. Notwithstanding the
foregoing, if a terminated Participant receives a distribution on account
of termination of his participation in the Plan of his entire vested
interest in the Pension Plan or the Profit Sharing Plan, such
Participant's nonvested interest in the relevant plan shall be treated as
a forfeiture and administered in accordance with Section 7.4 hereof. If
the Participant elects to have distributed less than the entire vested
portion of his Account balance derived from Employer contributions, the
part of the nonvested portion that will be treated as a forfeiture is the
total nonvested portion multiplied by a fraction, the numerator of which
is the amount of the distribution attributable to Employer contributions
and the denominator of which is the total value of the vested Employer
derived Account balance. For purposes of this Section, if the value of an
employee's vested account balance is zero, the Employee shall be deemed to
have received a distribution of such vested account balance. A
Participant's vested account balance shall not include accumulated
deductible employee contributions within the meaning of Code Section
72(o)(5)(B) for plan years beginning prior to January 1, 1989. If a
Participant receives or is deemed to receive a distribution pursuant to
this subsection (d) and such Participant subsequently resumes employment
covered under the Plan, the forfeited amounts shall be restored from
current forfeitures, or if those are insufficient by a special Employer
contribution, provided that the Participant repays to the Plan the full
amount of the distribution attributable to Employer contributions prior to
the earlier of (i) five (5) years after the Participant is reemployed, or
(ii) the time the Participant incurs five (5) consecutive Breaks in
Service. In the event a former Participant is reemployed after incurring
five (5) consecutive Breaks in Service, separate Accounts will be
maintained for Employer contributions allocated before and after the Break
in Service, and Years of Service earned after his return to employment
shall be disregarded in determining the Participant's vested percentage in
his prebreak Employer contributions.
8.2 MANNER OF DISTRIBUTIONS
(a) DISTRIBUTIONS FROM PENSION PLAN Distributions from the Pension
Plan shall be made as follows:
(i) A Participant's vested interest in the Plan shall be paid by
purchasing an annuity contract from a licensed insurance company,
unless the Participant elects to receive his interest in one of the
alternate forms of benefit described in subsection (c) below. If a
Partici-
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pant is not married at his annuity starting date, the annuity contract
shall provide a monthly benefit for his life. If a Participant is married
at his annuity starting date, the annuity shall be in the form of a
qualified joint and survivor annuity. A "qualified joint and survivor
annuity" is an immediate annuity for the life of the Participant with a
survivor annuity for the life of the spouse which is equal to fifty
percent (50%) of the amount of the annuity which is payable during the
joint lives of the Participant and the spouse and which is the amount of
benefit which can be purchased with the Participant's vested Account
balance. The Participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the Plan. Any annuity
contract purchased hereunder and distributed in accordance with this
Section 8.2 shall be nontransferable and shall comply with the terms of
this Plan. For purposes of this Section, the earliest retirement age
shall be the Participant's age on the earliest date on which the
Participant could elect to receive retirement benefits.
(ii) Unless an optional form of benefit is selected in accordance with
subsection (c) below, if a Participant has a spouse and dies prior to his
annuity starting date (the date annuity payments commence), the
Participant's vested Account balance in the Plan shall be applied toward
the purchase of a life only annuity contract from a licensed insurance
company providing a benefit 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.
(iii) For any distribution subject to the annuity requirements in
subsection (i) above, a Participant or Beneficiary may elect in
writing, within the ninety (90) day period ending on the annuity starting
date (the date annuity or any other form of benefit payments commence),
to receive his vested interest in the Plan in one of the alternate forms
of benefit set forth in subsection (c) below in lieu of the form of
benefit otherwise payable hereunder. Any waiver of the joint and survivor
annuity by a married Participant shall not be effective unless: (A) the
Participant's spouse consents in writing to the election; (B) the election
designates a specific Beneficiary, including any class of beneficiaries
or any contingent beneficiaries, which may not be changed without spousal
consent (or the spouse expressly permits 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 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 election 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 and
the spouse have received notice as provided in subsection (v) below.
(iv) A Participant may elect in writing to waive the surviving spouse
benefit otherwise payable under subsection (ii) above. The benefit may be
waived at any time during 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. A Participant and the spouse may waive the
pre-retirement survivor death benefit prior to age 35, provided that such
early waiver becomes invalid in the Plan Year the Participant attains age
35 and a new waiver must be made pursuant to this subsection (iv). If the
Participant separates from service prior to the first day of the Plan
Year in which he attains age 35, the surviving spouse benefit may be
waived, with respect to the Participant's account balance as of the date
of separation, at any time during the period which begins on the date of
such separation and ends on the date of the Participant's death.
Notwithstanding the foregoing, any election by a Participant to waive the
surviving spouse benefit payable under subsection (ii) above shall not be
effective unless: (A) the Participant's spouse consents in writing to the
election; (B) the spouse's consent acknowledges the effect of the
election; and (C) the spouse's consent is witnessed by a Plan
representative or notary public. 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 revocation of a prior election 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 and the spouse have received notice as provided in subsection
(v) below.
(v) The Administrator shall provide the Participant and the Spouse, as
applicable, with a written explanation of: (A) the terms and conditions
of the annuity described in subsections (i) or (ii), as applicable; (B)
the Participant's or Spouse's, as applicable, right to waive the payment
of benefits in the form of an annuity; (C) the rights of the
Participant's spouse; and (D) the right to make, and the effect of, the
revocation of a previous election to waive the payment of benefits in the
form of an annuity described in subsections (i) or (ii) hereof. In the
case of the annuity described in subsection (i), such explanation shall
be provided no less than thirty (30) days and no more than ninety (90)
days prior to the annuity starting date. In the case of the annuity
described in subsection (ii), such explanation shall be provided within
the applicable period for such Participant. 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 this Article first applies to the
Participant. Notwithstanding the foregoing, notice must be provided
within a reasonable period ending after separation from service in
22
<PAGE> 17
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) and (C) 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. A written explanation comparable
to the notices described above shall be provided to a Participant who
is waiving the surviving spouse benefit prior to attaining age 35.
(vi) The Administrator shall be responsible for the purchase of any
annuity contracts required to be purchased in accordance with the
terms of this Plan.
(b) DISTRIBUTIONS FROM PROFIT SHARING PLAN Distributions from the Profit
Sharing Plan shall be made in the form elected by the Participant (or
Beneficiary) as described in subsection (c) below. Notwithstanding the
foregoing, if the Profit Sharing Plan is a direct or indirect transferee of
a defined benefit plan, a money purchase pension plan (including a target
benefit plan), or a stock bonus or profit sharing plan or is an amendment
of an original Plan which is (or was) subject to the survivor annuity
requirements of Code Sections 401(a)(11) or 417 then distributions shall be
made in accordance with the provisions of subsection (a) above.
(c) Optional Forms of Distribution. All distributions required under this
subsection shall be determined and made in accordance with the Income Tax
Regulations under Code Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section 1.401(a)(9)-2 of such
Regulations.
(i) Amounts payable to a Participant shall be distributed in one of the
following forms as elected by the Participant, with spousal consent,
as applicable:
(A) a lump sum; or
(B) installments over a period certain not to exceed the life
expectancy of the Participant or the joint life expectancy of the
Participant and his Beneficiary.
Such election shall be made in writing and in such form as shall be
acceptable to the Administrator. If the Participant fails to elect any
of the methods of distribution described above within the time
specified for such election, the Administrator shall distribute the
Participant's Account in the form of a single sum cash payment by the
April 1 following the calendar year in which the Participant attains
age seventy and one-half (70 1/2).
(ii) If a Participant's benefit is to be distributed in installment
payments under (B) above, the amount distributed for each calendar
year, beginning with distributions for the first distribution calendar
year, must at least equal the quotient obtained by dividing the
Participant's benefit by the applicable life expectancy. The life
expectancy (or joint and last survivor expectancy) is calculated
using the attained age of the Participant (or Beneficiary) as of the
Participant's (or Beneficiary's) birthday in the applicable calendar
year reduced by one for each calendar year which has elasped since
the date 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.
Unless otherwise elected by the Participant (or the Participant's
spouse) 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. Life expectancy and joint life 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.
Notwithstanding anything herein to the contrary, for calendar years
beginning before January 1, 1989, if the Participant's spouse is not
the designated Beneficiary, the method of distribution selected
must assure that at least fifty percent (50%) of the present value of
the amount available for distribution is paid within the life
expectancy of the Participant. For calendar years beginning after
December 31, 1988, the amount to be distributed each year shall not
be less than the quotient obtained by dividing the Participant's
benefit by the lesser of (A) the applicable life expectancy or (B) if
the Participant's spouse is not the designated Beneficiary, the
applicable divisor determined from the table set forth in Q&A-4 of
Section 1.401(a)(9)-2 of the Income Tax Regulations. Distributions
after the death of the Participant shall be distributed using the
applicable return multiple specified in Section 1.72-9 of the Income
Tax Regulations as the relevant divisor without regard to Section
1.401(a)(9)-2 of the Income Tax Regulations.
(iii) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the
Participant's required beginning date as described in Section 8.3(c)
hereof. The minimum distribution for other calendar years,
including the minimum distribution for the distribution calendar year
in which such required beginning date occurs, must be made on or
before December 31 of that distribution calendar year.
(e) In any case where the Participant or Beneficiary has determined payment to
be on an installment basis, such Participant or Beneficiary may by written
request directed to the Administrator, at any time following commencement
of such installment payments, accelerate all or any portion of the unpaid
balance.
(f) For purposes of this Section a "spouse" shall include the spouse or
surviving spouse of a Participant, provided that a former spouse shall be
treated as the spouse or surviving spouse and a current spouse will not be
treated as a spouse or surviving spouse to the extent provided under a
qualified domestic relations order as descibed in Code Section 414(p).
(g) The payment of benefits in either a lump sum or in installments under this
Section 8.2 may be made in cash or in Investment Company Shares.
8.3 COMMENCEMENT OF PAYMENTS
(a) Subject to the provisions of this Section 8.3, payment of benefits, under
whichever method is selected, shall be made or commence as soon as
administratively practicable after the Valuation Date immediately following
the Participant's retirement, death or other termination of employment.
(b) If the Participant's vested Account balance in the Pension Plan or the
Profit Sharing Plan exceeds (or at the time of any prior distribution
exceeded) three thousand five hundred dollars ($3,500), no distribution
of that interest shall be made prior to the Participant's Normal Retirement
Age without the written consent of the Participant and, in the case of the
Pension Plan, the Participant's spouse (or where either the Participant or
the spouse has died, the
23
<PAGE> 18
survivor). The consent of the Participant and the Participant's spouse
shall be obtained in writing within the ninety (90) day period ending on
the annuity starting date. The annuity starting date is the first day of
the first period for which an amount is paid as an annuity or any other
form. The Administrator shall notify the Participant and the Participant's
spouse of the right to defer any distribution until the Participant's
Account balance is no longer immediately distributable. Such notification
shall include a general description of the material features, and an
explanation of the relative values of the optional forms of benefit
available under the Plan in a manner that would satisfy the notice
requirements of Code Section 417(a)(3), and shall be provided no less than
thirty (30) days and no more than ninety (90) days prior to the annuity
starting date.
Notwithstanding the foregoing, only the Participant need consent to the
commencement of a distribution in the form of a qualified joint and
survivor annuity while the Account balance is immediately distributable.
(Furthermore, if payment in the form of a qualified joint and survivor
annuity is not required with respect to the Participant pursuant to Section
8.2(b) of the Plan, only the Participant need consent to the distribution
of an Account balance that is immediately distributable.) Neither the
consent of the Participant nor the Participant's spouse shall be required
to the extent that a distribution is required to satisfy Code Sections
401(a)(9) or 415. In addition, upon termination of this Plan if the Plan
does not offer an annuity option (purchased from a commercial insurance
company), the Participant's Account balance may, without the Participant's
consent, be distributed to the Participant or transferred to another
defined contribution plan (other than an employee stock ownership plan as
defined in Code Section 4975(e)(7)) within the same controlled group.
An Account balance is immediately distributable if any part of the
Account balance could be distributed to the Participant (or surviving
spouse) before the Participant attains (or would have attained if not
deceased) the later of his Normal Retirement Age or age sixty-two (62).
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, a Participant's vested Account
balance shall not include amounts attributable to accumulated deductible
employee contributions within the meaning of Code Section 72(o)(5)(B).
(c) Unless the Participant (or the Participant's Beneficiary, if the
Participant is dead) elects to defer commencement under (b) above,
distribution of benefits shall begin no later than the sixtieth (60th) day
after the close of the Plan Year in which occurs the latest of (i) the
Participant's attainment of age 65 (or normal retirement age, if earlier);
(ii) the tenth (10th) anniversary of the year in which the Participant
commenced participation in the Plan; or (iii) the date the Participant
terminates service with the Employer. Notwithstanding the foregoing, the
failure of a Participant and the spouse to consent to a distribution while
a benefit is immediately distributable, within the meaning of Section 8.1
of the Plan, shall be deemed to be an election to defer commencement of
payment of any benefit sufficient to satisfy this Section.
(d) Notwithstanding anything herein to the contrary, payment of
benefits to a Participant shall commence by the Participant's required
beginning date, even if the Participant is still employed. A Participant's
required beginning date is the April 1 of the calendar year following the
calendar year in which the Participant attains age seventy and one-half (70
1/2): provided that the required beginning date of a Participant who
attains age 70 1/2 before January 1, 1988, shall be determined in
accordance with (i) or (ii) below:
(i) The required beginning date of a Participant who is not a
5-percent owner is the first day of April of the calendar year
following the calendar year in which the later of retirement or
attainment of age seventy and one-half (70 1/2) occurs.
(ii) The required beginning date of a Participant who is a
5-percent owner during any year beginning after December 31, 1979, is
the first day of April following the later of the calendar year in
which the Participant attains age seventy and one-half (70 1/2), or
the earlier of the calendar year with or within which ends the Plan
Year in which the Participant becomes a 5-percent owner, or the
calendar year in which the Participant retires.
The required beginning date of a Participant who is not a
5-percent owner who attains age seventy and one-half (70 1/2) during
1988 and who has not retired as of January 1, 1989, is April 1, 1990.
A Participant is treated as a 5-percent owner for purposes of
this subsection (d) if such Participant is a 5-percent owner as
defined in Code Section 416(i) (determined in accordance with Code
Section 416, but without regard to whether the Plan is top-heavy) at
any time during the Plan Year ending with or within the calendar year
in which such owner attains age sixty-six and one-half (66 1/2) or any
subsequent Plan Year. Once distributions have begun to a 5-percent
owner under this subsection (d), they must continue to be distributed,
even if the Participant ceases to be a 5-percent owner in a subsequent
year.
Distributions may be delayed pursuant to an election made prior
to January 1, 1984, under Section 242 of the Tax Equity and Fiscal
Responsibility Act of 1982; provided that the method of distribution
selected must be in accordance with the requirements of Code Section
401(a)(9) as in effect prior to amendment by the Deficit Reduction Act
of 1984. If such an election is revoked, any subsequent distribution
must satisfy the requirements of Code Section 401(a)(9). 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 Code Section 401(a)(9), but for such
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).
(e) (i) If a Participant dies after benefit payments have
begun, the Participant's remaining interest in the Plan shall be
distributed to his designated Beneficiary at least as rapidly as under
the method of distribution being used prior to the Participant's
death.
(ii) If the Participant dies before benefit payments have
commenced, distribution of the Participant's entire interest in the
Plan shall be completed by the December 31 of the calendar year
containing the fifth (5th)
24
<PAGE> 19
anniversary of the Participant's death, except to the extent that an
election is made to receive distributions in accordance with the
following: (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; (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
December 31 of the calendar year immediately following the calendar year
in which the Participant died and December 31 of the calendar year in
which the Participant would have attained age seventy and one-half
(70-1/2).
If the Participant has not made an election pursuant to this subsection
(ii) by the time of his death, the designated Beneficiary must elect the
method of distribution no later than the earlier of December 31 of the
calendar year in which distributions would be required to begin under
this subsection (e) or 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 in the Plan must be completed by December
31 of the calendar year containing the fifth anniversary of the
Participant's death.
For purposes of this subsection (ii), if the surviving spouse dies
after the Participant, but before payments to such spouse begin, the
provisions of this subsection (ii), with the exception of paragraph (B)
above, shall be applied as if the surviving spouse were the Participant.
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.
For the purposes of this subsection (e), distribution of a
Participant's interest is considered to begin on the Participant's
required beginning date (or the date distribution is required to begin
to the surviving spouse). If a distribution in the form of an annuity
irrevocably commences to the Participant before the required beginning
date, the date the distribution is considered to begin is the date
distribution actually commences.
(iii) A Participant's interest in the Plan is his Account balance as
of the last valuation date in the calendar year immediately preceding
the distribution calendar year (the valuation calendar year) increased
by the amount of any contributions or forfeitures allocated to the
Account balance as of dates in the valuation calendar year after the
valuation date and decreased by distributions made in the valuation
calendar year after the valuation date. 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.
The distribution calendar year is a calendar year for which a minimum
distribution is required. For distributions beginning before the
Participant's death, the first distribution calendar year is the
calendar year immediately preceding the calendar year which contains the
Participant's required beginning date. For distributions beginning after
the Participant's death, the first distribution calendar year is the
calendar year in which distributions are required to begin pursuant to
subsection (ii) above.
For purposes of this subsection (e), the designated Beneficiary is the
individual who is designated as the Beneficiary under the Plan in
accordance with Code Section 401(a)(9) and the proposed regulations
thereunder.
8.4 PAYMENT OF SMALL AMOUNTS Notwithstanding anything herein to the contrary,
if the present value of the Participant's vested interest in the Pension Plan
does not exceed (nor at the time of any prior distribution exceeded) three
thousand five hundred dollars ($3,500) as of the date the Participant's
employment with the Employer terminates, the Administrator shall distribute the
present value of such interest to the Participant in a lump sum as soon as
administratively practicable after the end of the Plan Year in which
termination occurs. Likewise, if the total present value of the Participant's
vested interest in the Profit Sharing Plan and Cash or Deferred Arrangement
does not exceed (nor at any time of any prior distribution exceeded) three
thousand five hundred dollars ($3,500) as of the date the Participant's
employment with the Employer terminates, the Administrator shall distribute the
present value of this interest to the Participant in a lump sum as soon as
administratively practicable after the end of the Plan Year in which
termination occurs. A Participant whose entire vested interest in the Pension
Plan and/or the Profit Sharing Plan has been distributed or who has no vested
interest in the Pension Plan and/or the Profit Sharing Plan shall be deemed
cashed out from the Pension Plan and/or the Profit Sharing Plan, as applicable.
8.5 PERSONS UNDER LEGAL OR OTHER DISABILITY In the event a Participant or
Beneficiary is declared incompetent and a guardian or other person legally
charged with the care of his person or of his property is appointed, any
benefits to which such Participant or Beneficiary is entitled shall be paid to
such guardian or other person legally charged with the care of his person or of
his property.
8.6 WITHDRAWALS FROM PROFIT SHARING PLAN
(a) If elected in item 10 of the Adoption Agreement (Profit Sharing
Plan), a Participant shall be permitted to withdraw the specified
percentage of his vested Employer Profit Sharing Account while he is still
employed after attainment of age fifty-nine and one-half (59-1/2) or
prior to attainment of such age on account of a financial hardship:
provided, that such Participant has been an active Participant in the Plan
for at least five (5) years. A Participant may not make another withdrawal
on account of financial hardship under this Section 8.6 until he has been
an active Participant for at least an additional five (5) years from the
date of his last hardship withdrawal. For purposes of this Section 8.6, a
financial hardship shall mean a financial need or emergency which requires
the distribution of a Participant's Plan account in order to meet such
need or emergency. The determination of the existence of a financial
hardship and the amount required to be distributed to meet the hardship
shall be made by the Administrator in accordance with such uniform and
nondiscriminatory rules as may be established by the Administrator. A
request for a withdrawal shall be made in writing in a form prescribed by
the Administrator and shall be made in accordance with procedures and
limitations established by the Administrator. Notwithstanding the above,
no withdrawal under this Section 8.6 shall be permitted if the Integration
Formula is selected in item 6 of the Adoption Agreement (Profit Sharing
Plan).
(b) If a distribution is made pursuant to this Section 8.6 at a time
when the Participant has a nonforfeitable right to less than one hundred
percent (100%) of his Account balance
25
<PAGE> 20
derived from Employer contributions and the Participant may increase
the nonforfeitable percentage in the Account:
(i) A separate Account will be established for the
Participant's interest in the Plan as of the time of the distribution;
and
(ii) At any relevant time the Participant's nonforfeitable
portion of the separate Account will be equal to an amount ("X")
determined by the formula:
X = P(AB + (R x D)) - (R x D)
For purposes of applying the formula above: P is the
nonforfeitable percentage at the relevant time, AB is the Account
balance at the relevant time, D is the amount of the distribution, and
R is the ratio of the Account balance at the relevant time to the
Account balance after distribution.
ARTICLE IX
ESTABLISHMENT OF CUSTODIAL ACCOUNT; INVESTMENTS
9.1 CUSTODIAL ACCOUNT
(a) Unless the Employer elects otherwise in the Adoption Agreement, the
Custodian shall open and maintain separate Custodial Accounts for each
individual that the Employer shall from time to time certify to the
Custodian as a Participant in the Plan. Such Custodial Accounts shall
reflect the various Participant Accounts described at Section 7.1 hereof.
(b) If the Employer so elects in the Adoption Agreement the Custodian
shall open and maintain a single Custodial Account in the name of the
Employer. If only a single Custodial Account is established, the Employer
shall be responsible for maintaining the records for the individual
Participant accounts.
(c) In the event that separate balances are not maintained for the
portion of a Participant's Account balance derived from Employer
contributions and Participant Voluntary Contributions, the Account balance
derived from Participant Voluntary Contributions shall be the Participant's
total account balance multiplied by a fraction, the numerator of which is
the total amount of Participant Voluntary Contributions (less any
withdrawals) and the denominator of which is the sum of the numerator and
the total Employer contributions (including Elective Deferrals) made on
behalf of such Participant.
9.2 RECEIPT OF CONTRIBUTIONS The Custodian shall accept such contributions of
money on behalf of Participants as it may receive from time to time from the
Employer. The Custodian may, in its sole discretion, also accept money or
Investment Company Shares held under a preceding plan of the Employer qualified
under Code Section 401(a) or which qualify as rollover contributions or
transfers under Section 4.6 of the Plan. All such contributions shall be
accompanied by written instructions, in a form acceptable to the Custodian,
from the Employer specifying the Participant Accounts to which they are to be
credited.
9.3 INVESTMENT OF ACCOUNT ASSETS
(a) Upon written instructions given by the Employer on a uniform and
nondiscriminatory basis as between Participants, the Custodian shall invest
and reinvest contributions credited to a Participant Account(s) in
Investment Company Shares. All Participant Accounts shall share in the
profits or losses of the investments on a pro rata basis (i.e., in the
ratio that the Participant's Account balance bears to all Account balances,
other than Accounts which are self-directed under subsection (b) below),
subject to adjustment by the Administrator on a fair and equitable basis
for contributions, distributions and/or withdrawals during the year. The
amount of each contribution credited to a Participant Account to be applied
to the purchase of Investment Company Shares shall be invested by the
Custodian at the applicable offering price. These purchases shall be
credited to such Account with notation as to cost. The Custodian shall have
no discretionary investment responsibility and in no event be liable to any
person for following investment instructions given by the Employer or the
Participant in the manner provided herein.
(b) Each Participant, through his separate Participant Account(s),
shall be the beneficial owner of all investments held in such Account(s).
The Employer however shall direct the Custodian (in a nondiscriminatory
manner) regarding the selection of specific Investment Company Shares to be
purchased for the Accounts of the Participants. The Employer may permit (in
a nondiscriminatory manner) the individual Participants to select and direct
the purchase of specific Investment Company Shares for their own
Account(s). In such a situation, the Employer shall transmit all such
directions to the Custodian. Notwithstanding the foregoing, unless
otherwise elected in the Adoption Agreement the individual Participant may
direct the investment of his Account(s) and select the specific Investment
Company Shares for purchase for his individual Account(s) by directly
communicating with the Custodian.
(c) All income, dividends and capital gain distributions received on
the Investment Company Shares held in each Participant Account shall be
reinvested in such shares which shall be credited to such Account. If any
distribution on Investment Company Shares may be received at the election
of the Participant in additional shares or in cash or other property, the
Custodian shall elect to receive it in additional shares. All investments
acquired by the Custodian shall be registered in the name of the Custodian
or its registered nominee.
9.4 EXCLUSIVE BENEFIT The Custodial Account or Accounts established hereby
shall not be used or diverted to purposes other than the exclusive benefit of
Participants or their Beneficiaries.
9.5 EXPENSES All expenses and charges in respect of the Plan and the Custodial
Account, including, without limitation, the Custodian's fees and commissions
and taxes of any kind upon or with respect to the Plan, shall be paid by the
Employer; provided, however, that the Custodian shall be authorized to pay such
charges and expenses from the Plan if the Employer shall fail to make payment
within thirty (30) days after it has been billed therefor by the Custodian or
such charges have otherwise become due.
9.6 VOTING The Custodian shall deliver, or cause to be executed and delivered,
to the Employer all notices, prospectuses, financial statements, proxies
and proxy soliciting materials received by the Custodian relating to investments
held in Participants' Accounts. The Custodian shall vote all proxies only in
accordance with instructions received from the Employer.
9.7 REPORTS OF THE CUSTODIAN AND ADMINISTRATOR
(a) The Custodian shall keep accurate and detailed records of all
receipts, investments, disbursements and other transactions required to be
performed hereunder. Not later than sixty (60) days after the close of each
calendar year (or after the Custodian's resignation or removal), the
Custodian shall file with the Employer a written report reflecting the
receipts, disbursements and other transactions effected by it during such
year (or period ending with such resignation or removal) and the assets of
this Plan at its close. Such report shall be open to inspection by any
Participant for a period of thirty (30) days immediately following the date
on which it is filed with the Employer. Upon the expiration of such thirty
(30) day period, the Custodian shall be forever released and discharged
from all liability and accountability to anyone with respect to its acts,
transactions, duties, obligations or responsibilities as shown in or
reflected by such report, except with respect to any such acts or
transactions as to which the Employer shall have
26
<PAGE> 21
filed written objections with the Custodian within such thirty (30) day
period.
(b) Annual reports provided to the Employer by the Custodian shall be,
in the Custodian's discretion, on a calendar year basis unless otherwise
required by law. The Employer shall compute the valuation of all Plan assets
at least annually at the fair market value as of the last day of each
calendar year.
(c) The Custodian shall keep such records, make such identifications
and file such returns and other information concerning the Plan as may be
required of the Custodian under the Code or forms adopted thereunder.
(d) The Administrator shall be solely responsible for the filing of any
reports or information required under the Code or forms adopted thereunder.
9.8 LIMITATION OF CUSTODIAN'S DUTIES AND LIABILITY
(a) The Custodian's duties are limited to those set forth in this Plan,
and the Custodian shall have no other responsibility in the administration
of the Plan or for compliance by the Employer with any provision thereof.
The Custodian shall not be responsible for the collection of contributions
provided for under the Plan; the purpose or propriety of any distribution;
or any action or nonaction taken by the Employer or pursuant to the
Employer's request. The Custodian shall have no responsibility to determine
if instructions received by it from the Employer, or the Employer's
designated agent, comply with the provisions of the Plan. The Custodian
shall not have any obligation either to give advice to any Participant on
the taxability of any contributions or payments made in connection with the
Plan or to determine the amount of excess contribution and net income
attributable thereto. The Custodian may employ suitable agents and counsel
and pay their reasonable expenses and compensation, and such agents or
counsel may or may not be agent or counsel for the Employer, and may be the
Investment Advisor or an Investment Company.
(b) The Employer shall at all times fully indemnify and hold harmless
the Custodian, its agents, counsel, successors and assigns, from any
liability arising from distributions made or actions taken, and from any
and all other liability whatsoever which may arise in connection with this
Plan, except liability arising from the negligence or willful misconduct of
the Custodian. The Custodian shall be under no duty to take any action
other than as herein specified with respect to this Plan unless the
Employer shall furnish the Custodian with instructions in a form acceptable
to the Custodian; or to defend or engage in any suit with respect to this
Plan unless the Custodian shall have first agreed in writing to do so and
shall have been fully indemnified to the satisfaction of the Custodian. The
Custodian (and its agents) may conclusively rely upon and shall be
protected in acting upon any written order from the Employer or any other
notice, request, consent, certificate or other instrument or paper believed
by it to be genuine and to have been properly executed, and, so long as it
acts in good faith, in taking or omitting to take any other action. No
amendment to the Plan shall place any greater burden on the Custodian
without its written consent. The Custodian shall not be lible for interest
on any cash balances maintained in the Plan.
(c) The Employer shall have the sole authority to enforce the terms of
the Plan on behalf of any and all persons having or claiming any interest
therein by virtue of the Plan.
(d) The Custodian, its agents, counsel, successors and assigns, shall
not be liable to the Employer, or to any Participants or Beneficiary for
any depreciation or loss of assets, or for the failure of this Plan to
produce any or larger net earnings. The Custodian further shall not be
liable for any act or failure to act of itself, its agents, employees, or
attorneys, so long as it exercises good faith, is not guilty of negligence
or willful misconduct, and has selected such agents, employees, and
attorneys with reasonable diligence. The Custodian shall have no
responsibility for the determination or verification of the offering or
redemption prices or net asset values of Investment Company Shares, and
shall be entitled to rely for such prices and net asset values upon
statements issued by or on behalf of the Investment Company issuing the
Investment Company Shares. The Custodian shall have no duty to inquire into
the investment practices of such Investment Company; such Investment
Company shall have the exclusive right to control the investment of its
funds in accordance with its stated policies, and the investments shall not
be restricted to securities of the character now or hereafter authorized
for trustees by law or rules of court. The Custodian shall not be liable or
responsible for any omissions, mistakes, acts or failures to act of such
Investment Company, or its successors, assigns or agents. Notwithstanding
the foregoing, nothing in this Plan shall relieve the Custodian of any
responsibility or liability under ERISA.
ARTICLE X
AMENDMENT AND TERMINATION
10.1 AMENDMENT
(a) The Employer reserves the right at any time and from time to time
to amend or terminate the Plan. No part of the Plan shall by reason of any
amendment or termination be used for or diverted to purposes other than the
exclusive benefit of Participants and their Beneficiaries, and further that
no amendment or termination may retroactively change or deprive any
Participant or Beneficiary of rights already accrued under the Plan except
insofar as such amendment is necessary to preserve the qualification and
tax exemption of the Plan pursuant to Code Section 401. No amendment shall
increase the duties of the Custodian or otherwise adversely affect the
Custodian unless the Custodian expressly agrees thereto. However, if the
Employer amends any provision of this Plan (including a waiver of the
minimum funding requirements under Code Section 412(d) other than by
changing any election made in the Adoption Agreement, adopting an amendment
stated in the Adoption Agreement which allows the Plan to satisfy Code
Section 415, to avoid duplication of minimum benefits under Code Section
416 or to 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 an individually designed plan, such Employer shall no
longer participate under this prototype plan and the Employer's Plan shall
be deemed to be an individually designed plan. The Employer hereby
irrevocably delegates (retaining, however, the right and power to change
any election made in the Adoption Agreement) to the Investment Advisor the
right and power to amend the Plan at any time, and from time to time, and
the Employer by adopting the Plan shall be deemed to have consented
thereto. The Investment Advisor shall notify the Employer of any amendment
to the Plan. For purposes of any Investment Advisor amendments, the mass
submitter shall be recognized as the agent of the Investment Advisor. If
the Investment Advisor 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) No amendment to the Plan shall be effective to the extent that it
has the effect of decreasing a Participant's accrued benefit except to the
extent permitted by Code Sections 412(c)(8) and 411(d)(6). For purposes of
this subsection, a Plan amendment which has the effect of decreasing a
Participant's Account balance or eliminating an optional form of benefit,
with respect to benefits attributable to service before the amendment shall
be treated as reducing an accrued benefit. Furthermore, if the vesting
schedule of a
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<PAGE> 22
Plan is amended, in the case of an Employee who is a Participant as of
the later of the date such amendment is adopted or the date it becomes
effective, the nonforfeitable percentage (determined as of such date) of
such Employee's right to his Employer-derived accrued benefit will not be
less than his percentage computed under the Plan without regard to such
amendment.
(c) Notwithstanding subsection (a) above, an Employer may amend the Plan
by adding overriding plan language to the Adoption Agreement where such
language is necessary to satisfy Code Sections 415 or 416 because of the
required aggregation of multiple plans under such Code Sections.
10.2 TERMINATION Upon complete discontinuance of the Employer's Profit Sharing
Contributions (if the Employer has adopted a Profit Sharing Plan by completing
the appropriate Adoption Agreement) or termination or partial termination of
the Plan, each affected Participant's Account shall become nonforfeitable. Upon
termination or partial termination of the Plan, the Employer shall instruct the
Custodian whether currently to distribute to each Participant the entire amount
of the Participant's Account, in such one or more of the methods described in
Article VIII, or whether to continue the Plan and to make distributions
therefrom as if the Plan had continued; provided that, in the event the Plan is
continued, the Plan must continue to satisfy the requirements of Code Section
401(a). The Employer shall in all events exercise such discretion in a
nondiscriminatory manner. The Plan shall continue in effect until the Custodian
shall have completed the distribution of all of the Plan asset and the accounts
of the Custodian have been settled.
ARTICLE XI
FIDUCIARY RESPONSIBILITIES
11.1 ADMINISTRATOR The Administrator shall have the power to allocate
fiduciary responsibilities and to designate other persons to carry out such
fiduciary responsibilities; provided such allocation is in writing and filed
with the Plan records. The Administrator may employ one or more persons to
render advice to the Administrator with regard to its responsibilities under
the Plan, and consult with counsel, who may be counsel to the Employer.
11.2 POWERS OF ADMINISTRATOR The Administrator shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out its
terms. The Administrator shall have discretionary authority to determine
eligibility for benefits and to interpret and construe the terms of the Plan,
and any such determination, interpretation or construction shall be final and
binding on all parties unless arbitrary and capricious. Any such discretionary
authority shall be carried out in a uniform and nondiscriminatory manner.
11.3 RECORDS AND REPORTS The Administrator, or those to whom it has delegated
fiduciary duties, shall keep a record of all proceedings and actions, and shall
maintain all such books of account, records and other data as shall be
necessary for the proper administration of the Plan. The Administrator, or
those to whom it has delegated fiduciary duties, shall have responsibility for
compliance with the provisions of ERISA relating to such office, including
filing with the Secretary of Labor and Internal Revenue Service of all reports
required by the Code and/or ERISA and furnishing Participants and Beneficiaries
with descriptions of the Plan and reports required by ERISA.
11.4 OTHER ADMINISTRATIVE PROVISIONS
(a) No bond or other security shall be required of the Administrator,
and/or any officer or Employee of the Employer to whom fiduciary
responsibilities are allocated, except as may be required by ERISA.
(b) The Administrator or the Employer may shorten, extend or waive the
time (but not beyond sixty days) required by the Plan for filing any
notice or other form with the Administrator or the Employer, or taking any
other action under the Plan, except a response to an appeal under Section
11.6, from a decision of the Administrator.
(c) The Administrator or the Employer may direct that such reasonable
expenses as may be incurred in the administration of the Plan shall be
paid out of the funds of the Plan, unless the Employer shall pay them.
(d) The Administrator, the Custodian, and any other persons performing
fiduciary duties under the Plan shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a prudent man
acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of like character and with like aims, and no such
person shall be liable, to the maximum extent permitted by ERISA, for any
act of commission or omission in accordance with the foregoing standard.
11.5 CLAIMS PROCEDURE Any claim relating to benefits under the Plan shall be
filed with the Administrator on a form prescribed by the Administrator. If a
claim is denied in whole or in part, the Administrator shall give the claimant
written notice of such denial within ninety (90) days after the filing of such
claim, which notice shall specifically set forth:
(a) The reasons for the denial;
(b) The pertinent Plan provisions on which the denial was based;
(c) Any additional material or information necessary for the claimant to
perfect the claim and an explanation of why such material or information
is needed; and
(d) An explanation of the Plan's procedure for review of the denial of the
claim.
In the event that the claim is not granted and notice of denial of a claim is
not furnished by the ninetieth (90th) day after such claim was filed, the claim
shall be deemed to have been denied on that day for the purpose of permitting
the claimant to request review of the claim.
11.6 CLAIMS REVIEW PROCEDURE
(a) Any person whose claim filed pursuant to Section 11.5 has been denied
in whole or in part by the Administrator may request review of the claim by
the Employer, by filing a written request with the Administrator. The
claimant shall file such request (including a statement of his position)
with the Employer no later than sixty (60) days after the mailing or
delivery of the written notice of denial provided for in Section 11.5 or,
if such notice is not provided, within sixty (60) days after such be
in writing and shall specifically set forth:
(i) The reasons for the decision; and
(ii) The pertinent Plan provisions on which the decision is based.
Any such decision of the Employer shall bind the claimant and the
Employer, and the Administrator shall take appropriate action to carry out
such decision.
(b) Any person whose claim has been denied in whole or in part must
exhaust the administrative review procedures provided in subsection (a)
above prior to initiating any claim for judicial review.
ARTICLE XII
AMENDMENT AND CONTINUATION OF ORIGINAL PLAN
Notwithstanding any of the foregoing provisions of the Plan to the contrary, an
employer that has previously established an Original Plan may, in accordance
with the provisions of the Original Plan, amend and continue the Original Plan
in the form of this Plan and become an Employer hereunder, subject to the
following:
(a) subject to the conditions and limitations of the Plan, each person who is
a Participant under the Original Plan imme-
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<PAGE> 23
diately prior to the effective date of the amendment and continuation
thereof in the form of this Plan will continue as a Participant in this
Plan;
(b) no election may be made in the Adoption Agreement if such election
would reduce the benefits of a Participant under the Original Plan to less
than the benefits to which he would have been entitled if he had resigned
from the employ of the Employer on the date of the Amendment and
continuation of the Original Plan in the form of this Plan;
(c) the amounts, if any, of a Participant's or former Participant's
Accounts immediately prior to the effective date of the amendment and
continuation of the Original Plan in the form of this Plan shall be
reduced to cash, deposited with the Custodian and constitute the opening
balances in such Participant's Account under this Plan;
(d) amounts being paid to individuals in accordance with the provisions
of the Original Plan shall continue to be paid under this Plan, but in the
form that they were being paid under the Original Plan;
(e) any Beneficiary designation in effect under the Original Plan
immediately before its amendment and continuation in the form of this Plan
which effectively meets the requirements contained in Section 2.3 hereof
shall be deemed to be a valid Beneficiary designation pursuant to Section
2.3 of this Plan, unless and until the Participant or former Participant
revokes such Beneficiary designation or makes a new Beneficiary
designation under this Plan. If the Beneficiary designation form does not
meet the requirements of Section 2.3 hereunder, the Participant's spouse
shall be deemed to be his Beneficiary. If the Participant is unmarried, or
his spouse does not survive him, his estate shall be deemed his
Beneficiary.
(f) if the Original Plan's vesting schedule (or this Plan's vesting
schedule) or the Plan is amended or changed in any way that directly or
indirectly affects the computation of a Participant's nonforfeitable
interest in his Account derived from Employer contributions, each such
Participant with at least three (3) Years of Service with the Employer may
elect, within a reasonable period after the adoption of the amendment or
change, to have his nonforfeitable percentage computed under the Plan
without regard for the amendment or change. For any Participant who does
not have at least one (1) Hour of Service in any Plan Year beginning after
December 31, 1988, the preceding sentence shall be applied by substituting
"five (5) Years of Service" for "three (3) Years of Service" where such
language appears therein. Any such election must be made during the period
commencing on the date of the amendment or change and ending on the latest
of: (i) sixty (60) days after that date; (ii) sixty (60) days after the
effective date of the amendment or change; or (iii) sixty (60) days after
such Participant is issued written notice of the amendment or change by
the Plan Administrator or Employer.
ARTICLE XIII
TOP-HEAVY PROVISIONS
13.1 EFFECT OF TOP-HEAVY STATUS The Plan shall be a "Top-Heavy Plan" for any
Plan Year commencing after December 31, 1983, if any of the following conditions
exist:
(a) If the Top-Heavy Ratio for this Plan exceeds sixty percent (60%)
and this Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group.
(b) If this Plan is a part of a Required Aggregation Group but not part
of a Permissive Aggregation Group and the Top-Heavy Ratio for the group
of plans exceeds sixty percent (60%).
(c) If this Plan is a part of a Required Aggregation Group and part of
a Permissive Aggregation Group and the Top-Heavy Ratio for the Permissive
Aggregation Group exceeds sixty percent (60%).
If the Plan is a Top-Heavy Plan in any Plan Year beginning after December 31,
1983, the provisions of Sections 13.3 through 13.6 shall supersede any
conflicting provisions of the Plan or the Adoption Agreement.
13.2 ADDITIONAL DEFINITIONS Solely for purposes of this Article, the following
terms shall have the meanings set forth below:
(a) Key Employee means any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the Determination
Period was an officer of the Employer if such individual's annual
compensation exceeds 50 percent of the dollar limitation under Code
Section 415(b)(1)(A), an owner (or considered an owner under Code Section
318) of one of the ten largest interests in the Employer if such
individual's compensation exceeds 100 percent (100%) of the dollar
limitation under Code Section 415(c)(1)(A), a five percent (5%) owner of
the Employer, or one percent (1%) owner of the Employer who has an annual
compensation of more than $150,000. Annual compensation means compensation
as defined in Code Section 415(c)(3), of the Code, but including amounts
contributed by the Employer pursuant to a salary reduction agreement which
are excludible from the Employee's gross income under Code Sections 125,
402(a)(8), 402(h) or 403(b). The determination period is the plan year
containing the Determination Date and the four (4) preceding Plan Years.
The determination of who is a Key Employee will be made in accordance with
Code Section 416(i)(1) and the Regulations thereunder.
(b) Determination Date means the last day of the preceding Plan Year.
For the first Plan Year of the Plan Determination Date shall mean the last
day of that year.
(c) Top-Heavy Ratio means:
(i) 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
five (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 five (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 five (5) year period ending on the
Determination Date(s)), both computed in accordance with Code Section
416 and the Regulations thereunder. Both the numerator and
denominator of the Top-Heavy Ratio are increased to reflect any
contribution not actually made as of the Determination Date, but
which is required to be taken into account on that date under Code
Section 416 and the Regulations thereunder.
(ii) 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 five (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 (i) above,
and the present value of accrued benefits under
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<PAGE> 24
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 (i) 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 Code
Section 416 and the Regulations thereunder. The accrued benefits
under a defined benefit plan in both the numerator and denominator of
the Top-Heavy Ratio are increased for any distribution of an accrued
benefit made in the five (5) year period ending on the Determination
Date.
(iii) For purposes of (i) and (ii) above the value of account balances and
the present value of accrued Valuation Date that falls within
or ends with the twelve (12) month period ending on the Determination
Date, except as provided in Code Section 416 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 (1) hour of
service with any employer maintaining the plan at any time during the
five (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 Code Section 416 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.
(iv) The accrued benefit of a participant other than a Key Employee shall
be determined under (i) the method, if any, that uniformly
applies for accrual purposes under all defined benefit plans
maintained by the employer, or (ii) 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 Code Section 411(b)(1)(C).
(d) Permissive Aggregation Group means 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 Code Sections 401(a)(4) and 410.
(e) Required Aggregation Group means (i) each qualified plan of the Employer in
which at least one Key Employee participates or participated at any
time during the five (5) year period ending on the Determination Date
(regardless of whether the plan has terminated), and (ii) any other
qualified plan of the Employer which enables a plan described in (i) to
meet the requirements of Code Sections 401(a)(4) or 410.
(f) Valuation Date means (i) in the case of a defined contribution plan, the
Determination Date, and (ii) in the case of a defined benefit plan, the
date as of which funding calculations are generally made within the twelve
(12) month period ending on the Determination Date.
(g) Employer means the employer or employers whose employees are covered by
this Plan and any other employer which must be aggregated with any such
employer under Code Sections 414(b), (c), (m) and (o).
(h) Present Value means the value based on an interest rate of five percent
(5%) and mortality assumptions based on the 1971 GAM Mortality Table or
such other interest rate or mortality assumptions as may be specified in
the Adoption Agreement.
13.3 MINIMUM ALLOCATIONS
(a) For any year in which the Plan is a Top-Heavy Plan, each Participant who is
not a Key Employee and who is not separated from service at the end of
the Plan Year shall receive allocations of Employer contributions and
forfeitures under this Plan at least equal to three percent (3%) of
Compensation (as defined in Section 2.6) for such year or, if less, the
largest percentage of the first two hundred thousand dollars ($200,000) of
compensation allocated on behalf of the Key Employee for the Plan Year
where the Employer has no defined benefit plan which designates this Plan
to satisfy Code Section 401. This minimum allocation shall be determined
without regard for any Social Security contribution and shall be provided
even though under other provisions the Participant would not otherwise be
entitled to receive an allocation or would have received a lesser
allocation because of (i) the Participant's failure to complete One
Thousand (1,000) Hours of Service (or any equivalent provided in the Plan),
or (ii) the Participant's failure to make mandatory Employee contributions
to the Plan, or (iii) Compensation less than a stated amount.
(b) The provision in (a) above shall not apply to any Participant to the extent
the Participant is covered under any other plan or plans of the
employer and the employer has provided in the Adoption Agreement that the
minimum allocation or benefit requirement applicable to top-heavy plans
will be met in the other plan or plans.
(c) The minimum allocation required (to the extent required to be nonforfeitable
under Section 416(b)) may not be forfeited under Code Sections
411(a)(3)(B) or 411(a)(3)(D).
(d) For purposes of subsection (a) above, neither Elective Deferrals nor
Employer Matching Contributions shall be taken into account for the
purposes of satisfying the minimum top-heavy benefits requirement.
13.4 BENEFIT LIMIT CHANGE If the Employer maintains both the Plan and a defined
benefit plan which cover one or more of the same Key Employees and the plans
are Top-Heavy in a Plan Year, then Section 6.5(c) and (j) hereof shall be
amended to substitute "one hundred percent (100%)" for the number "one hundred
and twenty-five percent (125%)" where the latter appears therein.
ARTICLE XIV
MISCELLANEOUS
14.1 RIGHTS OF EMPLOYEES AND PARTICIPANTS No Employee or Participant shall have
any right or claim to any benefit under the Plan except in accordance with the
provisions of the Plan, and then only to the extent that there are funds
available therefor in the hands of the Custodian. The establishment of the Plan
shall not be construed as creating any contract of employment between the
Employer and any Employee or otherwise conferring upon any Employee or other
person any legal right to continuation of employment, nor as limiting or
qualifying the right of the Employer to discharge any Employee without regard
to the effect that such discharge might have upon his rights under the Plan.
14.2 MERGER WITH OTHER PLANS The Plan shall not be merged or consolidated with,
nor transfer its assets or liabilities to, any other plan unless each
Participant, Beneficiary and other person entitled to benefits, would (if the
Plan then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he
would have been entitled to receive if the Plan had terminated immediately prior
to the merger, consolidation or transfer.
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<PAGE> 25
14.3 NON-ALIENATION OF BENEFITS The right to receive a benefit under the Plan
shall not be subject in any manner to anticipation, alienation, or assignment,
nor shall such right be liable for or subject to debts, contracts, liabilities
or torts, either voluntarily or involuntarily. Any attempt by the Participant,
Beneficiary or other person to anticipate, alienate or assign his interest in
or right to a benefit or any claim against him seeking to subject such interest
or right to legal or equitable process shall be null and void for all purposes
hereunder to the extent permitted by ERISA and the Code. Notwithstanding the
foregoing or any other provision of the Plan, the Administrator shall recognize
and give effect to a qualified domestic relations order with respect to child
support, alimony payments or marital property rights if such order is
determined by the Administrator to meet the applicable requirements of Code
Section 414(p). If any such order so directs, distribution of benefits to the
alternate payee may be made at any time, even if the Participant is not then
entitled to a distribution. The Administrator shall establish reasonable
procedures relating to notice to the Participant and determinations respecting
the qualified status of any domestic relations order.
14.4 FAILURE TO QUALIFY Notwithstanding anything in this Plan to the contrary,
all contributions under the Plan made prior to the receipt by the Employer of a
determination by the Internal Revenue Service to the effect that the Plan is
qualified under Code Section 401 shall be made on the express condition that
such a determination will be received, and in the event that the Internal
Revenue Service determines upon initial application for a determination that
the Plan is not so qualified or tax exempt, all contributions made by the
Employer or Participants prior to the date of determination must be returned
within one (1) year from the date of such determination, 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 prescribe.
14.5 MISTAKE OF FACT; DISALLOWANCE OF DEDUCTION Notwithstanding anything in
this Plan to the contrary, any contributions made by the Employer which are
conditioned on the deductibility of such amount under Code Section 404, to the
extent of the amount disallowed, or which are made because of a mistake of fact
must be returned to the Employer within one year after such disallowance or
such mistaken contribution.
14.6 PARTICIPATION UNDER PROTOTYPE PLAN If the Plan as adopted by the Employer
either fails to attain or maintain qualification under the Code, such Plan will
no longer participate in this prototype plan and will be considered an
individually designed plan.
14.7 GENDER Where the context admits, words used in the singular include the
plural, words used in the plural include the singular, and the masculine gender
shall include the feminine and neuter genders.
14.8 HEADINGS The headings of Sections are included solely for convenience of
reference, and if there is any conflict between such headings and the text of
the Plan, the text shall control.
14.9 GOVERNING LAW Except to the extent governed by ERISA and any other
applicable federal law, the Plan shall be construed, administered and enforced
according to the laws of the state in which the Employer has its principal
place of business.
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IRS OPINION LETTER
INTERNAL REVENUE SERVICE Department of the Treasury
Plan Description: Prototype Standardized Washington, D.C. 20224
Profit Sharing Plan
with CODA
FFN: 5025414AL01-001 Person to Contact: Ms. Arrington
Case: 9006833 EIN: 39-1213042 Telephone Number: (202)566-4576
BPD: 01 Plan: 001 Refer Reply to: E:EP:Q:ICU
Letter Serial No: D255803a Date: 11/29/90
Strong/Corneliuson Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, WI 53051
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit
of their employees. This opinion relates only to the acceptability of the form
of the plan under the Internal Revenue Code. It is not an opinion of the effect
of other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for officers, owners, or highly compensated
employees than for other employees. Except as stated below, the Key District
Director will not issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) if an employer ever maintained another qualified plan for
one or more employees who are covered by this plan, other than a specified
paired plan within the meaning of section 7 of Rev. Proc. 89-9, 1989-6 I.R.B.
14; or (2) after December 31, 1985, the employer maintains a welfare benefit
fund defined in Code section 419(e), which provides postretirement medical
benefits allocated to separate accounts for key employees as defined in Code
section 419A(d)(3). In such situations the employer should request a
determination as to whether the plan, considered with all related qualified
plans and, if appropriate, welfare benefit funds, satisfies the requirements of
Code section 401(a)(16) as to limitations on benefits and contributions in Code
section 415.
If you, the plan sponsor, have any questions concerning the IRS processing of
this case, please call the above telephone number. This number is only for use
of the plan sponsor. Individual participants and/or adopting employer with
questions concerning the plan should contact the plan sponsor. The plan's
adoption agreement must include the sponsor's address and telephone number for
inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial
Number and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerely yours,
/s/ John Swica
Chief, Employee Plans Qualifications Branch
32
<PAGE> 27
IRS OPINION LETTER
INTERNAL REVENUE SERVICE Department of the Treasury
Plan Description: Prototype Standardized Washington, D.C. 20224
Profit Sharing Plan
with CODA
FFN: 5025414AL01-002 Case: 9006834 Person to Contact: Ms. Arrington
EIN: 39-1213042 Telephone Number: (202)566-4576
BPD: 01 Plan: 002 Letter Serial No: D255804a Refer Reply to: E:EP:Q:ICU
Date: 11/29/90
Strong/Corneliuson Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, WI 53051
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit
of their employees. This opinion relates only to the acceptability of the form
of the plan under the Internal Revenue Code. It is not an opinion of the effect
of other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for officers, owners, or highly compensated
employees than for other employees. Except as stated below, the Key District
Director will not issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) if an employer ever maintained another qualified plan for
one or more employees who are covered by this plan, other than a specified
paired plan within the meaning of section 7 of Rev. Proc. 89-9, 1989-6 I.R.B.
14; or (2) after December 31, 1985, the employer maintains a welfare benefit
fund defined in Code section 419(e), which provides postretirement medical
benefits allocated to separate accounts for key employees as defined in Code
section 419A(d)(3). In such situations the employer should request a
determination as to whether the plan, considered with all related qualified
plans and, if appropriate, welfare benefit funds, satisfies the requirements of
Code section 401(a)(16) as to limitations on benefits and contributions in Code
section 415.
If you, the plan sponsor, have any questions concerning the IRS processing of
this case, please call the above telephone number. This number is only for use
of the plan sponsor. Individual participants and/or adopting employer with
questions concerning the plan should contact the plan sponsor. The plan's
adoption agreement must include the sponsor's address and telephone number for
inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial
Number and File Folder Number shown in the heading of this letter.
Your should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerly yours,
/s/ John Swica
Chief, Employee Plans Qualifications Branch
33
<PAGE> 28
IRS OPINION LETTER
INTERNAL REVENUE SERVICE Department of the Treasury
Plan Description: Prototype Money Purchase Washington, D.C. 20224
Pension Plan
FFN: 5025414AL01-003 Case: 9006836 Person to Contact: Ms. Arrington
EIN: 39-1213042 Telephone Number: (202)566-4576
BPD: 01 Plan: 003 Letter Serial No: D255805a Refer Reply to: E:EP:Q:ICU
Date: 11/29/90
Strong/Corneliuson Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, WI 53051
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit
of their employees. This opinion relates only to the acceptability of the form
of the plan under the Internal Revenue Code. It is not an opinion of the effect
of other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for officers, owners, or highly compensated
employees than for other employees. Except as stated below, the Key District
Director will not issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) if an employer ever maintained another qualified plan for
one or more employees who are covered by this plan, other than a specified
paired plan within the meaning of section 7 of Rev. Proc. 89-9, 1989-6 I.R.B.
14; or (2) after December 31, 1985, the employer maintains a welfare benefit
fund defined in Code section 419(e), which provides postretirement medical
benefits allocated to separate accounts for key employees as defined in Code
section 419A(d)(3). In such situations the employer should request a
determination as to whether the plan, considered with all related qualified
plans and, if appropriate, welfare benefit funds, satisfies the requirements of
Code section 401(a)(16) as to limitations on benefits and contributions in Code
section 415.
If you, the plan sponsor, have any questions concerning the IRS processing of
this case, please call the above telephone number. This number is only for use
of the plan sponsor. Individual participants and/or adopting employer with
questions concerning the plan should contact the plan sponsor. The plan's
adoption agreement must include the sponsor's address and telephone number for
inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial
Number and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerly yours,
/s/ John Swica
Chief, Employee Plans Qualifications Branch
34
<PAGE> 29
IRS OPINION LETTER
INTERNAL REVENUE SERVICE Department of the Treasury
Plan Description: Prototype Standardized Washington, D.C. 20224
Profit Sharing Plan
with CODA
FFN: 5025414AL01-004 Case: 9006838 Person to Contact: Ms. Arrington
EIN: 39-1213042 Telephone Number: (202)566-4576
BPD: 01 Plan: 004 Letter Serial No: D255810a Refer Reply to: E:EP:Q:ICU
Date: 11/29/90
Strong/Corneliuson Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, WI 53051
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit
of their employees. This opinion relates only to the acceptability of the form
of the plan under the Internal Revenue Code. It is not an opinion of the effect
of other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to each Key District Director of
Internal Revenue Service in whose jurisdiction there are adopting employers.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). An employer who adopts this plan will be considered to have a plan
qualified under Code section 401(a) provided all the terms of the plan are
followed, and the eligibility requirements and contribution or benefit
provisions are not more favorable for officers, owners, or highly compensated
employees than for other employees. Except as stated below, the Key District
Director will not issue a determination letter with regard to this plan.
Our opinion does not apply to the form of the plan for purposes of Code section
401(a)(16) if: (1) if an employer ever maintained another qualified plan for
one or more employees who are covered by this plan, other than a specified
paired plan within the meaning of section 7 of Rev. Proc. 89-9, 1989-6 I.R.B.
14; or (2) after December 31, 1985, the employer maintains a welfare benefit
fund defined in Code section 419(e), which provides postretirement medical
benefits allocated to separate accounts for key employees as defined in Code
section 419A(d)(3). In such situations the employer should request a
determination as to whether the plan, considered with all related qualified
plans and, if appropriate, welfare benefit funds, satisfies the requirements of
Code section 401(a)(16) as to limitations on benefits and contributions in Code
section 415.
If you, the plan sponsor, have any questions concerning the IRS processing of
this case, please call the above telephone number. This number is only for use
of the plan sponsor. Individual participants and/or adopting employer with
questions concerning the plan should contact the plan sponsor. The plan's
adoption agreement must include the sponsor's address and telephone number for
inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial
Number and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.
Sincerly yours,
/s/ John Swica
Chief, Employee Plans Qualifications Branch
35
<PAGE> 30
AMENDMENTS TO THE STRONG FUNDS
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
The Strong Funds Prototype Defined Contribution Retirement Plan has
been amended, effective as of the dates specified below, as follows:
1. Definition of Compensation. This amendment replaces the definition
of compensation at the first sentence of Section 2.6 of the
Plan, effective from the Plan Year which includes December 31, 1992,
with the following:
"'Compensation' is defined as wages within the meaning of Section
3401(a) of the Code and all other payments of compensation to the
Employee by the Employer (in the course of the Employer's trade or
business) for which the Employer is required to furnish the
Employee a written statement under Sections 6041(d), 6051(a)(3) and
6052 of the Code, determined without regard to any rules under
Section 3401(a) that limit the remuneration included in wages based
on the nature or locations of the employment or the services
performed."
2. Direct Rollover Requirements. This amendment adds the following new
Section 8.7 at the end of Article VIII of the Plan, effective
January 1, 1993:
"Section 8.7 Transfer of Benefits to Eligible Retirement Plan.
(a) This Section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a
distributee's election under this Article VIII, a distributee
may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(b) 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 (i) 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; (ii) any
distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; and (iii) the portion of any
distribution that is not includible in gross income (determined
without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(c) An eligible retirement plan is an individual retirement account
described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that
accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(d) 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.
(e) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee."
<PAGE> 31
NOTICE TO INTERESTED PARTIES
STRONG FUNDS PROTOTYPE DEFINED
CONTRIBUTION RETIREMENT PLAN
1. All employees participating in the Strong Funds Prototype Defined
Contribution Retirement Plan, a prototype plan sponsored by
Strong/Corneliuson Capital Management, Inc.
2. The Internal Revenue Service has previously issued a favorable opinion
letter with respect to the form of the prototype plan.
3. You have the right to submit to the IRS Key District Director, either
individually or jointly with other interested parties, your comments as
to whether this plan meets the qualification requirements of the Internal
Revenue Code. If you would like to comment, please contact the Plan
Administrator for the mailing address of the Key District Director and
other information that you will need to provide to the Key District Director
to identify the Plan.
4. You may instead, individually or jointly with other interested parties,
request the Department of Labor to submit, on your behalf, comments to
the Key District Director regarding qualification of the plan. If the
Department declines to comment on all or some of the matters you raise, you
may, individually or jointly, submit your comments on these matters
directly to the Key District Director.
5. The Department of Labor may not comment on behalf of interested parties
unless requested to do so by the lesser of 10 employees or 10 percent
of the employees who qualify as interested parties. If you request the
Department to comment, your comment must be in writing and must specify the
matters upon which comments are requested, and must also include:
- The name of the Plan, the employer that has adopted the Plan, the
prototype Plan sponsor, the Plan number and the identity of the
Plan Administrator. If you wish to comment, the Plan Administrator can
supply you with this information.
- The number of persons needed for the Department to comment.
6. A request to the Department of Labor to comment should be addressed as
follows: Deputy Assistant Secretary, Pension and Welfare Benefits
Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W.,
Washington, D.C. 20210, Attention: 3001 Comment Request.
7. Comments submitted by you to the Key District Director must be in writing
and received by him within 75 days following the date that your
employer received notice of the Plan amendments from Strong/Corneliuson
Capital Management (the "Notice of Amendment Date"). However, if there are
matters that you request the Department of Labor to comment upon on your
behalf, and the Department declines, you may submit comments on these
matters to the Key District Director to be received by him by the earlier
of (i) the later of the 15th day from the time the Department notifies you
that it will not comment on a particular matter or 75 days following the
Notice of Amendment Date, or (ii) 90 days following the Notice of Amendment
Date. A request to the Department of Labor to comment on your behalf must
be received by it within 15 days following the Notice of Amendment Date if
you wish to preserve your right to comment on a matter upon which the
Department declines to comment, or within 25 days of the Notice of
Amendment Date if you wish to waive that right. Further information
regarding the Notice of Amendment Date may be obtained from the Plan
Administrator.
8. Additional information concerning the Plan and these amendments are
available from the Plan Administrator during normal business hours for
inspection and copying. A nominal charge for copying and/or mailing may be
imposed.
<PAGE> 32
Page 1
[STRONG LOGO]
AMENDMENTS TO THE
STRONG FUNDS PROTOTYPE DEFINED CONTRIBUTION PLAN ("PLAN")
The following amendments have been made to the Plan, effective on the
first day of the first plan year beginning on or after January 1, 1994:
1. Section 2.6 is amended by inserting into the conclusion of the current
provision the following:
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
such employee taken into account under the plan shall not exceed the OBRA
'83 annual compensation limit. The OBRA '83 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with section 401(a)(11)(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 '83 annual
compensation limit will be multipled by a fraction, the numerator of which
is the number of months in the determination period, and the denominator
of which is 12.
For plan years beginning on or after January 1, 1994, any reference in
this plan to the limitation under section 401(a)(11) of the Code shall mean
the OBRA '83 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 OBRA '83 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 '83 annual compensation limit is $150,000.
2. The first paragraph of Section 3.3(b) is amended to read as follows:
(b) If the Participants vested account balance in the Pension Plan or
the Profit Sharing Plan exceeds (or at the time of any prior distribution
exceeded) three thousand five hundred dollars ($3,500), as distribution of
that interest shall be made prior to the time the Participant's account
becomes immediately distributable without the written consent of the
Participant and, in the case of the Pension Plan, the Participant's
spouse (or where either the Participant or the spouse has died, the
survivor). The consent of the Participant and the Participant's spouse
shall be obtained in writing within the ninety (90) day period ending on
the annuity starting date. The annuity starting date is the first day of
the first period for which an amount is paid as an annuity or any other
form. The Administrator shall notify the Participant and the Participant's
spouse of the right to defer any distribution until the Participant's
account balance is no longer immediately distributable. Such notification
shall include a general description of the material features, and an
explanation of the relative volume of the optional forms of benefit
available under the Plan is a manner that would satisfy the notice
requirements of Code Section 417(a)(3), and shall be provided no less than
thirty (30) days and no more than ninety (90) days prior to the annuity
starting date; provided that if a distribution is one to which Section
401(a)(11) and 417 of the Internal Revenue Code do not apply, such
distribution may commence less than 30 days after the notice required under
Section 1.411 (a)-11(c) of the Income Tax Regulations is given, provided
that:
(1) The Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
(2) the Participant, after receiving the notice, affirmatively
elects a distribution.
<PAGE> 1
EXHIBIT 99.B14.2
---------------
IRA
CUSTODIAL
AGREEMENT
---------------
<PAGE> 2
INDIVIDUAL RETIREMENT ACCOUNT
CUSTODIAL AGREEMENT
The following constitutes an agreement establishing an Individual Retirement
Account (under Section 408(a) of the Internal Revenue Code) between the
Depositor and the Custodian.
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) (but only after December 31, 1992),
403(a)(4),403(b)(8),408(d)(3), or an employer contribution to a simplified
employee pension plan as described in Section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in Section 402(a)(5),
402(a)(6), 402(a)(7),403(a)(4),403(b)(8), 408(d)(3), or an employer contribution
to a simplified employee pension plan as described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with
other property except in a common trust fund or common investment fund
(within the meaning of Section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by Section 408
(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
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 of 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.
11
<PAGE> 3
Such election shall be irrevocable as to the Depositor and the surviving
spouse and shall apply to all subsequent years. The life expectancy of a
nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date, (April 1
following the calendar year end in which the Depositor reaches age 70
1/2). By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
Paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over
the life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following
the year of the Depositor's death. If, however, the
beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of
the year in which the Depositor would have turned age 70 1/2.
12
<PAGE> 4
(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 a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
Paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and
designated beneficiary as of their birthdays in the year the Depositor
reaches age 70 1/2. In the case of a distribution in accordance with
Paragraph 4(b)(ii), determine life expectancy using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to
satisfy the minimum distribution requirements described above. This method
permits an individual to satisfy these requirements by taking from one
individual retirement account the amount required to satisfy the
requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under Section 408(i) and
Regulations Section 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.
13
<PAGE> 5
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. INVESTMENT OF ACCOUNT ASSETS.
(a) All contributions to the Custodial Account shall be invested in the
shares of any regulated investment company ("Investment Company") for
which Strong/Corneliuson Capital Management, Inc., serves as
investment advisor, or any other regulated investment company
designated by the investment advisor. Shares of stock of an
Investment Company shall be referred to as "Investment Company
Shares."
(b) Each contribution to the Custodial Account shall identify the
Depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The Custodian may
return to the Depositor, without liability for interest thereon, any
contribution which is not accompanied by adequate account
identification or an appropriate signed statement directing
investment of that contribution.
(c) Contributions shall be invested in whole and fractional Investment
Company Shares at the price and in the manner in which such shares
are offered to the public. All distributions received on Investment
Company Shares held in the Custodial Account shall be reinvested in
like shares. If any distribution of Investment Company Shares may be
received at the election of the Depositor in additional like shares
or in cash or other property, the Custodian shall elect to receive
such distribution in additional like Investment Company Shares.
(d) All Investment Company Shares acquired by the Custodian shall be
registered in the name of the Custodian or its nominee. The Depositor
shall be the beneficial owner of all Investment Company Shares held
in the Custodial Account and the Custodian shall not vote any of such
shares, except upon written direction of the Depositor. The Custodian
agrees to forward to the Depositor each prospectus, report, notice,
proxy and related proxy soliciting materials applicable to Investment
Company Shares held in the Custodial Account received by the
Custodian.
(e) The Depositor may, at any time, by written notice to the Custodian,
redeem any number of shares held in the Custodial Account and
reinvest the proceeds in the shares of any other Investment Company.
Such redemptions and reinvestments shall be done at the price and in
the manner such shares are then being redeemed or offered by the
respective Investment Companies.
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2. AMENDMENT AND TERMINATION.
(a) The Investment Advisor may amend the Custodial Account (including
retroactive amendments) by delivering to the Depositor written notice
of such amendment setting forth the substance and effective date of
the amendment. The Depositor shall be deemed to have consented to any
such amendment not objected to in writing by the Depositor within
thirty (30) days of receipt of the notice, provided that no amendment
shall cause or permit any part of the assets of the Custodial Account
to be diverted to purposes other than for the exclusive benefit of
the Depositor or his beneficiaries.
(b) The Depositor may terminate the Custodial Account by delivering to
the Custodian a written notice of such termination.
(c) The Custodial Account shall automatically terminate upon distribution
to the Depositor or any beneficiary of the entire balance in the
Custodial Account.
(d) At any time after three years from the effective date of this
Agreement, the Custodian may elect to terminate the Custodial Account
upon thirty (30) days written notice to the Depositor.
3. Taxes and Custodial Fees. Any income taxes or other taxes levied or
assessed upon or in respect of the assets or income of the Custodial
Account or any transfer taxes incurred shall be paid from the Custodial
Account. All administrative expenses incurred by the Custodian in the
performance of its duties, including fees for legal services rendered to
the Custodian, and the Custodian's compensation shall be paid from the
Custodial Account, unless otherwise paid by the Depositor or his or her
beneficiaries.
The Custodian's fees are:
(a) Annual maintenance fee - $10.00 per account
Maximum annual maintenance fee - $30.00
(b) Transfer to successor custodian - $10.00
(c) Distributions to participants
- Premature distribution - $10.00
- Lump-sum distribution - $10.00
Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by this schedule will be subject to such
additional charges as will reasonably compensate the Custodian for the
services performed.
A separate annual maintenance fee will be charged for each Investment
Company in which the Custodial Account is invested for that calendar year.
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If you decide not to prepay the maintenance fee, it will be deducted in
September of each year, and enough Investment Company Shares will be
redeemed to cover the fees. Upon thirty (30) days written notice to the
Depositor, the Custodian may change the fees payable in connection with
the Custodial Account.
4. REPORTS AND NOTICES.
(a) The Custodian shall keep adequate records of transactions it is
required to perform hereunder. After the close of each calendar year,
the Custodian shall provide to the Depositor or the Depositor's legal
representative a written report or reports reflecting the
transactions effected by it during such year and the assets and
liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given upon
receipt by the Custodian of Strong Funds, at P. O. Box 2936,
Milwaukee, Wisconsin 53201, or the Depositor at his or her most
recent address shown in the Custodian's records. The Depositor agrees
to advise the Custodian promptly, in writing, of any change of
address.
5. DESIGNATION OF BENEFICIARY. The Depositor may designate a beneficiary or
beneficiaries to receive benefits from the Custodial Account in the event
of the Depositor's death. In the event the Depositor has not designated a
beneficiary, or if all beneficiaries shall predecease the Depositor, the
following persons shall take in the order named:
(a) The spouse of the Depositor; or
(b) The personal representative of the Depositor's estate, if the
Depositor does not have a spouse.
6. MULTIPLE INDIVIDUAL RETIREMENT ACCOUNTS. In the event the Depositor
maintains more than one individual retirement account (as defined in
Section 408(a)) and elects to satisfy his or her minimum distribution
requirements described in Article IV above by making a distribution for
another individual retirement account in accordance with Paragraph 6
thereof, the Depositor shall be deemed to have elected to calculate the
amount of his or her minimum distribution under this Custodial Account in
the same manner as under the individual retirement account from which the
distribution is made.
7. INALIENABILITY OF BENEFITS. The benefits provided under this Custodial
Account 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 the extent
as may be required by law.
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8. ROLLOVER CONTRIBUTIONS AND TRANSFERS. The Custodian shall have the right
to receive rollover contributions and to receive direct transfers from
other custodians or trustees. All contributions must be made in cash or
check.
9. MINIMUM REQUIRED DISTRIBUTIONS. If a Depositor has attained age 70 1/2 and
has not notified the Custodian in writing as to how to calculate the
minimum required distribution or that a minimum required distribution has
been received from another IRA (reference Article IV, Section 6), a
minimum required distribution will be made in accordance with Article IV,
Section 5.
10. CONFLICT IN PROVISIONS. To the extent that any provisions of this Article
VIII shall conflict with the provisions of Articles IV, V and/or VII, the
provisions of this Article VIII shall govern.
11. APPLICABLE STATE LAW. This Custodial Account shall be construed,
administered, and enforced according to the laws of the State of
Wisconsin.
REV. 4/93
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<PAGE> 9
(STRONG LOGO)
AMENDMENTS TO IRA CUSTODIAL AGREEMENT
The following amendments have been made in the Strong Funds IRA
Disclosure Statement and Custodial Agreement:
Additional language has been added to section 10 in the Disclosure
Statement entitled "Designation of Beneficiary." The following sentences should
be added after the first sentence:
Any new account opened by exchanging money from an existing IRA
account with a valid beneficiary designation will have the same
beneficiary designation as the original account.
Further, Article VIII, section 1, of the IRA Custodial Agreement has
been amended. Paragraph (d) has changed and a new paragraph (e) has been added.
The previous paragraph (e) is now paragraph (f). As amended, these paragraphs
read as follows:
(d) All Investment Company shares acquired by the Custodian
shall be registered in the name of the Custodian or its
nominee. The Depositor shall be the beneficial owner of all
Investment Company Shares held in the Custodial Account.
(e) The Custodian agrees to forward to the Depositor each
prospectus, report, notice, proxy and related proxy soliciting
materials applicable to Investment Company Shares held in the
Custodial Account received by the Custodian. By establishing
or having established the Custodial Account, the Depositor
affirmatively directs the Custodian to vote any Investment
Company Shares held on the applicable record date that have
not been voted by the Depositor prior to a shareholder meeting
for which prior notice has been given. The Custodian shall
vote with the management of the Investment Company on each
proposal that the Investment Company's Board of Directors has
approved unanimously. If the Investment Company's Board of
Directors has not approved a proposal unanimously, the
Custodian shall vote in proportion to all shares voted by the
Investment Company's shareholders.
(f) [Paragraph previously lettered paragraph (e).] The
Depositor may, at any time, by written notice to the
Custodian, redeem any number of shares held in the Custodial
Account and reinvest the proceeds in the shares of any other
Investment Company. Such redemptions and reinvestments shall
be done at the price and in the manner such shares are then
being redeemed or effected by the respective Investment
Companies.
<PAGE> 1
EXHIBIT 99.B14.3
STRONG FUNDS
- --------------------------------------------------------------------------------
SECTION 403(b)(7)
RETIREMENT PLAN
PLAN DOCUMENT
Employees of certain exempt organizations and schools may have a portion of
their compensation set aside for their retirement years in a mutual fund
custodial account plan. The employee is not taxed on the amount set aside or the
earnings thereon until the accumulated funds are withdrawn, normally at
retirement.
Under the Strong Funds Section 403(b)(7) Retirement Plan, contributions are
held by the authorized custodian (the "Custodian") and are invested in the
shares of one or more of the regulated investment companies in the fund group
managed by Strong/Corneliuson Capital Management, Inc., the Investment Advisor.
The Strong Funds 403(b)(7) Retirement Plan (the "Plan") is designed to allow
eligible employers described in Article I to make employer contributions to the
Plan and to allow eligible employees to elect to have their employer make
contributions to the Plan on their behalf pursuant to a salary reduction
agreement. This Plan is intended to comply with the provisions of the Employee
Retirement Income Security Act of 1974 (the "Act") and the Internal Revenue
Code of 1986, as amended (the "Code").
ARTICLE I
ELIGIBILITY
A. Any person who performs services as an employee for an employer which is
an organization described in Section 501(c)(3) of the Code and is exempt from
tax under Section 501(a) of the Code, or who performs services for an
educational institution (as defined in Section 170(b)(1)(A)(ii) of the Code) or
for an employer which is a State or political subdivision of a State or an
agency or instrumentality of either, and who obtains the consent of such
employer to participate herein, is eligible to adopt this Plan.
B. Any employer which is an organization described in Section 501(c)(3) of the
Code and is exempt from tax under Section 501(a) of the Code, or is an
educational institution (as defined in Section 170(b)(1)(A)(ii) of the Code) or
a State or a political subdivision of a State or an agency or instrumentality
of either (the "Employer") may, but is not required to, adopt this Plan for
some or all of its eligible employees. It is,
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however, necessary for the Employer if it does not adopt this Plan to
cooperate to the extent of executing the proper documents allowing the employee
to establish a custodial account and to reduce the employee's salary and apply
the amount of the reduction for the employee to this Plan.
C. An eligible individual shall not be entitled to elect to have his
Employer make contributions to the Plan pursuant to a salary reduction
agreement unless the Employer has established a plan or program which allows
all employees of the Employer (except as otherwise permitted by the Code) the
opportunity to have contributions made pursuant to such an agreement. An
Employer may exclude from participation employees who are participants in an
eligible deferred compensation plan under Section 457 of the Code, a qualified
cash or deferred arrangement under Section 401(k) of the Code or another
Section 403(b) annuity contract, and non-resident aliens and certain students.
D. In lieu of or in addition to a salary reduction arrangement, an
Employer may make contributions on behalf of its employees, but an Employer is
not obligated to do so. If an Employer makes contributions (other than
contributions made pursuant to a salary reduction agreement), this Plan as
adopted by such Employer must satisfy the nondiscrimination and minimum
participation requirements as set forth in Section 403(b)(12) of the Code.
E. An eligible individual is not disqualified from participation by
reason of the fact that his Employer provides any other retirement plan for its
employees. However, the contributions under this Plan or any other Section
403(b) plan will be affected by the Employer's contributions to such other
retirement plan.
ARTICLE II
PARTICIPATION
An eligible employee who wishes to establish this Plan (the
"Individual") may do so by completing the Section 403(b)(7) Application,
Beneficiary Designation and Spousal Consent Form, and Salary Reduction
Agreement or Transfer Form (as applicable), obtaining the Employer's signature
and returning all necessary forms to Strong Funds. An eligible Employer may
adopt this Plan by either having the Individual follow the procedure described
in the preceding sentence or by obtaining the Individual's signature on the
Application and following the procedure itself thereafter.
The Application, Beneficiary Designation and Spousal Consent Form, and the
Salary Reduction Agree-
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ment, if applicable, are incorporated herein by reference as part of the Plan.
The Plan will be effective upon written acceptance by or on behalf of the
Custodian on the Application. If the Employer maintains a written Section
403(b) plan for which this Plan serves as a funding vehicle, the terms and
conditions of such plan shall take precedence over the provisions of this Plan
to the extent such provisions are inconsistent.
ARTICLE III
CONTRIBUTIONS
A. An Employer may contribute cash to the Plan in any taxable year in any
amount which (1) is not an "excess contribution" as defined in Section 4973(c)
of the Code and (2) if such contribution is made pursuant to a Salary Reduction
Agreement between the Employer and the Individual, does not exceed the
limitation on "elective deferrals" contained in Section 402(g) of the Code.
Neither the Investment Advisor nor the Custodian shall be responsible for
determining the amount an Employer may contribute on behalf of the Individual,
nor shall either be responsible to recommend or compel Employer contributions
under the Plan.
If during any taxable year the Employer contributes an amount which is an
"excess contribution", such excess contribution (plus any income attributable
thereto) shall, upon written request, be paid to the Individual by the
Custodian or applied towards a contribution for the next subsequent year. In
the event that an amount contributed during a calendar year exceeds the
limitation on "elective deferrals" contained in Section 402(g) of the Code and
the Individual notifies the Custodian, in writing, of such excess amount no
later than March 1 of the following calendar year, the Custodian will
distribute such excess amount (plus any income attributable thereto) to the
Individual not later than the following April 15. Neither the Investment
Advisor nor the Custodian shall have any responsibility for determining that an
excess contribution or excess elective deferral has been made or for
distributing such excess amount except in accordance with the specific written
instructions of the Individual.
B. In addition, the Individual or the Employer may (1) transfer or cause to be
transferred to the Plan the cash surrender or redemption value of a Section
403(b) annuity or variable annuity or the assets of another Section 403(b)(7)
custodial account for which contributions were previously made on the
Individual's behalf or (2) contribute to the Plan any amount distributed from a
Section 403(b) annuity or custodial account which qualifies as a "rollover
contribution" within the meaning of Section 403(b)(8) of the Code. Neither the
Investment Advisor nor
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<PAGE> 4
the Custodian shall be responsible for the tax treatment to the Individual of
any transfer or rollover contribution or for losses resulting from any acts,
omissions or delays of any party transferring or rolling over assets to the
Individual's account.
C. Employer contributions to the Plan (including permissible salary reduction
contributions) are not taxable income in the year contributed. The maximum
amount which may be contributed to the Plan on an Individual's behalf may not
exceed the lesser of:
(1) 25% of compensation (as defined in Section 415(c) of the
Code) or $30,000 whichever is less. For this purpose,
"compensation" generally means amounts included in your taxable
income, but does not include Section 403(b) contributions;
(2) the Individual's "exclusion allowance" under Section
403(b)(2) of the Code, which is calculated as 20% of Includible
Compensation times the number of years of service minus the
aggregate amount previously contributed by the Employer
(including salary reduction contributions), under a Section 403(b)
plan and excluded from the Individual's gross income for prior tax
years. "Includible Compensation" (as defined in Section 403(b)
(3) of the Code) is current taxable compensation from an eligible
employer, but does not include amounts contributed by an eligible
employer to a qualified retirement plan which were not currently
taxed to the employee or Section 403(b) contributions. (A special
minimum exclusion allowance applies to certain church employees
whose adjusted gross income is $17,000 or less under Section
403(b)(2)(D) of the Code.); or
(3) for amounts contributed pursuant to a Salary Reduction Agreement,
$9,500 less any salary reduction contributions made during the
year under a qualified cash or deferred arrangement under
Section 401(k) of the Code, a simplified employee pension under
Section 408(k) of the Code or any other Section 403(b) annuity or
custodial account.
If employed by an educational institution, hospital, home health service
agency, health and welfare service agency or a church or convention or
association of churches, the Individual may elect to be governed by one of
three alternate limitations: (a) in lieu of the limitation described in (1)
above, an amount equal to the lesser of 25% of Includible Compensation plus
$4,000, or $15,000; (b) that the limitation described in (2) above not apply;
or (c) for the year in which the
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<PAGE> 5
Individual's employment terminates, replace
the 25% of compensation (but not the $30,000) limitation described in (1) above
with an amount which is equal to the contributions which could have been made,
but were not, under Code Section 403(b), during a ten-year period ending on the
date of termination. The final "catch-up" contribution in (c) cannot exceed
$30,000 and may only be used once. The alternate limitations available are
mutually exclusive and an election of one of the alternatives is irrevocable.
In addition, any employee of a qualified employer who has completed at least 15
years of service, may increase the amount described in (3) above by the lesser
of:
(a) $3,000:
(b) $15,000, less amounts excluded in prior years under this special
catch up election; or
(c) the excess of $5,000 multiplied by the number of years of
service minus any salary reduction contributions under
a Section 403(b) annuity, a Section 401(k) plan or a simplified
employee pension made by the employer on behalf of the employee for
prior taxable years.
D. The interest of the Individual in the Plan and the assets in his custodial
account shall be nonforfeitable at all times, may not be assigned, and shall
not be subject to alienation, assignment, trustee process, garnishment,
attachment, execution or levy of any kind, except with regard to payment of the
expenses of the Custodian as authorized by the provisions of this Plan.
Notwithstanding the foregoing or any other provision herein to the contrary,
the Custodian may recognize a qualified domestic relations order with respect
to child support, alimony payments or marital property rights if such order
contains sufficient information for the Employer to determine that it meets the
applicable requirements of Section 414(p) of the Code. If any such order so
directs, distribution of benefits to the alternate payee may be made at any
time even if the Individual is not then entitled to a distribution.
ARTICLE IV
INVESTMENT OF CONTRIBUTIONS
All contributions made to the Plan shall be used by the Custodian to purchase
shares of any regulated investment company in the fund group of the Investment
Advisor. Each such regulated investment company will be referred to as an
"Investment Company," and the shares of each Investment Company will be
referred to as "Investment Company Shares". Unless otherwise directed by the
Employer, contributions shall be allocated to a separate custodial account
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<PAGE> 6
("Custodial Account") established for the Individual. The Individual (or the
Individual's beneficiary) may direct the Custodian to invest his Custodial
Account in the shares of the Investment Companies or other regulated investment
companies as may be made available by the Investment Advisor in the future. The
Individual (or the Individual's beneficiary) may direct the Custodian to
transfer all or any part of his Custodial Account assets from one Investment
Company to another at any time. In directing the Custodian to invest
contributions and/or Custodial Account assets, the Individual (or the
Individual's beneficiary) shall designate a percentage allocation to any or all
of the then available Investment Companies. The minimum allocation per fund is
$50 or 100% of the contribution, whichever is less. Any changes in the
allocation of future contributions will be effective only when the Custodian
receives written authorization from the Individual. In the event no direction
is made, the Custodian will invest all contributions in the Strong Money Market
Fund, until further notice is received. All dividends and capital gains shall
be reinvested in additional Investment Company Shares.
ARTICLE V
DISTRIBUTIONS
A. The Individual, or his beneficiary or estate in the event of his death,
shall be entitled to distribution of the assets in his Custodial Account upon
the occurrence of one of the following events:
(a) The Individual reaches age 59 1/2.
(b) The Individual terminates his employment.
(c) The Individual becomes disabled.
(d) The Individual's death.
Note that distributions prior to age 59 1/2 may be subject to a 10% additional
tax under the Code.
For purposes of the Plan, the Individual shall be considered disabled if he is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or to be of long continued and indefinite duration.
B. In addition, an Individual may request distribution of the assets in his
Custodial Account (to the extent attributable to contributions made pursuant to
a Salary Reduction Agreement, not including any earnings thereon upon incurring
a substantial financial hardship. A substantial financial hardship shall exist
if the Individual incurs immediate and heavy financial need and that need
cannot be met by other resources reasonably available to the Individual.
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<PAGE> 7
The Individual shall be eligible to receive a hardship distribution from his
Custodial Account after the Custodian's receipt of written notification from
the Employer indicating: (a) that the Individual has incurred a substantial
financial hardship and (b) the specific amount needed to meet the substantial
financial hardship. The amount distributed from the Custodial Account shall not
exceed the amount specified in the notification. The Employer will be
responsible for determining which of the Individual's assets are eligible for
hardship withdrawal.
For purposes of this Plan, a substantial financial hardship shall mean medical
expenses incurred by the Individual, his spouse or a dependent, purchase
(excluding mortgage payments) of a principal residence for the Individual,
payment of tuition for the next semester or quarter of post-secondary education
for the Individual, his spouse or a dependent, the need to prevent the eviction
of the Individual from his principal residence or foreclosure on the mortgage
of the Individual's principal residence, or such other events as may be
approved by the Commissioner of Internal Revenue in rulings, notices or other
published documents.
In determining whether the need cannot be met by other resources reasonably
available to the Individual, the Employer may rely on the Individual's
certification, executed in a form and manner specified by the Employer, that
the need cannot be relieved:
(a) through reimbursement or compensation by insurance or
otherwise;
(b) by reasonable liquidation of the Individual's assets, to
the extent such liquidation would not itself cause an immediate and
heavy financial need;
(c) by cessation of elective deferrals under the Plan; and
(d) by other distributions or nontaxable (at the time of the
loan) loans from plans maintained by the Employer or by any other
employer, or by borrowing from commercial sources on reasonable
commercial terms.
In the event the Individual is unwilling or unable to provide the certification
described above, or in the event the Employer determines that it cannot
reasonably rely on the certification provided by an Individual, then the
requirements of this Paragraph B shall be deemed satisfied only if all of the
following conditions are satisfied:
(a) the distribution is not in excess of the amount of the
immediate and heavy financial need of the Individual:
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<PAGE> 8
(b) the Individual has obtained all distributions, other than hardship
distributions, and all non-taxable (at the time of the loan) loans from
plans maintained by the Employer;
(c) the Individual's elective deferrals under this Plan and all other
plans maintained by the Employer shall be suspended for at least 12
months after receipt of the hardship distribution; and
(d) under this Plan and all other plans maintained by the Employer, the
Individual may not make elective deferrals for the Individual's taxable
year immediately following the taxable year of the hardship distribution
in excess of the limitation on elective deferrals in effect for such next
taxable year under Section 402(g) of the Code less the amount of such
Individual's elective deferrals for the taxable year of the hardship
distribution.
The Employer shall be responsible for:
(a) determining that a substantial financial hardship exists;
(b) designating the amount necessary to meet such a substantial financial
hardship; and
(c) notifying the Custodian in writing of its decisions.
If the Employer does not process hardship distributions in accordance with the
standards set forth under this Plan and applicable law, the hardship
distribution provisions under this Paragraph B shall be ineffective. Neither
the Custodian nor the Investment Advisor shall be responsible for determining
that a substantial financial hardship exists or the amount necessary to satisfy
such hardship and may rely on any written notification from the Employer
certifying the existence and the amount of a substantial financial hardship.
Any determination under Paragraph B is to be made in accordance with uniform
and nondiscriminatoy standards established by the Employer. The Individual has
the responsibility of providing the Employer with any and all documents,
financial data or other information which the Employer deems necessary in order
to make the determination.
C. The Individual may elect a form of distribution from among the following
alternatives:
(a) a single sum payment in cash;
(b) equal or substantially equal monthly, quarterly, or annual payments
over a period not extending beyond the life expectancy of the
Individual; or
(c) equal or substantially equal monthly, quarterly, or annual payments
over a period not extending
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<PAGE> 9
beyond the joint and last survivor life expectancy of the Individual and
his beneficiary.
Such election shall be made in writing in such form as shall be acceptable to
the Custodian. After attaining age 70 1/2, certain restrictions may apply to
the Individual's ability to change the period over which payments are made. In
no event shall the Custodian or the Investment Advisor have any responsibility
for determining, or giving advice with respect to life expectancies or minimum
distribution requirements.
If the Individual fails to elect any of the methods of distribution described
above within the time specified for such election, the Custodian may distribute
the Individual's Custodial Account in the form of a single sum cash payment by
the April 1 following the calendar year in which the Individual attains age
70 1/2. If the Individual elects a mode of distribution under subparagraphs
(b) or (c) of this Paragraph C, except as otherwise required by
Section 403(b)(10) of the Code, the amount of the monthly, quarterly or annual
payments shall be determined by dividing the entire interest of the Individual
in the Custodial Account at the close of the prior year by the number of years
remaining in the period specified by the Individual's election.
D. Unless the Individual (or his spouse) elects not to have his life expectancy
recalculated, the Individual's life expectancy (and the life expectancy of the
Individual's spouse, if applicable) will be recalculated annually using their
attained ages as of their birthdays in the year for which the minimum annual
payment is being determined. The life expectancy of the designated beneficiary
(other than the spouse) will not be recalculated. The minimum annual payment
may be made in a series of installments (e.g., monthly, quarterly, etc.) as
long as the total payments for the year made by the date required are not less
than the minimum amounts required.
E. The Individual must receive distributions from the Plan in accordance with
Regulations prescribed by the Secretary of the Treasury pursuant to Section
403(b)(10) of the Code which are hereby incorporated by reference, or in the
absence of such regulations, in accordance with Section 401(a)(9) of the Code.
In general, these provisions require that certian minimum distributions must
commence not later than April 1, following the calendar year in which the
Individual attains age 70 1/2.
F. If the Individual dies before his entire interest in the Custodial Account
is distributed to him, the remaining undistributed balance of such interest
shall be distributed to the beneficiary or beneficiaries, if
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any, designated by the Individual. If no beneficiary designation is made,
distributions shall be made to the Individual's surviving spouse, or the
Individual's estate, in that order.
If the Individual dies after installment payments have commenced, the
beneficiary shall continue to receive distributions in accordance with the
payment method specified by the Individual or may elect, in writing, to receive
a lump sum distribution.
If the Individual dies prior to the commencement of benefits, the beneficiary
may elect, in writing, to receive the distribution in one of the following
forms:
(a) a single sum payment in cash made by December 31 of the
year containing the fifth anniversary of the Individual's death;
or
(b) equal or substantially equal monthly, quarterly, or annual
payments commencing not later than December 31 following the year
of the Individual's death over a period not to exceed the life
expectancy of the beneficiary.
Notwithstanding the foregoing, if the beneficiary is the Individual's spouse,
distributions may be delayed until December 31 of the year in which the
Individual would have attained age 70 1/2. A beneficiary must receive
distributions from the Plan in accordance with the regulations prescribed by
the Secretary of the Treasury pursuant to Section 403(b)(10) of the Code,
including the incidental death benefit requirements, which are hereby
incorporated by reference, or in the absence of such Regulations, in accordance
with Section 401(a)(9) of the Code.
G. The Individual may designate a beneficiary or beneficiaries, and may, in
addition, name a contingent beneficiary. Such designation shall be made in
writing in a form acceptable to the Custodian. The Individual may, at any time,
revoke his or her designation of a beneficiary or change the beneficiary by
filing notice of such revocation or change with the Custodian. Notwithstanding
the foregoing, in the event the Individual is married at the time of his death,
the beneficiary shall be the Individual's surviving spouse unless such spouse
consented in writing to the designation of an alternative beneficiary after
notice of the spouse's rights and such consent was witnessed by a notary public
or representative of the Employer. In the event no valid designation of
beneficiary is on file with the Employer or the Custodian at the date of death
or no designated beneficiary survives him, the Individual's spouse shall be
deemed the beneficiary; in the further event the Individual is unmarried or his
spouse does not survive him, the Individual's estate shall be deemed to be his
beneficiary.
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ARTICLE VI
ADMINISTRATION
Except as otherwise provided in this Plan, the Custodian shall perform solely
the duties assigned to the Custodian hereunder as agent on behalf of the
Individual and any beneficiary. The Custodian shall not be deemed to be a
fiduciary in carrying out the following duties:
(a) Receiving contributions pursuant to the provisions of this
Plan.
(b) Holding, investing and reinvesting the contributions in Investment
Company Shares.
(c) Registering any property held by the Custodian in its own name, or
in nominee or bearer form that will pass delivery.
(d) Making distributions from the Custodial Account in cash.
The Custodian shall mail to the Individual all proxies, proxy soliciting
materials, and periodic reports or other communications that may come into the
Custodian's possession by reason of its custody of Investment Company Shares.
The Individual shall vote the proxy, notwithstanding the fact that the
Custodian may be the registered owner of the Investment Company Shares, and the
Custodian shall have no further liability or responsibility with respect to the
voting of such shares.
The Custodian shall keep accurate and detailed account of its receipts,
investments and disbursements. As soon as practicable after December 31, each
year, and whenever required by Regulations adopted by the Internal Revenue
Service under the Act or the Code, the Custodian shall file with the Individual
a written report of the Custodian's transactions relating to the Custodial
Account during the period from the last previous accounting, and shall file
such other reports with the Internal Revenue Service as may be required by its
Regulations.
Unless the Individual sends the Custodian written objection to a report within
sixty (60) days after its receipt, the Individual shall be deemed to have
approved such report, and in such case, the Custodian shall be forever released
and discharged with respect to all matters and things included therein. The
Custodian may seek a judicial settlement of its accounts. In any such
proceeding the only necessary party thereto in addition to the Custodian shall
be the Individual.
All written notices or communications to the Individual or the Employer shall
be effective when sent by first class mail to the last known address of the
Individual or the Employer on the Custodian's records.
11
<PAGE> 12
All written notices or communications to the Custodian shall be mailed or
delivered to the Custodian at its designated mailing address, and no such
written notice of communications shall be effective until the Custodian's
actual receipt thereof. The Custodian shall be entitled to rely conclusively
upon, and shall be fully protected in any action taken by it in good faith in
reliance upon the authenticity of signatures contained in all written notices
or other communications which it receives and which appear to have been sent by
the Individual, the Employer, or any other person.
The Custodian shall make payments from the Custodial Account in accordance with
written directions received from the Individual, and it need not make inquiry as
to the rightfulness of such distribution. If the Custodian has reason to
believe that a distribution may be due, it may, but shall not be required to
make the distribution at the request of any beneficiary who appears to be
entitled thereto. The Custodian shall properly withhold from any payment to the
Individual or beneficiary such amounts as may be required to satisfy any income
or other tax withholding requirements.
The Custodian shall use ordinary care and reasonable diligence in the
performance of its duties as Custodian. The Custodian shall have no
responsibilities other than those provided for herein or in the Act or Code and
shall not be liable for a mistake in judgment, for any action taken in good
faith, or for any loss that is not a result of its gross negligence, except as
provided herein, or in the Act or Code, or regulations promulgated thereunder.
The Individual and the Employer agree to indemnify and hold the Custodian
harmless from and against any liability that the Custodian may incur in the
administration of the Custodial Account, unless arising from the Custodian's
own negligence or willful misconduct or from a violation of the provisions of
the Act or Regulations promulgated thereunder.
The Custodian shall be under no duty to question any direction of the
Individual with respect to the investment of contributions, or to make
suggestions to the Individual with respect to the investment, retention or
disposition of any contributions or assets held in the Custodial Account.
The Custodian shall be paid out of the Custodial Account for expenses of
administration, including the fees of counsel employed by the Custodian, taxes,
and its fees for maintaining the Custodial Account which are set forth in the
Application or in accordance with any schedule of fees subsequently adopted by
the Custodian. The Custodian may sell Investment
12
<PAGE> 13
Company Shares and use the proceeds of sale to pay the foregoing expenses.
The following fees apply to Strong Funds Section 403(b)(7) custodial accounts:
To establish an account $ 8.00
Annual maintenance fee per account $10.00
Nonretirement distribution
to a participant $15.00
Transfer to successor trustee $15.00
Refund of excess contribution $15.00
Periodic retirement distribution $ 2.50
(per distribution)
Systematic Retirement distribution No charge
The Custodian may make changes in the fee schedule at any time.
The Custodian will send account statments periodically, and after all
transactions. Statements will include any information as the law may require,
and in particular the amount of contributions, earnings, distributions, and
total account valuation. The Custodian will also send a statement to the
Internal Revenue Service as required by law.
The Custodian may resign as Custodian of any Individual's Custodial Account
upon sixty (60) days prior notice to the Investment Advisor and thirty (30)
days prior notice to each Individual who will be affected by such resignation.
ARTICLE VII
THE INVESTMENT ADVISOR
The Individual and the Employer delegate to the Investment Advisor the
following powers with respect to the Plan: to remove the Custodian and select a
successor Custodian; and to amend this Plan as provided in Article VIII hereof.
The powers herein delegated to the Investment Advisor shall be exercised by such
officer thereof as the Investment Advisor may designate from time to time, and
shall be exercised only when similarly exercised with respect to all other
Individuals adopting the Plan.
Neither an Investment Company, the Investment Advisor, nor any officer,
director, board, committee, employee or member of any Investment Company or of
the Investment Advisor shall have any responsibility with regard to the
administration of the Plan except as provided in this Article VII of the Plan,
and none of them shall incur any liability of any nature to the Individual or
beneficiary or other person in connection with any act done or omitted to be
done in good faith in the exercise of any power or authority herein delegated to
the Investment Advisor.
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<PAGE> 14
The Individual and the Employer agree to indemnify and hold the Investment
Companies and the Investment Advisor harmless from and against any and all
liabilities and expenses, including attorneys' and accountants' fees, incurred
in connection with the exercise of, or omission to exercise, any of the powers
delegated to it under this Article, except such liabilities and expense as may
arise from the Investment Advisor's and/or Investment Company's willful
misconduct.
If the Investment Advisor shall hereafter determine that it is no longer
desirable for it to continue to exercise any of the powers hereby delegated to
it, it may relieve itself of any further responsibilities hereunder by notice
in writing to the Individual at least sixty (60) days prior to the date on
which it proposes to discontinue the exercise of the powers delegated to it.
ARTICLE VIII
AMENDMENT AND TERMINATION
The Individual and the Employer delegate to the Investment Advisor the power to
amend this Plan (including retroactive amendments).
The Individual or the Employer may amend the Application (including retroactive
amendment) by submitting to the Custodian a copy of such amended Application,
and evidence satisfactory to the Custodian that the Plan, as amended by such
amended Application, will continue to qualify under the provisions of Section
403(b)(7) of the Code.
No amendment shall be effective if it would cause or permit: (a) any part of
the Custodial Account to be diverted to any purpose that is not for the
exclusive benefit of the Individual and his beneficiaries; (b) the Individual
to be deprived of any portion of his interest in the Custodial Account; or (c)
the imposition of an additional duty on the Custodian without its consent.
The Employer reserves the right to terminate further contributions to this
Plan. The Individual also reserves the right to terminate his adoption of the
Plan in the event that he shall be unable to secure a favorable ruling from the
Internal Revenue Service with respect to this Plan. In the event of such
termination, the Custodian shall distribute the Custodial Account to the
Individual. The Individual also reserves the right to transfer the assets of
his Custodial Account to such other form of Section 403(b)(7) retirement plan
as he may determine, upon written instructions to the Custodian in such form as
the Custodian may reasonably require.
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<PAGE> 15
ARTICLE IX
PROHIBITED TRANSACTIONS
Except as provided in Section 408 of the Act or Section 4975 of the Code, the
Custodian:
A. Shall not cause the Plan to engage in a transaction if it knows or should
know that such transaction constitutes a direct or indirect:
(1) sale or exchange or leasing of any property between the Plan and a
party in interest;
(2) lending of money or other extension of credit between the Plan and
a party in interest;
(3) furnishing of goods, services, or facilities between the Plan and a
party in interest;
(4) transfer to, or use by or for the benefit of, a party in interest,
of any assets of the Plan; or
(5) acquisition, on behalf of the Plan, of any employer security or
employer real property in violation of Section 407(a) of the Act.
B. Shall not permit the Plan to hold any employer security or employer real
property if it knows or should know that holding such security or real property
violates Section 407(a) of the Act.
C. Shall not deal with the assets of the Plan in its own interest or for its
own account.
D. Shall not in any capacity act in any transaction involving the Plan on
behalf of a party (or represent a party) whose interests are adverse to the
interests of the Plan or the interests of its participants or beneficiaries.
E. Shall not receive any consideration for its own account from any party
dealing with the Plan in connection with a transaction involving the assets of
the Plan; provided that nothing in this Article IX shall be construed to
prohibit the payment to the Custodian of any fees otherwise authorized under
the terms of this Plan.
ARTICLE X
CHANGES IN APPLICABLE LAW
The foregoing Plan provisions are intended to comply with applicable Code
requirements as currently in effect. Certain provisions of the Tax Reform Act
of 1986, effective in 1989, affect the operation and administration of the
Plan. The changes impose additional nondiscrimination, distribution and
withdrawal requirements. An individual should consult his attorney or tax
advisor as to the effect these changes have on his Section 403(b)(7)
contributions.
It should be understood that neither the Investment Advisor nor the Custodian
is in a position to render legal or tax advice and that the information
contained
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<PAGE> 16
in and the documents furnished with this description merely represent the
Investment Advisor's understanding of the statutes and regulations affecting
the establishment and qualification of a Section 403(b)(7) plan. Accordingly,
an Individual is urged to consult his attorney or tax advisor in connection
with the adoption of the Plan and the submission of a ruling request on his
behalf.
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<PAGE> 17
AMENDMENT TO THE STRONG FUNDS
SECTION 403(b)(7) RETIREMENT PLAN
The Strong Funds Section 403(b)(7) Retirement Plan has been amended,
effective January 1, 1993, by adding the following Section H to Article V:
In the case of any distribution that constitutes an "eligible
rollover distribution" as defined in Section 402(f)(2)(A) of the Code,
the individual shall have the option of (i) receiving the distribution
directly, (ii) having the distribution transferred to an individual
retirement account or other eligible 403(b) retirement plan that
accepts such transfers, or (iii) to the extent required under
regulations issued by the Secretary of the Treasury, a combination of
(i) and (ii). The direct transfer option also applies to surviving
spouses who are entitled to receive distribution following the
Individual's death, and to former spouses who are entitled to
distribution of all or a portion of the Individual's account pursuant
to a qualified domestic relations order; in any such case, references
to the Individual in the remainder of this Section H shall be deemed a
reference to the surviving spouse or former spouse, as applicable.
If the Individual timely elects the transfer option and
provides appropriate information regarding the transferee plan or
account, including the name of the transferee plan or account and the
identity of the trustee or custodian, the transfer shall be
accomplished by delivering to the transferee trustee or custodian a
check or wire transfer for the full amount of the distribution.
Alternatively, the Custodian may deliver to the Individual a check, for
the full amount of the distribution, made payable to the trustee or
custodian of the transferee plan or account. The Individual shall then
be responsible for delivering the check to the trustee or custodian of
the transferee plan.
If the Individual elects payments made directly to the
Individual, distribution shall be accomplished by delivering to the
Individual a check, for the amount of the distribution less applicable
withholding, made payable to the Individual.
If the Individual fails to make a timely election, or if the
Individual elects the transfer option but fails to provide appropriate
information to enable the Custodian to implement the transfer, the
Individual's distribution will be paid directly to the Individual less
applicable withholding.
The direct transfer option will not apply in the case of any
"eligible rollover distribution" that has been exempted from the
transfer requirements under rules and regulations issued (whether in
proposed, temporary or final form) by the Secretary of the Treasury. In
addition, the Custodian may promulgate additional rules and
regulations, including rules and regulations governing the time by
which elections must be made, that it determines to be necessary or
desirable to administer the direct transfer provisions of this Plan.
<PAGE> 1
Exhibit 16
One year period ended December 31, 1995:
1
1,000 (1 - .3415) = $1,342
Five year period ended December 31, 1995:
5
1,000 (1 + .2165) = $2,664
10 year period ended December 31, 1995:
10
1,000 (1 + .1495) = $4,028
