Registration No. 33-16812
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. ___ [_]
Post-Effective Amendment No. 11 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 13 [X]
(Check appropriate box or boxes.)
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
(Exact name of Registrant as Specified in Charter)
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
(Address of Principal Executive (Zip Code)
Offices)
(312) 669-1650
(Registrant's Telephone Number, including Area Code)
Gerald W. Perritt
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
(Name and Address of Agent for Service)
______________________________
Copy to:
Phillip J. Hanrahan
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
It is proposed that this filing will become effective (check
appropriate box):
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on February 27, 1998 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
___ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box: [_] this post-effective
amendment designates a new effective date for a previously filed
post-effective amendment.
<PAGE>
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the Items of
Parts A and B of Form N-1A.)
Caption or Subheading in Prospectus
Item No. on Form N-1A or Statement of Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis *
3. Condensed Financial Financial Highlights
Information
4. General Description of The Fund; Investment Objective and
Registrant Policies Caption or Subheading in
Item No. on Form N-1A Prospectus or Statement of Additional
Information
5. Management of the Fund Management of the Fund; Selected Per
Share Data and Ratios; Capital Stock
5A. Management's Discussion of Included in Annual Report to
Fund Performance Shareholders
6. Capital Stock and Other Distributions and Taxes; Capital Stock
Securities
7. Purchase of Securities Determination of Net Asset Value; How
Being Offered to Purchase Shares; Shareholder Plans
8. Redemption or Repurchase How to Redeem Shares
9. Legal proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and **
History
13. Investment Objectives and Investment Objective; Investment
Policies Considerations; Investment
Restrictions; Investment Techniques
14. Management of the Directors and Officers; Management of
Registrant the Fund (in the Prospectus);
Investment Adviser
15. Control Persons and Principal Shareholders
Principal Holders of
Securities
16. Investment Advisory and Investment Adviser; Management of the
Other Services Fund (in Prospectus)
17. Brokerage Allocation Allocation of Portfolio Brokerage
18. Capital Stock and Other Included in Prospectus under "Capital
Securities Stock" Caption or Subheading in Prospectus
Item No. on Form N-1A or Statement of Additional Information
19. Purchase, Redemption and Included in Prospectus under
Pricing of Securities "Determination of Net Asset Value";
Being Offered "Shareholder Plans"; "How to Redeem
Shares" and under "Retirement Plans",
"Other Shareholder Plans" and
"Determination of Net Asset Value" in
the Statement of Additional
Information
20. Tax Status Included in Prospectus under
"Distributions and Taxes" and under
"Taxes" in the Statement of Additional
Information
21. Underwriters *
22. Calculations of Performance Information
Performance Data
23. Financial Statements Financial Statements
_______________
* Answer negative or not applicable.
** Complete answer to Item is included in the Prospectus.
<PAGE>
----------------------------------------------------------
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
----------------------------------------------------------
A no-load mutual fund that invests in stocks of rapidly
growing companies that at the time of purchase have equity market values
below $300 million.
No Sales Charges
No Redemption Charges
No 12b-1 Fees
Minimum Initial Investment $1,000
IRA Minimum Initial Investment $250
Dividend Reinvestment Plan
Systematic Withdrawal Plan
Automatic Investment Plan
Retirement Plans Including:
- IRA - SIMPLE IRA
-SEP/IRA -Roth IRA
- Education IRA - 401(k)
The Fund can also be purchased at the following
brokerage firms: Jack White & Company, Charles
Schwab & Company and Waterhouse Securities.
-----------------
PROSPECTUS
-----------------
February 28, 1998
<PAGE>
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
PROSPECTUS
----------
120 S. Riverside Plaza
Suite 1745
Chicago, Illinois 60606
Telephone: (312) 669-1650
Toll-Free (800) 332-3133
Perritt MicroCap Opportunities Fund, Inc. (the "Fund") is an open-end
diversified management investment company. The Fund's objective is
long-term capital appreciation, which it seeks by investing primarily in a
diversified portfolio of common stocks of small companies that management
believes have growth potential.
In view of the Fund's investment objective and strategy, the Fund
must be considered speculative and therefore subject to above-average
risk. Because the Fund is intended to be an investment vehicle for that
part of an investor's capital that can be exposed to above-average risk in
return for the potential for greater returns, an investment in this Fund
may not be appropriate for all investors and, by itself, should not be
considered a long-term investment program.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus sets forth concisely the information about the Fund
that a prospective investor should know before investing. Additional
information about the Fund has been filed with the Securities and Exchange
Commission in the form of a Statement of Additional Information, dated
February 28, 1998, which is incorporated into this prospectus by
reference. A copy of the Statement of Additional Information will be
provided upon request by the Fund without charge to each person to whom a
prospectus is delivered. Write to the Fund at 120 S. Riverside Plaza,
Suite 1745, Chicago, Illinois 60606, or call, toll-free, 1-800-332-3133 or
1-312-669-1650. The Securities and Exchange Commission maintains a
website (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference into this prospectus and
other information about the Fund and other companies that file
electronically with the Commission.
INVESTORS ARE ADVISED TO READ AND RETAIN A COPY OF THIS PROSPECTUS FOR
FUTURE REFERENCE.
The date of this prospectus is February 28, 1998.
TABLE OF CONTENTS
page
Fund Expenses........................................... 1
The Fund................................................ 2
Financial Highlights.................................... 3
Investment Objective, Policies, and Risk Factors........ 5
Investment Restrictions................................. 6
Management of the Fund.................................. 7
Determination of Net Asset Value........................ 8
How to Purchase Shares.................................. 9
How to Redeem Shares.................................... 11
Shareholder Plans....................................... 13
Distributions and Taxes................................. 15
Capital Stock........................................... 16
Shareholder Reports and Meetings........................ 16
Performance Information................................. 17
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the
Statement of Additional Information dated February 28, 1998, and, if given
or made, such information or representations may not be relied upon as
having been authorized by Perritt MicroCap Opportunities Fund, Inc. This
Prospectus does not constitute an offer to sell securities in any state or
jurisdiction in which such offering may not be lawfully made.
FUND EXPENSES
The following information is provided in order to assist you in
understanding the various costs and expenses that a shareholder of the
Fund will bear directly or indirectly. There are certain charges
associated with retirement accounts and with certain services offered by
the Fund. See "SHAREHOLDER PLANS." Purchases and redemptions may also be
made through broker-dealers or others who may charge a commission or other
transaction fee for their services. The Annual Fund Operating Expenses
are actual expenses incurred during the fiscal year ended October 31,
1997. The Adviser will waive its management fee (0.7%) to the extent that
the Fund's total operating expenses exceed 2.0% of the average net assets.
See "MANAGEMENT OF THE FUND." The example below is based on the Annual
Fund Operating Expenses set forth in the accompanying table.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
or Reinvested Dividends............................None
Deferred Sales Load..................................None
Redemption Fee...........................................None
Exchange Fee.............................................None
Annual Fund Operating Expenses:
Management Fee.......................................0.70%
12b-1 Fees...........................................None
Other Expenses.......................................0.82%
Total Fund Operating Expenses............................1.52%
Example: You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 years 5 years 10 years
------ ------- ------- --------
$15 $47 $81 $178
The example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
THE FUND
Perritt MicroCap Opportunities Fund, Inc. (the "Fund") is a no-load,
open-end diversified management investment company commonly called a
"mutual fund." As a no-load fund, the Fund does not impose sales charges,
redemption fees, or 12b-1 charges. The Fund was organized as a Maryland
corporation on August 24, 1987. On February 2, 1998, the Fund's corporate
name was changed from Perritt Capital Growth Fund, Inc. to Perritt
MicroCap Opportunities Fund, Inc.
FINANCIAL HIGHLIGHTS
The following Financial Highlights and Capital Changes have been
audited by independent accountants, whose report thereon appears in the
Fund's Annual Report. The Financial Highlights should be read in
conjunction with the financial statements and related notes which are
included in the Fund's Annual Report. The Fund's audited financial
statements, notes thereto and auditor's report thereon contained in the
Fund's Annual Report are incorporated by reference into the Statement of
Additional Information. Additional information about the Fund's
performance is also contained in the Annual Report, a copy of which may be
obtained from the Fund without charge.
<TABLE>
SELECTED PER-SHARE DATA
<CAPTION>
Years ended October 31
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . . . . . . . $14.33 $14.17 $11.89 $12.54 $11.43
------ ------- ------- ------ -------
Income from Investment Operations
Net investment income
(loss) . . . . . . . . . . . (0.05) (0.16) (0.13) (0.13) (0.14)
Net realized and unrealized
gain (loss) on
investments . . . . . . . . 4.78 2.42 3.01 0.02 1.61
------ ------- ------- ------ -------
Total from Investment
Operations . . . . . . . . . 4.73 2.26 2.88 (0.11) 1.47
------ ------- ------ ------ -------
Less Distributions
From net investment income . . (0.04) (0.90) -- -- (0.08)
From net realized gain . . . . (1.27 (1.20) (0.60) (0.54) (0.28)
------ ------ ------- ------- -------
Total Distributions . . . . . . . (1.31 (2.10) (0.60) (0.54) (0.36)
------ ------ ------- ------- -------
Net asset value, end of period . $17.75 $14.33 $14.17 $11.89 $12.54
====== ====== ======= ======= =======
Total Return . . . . . . . . . . 35.95% 18.56% 25.60% (1.05%) 12.97%
Ratios and Supplemental Data
Net assets, end of period
(in thousands) . . . . . . . . $24,831 $8,130 $6,729 $6,279 $7,208
Ratio of expenses to
average net assets . . . . . . 1.52% 1.92% 2.07% 2.00% 1.96%
Ratio of net investment income
to average net assets . . . . . (0.6%) (1.2%) (1.0%) (1.0%) (1.1%)
Portfolio turnover rate . . . . 83.1% 58.0% 67.4% 39.2% 34.6%
Average commission rate per
equity stock trade** . . . . . $0.0270 $0.0363
** Disclosure required for fiscal years beginning after September 1, 1995
</TABLE>
<TABLE>
SELECTED PER-SHARE DATA
For the Period
<CAPTION>
period April
For the Years Ended 11, 1988 to
October 31 October 31,
1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . . . . . . $11.36 $8.17 $10.52 $10.22 $10.00
------- ------ ------ ------- --------
Income from Investment Operations
Net investment income (loss) . (0.12) (0.02) 0.09 0.16 0.06
Net realized and unrealized
gain (loss) on investments . 0.31 3.27 (2.27) 0.22 0.16
-------- ------- ------- ------- -------
Total from Investment Operations 0.19 3.25 (2.18) 0.38 0.22
-------- ------- ------- ------- -------
Less Distributions
From net investment income . -- (0.06) (0.17) (0.08) --
From net realized gain . . . (0.12) -- -- -- --
-------- ------- ------ ------ -------
Total Distributions . . . . . . . (0.12) (0.06) (0.17) (0.08) --
-------- ------- ------ ------ -------
Net asset value, end of period . $11.43 $11.36 $8.17 $10.52 $10.22
======== ======== ====== ====== =======
Total Return . . . . . . . . . . 1.70% 40.06% (21.07%) 3.75% 2.20%
Ratios and Supplemental Data
Net assets, end of period
(in thousands) . . . . . . . . $6,942 $6,183 $4,265 $5,573 $3,020
Ratio of expenses to
average net assets . . . . . . 2.30% 2.50% 2.50% 2.50% 2.70%*
Ratio of net investment income
to average net assets . . . . . (1.1%) (0.2%) 0.9% 1.8% 1.6%*
Portfolio turnover rate . . . . . 24.4% 37.4% 23.6% 22.6% 3.5%
Average commission rate per
equity stock trade**
* Annualized
** Disclosure required for fiscal years beginning after
September 1, 1995
<PAGE>
INVESTMENT OBJECTIVE, POLICIES, AND RISK FACTORS
The Fund's investment objective is long-term capital appreciation
which it seeks by investing primarily in a diversified portfolio of common
stocks of small companies that management believes have growth potential.
The Fund will, under normal market conditions, invest at least 80% of its
assets in common stocks and other equity-type securities of small equity
capitalization firms. Small equity capitalization firms are those firms
whose shares are not widely held by institutions and whose equity market
value at the time of purchase will generally range from $10 million to
$300 million. Other equity-type securities will generally be limited to
convertible securities, preferred stocks and warrants to purchase common
stock which are believed to offer favorable possibilities of capital
appreciation. The Fund may invest in securities not listed on a national
or regional securities exchange, but such securities typically will have
an established over-the-counter market. The Fund does not intend to
invest in any security which, at the time of purchase, is not readily
marketable. The current income return of the Fund will be low because
smaller companies frequently need to retain all or most of their profits
to finance growth.
The Fund does not intend to place emphasis on short-term trading
profits. However, when circumstances warrant, investment securities may
be sold from time to time without regard to the length of time they have
been held. The Fund may, for temporary defensive purposes, invest greater
than 20% of its assets in high quality money market securities, including
U.S. Government obligations, certificates of deposit, bankers'
acceptances, commercial paper or cash or cash equivalents. Except for
temporary defensive purposes, the Fund will retain cash and cash
equivalents only in amounts deemed adequate for current needs and to
permit the Fund to take advantage of investment opportunities.
The Fund's investment adviser expects that under normal circumstances
its annual portfolio turnover rate will not exceed 50%. However, this
rate should not be construed as a limiting factor and the portfolio
turnover rate may exceed 50% when the adviser deems changes appropriate.
The annual portfolio turnover rate indicates changes in the Fund's
portfolio. For instance, a rate of 100% would result if all the
securities in the portfolio (excluding securities whose maturities at
acquisition were one year or less) at the beginning of an annual period
had been replaced by the end of the period. The Fund intends to limit
turnover so that realized short-term gains on securities held for less
than three months do not exceed 30% of adjusted gross income in order to
derive the benefits of favorable tax treatment available to regulated
investment companies under the Internal Revenue Code. Increased portfolio
turnover necessarily results in correspondingly heavier brokerage costs
which the Fund must pay and increased realized gains (or losses) to
shareholders.
The Fund is designed for investors with a long-term investment
perspective (and not with a view to playing short-term swings in the
market) who can accept the relatively high volatility in portfolio value
and other risks entailed in seeking long-term growth through investment in
the common stocks of small companies that management believes have growth
potential. Investors should be aware that up to 100% of the Fund's
portfolio may be invested in common stocks and other equity-type
securities. To the extent that the Fund's portfolio is primarily invested
in common stocks and other equity-type securities, the Fund's net asset
value may be subject to greater fluctuation than a portfolio containing a
substantial amount of fixed income securities. There can be no assurance
that the objective of the Fund will be realized or that any income will be
earned. Nor can there be assurance that the Fund's portfolio will not
decline in value.
Investments in small equity capitalization firms tend to be
speculative and volatile and involve greater risks than are customarily
associated with larger companies. Such companies may have limited product
lines and markets, may lack sufficient resources, may be unable to
generate internally the funds necessary for growth and may find external
financing to be either unavailable or unavailable on favorable terms. In
addition, the securities of smaller companies are frequently traded
over-the-counter or on a regional exchange, and the frequency and volume
of their trading is generally substantially less than is typical of larger
companies. When making larger sales, the Fund may have to sell assets at
discounts from quoted prices or may have to make a series of small sales
over an extended period of time.
With respect to investments in securities of foreign issuers, there
is less publicly available information about foreign issuers than is
available in the reports and ratings published about companies in the
United States. Additionally, foreign companies may not be subject to
uniform accounting, auditing and financial reporting standards, and
dividends and interest on foreign securities may be subject to foreign
withholding taxes, which would reduce the Fund's income without providing
a tax credit for the Fund's stockholders. There is also the possibility
of expropriation, nationalization, confiscatory taxation, currency
blockage or political or social instability which could affect investments
in securities of foreign issuers. The Fund will limit its investments in
securities of foreign issuers to those issuers organized under the laws of
Canada and will limit its foreign investments to 10% or less of its
assets. As a result, the adviser considers the foregoing risks to be
minimal.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions which are
presented in the Statement of Additional Information and which, together
with the investment objective of the Fund, cannot be changed without
approval by holders of a majority of the Fund's outstanding voting shares.
As defined in the Investment Company Act of 1940, this means the lesser of
(a) 67% of the shares of the Fund at a meeting where more than 50% of the
outstanding shares are present in person or by proxy; or (b) more than 50%
of the outstanding shares of the Fund.
Certain restrictions referred to in the foregoing paragraph are
summarized below. Reference should be made to the Statement of Additional
Information for a complete list of fundamental investment restrictions
adopted by the Fund.
The Fund will not:
(1) purchase the securities of a company if, as a result (a) it
would own more than 10% of the outstanding voting securities of any one
company, (b) such holdings would amount to more than 5% of the Fund's
total assets, or (c) more than 25% of its total assets would be
concentrated in any one industry;
(2) borrow money except from banks for temporary or emergency
purposes and then only in amounts not exceeding 5% of the Fund's total
assets valued at market;
(3) pledge, mortgage, hypothecate or otherwise encumber any of its
assets, except as a temporary measure for extraordinary or emergency
purposes, and then not in excess of 15% of its assets taken at cost;
(4) invest in restricted, illiquid or other securities without
readily available market quotations; and
(5) purchase, sell or write options on portfolio securities or stock
indexes, if as a result thereof, (i) the aggregate market value of all
portfolio securities covering such options exceeds 25% of the Fund's net
assets or (ii) the aggregate premiums paid for all such options held
exceeds 5% of the Fund's net assets. The Fund, however, will not
purchase, sell or write options unless otherwise disclosed in this
prospectus.
MANAGEMENT OF THE FUND
Directors
The Fund's Board of Directors has overall responsibility for the
business and affairs of the Fund in accordance with the laws of Maryland
governing the responsibilities of directors. The Statement of Additional
Information lists the Fund's directors and officers and provides certain
information about them.
Investment Adviser
The Fund has entered into an Investment Advisory Agreement ("Advisory
Agreement") with Perritt Capital Management, Inc., 120 S. Riverside Plaza,
Suite 1745, Chicago, Illinois 60606 (the "Adviser"). The Adviser was
incorporated as an Illinois corporation on July 8, 1987 and is a wholly
owned subsidiary of Investment Information Services, Inc. ("IIS"). IIS
was organized in 1983 and is primarily in the business of the publication
of The Mutual Fund Letter (a monthly mutual fund advisory newsletter).
The Adviser is registered as an investment adviser under the Investment
Advisers Act of 1940. Essentially, the same staff of financial analysts
that has been actively involved in research for the newsletter published
by IIS uses its experience in selecting small equity capitalization stocks
for the benefit of the Fund and its shareholders. Gerald W. Perritt,
President and Chairman of IIS, is also President of the Adviser. Dr.
Perritt, President and Treasurer of the Fund, has been the principal
portfolio adviser of the Fund since its inception and has authored several
books on investing including "Small Stocks, Big Profits," a book which
discusses the benefits of investing in small firm stocks. Dr. Perritt
received a doctorate in finance and economics from the University of
Kentucky in 1974. He has taught investments and finance at a number of
colleges and universities including: Babson College, the University of
Miami, Florida International University, Ball State University and De Paul
University in Chicago. Since its inception, the Adviser's principal
business has been providing continuous investment supervision for
individuals and institutional accounts such as the Fund.
The Advisory Agreement provides that the Adviser shall manage the
Fund's investments and shall determine the Fund's portfolio transactions
and shall be responsible for overall management of the Fund's business
affairs, subject to the supervision of the Fund's Board of Directors. As
compensation for its services, the Fund pays to the Adviser a monthly
advisory fee at the annual rate of 0.7% of the average daily net asset
value of the Fund unless partially or completely waived by the Adviser.
See "Determination of Net Asset Value." The Advisory Agreement also
provides that the Adviser will waive its management fee to the extent that
total operating expenses exceed 2.0% of the Fund's average net assets.
The Fund bears all expenses of its operation other than those
incurred by the Adviser. The Fund's expenses include, but are not limited
to, investment advisory fees, custodian fees and expenses, legal, pricing,
accounting and auditing fees, brokerage fees, expenses of preparing
prospectuses and shareholder reports for existing shareholders and
registration fees and expenses. For the year ended October 31, 1997,
expenses were 1.52% of the Fund's average net assets.
Custodian, Transfer Agent and Dividend Disbursing Agent
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201 acts
as custodian of all cash and securities of the Fund. Firstar Trust
Company also acts as transfer agent and dividend disbursing agent and
accountant for the Fund.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined as of the
close of trading on the New York Stock Exchange (currently 4:00 P.M., New
York Time) on days on which the Exchange is open for business except that
the net asset value may not be computed on a day in which no orders to
purchase shares were received and no shares were tendered for redemption.
The net asset value per share is calculated by adding the value of all
securities, cash or other assets, subtracting liabilities, and dividing
the remainder by the number of shares outstanding.
Each security traded on a national stock exchange is valued at its
last sale price on that exchange on the day of valuation or, if there are
no sales that day, at the mean between the then current closing bid and
asked prices. Each over-the-counter security for which the last sale
price on the day of valuation is available from the Nasdaq Stock Market is
valued at that price. All other over-the-counter securities for which
quotations are available are valued at the mean between the then current
closing bid and asked prices. Other assets and securities are valued at a
fair value determined in good faith by the Board of Directors. High
quality debt securities having maturities of less than 60 days will be
valued by the amortized cost method.
HOW TO PURCHASE SHARES
Purchases by Mail
Shares of the Fund may be purchased directly from the Fund by sending
a properly completed Share Purchase Application to the Fund c/o Firstar
Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201. An application
is included on the back flap of this prospectus. To purchase shares by
overnight or express mail, please use the following address: Perritt
MicroCap Opportunities Fund, c/o Firstar Trust Company, Mutual Fund
Service, Third Floor, 615 East Michigan Street, Milwaukee, WI 53202. To
make additional purchases, enclose a check payable to the Fund, together
with either the additional investment form attached to your account
statement or a letter indicating your account number, and send the
foregoing to the Fund. The offering price for the Fund's shares is equal
to the net asset value per share (derived in the manner described under
"Determination of Net Asset Value") as computed at the close of the New
York Stock Exchange on the day that the purchase order is received in
proper form. Orders received by a Fund after the close of the New York
Stock Exchange will be confirmed at the net asset value determined at the
close of the New York Stock Exchange on the next business day. All
purchases must be made in U.S. dollars, and checks must be drawn on U.S.
banks. No cash will be accepted.
Purchases Through Financial Service Agents
If you are investing through a Financial Service Agent, such as
Charles Schwab & Co., Inc., Waterhouse Securities or Jack White & Co.,
please refer to their program materials for any additional special
provisions or conditions that may be different from those described in
this prospectus. Financial Service Agents have the responsibility of
transmitting purchase orders and funds, and of crediting their customers'
accounts following redemptions, in a timely manner in accordance with
their customer agreements and this prospectus.
If you place an order for Fund shares through a Financial Service
Agent, in accordance with such Financial Service Agent's procedures and
such Financial Service Agent then transmits your order to the Transfer
Agent before 4:00 p.m. New York time on that day, then your purchase will
be processed at the net asset value calculated at 4:00 p.m. New York time
on that day. The Financial Service Agent must promise to send to the
Transfer Agent immediately available funds in the amount of the purchase
price within three business days of the order.
Purchases by wire
Shares may also be purchased by wire by instructing your bank to wire
Federal funds (monies of member banks within the Federal Reserve System)
to the Fund's custodian bank. If a new account is opened by wire
transfer, Firstar Trust Company, the Fund's custodian, must first be
notified and the shareholder must furnish his/her social security or other
tax identification number. The Fund will not be responsible for the
consequences of delays resulting from the banking or Federal Reserve wire
systems. A follow-up application should be sent for all new accounts
opened by wire transfer. Please note that there is a $12 wire transfer
fee. Your bank must include in its wire the full name(s) in which the
account is registered and the Fund account number and should address its
wire as follows:
Firstar Bank, Milwaukee, N.A.
ABA #0750-00022
Account #112950027
For further credit to Perritt MicroCap Opportunities Fund, Inc.
Shareholder name:__________________________________________
Shareholder account number:________________________________
General Information for all Purchases
An initial purchase of shares of the Fund must be at least $1,000,
and subsequent purchases must be made in amounts of $50 or more. An
initial purchase of shares under the Uniform Gift to Minors Act,
individual retirement accounts or tax deferred retirement plans must be at
least $250. The minimums for subsequent purchases do not apply to shares
purchased pursuant to the reinvestment of income dividends and capital
gain distributions and shares purchased pursuant to the automatic
investment plan. The minimums may be changed at any time. Shareholders
will be given at least thirty days notice of any increase in the minimums.
All orders to purchase shares are subject to the Fund's acceptance
and are not binding until so accepted. All orders to purchase shares that
are accepted will be processed at the net asset value next determined
after receipt of the purchase order as provided herein regardless of the
date of acceptance. At its discretion, the Fund may accept telephone
orders from securities dealers. The Fund may decline to accept a purchase
order when in the judgment of management the acceptance of an order is not
in the best interests of existing shareholders. Investments (and
redemptions) may be made in the Fund through broker-dealers and others who
may charge a commission or other fee for their services. A $20 service
fee will be charged when a check is returned because of insufficient or
uncollected funds or when payment is stopped. You will also be
responsible for any losses suffered by the Fund as a result. If a new
account is opened and the check is returned for insufficient or
uncollected funds, the Adviser is responsible for the $20 NSF fee.
Firstar Trust Company may also accept orders from certain qualified
institutions, with payment made to the Fund at a later time. The Adviser
is responsible for insuring that such payment is made on a timely basis.
A broker-dealer which effects such a purchase for an investor may charge
the investor a reasonable service fee, no part of which will be paid to
the Fund or the Adviser.
The Adviser may make payments out of its own resources to dealers and
other persons who distribute shares of the Fund.
HOW TO REDEEM SHARES
Shareholders of the Fund may request redemption of their shares at
any time as provided herein. The redemption price shall be equal to the
net asset value next determined after receipt by the Fund's transfer agent
of a request for redemption submitted in proper form. See "Determination
of Net Asset Value." The value of the shares on redemption may be more or
less than their original cost, depending upon the then-current market
value of the Fund's investments. There is no liquidation charge when
shares are redeemed, nor is one contemplated, although the Board of
Directors is authorized to establish such a charge (not over 1% of the net
asset value of the shares redeemed). Should such a charge ever be
established, shareholders will be given written notice and a reasonable
period (at least 30 days) within which to redeem without charge.
Shares may be redeemed by submitting a written request for redemption
to the Fund, c/o the Fund's transfer agent, Firstar Trust Company, P.O.
Box 701, Milwaukee, Wisconsin 53201. A written redemption request to
Firstar Trust Company (the "Transfer Agent") must specify (i) the name of
the Fund, (ii) the dollar amount or specific number of shares to be
redeemed, and (iii) the shareholder's name and account number. The
redemption request must be signed by each registered owner exactly as the
shares are registered. A redemption request must be signature guaranteed
if it is submitted within 15 days of an address change.
If a redemption request is inadvertently sent to the Fund, it will be
forwarded to Firstar Trust Company, but the effective date of redemption
will be delayed until the request is received by Firstar Trust Company.
Requests for redemption by telephone or telegram and requests that are
subject to any special conditions or that specify an effective date or
other than as provided herein cannot be honored.
For accounts registered in the name of corporations or associations,
the redemption request must include a corporate resolution certified by a
duly authorized officer of the corporation or association, with such
officer's signature guaranteed. For accounts registered in the name of a
trust, the redemption request must be signed by each trustee, with each
signature guaranteed. If a trustee's name is not registered on the
account, a trust document certified within 60 days prior to the redemption
request must also be submitted. A redemption request will not be deemed
to be properly received until the Transfer Agent receives all required
documents in proper form. Questions with respect to the proper form of
redemption requests should be directed to the Transfer Agent at
800-332-3133.
If the shares to be redeemed were issued in certificate form, the
certificates must be endorsed for transfer (or be accompanied by an
endorsed stock power) and must be submitted to the Transfer Agent together
with the redemption request, with all signatures guaranteed. Where the
shares to be redeemed are NOT represented by certificates, and except as
provided above, signature guarantees are required only for (1) redemptions
involving more than $10,000; or (2) redemptions whereby the proceeds are
to be paid to someone other than the person(s) or organization in whose
name the account is registered or the proceeds are to be sent to an
address other than the address of record. In addition, a redemption
request received within 15 days of an address change must be accompanied
by a signature guarantee. The guarantor of a signature must be a national
bank or trust company, a member of the Federal Reserve System or a member
firm of a national securities exchange or any other financial institution
authorized to guarantee signatures. The Transfer Agent reserves the right
to reject the signature guarantee of an institution if such rejection
would be in the best interests of the Fund and its shareholders.
Notwithstanding the above, signature guarantees will be required where
there appears to be a pattern of redemptions designed to circumvent the
signature guarantee requirement, or where the Fund has other reason to
believe that this requirement would be in the best interests of the Fund
and its shareholders.
The proceeds of redemptions will ordinarily be mailed within two
business days after receipt of a properly completed redemption request,
but no later than the seventh day after a receipt of a redemption request
in proper form, except as indicated below. It is mandatory that the Fund
redeem shares upon the proper request of a shareholder. When shares are
purchased by check, the Fund reserves the right to delay redemption of
shares until it is satisfied that the investor's check used to purchase
shares has cleared. Local checks generally are collected in three
business days and non-local checks in seven business days, although
collection may take longer in certain circumstances. Shareholders may
avoid potential delays when redeeming shares soon after purchase by wiring
funds as provided herein. The right of redemption may be suspended during
any period when: (a) trading on the New York Stock Exchange is restricted
as determined by the Securities and Exchange Commission, or such Exchange
is closed for other than weekends and holidays; (b) the Securities and
Exchange Commission has by order permitted such suspension; or (c) an
emergency as determined by the Securities and Exchange Commission exists,
making disposal of portfolio securities or valuation of net assets of the
Fund not reasonably practicable. A shareholder's account may be
terminated by the Fund if, at the time of any transfer or redemption of
shares of the Fund in the account, the value of the remaining shares in
the account at the current offering price falls below $500. The Fund will
notify a shareholder of its intention to terminate the account and provide
the shareholder with not less than thirty days to make additional
investments. Requests for transfers of shares of the Fund from or between
broker-dealer street name accounts must be made by the broker-dealer. A
shareholder should contact the broker in whose account the shares are held
if he/she wants to transfer these shares.
Redemption requests from shareholders in an individual retirement
account or defined contribution retirement plan must include instructions
regarding federal income tax withholding. Redemption requests not
indicating an election not to have federal income tax withheld will be
subject to withholding. Questions regarding redemptions and the
procedures that must be followed should be directed to the transfer agent,
Firstar Trust Company (1-800-332-3133).
SHAREHOLDER PLANS
Automatic Investment Plan
The Fund offers an Automatic Investment Plan, which may be
established at any time, pursuant to which shareholders may automatically
make purchases of shares of the Fund on a regular, convenient basis.
There is a $50 minimum per transaction, and there is no service fee
charged. Under the Automatic Investment Plan, shareholders' banks or
other financial institutions debit preauthorized amounts each month from
their checking accounts and apply such amounts to the purchase of shares
of the Fund.
Dividend Reinvestment Plan
Unless a shareholder elects otherwise by written notice to the Fund,
all income dividends and all capital gains distributions payable on shares
of the Fund will be reinvested in additional shares of the Fund at the net
asset value in effect on the dividend or distribution payment date. The
Fund acts as the shareholder's agent to reinvest dividends and
distributions in additional shares and hold for his/her account the
additional full and fractional shares so acquired. A shareholder may at
any time change his/her election as to whether to receive his/her
dividends and distributions in cash or have them reinvested by giving
written notice of such change of election to the Fund. Such change of
election applies to dividends and distributions the record dates of which
fall on or after the date that the Fund receives the written notice.
Systematic Withdrawal Plan
To accommodate the current cash needs of investors, the Fund offers a
Systematic Withdrawal Plan pursuant to which a shareholder who owns Fund
shares worth at least $10,000 at current net asset value may provide that
a fixed sum ($200 minimum per payment) will be distributed to him/her at
regular intervals. If requested, these distributions may be automatically
moved from the investor's Fund account to the investor's bank account via
Electronic Funds Transfer, at a cost of $0.50. In electing to participate
in the Systematic Withdrawal Plan, investors should realize that within
any given period the appreciation of their investment in the Fund may not
be as great as the amount withdrawn. Additional information regarding
this service is available from the Fund.
Payments will be made out of the proceeds of redemptions of shares
made on the chosen business day of each month or, if that day is a
holiday, on the following business day. Establishment of a Systematic
Withdrawal Plan constitutes an election by the shareholder to reinvest in
additional Fund shares, at net asset value, all income dividends and
capital gains distributions payable by the Fund on the shares held in such
account, and shares so acquired will be added to such account. The
shareholder may deposit additional Fund shares in his/her account at any
time. The shareholder may vary the amount or frequency of withdrawal
payments, temporarily discontinue them, or change the designated payee or
payee's address by notifying the Fund in writing.
Additional information regarding this service, including applications to
establish the Automatic Investment Plan, are available from the Fund.
Individual Retirement Accounts
Individual shareholders may establish their own tax-sheltered
Individual Retirement Accounts ("IRA"). The Fund offers three types of
IRAs that can be adopted by executing the appropriate Internal Revenue
Service ("IRS") Form. The IRAs offered by the Fund are a traditional IRA,
a Roth IRA (sometimes known as American Dream IRA) and Education IRA.
Under current IRS regulations, an IRA applicant must be furnished a
disclosure statement containing information specified by the IRS.
Simplified Employee Pension Plan ("SEP/IRA")
The Fund also offers a prototype simplified employee pension (SEP)
plan for employers, including self-employed individuals, who wish to
purchase shares of the Fund with tax-deductible contributions not
exceeding annually for any one participant 15% of compensation
(disregarding for this purpose compensation in excess of $160,000, subject
to periodic adjustment for cost of living increases). Under the SEP plan,
employer contributions are made directly to the IRA accounts of eligible
participants.
SIMPLE IRA
An IRA may also be used in connection with a SIMPLE PLAN established
by the shareholder's employer (or by a self-employed individual). When
this is done, the IRA is known as a SIMPLE IRA, although it is similar to
a traditional IRA, subject to certain exceptions.
Defined Contribution Retirement Plan
A prototype defined contribution retirement plan is available for
employers, including self-employed individuals, who wish to purchase
shares of the Fund with tax-deductible contributions not exceeding
annually for any one participant the lesser of $30,000 or 25% of earned
income.
The defined contribution plan also contains a cash or deferred
arrangement which the employer may adopt. The cash or deferred
arrangement is intended to satisfy the requirements of Section 401(k) of
the Internal Revenue Code and allows eligible employees to reduce their
compensation and have such amount contributed to the plan on their behalf.
An employer may also make matching contributions on behalf of
participating employees.
Because a retirement program involves commitments covering future
years, it is important that the investment objective of the Fund be
consistent with the participant's retirement objectives. Premature
withdrawals from a retirement plan may result in adverse tax consequences.
A description of applicable acceptance, maintenance, and other
service fees and certain limitations on contributions and withdrawals, as
well as application forms for the foregoing retirement plans, are
available from the Fund upon request. Firstar Trust Company serves as
custodian for these plans and provides certain services. For such
services, the following fees (which are subject to change) are charged
against the accounts of participants: $12.50 annual maintenance fee; $15
for transferring to a successor trustee; $15 for distribution to
participant; $12.00 for outgoing federal wire transfers; and $15 for
refunding any contribution in excess of the deductible limit.
DISTRIBUTIONS AND TAXES
Distributions
Dividends from the Fund's net investment income as well as
distributions designated as capital gains will ordinarily be declared and
paid annually in such a manner as to avoid paying income tax on the Fund's
net investment income and net realized capital gains or being subject to a
federal excise tax on undistributed net investment income and net realized
capital gains. Such distributions and dividends will typically be made in
December. As current income is not an objective of the Fund, the amount
of dividends will likely be small. There is no fixed dividend rate and
there can be no assurance as to the payment of any dividends or the
realization of any gains.
Taxes
The Fund will endeavor to qualify annually as a "regulated investment
company" under Sub-chapter M of the Internal Revenue Code of 1986, as
amended, and accordingly, it will be necessary for the Fund to distribute
substantially all of the income of the Fund (exclusive of capital gains)
earned during the year. If the Fund so qualifies, the Fund will not be
subject to Federal income tax to the extent its income is distributed to
shareholders.
For Federal income tax purposes, dividends paid by the Fund and
distributions from short-term capital gains, whether received in cash or
reinvested in additional shares, are taxable to shareholders as ordinary
income. Distributions paid by the Fund from long-term capital gains,
whether received in cash or reinvested in additional shares, are taxable
to shareholders as long-term capital gains, regardless of the length of
time you have owned shares in the Fund. The distributions are taxable
whether you receive them in cash or in additional shares. If you are not
required to pay tax on your income, you will not be required to pay
Federal income taxes on the amounts distributed to you. Dividends and
capital gain distributions declared in December and paid the following
January will be taxable in the year they are declared.
The Fund may be required to withhold Federal income tax at a rate of
31% ("backup withholding") from dividend payments, distributions and
redemption proceeds if a shareholder fails to furnish the Fund with
his/her social security or other tax identification number ("TIN") and
certify under penalty of perjury that such number is correct and that
he/she is not subject to backup withholding due to the underreporting of
income. The certification form is included as part of the Share Purchase
Application and should be completed when the account is established.
If you do not have a tax identification number, you should indicate
on the application form whether a number has been applied for. The Fund
may be required to backup withhold if a certified TIN is not delivered to
the Fund within 7 days.
Distributions by the Fund may subject an investor to state and local
taxes on the distributions, depending on the laws of a shareholder's home
state and locality. Because this section is not intended to be a full
discussion of present or proposed Federal income tax law and its effect on
shareholders, shareholders are urged to consult their own tax adviser.
CAPITAL STOCK
The Fund is a corporation organized under the laws of the State of
Maryland and was incorporated on August 24, 1987. The Fund has 20,000,000
shares of authorized capital stock, $.01 par value per share. Each share
has one vote and all shares participate equally in dividends and other
distributions by the Fund and in the residual assets of the Fund in the
event of liquidation. Fractional shares have the same rights
proportionately as do full shares. Shares of the Fund have no preemptive
rights and no conversion or subscription rights. Shareholders are
entitled to redeem shares as set forth under "How to Redeem Shares."
Certificates for shares held in an investor's account will be issued
only upon written request, but the investor will be the record owner of
all shares in his account with full shareholder rights.
SHAREHOLDER REPORTS AND MEETINGS
The Fund will provide to shareholders a semiannual statement of their
account. Shareholders will also receive monthly financial information
including a semi-annual report showing the Fund's portfolio and other
information and an annual report containing audited financial statements
for the Fund. Shareholders will receive a confirmation after each
transaction. Any inquiries concerning the Fund may be made by telephone
toll-free 1-800-332-3133, or by writing to the Fund at 120 S. Riverside
Plaza, Suite 1745, Chicago, Illinois 60606.
The Maryland Statutes permit registered investment companies, such as
the Fund, to operate without an annual meeting of shareholders under
specified circumstances if an annual meeting is not required by the
Investment Company Act of 1940. The Fund has adopted the appropriate
provisions in its By-Laws and does not anticipate holding annual meetings
of shareholders for the election of directors unless otherwise required by
the Investment Company Act of 1940. The Fund also has adopted provisions
in its By-Laws for the removal of directors by the shareholders.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders,
the Fund may compare its performance to that of other mutual funds
including funds with similar investment objectives and to other relevant
indices published by recognized mutual fund statistical rating services or
publications of general interest such as "Forbes" or "Money". For
example, the Fund may compare its performance to that of other growth or
aggressive growth mutual funds and to the mutual fund industry as a whole
(excluding money market funds), as compiled by Lipper Analytical Services,
Inc. In addition, the Fund may compare its performance to that of
recognized stock market indicators including, but not limited to, the
Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average.
The Fund may also compare its performance to the AMEX Market Value Index
and the Nasdaq Composite Index. Performance comparisons should not be
considered as representative of the future performance of the Fund.
The Fund may cite its performance in the form of a total return over
specified periods. The Fund's total return for any specified period of
time is calculated by assuming the purchase of shares of the Fund at the
offering price at the beginning of the period. Each dividend or other
distribution paid by the Fund during the period is assumed to have been
reinvested in additional shares of the Fund at net asset value on the
reinvestment date. The number of shares thereby accumulated are valued at
the end of the period.
The percentage increase is determined by subtracting the initial
value of the investment from the ending value and dividing the remainder
by the initial value.
The Fund may also cite its performance in the form of an average
annualized compounded return for a specified period of time. The average
annual compounded return for the Fund is the return which, if applied to
an initial investment and compounded over the given period, would result
in the value of the investment at the end of the period.
Performance will vary from time to time and past results are not
necessarily representative of future results. Performance information,
such as that described above, may not provide a basis for comparison with
other investments or other investment companies using a different method
of calculating performance. Investors' principal in the Fund and its
return are not guaranteed and will fluctuate according to market
conditions. When redeemed, shares may be worth more or less than their
original cost.
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
SHARE PURCHASE APPLICATION
Mail to: Minimum Investments:
Perritt MicroCap Opportunities Fund Initial: $1,000
c/o Firstar Trust Company Subsequent: $ 50
P.O. Box 701
Milwaukee, WI 53201-0701
#1...Registration of Shares
____________________________________________________________
Owner (Individual, Corporation, Trustee or Custodian)
____________________________ __________________________
Social Security Number Phone Number
____________________________________________________________
Joint Owner
____________________________________________________________
Address
____________________________________________________________
City State Zip
If more than one owner is listed above, then shares will be registered as
joint tenants with rights of survivorship and not as tenants in common,
unless otherwise instructed. UGMA accounts please list the custodian as
owner, the minor as joint owner; put the minor's Social Security Number in
the space above.
#2...Investment Information
This Investment represents an:
___ Initial Purchase payable to: Perritt MicroCap Opportunities Fund
$____
___ Investment wired to Account #: __________________________ $____
#3...Dividend Option
All income dividends and capital gains distributions will be reinvested in
additional shares as stated in the prospectus unless the item below is
checked.
___ Please pay all income dividends and capital gains distributions in
cash.
I(We) understand that certificates for shares purchased (either initial or
reinvested) will be issued only upon request.
#4...Automatic Investment Plan
Please start my Automatic Investment Plan as described in the prospectus
beginning: Month______ Year______. I hereby instruct Firstar Trust
Company, Transfer Agent for Perritt MicroCap Opportunities Fund, to
automatically transfer $________ (minimum $50) directly from my checking,
Now, or savings account named below on the ______(st/th/rd) of each month
or the first business day thereafter. I understand that I will be
assessed a $20 fee if the automatic purchase cannot be made due to
insufficient fund, stop payment, or any other reason.
Names(s) on Bank Account______________________________________________
Bank Name______________________________________________________________
Bank Address___________________________________________________________
Account Number_________________________________________________________
Signature of Bank Account Owner________________________________________
Signature of Joint Owner_______________________________________________
#5...Systematic Withdrawals
I would like to withdraw from Perritt MicroCap Opportunities Fund
$________
($200 minimum) as follows:
______ I would like to have payments made to me on or about the ______
day of each month (circle ALL) OR the months that I have circled -- Jan
Feb Mar Apr May June July Aug Sept Oct Nov Dec
______ I would like to have payments automatically deposited to may bank
account. Complete bank account information below. (A check will be
mailed to the above address if this box is not checked.) To ensure proper
crediting of your bank account, please attach a voided check or deposit
slip.
Name(s) on Bank Account______________________________________________
Bank Name____________________________________________________________
Bank Address_________________________________________________________
Account Number_______________________________________________________
#6...Signature and Certification by the Internal Revenue Service
I (We), the undersigned, have received a copy of the current
prospectus of the Perritt MicroCap Opportunities Fund and are purchasing
fund shares in accordance with its provisions. I (We) further certify
that the undersigned is of legal age and has full legal capacity to make
this purchase. The purchase price shall be the net asset value next
determined following receipt of the application by the Fund, if the
application is accepted. This application cannot be processed unless
accompanied by payment.
Under the penalty of perjury, I (we) certify that (1) the Social
Security Number or Taxpayer Identification Number shown on this form is my
(our) correct Taxpayer Identification Number, and (2) I am (we are) not
subject to backup withholding either because I (we) have not been notified
by the Internal Revenue Service (IRS) that I am (we are) subject to backup
withholding as a result of failure to report all interest or dividends, or
that IRS has not notified me (us) that I am (we are) no longer subject to
backup withholding. The IRS does not require your consent to any of this
provision of the document other than the certifications required to avoid
backup withholding.
_________________________________ __________________
Signature of Owner Date
_________________________________ __________________
Signature of Joint Owner (if any) Date
Investment Adviser
Perritt Capital Management, Inc.
120 S. Riverside Plaza
Suite 1745
Chicago, IL 60606
(312) 669-1650
Officers of the Fund
Gerald W. Perritt - President/Treasurer
Michael J. Corbett - Vice President
Allison B. Hearst - Secretary
Directors of the Fund
David Maglich
Gerald W. Perritt
Diane C. Click
Custodian, Transfer Agent and Dividend Disbursing Agent
Firstar Trust Company
Mutual Fund Services-Third Floor
P.O. Box 701
Milwaukee, WI 53201-0701
1-800-332-3133
Independent Accountants
Checkers, Simon & Rosner LLP
One South Wacker Drive
Chicago, IL 60606
Legal Counsel
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated February 28, 1998
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
120 South Riverside Plaza
Suite 1745
Chicago, Illinois 60606
Toll Free: (800) 332-3133
This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Prospectus of
Perritt MicroCap Opportunities Fund, Inc., dated February 28, 1998 and any
supplement thereto. A copy of the Prospectus may be obtained without
charge from Perritt MicroCap Opportunities Fund, Inc. at the address and
telephone number set forth above.
No person has been authorized to give any information or to
make any representations other than those contained in this Statement of
Additional Information and the Prospectus dated February 28, 1998 and, if
given or made, such information or representations may not be relied upon
as having been authorized by Perritt MicroCap Opportunities Fund, Inc.
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 4
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Individual Retirement Accounts . . . . . . . . . . . . . . 6
Simplified Employee Pension Plan . . . . . . . . . . . . . 7
SIMPLE IRA . . . . . . . . . . . . . . . . . . . . . . . . 7
Defined Contribution Plans . . . . . . . . . . . . . . . . 8
OTHER SHAREHOLDER PLANS . . . . . . . . . . . . . . . . . . . . . . . 8
Automatic Investment Plan . . . . . . . . . . . . . . . . . 8
Dividend Reinvestment Plan . . . . . . . . . . . . . . . . 9
Systematic Withdrawal Plan . . . . . . . . . . . . . . . . 9
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . 9
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 11
INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . 12
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . 13
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . 15
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
STOCKHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . 16
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 17
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . 18
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 18
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term capital
appreciation which it seeks by investing primarily in a diversified
portfolio of common stocks of small, rapidly growing companies. The Fund
will, under normal market conditions, invest at least 80% of its assets in
common stocks, securities convertible into common stocks and other
equity-type securities of firms whose equity market value at the time of
purchase is less than $300 million. The Fund may invest in securities not
listed on a national or regional securities exchange, but such securities
typically will have an established over-the-counter market. The Fund does
not intend to invest in any security which, at the time of purchase, is
not readily marketable. The Fund may, for temporary defensive purposes,
invest greater than 20% of its assets in money market securities,
including U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper or cash and cash equivalents. Except for
temporary defensive purposes, the Fund will retain cash and cash
equivalents only in amounts deemed adequate for current needs and to
permit the Fund to take advantage of investment opportunities. The Fund's
investment objective and policies are described in detail in the
Prospectus under the caption "Investment Objective and Policies."
INVESTMENT CONSIDERATIONS
Because the Fund intends to invest to a substantial degree
in common stocks of smaller companies which are, in the opinion of Perritt
Capital Management, Inc., the Fund's investment adviser ("Adviser"),
rapidly growing, an investment in the Fund is subject to greater risks
than those involved with funds that invest in larger companies.
Investments in relatively small companies tend to be
speculative and volatile. Relatively small companies may lack depth in
management on which to rely should loss of key personnel occur.
Relatively small companies also may be involved in the development or
marketing of new products or services, the market for which may not have
been established. Such companies could sustain significant losses when
projected markets do not materialize. Further, such companies may have,
or may develop, only a regional market for products or services and may be
adversely affected by purely local events. Moreover, such companies may be
insignificant factors in their industries and may become subject to
intense competition from larger companies.
Equity securities of relatively small companies frequently
will be traded only in the over-the-counter market or on regional stock
exchanges and often will be closely held with only a small proportion of
the outstanding securities held by the general public. In view of such
factors, the Fund may assume positions in securities with limited trading
markets which are subject to wide price fluctuations. Therefore, the
current net asset value of the Fund may fluctuate significantly.
Accordingly, the Fund should not be considered suitable for investors who
are unable or unwilling to assume the risks of loss inherent in such a
program, nor should an investment in the Fund, by itself, be considered a
balanced or complete investment program.
INVESTMENT RESTRICTIONS
In seeking to achieve its investment objectives, the Fund
has adopted the following restrictions which are matters of fundamental
policy and cannot be changed without approval by the holders of the lesser
of:
(i) 67% of the Fund's shares present or
represented at a meeting of shareholders 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.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values
of assets will not constitute a violation of that restriction.
The Fund may not:
1. Purchase the securities of any issuer if
such purchase would cause more than 5% of the value of
the Fund's total assets to be invested in securities
of any one issuer (except securities of the United
States Government or any agency or instrumentality
thereof), or purchase more than 10% of the outstanding
securities of any class or more than 10% of the
outstanding voting securities of any one issuer.
2. Purchase securities of any other investment
company, except in connection with a merger,
consolidation, reorganization or acquisition of
assets.
3. Purchase or retain the securities of any
issuer if those officers or directors of the Fund or
its investment adviser owning individually more than 1-2
of 1% of the securities of such issuer together own
more than 5% of the securities of such issuer.
4. Borrow money except from banks for temporary
or emergency purposes (but not for the purpose of
purchase of investments) and then only in an amount
not to exceed 5% of the value of a Fund's net assets
at the time the borrowing is incurred.
5. Invest in real estate (although the Fund may
purchase securities secured by real estate or
interests therein, or securities issued by companies
which invest in real estate or interests therein),
commodities, commodities contracts or interests in
oil, gas and/or mineral exploration or development
programs.
6. Act as an underwriter of securities or
participate on a joint or joint and several basis in
any trading account in any securities.
7. Invest in companies for the primary purpose
of acquiring control or management thereof.
8. Purchase securities on margin, except such
short-term credits as are necessary for the clearance
of transactions and make short sales of securities
(except short sales against the box).
9. Pledge, mortgage, hypothecate or otherwise
encumber any of its assets, except as a temporary
measure for extraordinary or emergency purposes, and
then not in excess of 15% of its assets taken as cost.
10. Concentrate more than 25% of the value of
its total assets (taken at market value at the time of
each investment) in securities of non-governmental
issuers whose principal business activities are in the
same industry.
11. Invest in restricted securities or illiquid
or other securities without readily available market
quotations, including repurchase agreements.
12. Make loans, except that this restriction
shall not prohibit the purchase and holding of a
portion of an issue of publicly distributed debt
securities.
13. Engage in the purchase and sale of put and
call options on portfolio securities or stock indexes
except that the Fund may, subject to the restrictions
in Item 14 below, (i) write covered call options and
purchase covered put options on securities with
respect to all of its portfolio securities; (ii)
purchase stock index put options for hedging purposes;
and (iii) enter into closing transactions with respect
to such options.
14. Purchase, sell or write options on portfolio
securities or stock indexes if, as a result thereof,
(i) the aggregate market value of all portfolio
securities covering such options exceeds 25% of the
Fund's net assets; or (ii) the aggregate premiums paid
for all options held exceeds 5% of the Fund's net
assets.
15. Purchase securities of any company having
less than three years continuous operation (including
operations of any predecessors) if such purchase would
cause the value of the Fund's investments in all such
companies to exceed 5% of the value of its assets.
16. Invest more than 5% of its total assets in
warrants, whether or not the warrants are listed on
the New York or American Stock Exchange, or more than
2% of the value of the assets of the Fund in warrants
which are not listed on those exchanges. Warrants
acquired in units or attached to securities are not
included in this restriction.
RETIREMENT PLANS
Shares of the Fund may be purchased in connection with many
types of tax-deferred retirement plans. Initial purchase payments in
connection with tax-deferred retirement plans must be $250. It is
advisable for an individual considering the establishment of a retirement
plan to consult with an attorney and/or an accountant with respect to the
terms and tax aspects of the plan. Additional details about these plans,
application forms and plan documents may be obtained by contacting the
Fund.
Individual Retirement Accounts
Individual shareholders may establish their own
tax-sheltered Individual Retirement Accounts ("IRA"). The Fund offers
three types of IRAs, including the Traditional IRA, that can be adopted by
executing the appropriate Internal Revenue Service ("IRS") Form.
Traditional IRA. In a Traditional IRA, amounts contributed
to the IRA may be tax deductible at the time of contribution depending on
whether the shareholder is an "active participant" in an
employer-sponsored retirement plan and the shareholder's income.
Distributions from a Traditional IRA will be taxed at distribution except
to the extent that the distribution represents a return of the
shareholder's own contributions for which the shareholder did not claim
(or was not eligible to claim) a deduction. Distributions prior to age
59-1/2 may be subject to an additional 10% tax applicable to certain
premature distributions. Distributions must commence by April 1 following
the calendar year in which the shareholder attains age 70-1/2. Failure to
begin distributions by this date (or distributions that do not equal
certain minimum thresholds) may result in adverse tax consequences.
Roth IRA. In a Roth IRA (sometimes known as American Dream
IRA), amounts contributed to the IRA are taxed at the time of
contribution, but distributions from the IRA are not subject to tax if the
shareholder has held the IRA for certain minimum periods of time
(generally, until age 59-1/2). Shareholders whose incomes exceed certain
limits are ineligible to contribute to a Roth IRA. Distributions that do
not satisfy the requirements for tax-free withdrawal are subject to income
taxes (and possibly penalty taxes) to the extent that the distribution
exceeds the shareholder's contributions to the IRA. The minimum
distribution rules applicable to Traditional IRAs do not apply during the
lifetime of the shareholder. Following the death of the shareholder,
certain minimum distribution rules apply.
For Traditional and Roth IRAs, the maximum annual
contribution generally is equal to the lesser of $2,000 or 100% of the
shareholder's compensation (earned income). An individual may also
contribute to a Traditional IRA or Roth IRA on behalf of his or her spouse
provided that the individual has sufficient compensation (earned income).
Contributions to a Traditional IRA reduce the allowable contribution under
a Roth IRA, and contributions to a Roth IRA reduce the allowable
contribution to a Traditional IRA.
Education IRA. In an Education IRA, contributions are made
to an IRA maintained on behalf of a beneficiary under age 18. The maximum
annual contribution is $500 per beneficiary. The contributions are not
tax deductible when made. However, if amounts are used for certain
educational purposes, neither the contributor nor the beneficiary of the
IRA are taxed upon distribution. The beneficiary is subject to income
(and possible penalty taxes) on amounts withdrawn from an Education IRA
that are not used for qualified educational purposes. Shareholders whose
income exceeds certain limits are ineligible to contribute to an Education
IRA.
Under current IRS regulations, an IRA applicant must be
furnished a disclosure statement containing information specified by the
IRS. The applicant generally has the right to revoke his account within
seven days after receiving the disclosure statement and obtain a full
refund of his contributions. The custodian may, in its discretion, hold
the initial contribution uninvested until the expiration of the seven-day
revocation period. The custodian does not anticipate that it will
exercise its discretion but reserves the right to do so.
Simplified Employee Pension Plan
A Traditional IRA may also be used in conjunction with a
Simplified Employee Pension Plan ("SEP-IRA"). A SEP-IRA is established
through execution of Form 5305-SEP together with a Traditional IRA
established for each eligible employee. Generally, a SEP-IRA allows an
employer (including a self-employed individual) to purchase shares with
tax deductible contributions not exceeding annually for any one
participant 15% of compensation (disregarding for this purpose
compensation in excess of $160,000 per year). The $160,000 compensation
limit applies for 1998 and is adjusted periodically for cost of living
increases. A number of special rules apply to SEP Plans, including a
requirement that contributions generally be made on behalf of all
employees of the employer (including for this purpose a sole
proprietorship or partnership) who satisfy certain minimum participation
requirements.
SIMPLE IRA
An IRA may also be used in connection with a SIMPLE Plan
established by the shareholder's employer (or by a self-employed
individual). When this is done, the IRA is known as a SIMPLE IRA,
although it is similar to a Traditional IRA with the exceptions described
below. Under a SIMPLE Plan, the shareholder may elect to have his or her
employer make salary reduction contributions of up to $6,000 per year to
the SIMPLE IRA. The $6,000 limit applies for 1998 and is adjusted
periodically for cost of living increases. In addition, the employer will
contribute certain amounts to the shareholder's SIMPLE IRA, either as a
matching contribution to those participants who make salary reduction
contributions or as a non-elective contribution to all eligible
participants whether or not making salary reduction contributions. A
number of special rules apply to SIMPLE Plans, including (1) a SIMPLE Plan
generally is available only to employers with fewer than 100 employees;
(2) contributions must be made on behalf of all employees of the employer
(other than bargaining unit employees) who satisfy certain minimum
participation requirements; (3) contributions are made to a special SIMPLE
IRA that is separate and apart from the other IRAs of employees; (4) the
distribution excise tax (if otherwise applicable) is increased to 25% on
withdrawals during the first two years of participation in a SIMPLE IRA;
and (5) amounts withdrawn during the first two years of participation may
be rolled over tax-free only into another SIMPLE IRA (and not to a
Traditional IRA or to a Roth IRA). A SIMPLE IRA is established by
executing Form 5304-SIMPLE together with an IRA established for each
eligible employee.
Defined Contribution Plans
A prototype defined contribution retirement plan is
available for employers, including self-employed individuals, who wish to
purchase shares of the Fund with tax-deductible contributions not
exceeding annually for any one participant the lesser of $30,000 or 25% of
earned income.
The defined contribution plan also contains a cash or
deferred arrangement which the employer may adopt. The cash or deferred
arrangement is intended to satisfy the requirements of Section 401(k) of
the Internal Revenue Code and allows eligible employees to reduce their
compensation and have such amount contributed to the plan on their behalf.
An employer may also make matching contributions on behalf of
participating employees.
OTHER SHAREHOLDER PLANS
Automatic Investment Plan
An Automatic Investment Plan may be established at any
time. By participating in the Automatic Investment Plan, shareholders may
automatically make purchases of shares of the Fund on a regular,
convenient basis. A shareholder may elect to make automatic deposits on
any date specified by the shareholder each month. There is a $50 minimum
for each automatic transaction.
Under the Automatic Investment Plan, shareholders' banks or
other financial institutions debit pre-authorized amounts drawn on their
accounts each month and apply such amounts to the purchase of shares of
the Fund. The Automatic Investment Plan can be implemented with any
financial institution that is a member of the Automated Clearing House. No
service fee is charged to shareholders for participating in the Automatic
Investment Plan. An application to establish the Automatic Investment
Plan may be obtained from the Fund. The Fund reserves the right to
suspend, modify or terminate the Automatic Investment Plan, without
notice.
Dividend Reinvestment Plan
As described under "SHAREHOLDER PLANS - Dividend
Reinvestment Plan" in the Prospectus, all income dividends and capital
gain distributions will be invested automatically in additional Fund
shares, unless the Fund is otherwise notified in writing.
Systematic Withdrawal Plan
A shareholder who owns Fund shares worth at least $10,000
at the current net asset value may, by completing an Application which may
be obtained from the Fund, create a Systematic Withdrawal Plan from which
a fixed sum will be paid to him at regular intervals. To establish the
Systematic Withdrawal Plan, the shareholder deposits his Fund shares with
the Fund and appoints it as his agent to effect redemptions of Fund shares
held in his account for the purpose of making monthly or quarterly
withdrawal payments of a fixed amount to him out of his account. Fund
shares deposited by the investor in his account need not be endorsed or
accompanied by a stock power if registered in the same name as his
account; otherwise, a properly executed endorsement or stock power,
obtained from any bank, broker-dealer or the Fund is required. The
investor's signature should be guaranteed by a bank or a member firm of a
national stock exchange.
The minimum amount of a withdrawal payment is $200. These
payments will be made out of the proceeds of periodic redemption of shares
in the account at net asset value. Redemptions will be made on the fifth
business day of each month or, if that day is a holiday, on the next
preceding business day. Establishment of a Systematic Withdrawal Plan
constitutes an election by the shareholder to reinvest in additional Fund
shares, at net asset value, all income dividends and capital gains
distributions payable by the Fund on the shares held in such Account, and
shares so acquired will be added to such account. The shareholder may
deposit additional Fund shares in his account at any time.
Withdrawal payments cannot be considered to be yield or
income on the shareholder's investment, since portions of each payment
will normally consist of a return of capital. Depending on the size or the
frequency of the disbursements requested and the fluctuation in the value
of the Fund's portfolio, redemptions for the purpose of making such
disbursements may reduce or even exhaust the shareholder's account.
DIRECTORS AND OFFICERS
The directors and officers of the Fund together with
information as to their principal business occupations during the last
five years and other information are shown below. The address of Dr.
Perritt, Mr. Corbett and Ms. Hearst is 120 South Riverside Plaza,
Suite 1745, Chicago, Illinois 60606. The address of David S. Maglich is
c/o Fergeson, Skipper et. al., 1515 Ringling Blvd., Suite 1000, Sarasota,
Florida 34236. The address of Dianne C. Click is 514 North Montana
Avenue, Bozeman, Montana 59715. In the list below, the Fund's directors
who are considered "interested persons" as defined in Section 2(a)(19) of
the Investment Company Act of 1940 are noted with an asterisk(*). These
directors are referred to as inside directors by virtue of their position
as an officer and director of the Fund's investment adviser or their being
a member of the immediate family of an affiliate of the Fund. Dr. Perritt
and Mr. Maglich have served as directors since the Fund's inception. Ms.
Dianne Click has served as a director since February 1995.
*Gerald W. Perritt, President, Treasurer and Director of
the Fund
Dr. Perritt, age 56, has been President and a director of
the Fund since its inception in August 1987. Dr. Perritt is also the
President of Perritt Capital Management, Inc., the investment adviser to
the Fund, and Chairman of Investment Information Services, Inc., a
publisher of financial newsletters and other financial publications. Dr.
Perritt founded Investment Information Services, Inc. in 1983. Prior
thereto, he was Executive Director of the American Association of
Individual Investors, a not-for-profit organization formed to educate the
public about the financial and investment marketplace.
Michael J. Corbett, Vice President of the Fund
Mr. Corbett, age 33, has been a Vice President of the Fund
since March 1991, Vice President of the Adviser since February 1997 and
the Senior Securities Analyst of the Adviser since October 1989. He is
currently working for his CFA (charter financial analyst), and has a
Bachelor's of Science degree from DePaul University in Chicago, Illinois.
Prior to October, 1989, Mr. Corbett worked in the Options Department at
Charles Schwab & Co. and was a student at DePaul University in Chicago,
Illinois, where he received a Bachelor of Science degree in finance.
Robert A. Laatz, Vice President of the Fund
Mr. Laatz, age 53, has been a Vice President of the Fund
since November 1997, and an associate since May 1997. He holds a
series 7, 63 and 24 license. Prior to May 1997, he was a financial and
operations principal for J.B. Richards Securities Corp., a position he had
held since July 1980. Mr. Laatz attended the University of Illinois,
Urbana.
Allison B. Hearst, Secretary of the Fund
Ms. Hearst, age 35, has been the Fund's principal
financial, accounting and compliance officer since April 1991. She is
also Senior Accountant of Investment Information Services, Inc., a
publisher of a mutual fund advisory newsletter, as well as for the
Adviser. Ms. Hearst is currently studying for the CPA exam at
Northwestern University, Chicago, Illinois. Prior to April 1991, Ms.
Hearst was a student at the University of Colorado, Boulder, where she
graduated Phi Beta Kappa.
David S. Maglich, Director
Mr. Maglich, age 41, has been a director of the Fund since
its inception in August 1987. Mr. Maglich is a Shareholder with the law
firm of Fergeson, Skipper et. al. and has been employed with such firm
since April 1989. He holds a Bachelor's of Science degree from Florida
State University and a law degree from Stetson College of Law.
Dianne Chaykin Click, Director
Ms. Click, age 35, has been the sole proprietor of The
Marketing Arm., a direct mail marketing consulting firm to financial
institutions, since 1990. She is also a realtor in Bozeman, Montana with
the firm of Gallatin River Realty. She holds a Bachelor of Science degree
in Marketing from the University of Miami, Florida.
The following table provides information concerning the
compensation paid to directors of the Fund for the fiscal year ended
October 31, 1997.
</TABLE>
<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Benefits Estimated Annual Total Compensation from
Compensation from Accrued as Part of Benefits Upon Fund and Fund Complex Paid
Name of Person Fund Fund Expenses Retirement to Directors
<S> <C> <C> <C> <C>
Dianne Chaykin Click -0- -0- -0- -0-
David S. Maglich $1,000 -0- -0- $1,000
Gerald W. Perritt -0- -0- -0- -0-
</TABLE>
As of January 31, 1998, all officers and directors of the
Fund owned in the aggregate 4,396.768 shares of the Fund representing .44%
of the Fund's then issued and outstanding shares.
PRINCIPAL SHAREHOLDERS
At January 31, 1998, John W. Galbraith, 360 Central Avenue,
Suite 1300, St. Petersburg, Florida 33701, owned of record and
beneficially 68,328 shares of the Fund or 7.2% of the then outstanding
shares. Other than the foregoing, the Fund was not aware of any person
who, as of January 31, 1998, owned of record or beneficially 5% or more of
the shares of the Fund.
INVESTMENT ADVISER
Perritt Capital Management, Inc., 120 South Riverside
Plaza, Suite 1745, Chicago, Illinois (the "Adviser"), currently serves as
investment adviser to the Fund pursuant to an investment advisory
agreement dated April 12, 1988 (the "Advisory Agreement"). The Adviser is
a wholly owned subsidiary of Investment Information Services, Inc., an
Illinois corporation ("IIS"). Dr. Gerald W. Perritt, President of the
Adviser, owns 60% of the outstanding common stock of IIS and controls both
IIS and the Adviser.
The Advisory Agreement is required to be approved annually
by the Board of Directors of the Fund or by vote of a majority of the
Fund's outstanding voting securities. In addition, in either case, each
annual renewal must be approved by the vote of a majority of the Fund's
directors who are not parties to the Advisory Agreement or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement is terminable
without penalty, on 60 days' written notice, by the Board of Directors of
the Fund, by vote of a majority of the Fund's outstanding voting
securities, or by the Adviser, and will terminate automatically in the
event of its assignment. The Advisory Agreement was last approved by the
shareholders of the Fund on June 2, 1990 and by the Board of Directors on
November 22, 1997.
Under the terms of the Advisory Agreement, the Adviser
manages the Fund's investments subject to the supervision of the Fund's
Board of Directors. The Adviser is responsible for investment decisions
and supplies investment research and portfolio management. At its
expense, the Adviser provides office space and all necessary office
facilities, equipment and personnel for servicing the investments of the
Fund. The Adviser, at its expense, places all orders for the purchase and
sale of the Fund's portfolio securities.
Except for expenses assumed by the Adviser as set forth
above, the Fund is responsible for all its other expenses including,
without limitation, interest charges, taxes, brokerage commissions and
similar expenses, expenses of issue, sale, repurchase or redemption of
shares, expenses of registering or qualifying shares for sale, the
expenses for printing and distribution costs of prospectuses and quarterly
financial statements mailed to existing shareholders, charges of
custodians, transfer agent fees (including the printing and mailing of
reports and notices to shareholders), fees of registrars, fees for
auditing and legal services, fees for clerical services related to
recordkeeping and shareholder relations (including determination of net
asset value), the cost of stock certificates and fees for directors who
are not "interested persons" of the Adviser.
As compensation for its services, the Fund pays to the
Adviser a monthly advisory fee at the annual rate of 0.70% of the average
daily net asset value of the Fund. See "Determination of Net Asset Value"
in the Prospectus. The Adviser received $44,174, $53,327 and $83,934 in
management fees for fiscal years 1995, 1996 and 1997, respectively.
The Advisory Agreement requires the Adviser to reimburse
the Fund in the event that the expenses and charges payable by the Fund in
any fiscal year, including the advisory fee but excluding taxes, interest,
brokerage commissions and similar fees, exceed that percentage of the
average net asset value of the Fund for such year, as determined by
valuations made as of the close of each business day of the year, which is
the most restrictive percentage provided by the state laws of the various
states in which the Fund's common stock is qualified for sale. If the
states in which the Fund's common stock is qualified for sale impose no
restrictions, the Adviser shall reimburse the Fund in the event the
expenses and charges payable by the Fund in any fiscal year (as described
above) exceed 2%. As of the date of this Statement of Additional
Information, no such state law provision was applicable to the Fund.
Reimbursement of expenses in excess of the applicable limitation will be
made on a monthly basis and will be paid to the Fund by reduction of the
Adviser's fee, subject to later adjustment month by month for the
remainder of the Fund's fiscal year. The Adviser may from time to time,
at its sole discretion, reimburse the Fund for expenses incurred in
addition to the reimbursement of expenses in excess of applicable
limitations.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the Fund are made
by the Adviser subject to review by the Fund's Board of Directors. In
placing purchase and sale orders for portfolio securities for the Fund, it
is the policy of the Adviser 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 Adviser's evaluation of the broker's efficiency in
executing and clearing transactions, block trading capability (including
the broker's willingness to position securities) 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. Over-the-counter securities are
generally purchased and sold directly with principal market makers who
retain the difference in their cost in the security and its selling price.
In some instances, better prices may be available from non-principal
market makers who are paid commissions directly. While some brokers with
whom the Fund effects portfolio transactions may recommend the purchase of
the Fund's shares, the Fund may not allocate portfolio brokerage on the
basis of recommendations to purchase shares of the Fund.
In allocating brokerage business for the Fund, the Adviser
may 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, market timing and technical information, and
the availability of the brokerage firm's analysts for consultation. While
the Adviser believes these services have substantial value, they are
considered supplemental to the Adviser's own efforts in the performance of
its duties under the Advisory Agreement. Other clients of the Adviser may
indirectly benefit from the availability of these services to the Adviser,
and the Fund may indirectly benefit from services available to the Adviser
as a result of transactions for other clients.
Section 28(e) of the Securities Exchange Act of 1934
("Section 28(e)") permits an investment adviser, under certain
circumstances, to cause an account to pay a broker or dealer who supplies
brokerage and research services a commission for effecting a transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting the transaction. Brokerage and research services
include (a) furnishing advice as to the value of securities, the
advisability of investing, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, (b)
furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy, and the
performance of accounts and (c) effecting securities transactions and
performing functions incidental thereto (such as clearance, settlement and
custody).
The Agreement provides that the Adviser may cause the Fund
to pay a broker which provides brokerage and research services to the
Adviser a commission for effecting a securities transaction in excess of
the amount another broker would have charged for effecting the
transaction, if (a) the Adviser determines in good faith that such amount
of commission is reasonable in relation to the value of brokerage and
research services provided by the executing broker viewed in terms of
either the particular transaction or the Adviser's overall
responsibilities with respect to the Fund and the other accounts as to
which he exercises investment discretion, (b) such payment is made in
compliance with the provisions of Section 28(e), other applicable state
and federal laws, and the Advisory Agreement and (c) in the opinion of the
Adviser, the total commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long term. The investment
advisory fee paid by the Fund under the Advisory Agreement is not reduced
as a result of the Adviser's receipt of research services.
The Adviser places portfolio transactions for other
advisory accounts. Research services furnished by firms through which the
Fund effects its securities transactions may be used by the Adviser in
servicing all of its accounts; not all of such services may be used by the
Adviser in connection with the Fund. In the opinion of the Adviser, it is
not possible to measure separately the benefits from research services to
each of the accounts (including the Fund) managed by the Adviser. Because
the volume and nature of the trading activities of the accounts are not
uniform, the amount of commissions in excess of those charged by another
broker paid by each account for brokerage and research services will vary.
However, in the opinion of the Adviser, such costs to the Fund will not be
disproportionate to the benefits received by the Fund on a continuing
basis.
The Adviser seeks to allocate portfolio transactions
equitably whenever concurrent decisions are made to purchase or sell
securities by the Fund and another advisory account. In some cases, this
procedure could have an adverse effect on the price or the amount of
securities available to the Fund. In making such allocations between the
Fund and other advisory accounts, the main factors considered by the
Adviser are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability
of cash for investment, the size of investment commitments generally held,
and opinions of the persons responsible for recommending the investment.
For the one year periods ended October 31, 1995, 1996 and
1997, the Fund paid brokerage commissions in the amounts of $25,319,
$20,352 and $47,032, respectively.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the Fund. As such, Firstar Trust
Company holds all securities and cash of the Fund, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties, all as
directed by officers of the Fund. Firstar Trust Company does not exercise
any supervisory function over the management of the Fund, the purchase and
sale of securities or the payment of distributions to stockholders.
Firstar Trust Company also acts as the Fund's transfer agent and dividend
disbursing agent.
DETERMINATION OF NET ASSET VALUE
A more complete discussion of the Fund's determination of
net asset value is contained in the Prospectus. The net asset value of the
Fund will be determined as of the close of trading on each day the New
York Stock Exchange is open for trading. The Fund does not determine net
asset value on days the New York Stock Exchange is closed and at other
times described in the Prospectus. The New York Stock Exchange is closed
on New Year's Day, Dr. Martin Luther King, Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Additionally, if any of the aforementioned holidays falls
on a Sunday, the New York Stock Exchange will not be open for trading on
the succeeding Monday, unless unusual business conditions exist, such as
the ending of a monthly or the yearly accounting period. If any of the
aforementioned holidays falls on a Saturday, the Exchange will not be open
for trading on the preceding Friday. The New York Stock Exchange also may
be closed on national days of mourning.
TAXES
As set forth in the Prospectus under the caption
"Distributions and Taxes," the Fund will endeavor to qualify annually for
and elect tax treatment applicable to a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). The Fund did so qualify for the year ended October 31, 1997.
A dividend or capital gains distribution received shortly
after the purchase of shares reduces the net asset value of the shares by
the amount of the dividend or distribution and, although in effect a
return of capital, will be subject to income taxes. Net gain on sale of
securities when realized and distributed, actually or constructively, is
taxable as capital gain. If the net asset value of shares were reduced
below a shareholder's cost by distribution of gains realized on sales of
securities, such distribution would be a return of investment though
taxable as stated above.
STOCKHOLDER MEETINGS
The Maryland General Corporation Law permits registered
investment companies, such as the Fund, to operate without an annual
meeting of stockholders under specified circumstances if an annual meeting
is not required by the Investment Company Act of 1940. The Fund has
adopted the appropriate provisions in its Bylaws and may, at its
discretion, not hold an annual meeting in any year in which the election
of directors is not required to be acted on by stockholders under the
Investment Company Act of 1940.
The Fund's Bylaws also contain procedures for the removal
of directors by its stockholders. At any meeting of stockholders, duly
called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled
to not less than ten percent (10%) of all the votes entitled to be cast at
such meeting, the Secretary of the Fund shall promptly call a special
meeting of stockholders for the purpose of voting upon the question of
removal of any director. Whenever ten or more stockholders of record who
have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at
least $25,000 or at least one percent (1%) of the total outstanding
shares, whichever is less, shall apply to the corporation's Secretary in
writing, stating that they wish to communicate with other stockholders
with a view to obtaining signatures to a request for a meeting as
described above and accompanied by a form of communication and request
which they wish to transmit, the Secretary shall within five business days
after such application either: (1) afford to such applicants access to a
list of the names and addresses of all stockholders as recorded on the
books of the Fund; or (2) inform such applicants as to the approximate
number of stockholders of record and the approximate cost of mailing to
them the proposed communication and form of request.
If the Secretary elects to follow the course specified in
clause (2) of the last sentence of the preceding paragraph, the Secretary,
upon the written request of such applicants, accompanied by a tender of
the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all stockholders
of record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified
in the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the Board of Directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all stockholders with reasonable promptness
after the entry of such order and the renewal of such tender.
MISCELLANEOUS
A shareholder's account with the Fund may be terminated by
the Fund on not less than 30 days' notice if, at the time of any transfer
or redemption of shares in the account, the value of the remaining shares
in the account, at the current offering price, falls below $500. Upon any
such termination, the shares will be redeemed at the then current net
asset value and a check for the proceeds of redemption sent within seven
days of such redemption.
PERFORMANCE INFORMATION
As described in the Prospectus under "Performance
Information," the Fund may quote its performance in the form of an average
annual compounded total return. The average annual return is computed by
finding the average annual compounded rates of return over specified
periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000
payment made at the beginning of the stated
periods at the end of the stated periods.
The Fund's average annual compounded returns for the one, three and five
year periods ended October 31, 1997 and for the period April 11, 1988
(inception of the Fund) to October 31, 1997 were 30.95%, 26.50%, 17.74%
and 10.94%, respectively. These figures are historical. An investor may
have a gain or loss when his/her shares are sold.
INDEPENDENT PUBLIC ACCOUNTANTS
Checkers Simon & Rosner LLP, Chicago, Illinois, audited the
Fund's financial statements for the fiscal year ended October 31, 1997 and
have been selected as the Fund's accountants for fiscal year 1998.
FINANCIAL STATEMENTS
The following audited financial statements of the Fund and
Report of Independent Accountants are incorporated by reference to the
Fund's Annual Report to Shareholders for the fiscal year ended October 31,
1997, File No. 811-05308, as filed with the Securities and Exchange
Commission on December 18, 1997:
(a) Statement of Net Assets.
(b) Statement of Changes in Net Assets.
(c) Financial Highlights.
(d) Statement of Operations.
(e) Notes to Financial Statements.
(f) Report of Independent Public Accountants.
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Audited Financial Statements (Financial Highlights included
in Part A and all incorporated by reference to the Perritt MicroCap
Opportunities Fund, Inc. Annual Report dated October 31, 1997 (File
No. 811-05308) (as filed with the Securities and Exchange Commission on
December 18, 1997) in Part B
Perritt MicroCap Opportunities Fund, Inc.
Statement of Net Assets.
Statement of Changes in Net Assets.
Financial Highlights.
Statement of Operations.
Notes to Financial Statements.
Report of Independent Public Accountants.
(b) Exhibits
(1) Registrant's Articles of Incorporation, as amended.
(2) Registrant's By-Laws, as amended.
(3) None
(4) Not Applicable.
(5) Investment Advisory Agreement.
(6) None
(7) None
(8) Custodian Agreement with Firstar Trust Company
(9) Shareholder Servicing Agent Agreement
*(10) Opinion of Foley & Lardner, counsel for Registrant
(incorporated by reference to Pre-Effective
Amendment No. 1 to Registrant's Registration
Statement on Form N-1A)
(11) Consent dated February 23, 1998 of Checkers, Simon &
Rosner LLP to the use of their report dated
December 18, 1997
(12) None
(13) Subscription Agreement of Gerald W. Perritt
(14.1) Prototype Defined Contribution Retirement Plan
(14.2) Individual Retirement Custodial Accounts
(14.3) SIMPLE IRA
(14.4) SEP/IRA
(15) None
*(16) Statement of Calculation of Performance Figures
(incorporated by reference to Post-Effective Amendment
No. 10 to Registrant's Registration Statement on Form
N-1A).
(17) Financial Data Schedule
(18) None
_______________
* Previously filed and incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant neither controls any person nor is under common
control with any other person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of January 31, 1998
Common Stock, $.01 par value 1,191
Item 27. Indemnification
Pursuant to the authority of the Maryland General
Corporation Law, particularly Section 2-418 thereof, Registrant's Board of
Directors has adopted the following By-Law which is in full force and
effect and has not been modified or cancelled:
Section 7. Indemnification.
A. The corporation shall indemnify all of its corporate
representatives against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly
absolves the corporate representative, or in the event of a settlement,
each corporate representative shall be indemnified hereunder only if there
has been a reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall create a rebuttable presumption that the person
was guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the
preparation of and/or presentation of the defense of a civil or criminal
action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding as authorized in
the manner provided in Section 2-418(F) of the Maryland General
Corporation Law upon receipt of: (i) an undertaking by or on behalf of
the corporate representative to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified by
the corporation as authorized in this bylaw; and (ii) a written
affirmation by the corporate representative of the corporate
representative's good faith belief that the standard of conduct necessary
for indemnification by the corporation has been met.
E. The indemnification provided by this bylaw shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under these bylaws, any agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person subject to the limitations
imposed from time to time by the Investment Company Act of 1940, as
amended.
F. This corporation shall have power to purchase and
maintain insurance on behalf of any corporate representative against any
liability asserted against him or her and incurred by him or her in such
capacity or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such
liability under this bylaw provided that no insurance may be purchased or
maintained to protect any corporate representative against liability for
gross negligence, willful misfeasance, bad faith or reckless disregard of
the duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is
or was a director, officer, agent or employee of the corporation or who
serves or served another corporation, partnership, joint venture, trust or
other enterprise in one of these capacities at the request of the
corporation and who, by reason of his or her position, is, was, or is
threatened to be made, a party to a proceeding described herein.
Insofar as indemnification for and with respect to
liabilities arising under the Securities Act of 1933 (the "Act") may be
permitted to directors, officers and controlling persons of Registrant
pursuant to the foregoing provisions or otherwise, 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 Registrant of expenses
incurred or paid by a director, officer or controlling person or
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, 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 of
whether such indemnification is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Incorporated by reference to the information contained
under "MANAGEMENT OF THE FUND" in the Prospectus and under "DIRECTORS AND
OFFICERS OF THE FUND" in the Statement of Additional Information, all
pursuant to Rule 411 under the Securities Act of 1933.
Item 29. Principal Underwriters
Registrant has no principal underwriters.
Item 30. Location of Accounts and Records
All accounts, books, or other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the
rules promulgated thereunder are in the physical possession of
Registrant's Treasurer, Gerald W. Perritt, at Registrant's corporate
offices, 120 S. Riverside Plaza, Suite 1745, Chicago, Illinois 60606.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
(c) The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940 ("Act"), the Registrant hereby
represents that this Amended Registration Statement on Form N-1A meets all
of the requirements for effectiveness pursuant to Rule 485(b) of the Act
and that Registrant has duly caused this Amended Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Chicago and State of Illinois on the 26th day of February,
1998.
PERRITT MICROCAP OPPORTUNITIES
FUND, INC.
By: /s/ Gerald W. Perritt
Gerald W. Perritt
President
Pursuant to the requirements of the Securities Act of 1933,
this Amended Registration Statement on Form N-1A has been signed below by
the following persons in the capacities and on the dates indicated.
Name Title Date
/s/ Gerald W. Perritt Principal Executive
Gerald W. Perritt Officer and
Director February 26, 1998
/s/ Allison B. Hearst Principal Financial
Allison B. Hearst and Accounting
Officer February 26, 1998
/s/ David S. Maglich Director February 23, 1998
David S. Maglich
/s/ Dianne C. Click Director February 20, 1998
Dianne C. Click
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(1) Registrant's Articles of Incorporation, as amended
(2) Registrant's By-Laws, as amended
(3) None
(4) Not applicable
(5) Investment Advisory Agreement
(6) None
(7) None
(8) Custodian Agreement with First Wisconsin Trust Company
(now known as Firstar Trust Company)
(9) Shareholder Servicing Agent Agreement
*(10) Opinion of Foley & Lardner, counsel for Registrant
(11) Consent dated February 23, 1998 of Checkers, Simon &
Rosner to the use of their report dated December 18,
1997
(12) None
(13) Subscription Agreement of Gerald W. Perritt
(14.1) Prototype Defined Contribution Retirement Plan
(14.2) Individual Retirement Custodial Accounts
(14.3) SIMPLE IRA
(14.4) SEP/IRA
(15) None
*(16) Statement of Calculation of Performance Figures
(17) Financial Data Schedule
(18) None
_______________
* Previously filed and incorporated herein by reference.
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
(as amended February 2, 1998)
The undersigned sole incorporator, being at least eighteen years
of age, hereby adopts the following Articles of Incorporation for the
purpose of forming a Maryland corporation under the general laws of the
State of Maryland.
ARTICLE I
The name of the corporation (hereinafter called "Corporation")
is:
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
ARTICLE II
The period of existence shall be perpetual.
ARTICLE III
The purposes for which the Corporation is formed are to engage
in any lawful business for which corporations may be organized under the
Maryland General Corporation Law.
ARTICLE IV
A. The aggregate number of shares which the Corporation shall
have authority to issue is Twenty Million (20,000,000) shares, all
with one cent ($0.01) per share par value, consisting of one class
only, designated as "Common Stock." The aggregate par value of the
authorized shares of the Corporation is Two Hundred Thousand Dollars
($200,000).
B. The Corporation may issue and sell shares of its own Common
Stock in such amounts and on such terms and conditions, for such
purposes and for such amount or kind of consideration now or
hereafter permitted by the laws of the State of Maryland, the Bylaws
and these Articles of Incorporation, as its Board of Directors may
determine; provided, however, that the consideration per share to be
received by the Corporation upon the sale of any shares of its Common
Stock shall not be less than the net asset value per share of such
Common Stock outstanding at the time as of which the computation of
said net asset value shall be made. Each share of the Common Stock
of the Corporation now or hereafter issued shall be subject to
redemption by the shareholders of the Corporation and, subject to the
suspension of such right of redemption as provided in the Bylaws,
each holder of the Common Stock of the Corporation upon request to
the Corporation accompanied by surrender of the appropriate stock
certificate or certificates in proper form for transfer and after
complying with other redemption procedures established by the Board
of Directors, shall be entitled to require the Corporation to redeem
all or any part of the shares of Common Stock standing in the name of
such holder on the books of the Corporation at the net asset value of
such shares. Any shares of its Common Stock redeemed by the
Corporation shall be deemed to be cancelled and restored to the
status of authorized but unissued shares. The method of computing
net asset value of shares of the Common Stock of the Corporation for
purposes of the issuance and sale thereof or the redemption by the
Corporation and the time as of which such net asset value shall be
computed shall be as set forth in the Bylaws.
C. If, at any time when a request for transfer or redemption
of the Corporation's shares of Common Stock is received by the
Corporation or its agent, the value (computed as set forth in the
Bylaws) of the shares in a shareholder's account is less than Five
Hundred Dollars ($500.00), after giving effect to such transfer or
redemption, the Corporation may cause the remaining shares in such
shareholder's account to be redeemed in accordance with such
procedures as the Board of Directors shall adopt.
D. The Board of Directors of the Corporation may, upon
reasonable notice to shareholders of the Corporation, impose a fee
for the privilege of redeeming shares, such fee to be not in excess
of one percent (1.0%) of the proceeds of any such redemption. The
Board shall have authority to rescind the imposition of any such fee
in its discretion and to reimpose the redemption fee from time to
time upon reasonable notice. Any fee so imposed shall be uniform as
to all shareholders.
E. No holder of stock of the Corporation shall, as such
holder, have any right to purchase or subscribe for any shares of the
Common Stock of the Corporation which it may issue or sell (whether
out of the number of shares authorized by these Articles of
Incorporation, or out of any shares of the Common Stock of the
Corporation acquired by it after the issue thereof, or otherwise)
other than such right, if any, as the Board of Directors, in its
discretion, may determine.
ARTICLE V
The number of directors constituting the Board of Directors
shall initially be five (5), and the names of the initial directors are
Gerald W. Perritt, Cheryl A. Pierce, Dianne V. Chaykin, Joseph Sasenick
and David F. Maglich. Thereafter, the number of directors shall be such
number as is fixed from time to time by the Bylaws.
ARTICLE VI
From time to time, any of the provisions of these Articles of
Incorporation may be amended, altered or repealed (including any amendment
which changes the terms of any of the outstanding stock by classification,
reclassification or otherwise) upon the vote of the holders of a majority
of the shares of Common Stock of the Corporation at the time outstanding
and entitled to vote, and other provisions which might under the Statutes
of the State of Maryland at the time in force be lawfully contained in
Articles of Incorporation, may be added or inserted upon the vote of the
holders of a majority of the shares of Common Stock of the Corporation at
the time outstanding and entitled to vote, and all rights at any time
conferred upon the shareholders of the Corporation by these Articles of
Incorporation are granted subject to the provisions of this Article VI.
The term "these Articles of Incorporation" as used herein and in the
Bylaws of the Corporation shall be deemed to mean these Articles of
Incorporation as from time to time amended and restated.
ARTICLE VII
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 and the furnishing
of clerical and administrative services to the Corporation. Such
agreement shall contain such other terms, provisions and conditions as the
Board of Directors of the Corporation may deem advisable and as are
permitted by the Investment Company Act of 1940.
The Corporation may designate custodians, 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, transfer agent,
registrar and/or disbursing agent.
ARTICLE VIII
The following provisions define, limit and regulate the powers
of the Corporation, the Board of Directors and the shareholders:
A. The Board of Directors may, in its sole and absolute
discretion, reject in whole or in part orders for the purchase of
shares of Common Stock, and may, in addition, require such orders to
be in such minimum amounts as it shall determine.
B. The holders of any fractional shares of Common Stock shall
be entitled to the payment of dividends on such fractional shares, to
receive the net asset value thereof upon redemption, to share in the
assets of the Corporation upon liquidation and to exercise voting
rights with respect thereto.
C. The Board of Directors shall have full power in accordance
with good accounting practice: (a) to determine what receipts of the
Corporation shall constitute income available for payment of
dividends and what receipts shall constitute principal and to make
such allocation of any particular receipt between principal and
income as it may deem proper; and (b) from time to time, in its
discretion (i) to determine whether any and all expenses and other
outlays paid or incurred (including any and all taxes, assessments or
governmental charges which the Corporation may be required to pay or
hold under any present or future law of the United States of America
or of any other taxing authority therein) shall be charged to or paid
from principal or income or both, and (ii) to apportion any and all
of said expenses and outlays, including taxes, between principal and
income.
D. Each holder of record of stock of this Corporation shall be
entitled to one (1) vote for each share thereof standing registered
in his name on the books of the Corporation. At all elections of
directors of the Corporation, each shareholder shall be entitled to
vote the shares owned of record by him for as many persons as there
are directors to be elected, but shall not be entitled to exercise
any right of cumulative voting.
E. The Board of Directors shall have power to determine from
time to time whether and to what extent and at what time and places
and under what conditions and regulations the books, accounts and
documents of the Corporation or any of them, shall be open to the
inspection of shareholders, except as otherwise provided by statute
or by law; and except as so provided, no shareholder shall have any
right to inspect any book, account or document of the Corporation
unless authorized to do so by resolution of the Board of Directors.
ARTICLE IX
The address of the principal office of the Corporation is 205
West Wacker Drive, Chicago, Illinois 60606.
ARTICLE X
The address of the initial registered office is c/o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland
21202.
ARTICLE XI
The name of the initial registered agent at such address is The
Corporation Trust Incorporated, a Maryland corporation.
ARTICLE XII
The name and address of the sole incorporator is:
Name Address
Randy M. Pavlick c/o Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202
IN WITNESS WHEREOF, the undersigned incorporator who executed
the foregoing Articles of Incorporation hereby acknowledges the same to be
his act and further acknowledges that, to the best of his knowledge, the
matters and facts set forth therein are true in all material respects
under the penalties of perjury.
Dated this 22nd day of August, 1987.
______________________
Randy M. Pavlick
EXHIBIT 2
BYLAWS
OF
PERRITT MICROCAP OPPORTUNITIES FUND, INC.
(as amended)
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. Place of Meetings. All meetings of stockholders shall be held
at such location as the Board of Directors shall direct.
Section 2. Annual Meeting.
(a) The annual meeting of stockholders for the election of
directors and the transaction of such other business as may properly come
before it, if the annual meeting shall be held, shall be held during the
month of February of each year (or during such other month as the Board of
Directors shall determine), commencing in 1989, at such date and time as
shall be fixed by the Board of Directors and stated in the notice of such
meeting. Any business of the corporation may be transacted at the annual
meeting without being specifically designated in the notice, except such
business as is specifically required by statute to be stated in the
notice.
(b) The corporation shall not be required to hold an annual
meeting in any year in which none of the following is required to be acted
on by stockholders under the Investment Company Act of 1940:
(i) Election of directors;
(ii) Approval of the corporation's investment advisory contract;
(iii) Ratification of the selection of the corporation's
independent public accountants; and
(iv) Approval of the corporation's distribution agreement with
respect to any particular class of series.
Section 3. Special Meeting. Special meetings of the stockholders may be
called by the board of directors, the president, vice president, or the
secretary, and shall be called by the secretary upon the written request
of the holders of shares entitled to not less than ten percent (10%) of
all the votes entitled to be cast at such meeting; provided that such
holders prepay the costs to the corporation of preparing and mailing the
notice of the meeting. The business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 4. Notice of Meeting. Not less than ten (10) days nor more than
ninety (90) days before the date of every stockholders' meeting, the
secretary shall give to each stockholder entitled to vote at such meeting,
written or printed notice stating the time and place of the meeting, and
in the case of a special meeting the purpose or purposes for which the
meeting is called, either by mail, by presenting it to him personally or
by leaving it at his residence or usual place of business. If mailed,
such notice shall be deemed to be given when deposited in the United
States mail addressed to the stockholder at his post office address as it
appears on the records of the corporation, with postage thereon prepaid.
Section 5. Quorum. At any meeting of stockholders the presence in person
or by proxy of stockholders entitled to cast a majority of the votes
thereat shall constitute a quorum; but this section shall not affect any
requirement under statute or under the charter for the vote necessary for
the adoption of any measure. If at any meeting a quorum is not present or
represented, the chairman of the meeting or the holders of a majority of
the stock present or represented may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a
quorum is present or represented. At such adjourned meeting at which a
quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally called.
Section 6. Stock Entitled to Vote. Each issued share of stock shall be
entitled to vote at any meeting of stockholders except shares owned, other
than in a fiduciary capacity, by the corporation or by another corporation
in which the corporation owns shares entitled to cast a majority of all
the votes entitled to be cast by all shares outstanding and entitled to
vote of such corporation.
Section 7. Voting. Each outstanding share of stock entitled to vote at a
meeting of stockholders shall be entitled to one vote on each matter
submitted to a vote. In all elections for directors every stockholder
shall have the right to vote the shares owned of record by him for as many
persons as there are directors to be elected, but shall not be entitled to
exercise any right of cumulative voting. A stockholder may vote the
shares owned of record by him either in person or by proxy executed in
writing by the stockholder or by his authorized attorney-in-fact. No
proxy shall be valid after eleven (11) months from its date unless
otherwise provided in the proxy. At all meetings of stockholders, unless
the voting is conducted by inspectors, all questions relating to the
qualification of voters, the validity of proxies and the acceptance or
rejection of votes shall be decided by the chairman of the meeting. A
majority of the votes cast at a meeting of stockholders, duly called and
at which a quorum is present, shall be sufficient to take or authorize any
action which may properly come before the meeting, unless a greater number
is required by statute or by the charter.
Section 8. Informal Action. Any action required or permitted to be taken
at any meeting of stockholders may be taken without a meeting, if a
consent in writing, setting forth such action, is signed by all the
stockholders entitled to vote on the subject matter thereof and such
consent is filed with the records of the corporation.
ARTICLE II
DIRECTORS
Section 1. Number. The number of directors of the corporation shall be
four (4). By vote of a majority of the entire board of directors, the
number of directors fixed by the charter or by these bylaws may be
increased or decreased from time to time to not more than fifteen nor less
than three, but the tenure of office of a director shall not be affected
by any decrease in the number of directors so made by the board.
Section 2. Election and Qualification. Until the first annual meeting of
stockholders and until successors are duly elected and qualify, the board
of directors shall consist of the persons named as such in the charter.
At the first annual meeting of stockholders, the stockholders shall elect
directors to hold office until their successors are elected and qualify. A
director need not be a stockholder of the corporation, but must be
eligible to serve as a director of a registered investment company under
the Investment Company Act of 1940. All but two of the directors may be
interested persons of the investment adviser of the corporation, as
defined in the Investment Company Act of 1940, or officers or employees of
the corporation.
Section 3. Vacancies. Any vacancy on the board of directors occurring
between stockholders' meetings called for the purpose of electing
directors may be filled, if immediately after filling any such vacancy at
least two-thirds of the directors then holding office shall have been
elected to such office at an annual or special meeting of stockholders, in
the following manner: (i) for a vacancy occurring other than by reason of
an increase in directors, by a majority of the remaining members of the
board, although such majority is less than a quorum; and (ii) for a
vacancy occurring by reason of an increase in the number of directors, by
action of a majority of the entire board. A director elected by the board
to fill a vacancy shall be elected to hold office until the next annual
meeting of stockholders or until his successor is elected and qualifies.
If by reason of the death, disqualification or bona fide resignation of
any director or directors, there is no member of the board of directors
who is not an interested person of the investment adviser of the
corporation, as defined in the Investment Company Act of 1940, such
vacancy shall be filled within thirty (30) days if it may be filled by the
board, or within sixty (60) days if a vote of stockholders is required to
fill such vacancy; provided that such vacancy may be filled within such
longer period as the Securities and Exchange Commission may prescribe by
rules and regulations, upon its own motion or by order upon application.
In the event that at any time less than a majority of the directors were
elected by the stockholders, the board or proper officer shall forthwith
cause to be held as promptly as possible, and in any event within sixty
(60) days, a meeting of the stockholders for the purpose of electing
directors to fill any existing vacancies in the board, unless the
Securities and Exchange Commission shall by order extend such period.
Section 4. Powers. The business and affairs of the corporation shall be
managed under the direction of the board of directors, which may exercise
all of the powers of the corporation, except such as are by law or by the
charter or by these bylaws conferred upon or reserved to the stockholders.
Section 5. Removal. At any meeting of stockholders, duly called and at
which a quorum is present, the stockholders may, by the affirmative vote
of the holders of a majority of the votes entitled to be cast thereon,
remove any director or directors from office and may elect a successor or
successors to fill any resulting vacancies for the unexpired terms of
removed directors.
Section 6. Place of Meetings. Meetings of the board of directors,
regular or special, may be held at any place in or out of the State of
Maryland as the board may from time to time determine or as may be
specified in the notice of meeting.
Section 7. First Meeting of Newly Elected Board. The first meeting of
each newly elected board of directors shall be held without notice
immediately after and at the same general place as the annual meeting of
the stockholders, for the purpose of organizing the board, electing
officers and transacting any other business that may properly come before
the meeting.
Section 8. Regular Meetings. Regular meetings of the board of directors
may be held without notice at such time and place as shall from time to
time be determined by the board.
Section 9. Special Meetings. Special meetings of the board of directors
may be called at any time either by the board, the president, a vice
president or a majority of the directors in writing with or without a
meeting. Notice of special meetings shall either be mailed by the
secretary to each director at least three (3) days before the meeting or
shall be given personally or telegraphed to each director at least one (1)
day before the meeting. Such notice shall set forth the time and place of
such meeting but need not, unless otherwise required by law, state the
purposes of the meeting.
Section 10. Quorum and Vote Required for Action. At all meetings of the
board of directors a majority of the entire board shall constitute a
quorum for the transaction of business, and the action of a majority of
the directors present at any meetings at which a quorum is present shall
be the action of the board of directors unless the concurrence of a
greater proportion is required for such action by statute, the articles of
incorporation or these bylaws. If at any meeting a quorum is not present,
a majority of the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a
quorum is present. Members of the board of directors or a committee of
the board may participate in a meeting by means of a conference telephone
or similar communications equipment if all persons participating in the
meeting can hear each other at the same time. Participation in a meeting
by these means constitutes presence in person at the meeting.
Section 11. Executive and Other Committees. The board of directors may
appoint from among its members an executive and other committees composed
of two (2) or more directors. The board may delegate to such committees in
the intervals between meetings of the board any of the powers of the board
to manage the business and affairs of the corporation, except the power
to: (i) declare dividends or distributions upon the stock of the
corporation; (ii) issue stock of the corporation; (iii) recommend to the
stockholders any action which requires stockholder approval; (iv) amend
the bylaws; (v) approve any merger or share exchange which does not
require stockholder approval; or (vi) take any action required by the
Investment Company Act of 1940 to be taken by the independent directors of
the corporation or by the full board of directors.
Section 12. Informal Action. Any action required or permitted to be
taken at any meeting of the board of directors may be taken without a
meeting, if a written consent to such action is signed by all members of
the board and such written consent is filed with the minutes of
proceedings of the board.
ARTICLE III
OFFICERS AND EMPLOYEES
Section 1. Election and Qualification. At the first meeting of each
newly elected board of directors there shall be elected a president, one
or more vice presidents, a secretary and a treasurer. The board may also
elect one or more assistant secretaries and assistant treasurers. No
officer need be a director. Any two or more offices, except the offices
of president and 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 is required by law, charter or these
bylaws to be executed, acknowledged or verified by two or more officers.
Each officer must be eligible to serve as an officer of a registered
investment company under the Investment Company Act of 1940. Nothing
herein shall preclude the employment of other employees or agents by the
corporation from time to time without action by the board.
Section 2. Term, Removal and Vacancies. The officers shall be elected to
serve until the next first meeting of a newly elected board of directors
and until their successors are elected and qualify. Any officer may be
removed by the board, with or without cause, whenever in its judgment the
best interests of the corporation will be served thereby, but such removal
shall be without prejudice to the contractual rights, if any, of the
person so removed. A vacancy in any office shall be filled by the board
for the unexpired term.
Section 3. Bonding. Each officer and employee of the corporation who
singly or jointly with others has access to securities or funds of the
corporation, either directly or through authority to draw upon such funds,
or to direct generally the disposition of such securities shall be bonded
against larceny and embezzlement by a reputable fidelity insurance company
authorized to do business in Illinois. Each such bond, which may be in
the form of an individual bond, a schedule or blanket bond covering the
corporation's officers and employees and the officers and employees of the
investment adviser to the corporation and other corporations to which said
investment adviser also acts as investment adviser, shall be in such form
and for such amount (determined at least annually) as the board of
directors shall determine in compliance with the requirements of Section
17(g) of the Investment Company Act of 1940, as amended from time to time,
and the rules, regulations or orders of the Securities and Exchange
Commission thereunder.
Section 4. President. The president shall be the principal executive
officer of the corporation. He shall preside at all meetings of the
stockholders and directors, have general and active management of the
business of the corporation, see that all orders and resolutions of the
board of directors are carried into effect, and execute in the name of the
corporation all authorized instruments of the corporation, except where
the signing shall be expressly delegated by the board to some other
officer or agent of the corporation.
Section 5. Vice Presidents. The vice president, or if there be more than
one, the vice presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform
the duties and exercise the powers of the president, and shall have such
other duties and powers as the board may from time to time prescribe or
the president delegate.
Section 6. Secretary and Assistant Secretaries. The secretary shall give
notice of, attend and record the minutes of meetings of stockholders and
directors, keep the corporate seal and, when authorized by the board,
affix the same to any instrument requiring it, attesting to the same by
his signature, and shall have such further duties and powers as are
incident to his office or as the board may from time to time prescribe.
The assistant secretary, if any, or, if there be more than one, the
assistant secretaries in the order determined by the board, shall in the
absence or disability of the secretary, perform the duties and exercise
the powers of the secretary, and shall have such other duties and powers
as the board may from time to time prescribe or the secretary delegate.
Section 7. Treasurer and Assistant Treasurers. The treasurer shall be
the principal financial and accounting officer of the corporation. He
shall be responsible for the custody and supervision of the corporation's
books of account and subsidiary accounting records, and shall have such
further duties and powers as are incident to his office or as the board of
directors may from time to time prescribe. The assistant treasurer, if
any, or, if there be more than one, the assistant treasurers in the order
determined by the board, shall in the absence or disability of the
treasurer, perform all duties and exercise the powers of the treasurer,
and shall have such other duties and powers as the board may from time to
time prescribe or the treasurer delegate.
ARTICLE IV
RESTRICTIONS ON COMPENSATION
TRANSACTIONS AND INVESTMENTS
Section 1. Salary and Expenses. Directors and executive officers as such
shall not receive any salary for their services or reimbursement for
expenses from the corporation; provided that the corporation may pay fees
in such amounts and at such times as the board of directors shall
determine to directors who are not interested persons of the corporation
for attendance at meetings of the board of directors. Clerical employees
shall receive compensation for their services from the corporation in such
amounts as are determined by the board of directors.
Section 2. Compensation and Profit from Purchase and Sales. No affiliated
person of the corporation, as defined in the Investment Company Act of
1940, or affiliated person of such person, shall, except as permitted by
Section 17(e) of the Act, or the rules, regulations or orders of the
Securities and Exchange Commission thereunder, (i) acting as agent, accept
from any source any compensation for the purchase or sale of any property
or securities to or for the corporation or any controlled company of the
corporation, as defined in such Act, or (ii) acting as a broker, in
connection with the sale of securities to or by the corporation or any
controlled company of the corporation, receive from any source a
commission, fee or other remuneration for effecting such transaction. The
investment adviser to the corporation shall not profit directly or
indirectly from sales of securities to or from the corporation.
Section 3. Transactions with Affiliated Person. No affiliated person of
the corporation, as defined in the Investment Company Act of 1940, or
affiliated person of such person shall knowingly (i) sell any security or
other property to the corporation or to any company controlled by the
corporation, as defined in the Act, except shares of stock of the
corporation or securities of which such person is the issuer and which are
part of a general offering to the holders of a class of its securities,
(ii) purchase from the corporation or any such controlled company any
security or property except shares of stock of the corporation or
securities of which such person is the issuer, (iii) borrow money or other
property from the corporation or any such controlled company, or (iv)
acting as a principal effect any transaction in which the corporation or
controlled company is a joint or joint and several participant with such
person; provided, however, that this section shall not apply to any
transaction permitted by Sections 17(a), (b), (c), (d) or 21(b) of the
Investment Company Act of 1940 or the rules, regulations or orders of the
Securities and Exchange Commission thereunder, and shall not prohibit the
joint participation by the corporation and an affiliate in a fidelity bond
arrangement.
Section 4. Investment Adviser. The corporation shall employ only one
investment adviser, the employment of which shall be pursuant to a written
agreement in accordance with Section 15 of the Investment Company Act of
1940, as amended from time to time.
ARTICLE V
STOCK CERTIFICATES AND TRANSFER BOOKS
Section 1. Certificates. Each stockholder shall be entitled to a
certificate or certificates, in such form as the board of directors shall
from time to time approve, representing and certifying the number of
shares of stock owned by him in the corporation. Each certificate shall
be signed, manually or by facsimile signature, by the president or a vice
president, countersigned, manually or by facsimile signature, by the
secretary, an assistant secretary, the treasurer or an assistant treasurer
and sealed with the corporate seal or facsimile thereof. In case any
officer who has signed any certificate, or whose facsimile signature
appears thereon, ceases to be an officer of the corporation before the
certificate is issued, the certificate may nevertheless be issued with the
same effect as if the officer had not ceased to be such officer as of the
date of its issue. Any certificate representing stock which is restricted
or limited as to transferability shall have a full statement of such
restriction or limitation plainly stated thereon or shall state that the
corporation will furnish information to the stockholder on request and
without charge.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been
lost, stolen, destroyed or mutilated (or may delegate such authority to
one or more officers of the corporation) upon the making of an affidavit
of that fact by the person claiming the certificate to be lost, stolen,
destroyed or mutilated. The board or such officer may, in its or his
discretion, require the owner of such certificate or his legal
representative to give bond with sufficient surety to the corporation to
indemnify it against any loss or claim which may arise or expense which
may be incurred by reason of the issuance of a new certificate.
Section 3. Stock Ledger. The corporation shall maintain at its office in
Chicago, Illinois, or at the office of its principal transfer agent, if
any, an original or duplicate stock ledger containing the names and
addresses of all stockholders and the number of shares held by each
stockholder.
Section 4. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as such,
as the owner of shares for all purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not it shall have express or
other notice thereof, except as other provided by the laws of Maryland.
Section 5. Transfer Agent and Registrar. The corporation may maintain
one or more transfer offices or agencies, each in charge of a transfer
agent designated by the board of directors, where the shares of stock of
the corporation shall be transferable. The corporation may also maintain
one or more registry offices, each in charge of a registrar designated by
the board, where such shares of stock shall be registered.
Section 6. Transfers of Stock. Upon surrender to the corporation or a
transfer agent of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the corporation to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 7. Fixing of Record Dates and Closing of Transfer Books. The
board of directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to vote at,
any meeting of stockholders, or stockholders entitled to receive payment
of any dividend or the allotment of any rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in
any case, shall be not more than ninety (90) days, and in case of a
meeting of stockholders not less than ten (10) days, prior to the date on
which the particular action requiring such determination of stockholders
is to be taken. In lieu of fixing a record date, the board may provide
that the stock transfer books shall be closed for a stated period but not
to exceed, in any case, twenty (20) days. If the stock transfer books are
closed or a record date is fixed for the purpose of determining stock-
holders entitled to vote at a meeting of stockholders, such books shall be
closed for at least ten (10) days immediately preceding such action.
ARTICLE VI
ACCOUNTS, REPORTS, CUSTODIAN AND INVESTMENT ADVISER
Section 1. Inspection of Books. The board of directors shall determine
from time to time whether, and, if allowed, when and under what conditions
and regulations the accounts and books of the corporation (except such as
may by statute be specifically open to inspection) or any of them, shall
be open to the inspection of the stockholders and the stockholders' rights
in this respect are and shall be limited accordingly.
Section 2. Reliance on Records. Each director and officer shall, in the
performance of his duties, be fully protected in relying in good faith on
the books of account or reports made to the corporation by any of its
officials or by an independent public accountant.
Section 3. Preparation and Maintenance of Accounts, Records and
Statements. The president, a vice president or the treasurer shall
prepare or cause to be prepared annually, a full and correct statement of
the affairs of the corporation, including a balance sheet or statement of
financial condition and a financial statement of operations for the
preceding fiscal year, which shall be submitted at the annual meeting of
the stockholders and filed within twenty (20) days thereafter at the
principal office of the corporation in the State of Illinois. The proper
officers of the corporation shall also prepare, maintain and preserve or
cause to be prepared, maintained and preserved the accounts, books and
other documents required by Section 2-111 of the Maryland General
Corporation Law and Section 31 of the Investment Company Act of 1940 and
shall prepare and file or cause to be prepared and filed the reports
required by Section 30 of such Act. No financial statement shall be filed
with the Securities and Exchange Commission unless the officers or
employees who prepared or participated in the preparation of such
financial statement have been specifically designated for such purpose by
the board of directors.
Section 4. Auditors. No independent public accountant shall be retained
or employed by the corporation to examine, certify or report on its
financial statements for any fiscal year unless such selection: (i) shall
have been approved by a majority of the entire board of directors within
thirty (30) days before or after the beginning of such fiscal year or
before the annual ratification by the stockholders; (ii) shall have been
ratified by the stockholders, provided that any vacancy occurring between
such annual ratification due to the death or resignation of such
accountant may be filled by the board of directors; and (iii) shall
otherwise meet the requirements of Section 32 of the Investment Company
Act of 1940.
Section 5. Custodianship. All securities owned by the corporation and
all cash, including, without limiting the generality of the foregoing, the
proceeds from sales of securities owned by the corporation and from the
issuance of shares of the capital stock of the corporation, payments of
principal upon securities owned by the corporation, and distributions in
respect of securities owned by the corporation which at the time of
payment are represented by the distributing corporation to be capital
distributions, shall be held by a custodian or custodians which shall be a
bank, as that term is defined in the Investment Company Act of 1940,
having capital, surplus and undivided profits aggregating not less than
$2,000,000. The terms of custody of such securities and cash shall
include provisions to the effect that the custodian shall deliver
securities owned by the corporation only (a) upon sales of such securities
for the account of the corporation and receipt by the custodian of payment
therefor, (b) when such securities are called, redeemed or retired or
otherwise become payable, (c) for examination by any broker selling any
such securities in accordance with "street delivery" custom, (d) in
exchange for or upon conversion into other securities alone or other
securities and cash whether pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment, or otherwise, (e) upon
conversion of such securities pursuant to their terms into other
securities, (f) upon exercise of subscription, purchase or other similar
rights represented by such securities, (g) for the purpose of exchanging
interim receipts or temporary securities for definitive securities, (h)
for the purpose of redeeming in kind shares of the capital stock of the
corporation, or (i) for other proper corporate purposes. Such terms of
custody shall also include provisions to the effect that the custodian
shall hold the securities and funds of the corporation in a separate
account or accounts and shall have sole power to release and deliver any
such securities and draw upon any such account, any of the securities or
funds of the corporation only on receipt by such custodian of written
instruction from one or more persons authorized by the board of directors
to give such instructions on behalf of the corporation, and that the
custodian shall deliver cash of the corporation required by this Section 5
to be deposited with the custodian only upon the purchase of securities
for the portfolio of the corporation and the delivery of such securities
to the custodian, for the purchase or redemption of shares of the capital
stock of the corporation, for the payment of interest, dividends, taxes,
management or supervisory fees or operating expenses, for payments in con-
nection with the conversion, exchange or surrender of securities owned by
the corporation, or for other proper corporate purposes. Upon the
resignation or inability to serve of any such custodian the corporation
shall (a) use its best efforts to obtain a successor custodian, (b)
require the cash and securities of the corporation held by the custodian
to be delivered directly to the successor custodian, and (c) in the event
that no successor custodian can be found, submit to the stockholders of
the corporation, before permitting delivery of such cash and securities to
anyone other than a successor custodian, the question whether the corpora-
tion shall be dissolved or shall function without a custodian; provided,
however, that nothing herein contained shall prevent the termination of
any agreement between the corporation and any such custodian by the
affirmative vote of the holders of a majority of all the shares of the
capital stock of the corporation at the time outstanding and entitled to
vote. Upon its resignation or inability to serve, the custodian may
deliver any assets of the corporation held by it to a qualified bank or
trust company selected by it, such assets to be held subject to the terms
of custody which governed such retiring custodian, pending action by the
corporation as set forth in this Section 5.
Section 6. Termination of Custodian Agreement. Any employment agreement
with a custodian shall be terminable on not more than sixty (60) days'
notice in writing by the board of directors or the custodian and upon any
such termination the custodian shall turn over only to the succeeding
custodian designated by the board of directors all funds, securities and
property and documents of the corporation in its possession.
Section 7. Checks and Requisitions. Except as otherwise authorized by
the board of directors, all checks and drafts for the payment of money
shall be signed in the name of the corporation by a custodian, and all
requisitions or orders for the payment of money by a custodian or for the
issue of checks and drafts therefore, all promissory notes, all
assignments of stock or securities standing in the name of the
corporation, and all requisitions or orders for the assignment of stock or
securities standing in the name of a custodian or its nominee, or for the
execution of powers to transfer the same, shall be signed in the name of
the corporation by not less than two persons (who shall be among those
persons, not in excess of five, designated for this purpose by the board
of directors) at least one of which shall be an officer. Promissory
notes, checks or drafts payable to the corporation may be endorsed only to
the order of a custodian or its nominee by the treasurer or president or
by such other person or persons as shall be thereto authorized by the
board of directors.
Section 8. Investment Advisory Contract. Any investment advisory
contract in effect after the first annual meeting of stockholders of the
corporation, to which the corporation is or shall become a party, whereby,
subject to the control of the Board of Directors of the corporation, the
investment portfolio of the corporation shall be managed or supervised by
the other party to such contract, shall be effective and binding only upon
the affirmative vote of a majority of the outstanding voting securities of
the corporation (as defined in the Investment Company Act of 1940), and
the investment advisory contract currently in effect shall be submitted to
the stockholders of the corporation for ratification by the affirmative
vote of such majority. Any investment advisory contract to which the
corporation shall be a party whereby, subject to the control of the Board
of Directors of the corporation, the investment portfolio of the
corporation shall be managed or supervised by the other party to such
contract, shall provide, among other things, that such contract cannot be
assigned. Such investment advisory contract shall prohibit the other
party thereto from making short sales of shares of capital stock of the
corporation; and such investment advisory contract shall prohibit such
other party from purchasing shares otherwise than for investment, and
shall require such other party to advise the corporation of any sales of
shares of the capital stock of the corporation made by such person or
organization less than two months after the date of any purchase by him or
it of shares of the capital stock of the corporation. Unless any such
contract shall expressly otherwise provide, any provisions therein for the
termination thereof by action of the Board of Directors of the corporation
shall be construed to require that such termination can be accomplished
only upon the vote of a majority of the entire Board.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Offices. The registered office of the corporation in the
State of Maryland shall be in the City of Baltimore. The corporation
shall also have an office in Chicago, Illinois. The corporation may also
have offices at such other places within and without the State of Maryland
as the board of directors may from time to time determine. Except as
otherwise required by statute, the books and records of the corporation
may be kept outside the State of Maryland.
Section 2. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, and the words "Corporate Seal" and "Maryland".
The seal may be used by causing it or a facsimile thereof to be impressed,
affixed, reproduced or otherwise.
Section 3. Fiscal Year. The fiscal year of the corporation shall be
fixed by the board of directors.
Section 4. Notice of Waiver of Notice. Whenever any notice of the time,
place or purpose of any meeting of stockholders or directors is required
to be given under the statute, the charter or these bylaws, a waiver
thereof in writing, signed by the person or persons entitled to such
notice and filed with the records of the meeting, either before or after
the holding thereof, or actual attendance at the meeting of stockholders
in person or by proxy or at the meeting of directors in person, shall be
deemed equivalent to the giving of such notice to such person. No notice
need be given to any person with whom communication is made unlawful by
any law of the United States or any rule, regulation, proclamation or
executive order issued by any such law.
Section 5. Voting of Stock. Unless otherwise ordered by the board of
directors, the president shall have full power and authority, in the name
and on behalf of the corporation, (i) to attend, act and vote at any
meeting of stockholders of any company in which the corporation may own
shares of stock of record, beneficially (as the proxy or attorney-in-fact
of the record holder) or of record and beneficially, and (ii) to give
voting directions to the record stockholder of any such stock beneficially
owned. At any such meeting, he shall possess and may exercise any and all
rights and powers incident to the ownership of such shares which, as the
holder or beneficial owner and proxy of the holder thereof, the
corporation might possess and exercise if personally present, and may
delegate such power and authority to any officer, agent or employee of the
corporation.
Section 6. Dividends. Dividends upon the stock of the corporation,
subject to the provisions of the charter, if any, may be declared by the
board of directors in any lawful manner. The source of each dividend
payment shall be disclosed to the stockholders receiving such dividend, to
the extent required by the laws of the State of Maryland and by Section 19
of the Investment Company Act of 1940 and the rules and regulations of the
Securities and Exchange Commission thereunder. The total of each dividend
payment made to stockholders in respect of any one fiscal year shall be
approximately equal to the sum of (a) the net income for such fiscal year
exclusive of profits or losses realized upon the sale of securities or
other property, and (b) the excess of profits over losses on sales of
securities or other property for such fiscal year; provided the above
provision shall be interpreted to give the board of directors the power in
its discretion to distribute for any fiscal year as ordinary dividends and
as capital gains distributions, respectively, amounts sufficient to enable
the corporation to avoid or reduce its tax liability.
Section 7. Indemnification.
A. The corporation shall indemnify all of its corporate
representatives against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding1 or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors,by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Section 8. Amendments.
A. These bylaws may be altered, amended or repealed and new
bylaws may be adopted by the stockholders by affirmative vote of not less
than a majority of the shares present or represented at any annual or
special meeting of the stockholders at which a quorum is in attendance.
B. These bylaws may also be altered, amended or repealed and
new bylaws may be adopted by the Board of Directors by affirmative vote of
a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no bylaw adopted by the stockholders shall be
amended or repealed by the Board of Directors if the bylaws so adopted so
provides.
C. Any action taken or authorized by the stockholders or by
the Board of Directors, which would be inconsistent with the bylaws then
in effect but is taken or authorized by affirmative vote of not less than
the number of shares or the number of directors required to amend the
bylaws so that the bylaws would be consistent with such action, shall be
given the same effect as though the bylaws had been temporarily amended or
suspended so far, but only so far, as was necessary to permit the specific
action so taken or authorized.
Section 9. Reports to Stockholders. The books of account of the
corporation shall be examined by an independent firm of public accountants
at the close of each annual fiscal period 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 include the financial information
required to be transmitted to stockholders by rules or regulations of the
Securities and Exchange Commission under the Investment Company Act of
1940 and shall be in such form as the Board of Directors shall determine
pursuant to rules and regulations of the Securities and Exchange
Commission.
Section 10. Information to Accompany Dividends. At the time of the
payment by the corporation of any dividend to its stockholders, each
stockholder to whom such dividend is paid shall be notified of the account
or accounts from which it is paid and the amount thereof paid from each
such account.
ARTICLE VIII
SALES, REDEMPTION AND
NET ASSET VALUE OF SHARES
Section 1. Sale of Shares. Shares of Common Stock of the corporation
shall be sold by it for the net asset value per share of such Common Stock
outstanding at the time as of which the computation of said net asset
value shall be made as hereinafter provided in these bylaws.
Section 2. Periodic Investment and Dividend Reinvestment Plans. The
corporation acting by and through the Board of Directors shall have the
right to adopt and to offer to the stockholders and to the public a
periodic investment plan and an automatic reinvestment of dividend plan
subject to the limitations and restrictions imposed thereon and as set
forth in the Investment Company Act of 1940 and any rule or regulation
adopted or issued thereunder.
Section 3. Shares Issued for Securities. In the case of shares of stock
of the corporation issued in whole or in part in exchange for securities,
there may, at the discretion of the Board of Directors of the corporation,
be included in the value of said securities, for the purpose of
determining the number of shares of stock of the corporation issuable in
exchange therefor, the amount, if any, of brokerage commissions (not
exceeding an amount equal to the rates payable in connection with the
purchase of comparable securities on the New York Stock Exchange) or other
similar costs of acquisition of such securities paid by the holder of said
securities in acquiring the same.
Section 4. Redemption of Shares. Each share of Common Stock of the
corporation now or hereafter issued shall be subject to redemption and,
subject to the suspension of such right of redemption as hereinafter
provided in these bylaws, each holder of the Common Stock of the
corporation upon request to the corporation accompanied by surrender of
the appropriate certificate or certificates in proper form for transfer
shall be entitled to require the corporation to redeem all or any part of
shares of Common Stock standing in the name of such holder on the books of
the corporation at the net asset value of such shares determined as
hereinafter provided in these bylaws. In the event that no certificates
have been issued to the holder, there shall be submitted a stock power
with an appropriate signature guarantee, to the extent required by the
Board of Directors. Payment of the net asset value of Common Stock of the
corporation surrendered to it for redemption shall be made by the
corporation within seven (7) days after surrender of such stock to the
corporation for such purposes.
Section 5. Suspension of Right of Redemption. The Board of Directors of
the corporation may suspend the right of the holders of the Common Stock
of the corporation to require the corporation to redeem shares of the
Common Stock:
(1) for any period (a) during which the New York Stock Exchange
is closed other than customary weekend and holiday closings, or (b)
during which trading on the New York Stock Exchange is restricted;
(2) for any period during which an emergency, as defined by
rules of the Securities and Exchange Commission or any successor
thereto, exists as a result of which (a) disposal by the corporation
of securities owned by it is not reasonably practicable, or (b) it is
not reasonably practicable for the corporation fairly to determine
the value of its net assets; or
(3) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the corporation.
Section 6. Computation of Net Asset Value. For purposes of these bylaws,
the following rules shall apply:
A. The net asset value of each share of Common Stock of the
corporation shall be determined at such time or times as may be
disclosed in the then currently effective Prospectus relating to the
Common Stock of this corporation. The Board of Directors may also,
from time to time by resolution, designate a time or times
intermediate of the opening and closing of trading on the New York
Stock Exchange on each day that said Exchange is open for trading as
of which the net asset value of each share of Common Stock of the
corporation shall be determined or estimated.
Any determination or estimation of net asset value as provided
in this subparagraph A shall be effective at the time as of which
such determination or estimation is made.
The net asset value of each share of Common Stock of the
corporation for purposes of the issue of such Common Stock shall be
the net asset value which becomes effective as provided in
Subparagraph A above, next succeeding receipt of the subscription to
such share of Common Stock. The net asset value of each share of
Common Stock of the corporation tendered for redemption shall be the
net asset value which becomes effective as provided in Subparagraph A
above, next succeeding the tender of such share of Common Stock for
redemption.
B. The net asset value of each share of the Common Stock of
the corporation, as of the close of business on any day, shall be the
quotient obtained by dividing the value at such close of the net
assets of the corporation (i.e., the value of the assets of the
corporation less its liabilities exclusive of Common Stock and
surplus) by the total number of shares of Common Stock outstanding at
such close, all determined and computed as follows:
(i) The assets of the corporation shall be
deemed to include (a) all cash on hand, on deposit, or
on call, (b) all bills and notes and accounts
receivable, (c) all shares of stock and subscription
rights and other securities owned or contracted for by
the corporation, other than its own common stock, (d)
all stock and cash dividends and cash distributions,
to be received by the corporation, and not yet
received by it but declared to stockholders of record
on a date on or before the date as of which the net
asset value is being determined, (e) all interest
accrued on any interest-bearing securities owned by
the corporation, and (f) all other property of every
kind and nature including prepaid expenses; the value
of such assets to be determined as follows: In
determining the value of the assets of the corporation
for the purpose of obtaining the net asset value, each
security listed on an exchange shall be valued on the
basis of the closing sale thereof on that exchange on
the business day as of which such value is being
determined. If there be no sale on such day, then the
security shall be valued on the basis of the closing
bid price on such day. All other securities for which
over-the-counter market quotations are readily
available shall be valued on the basis of the last
current bid price. When market quotations are not
readily available, or when restricted securities are
being valued, such securities are valued at fair value
as determined in good faith by the Board of Directors.
All other assets of the corporation shall be valued at
fair value as determined in good faith by the Board of
Directors, except that debt securities having
maturities of less than 60 days may be valued by the
amortized cost method.
(ii) The liabilities of the corporation shall be
deemed to include (a) all bills and notes and accounts
payable, (b) all administration expenses payable
and/or accrued (including investment advisory fees),
(c) all contractual obligations for the payment of
money or property including the amount of any unpaid
dividend declared upon the corporation's stock and
payable to stockholders of record on or before the day
as of which the value of the corporation's stock is
being determined, (d) all reserves, if any, authorized
or approved by the Board of Directors for taxes,
including reserves for taxes at current rates based on
any unrealized appreciation in the value of the assets
of the corporation, and (e) all other liabilities of
the corporation of whatever kind and nature except
liabilities represented by outstanding capital stock
and surplus of the corporation.
(iii) For the purposes hereof: (a) Common Stock
subscribed for shall be deemed to be outstanding as of
the time of acceptance of any subscription and the
entry thereof on the books of the corporation and the
net price thereof shall be deemed to be an asset of
the corporation; (b) Common Stock surrendered for
redemption by the corporation shall be deemed to be
outstanding until the time as of which the net asset
value for purposes of such redemption is determined or
estimated.
C. The net asset value of each share of the Common Stock of
the corporation, as of any time other than the close of business on
any day, may be determined by applying to the net asset value as of
the close~ of business on the preceding business day, computed as
provided in Paragraph C of this Section of these bylaws, such
adjustments as are authorized by or pursuant to the direction of the
Board of Directors and designed reasonably to reflect any material
changes in the market value of securities and other assets held and
any other material changes in the assets or liabilities of the
corporation and in the number of its outstanding shares which shall
have taken place since the close of business on such preceding
business day.
D. In addition to the foregoing, the Board of Directors is
empowered, in its absolute discretion, to establish other bases or
times, or both, for determining the net asset value of each share of
the Common Stock of the corporation.
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made and entered into on this 12th day of April,
1988, by and between PERRITT CAPITAL GROWTH FUND, INC., a Maryland
corporation (hereinafter sometimes referred to as the "Fund"), and PERRITT
INVESTMENTS, INC., an Illinois corporation (hereinafter sometimes called
the "Adviser");
W I T N E S S E T H :
WHEREAS, the Fund is in the process of registering with the
Securities and Exchange Commission as an open-end management investment
company under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain Adviser, which is a
registered Investment Adviser under the Investment Advisers Act of 1940,
to act as investment adviser for and to manage its assets;
NOW, THEREFORE, in consideration of the foregoing and the terms,
conditions and covenants contained herein, the Fund and Adviser do
mutually promise and agree as follows:
1. Employment. The Fund hereby employs Adviser to act as
investment adviser for and to manage the investment and reinvestment of
the assets of the Fund subject to the supervision of the Board of
Directors of the Fund and subject to the terms of this Agreement. The
Adviser shall, at its expense, provide for the use of the Fund, office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Fund and maintaining its organization,
shall pay the salaries and fees of all officers of the Fund and of
directors of the Fund who are "interested persons" of the Adviser as such
term is defined under the Investment Company Act of 1940, and shall pay
for all clerical services relating to research, statistical and investment
work.
2. Allocation of Portfolio Brokerage. The Adviser is
authorized, subject to the supervision of the Board of Directors of the
Fund, to place orders for the purchase and sale of the Fund's portfolio
securities and to negotiate commissions to be paid on such transactions.
The Adviser may, on behalf of the Fund, pay brokerage commissions to a
broker which provides brokerage and research services to the Adviser in
excess of the amount another broker would have charged for effecting the
transaction, provided (i) the Adviser determines in good faith that the
amount is reasonable in relation to the value of the brokerage and
research services provided by the executing broker in terms of the
particular transaction or in terms of the Adviser's overall
responsibilities with respect to the Fund and the accounts as to which the
Adviser exercises investment discretion, (ii) such payment is made in
compliance with Section 28(e) of the Securities Exchange Act of 1934 and
other applicable state and federal laws, and (iii) in the opinion of the
Adviser, the total commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long term.
3. Expenses Borne by Fund. The Fund will pay all its expenses
other than those expressly stated to be payable by the Adviser hereunder,
which expenses payable by the Fund shall include, without limitation,
interest charges, taxes, brokerage commissions and similar expenses,
expenses of issue, sale, repurchase or redemption of shares, expense of
registering or qualifying shares for sale, expenses of printing and
distributing prospectuses to existing shareholders, charges of custodians
(including sums as custodian and for keeping books and similar services to
the Fund), transfer agents (including the printing and mailing of reports
and notices to shareholders), registrars, auditing and legal services,
clerical services related to recordkeeping and shareholder relations,
printing of stock certificates, fees for directors who are not "interested
persons" of Adviser, and other expenses not expressly assumed by Adviser
under Paragraph 1 above, provided, that in the event the expenses and
charges payable by the Fund, except interest charges, taxes, brokerage
commissions and similar fees, in any given fiscal year exceed that
percentage of the average net asset value of the Fund for such year, as
determined by valuations made as of the close of each business day of such
year, which is the most restrictive percentage expenses limitation
provided by the state laws of the various states in which Fund shares are
qualified for sale, or if the states in which the Fund's common stock is
qualified for sale impose no restrictions, then 2.0%. Adviser shall
reimburse the Fund for such excess. Reimbursement of expenses by Adviser
shall be made on a monthly basis and will be paid to the Fund by a
reduction in the Adviser's fee, subject to later adjustment month by month
for the remainder of the Fund's fiscal year.
4. Authority of Adviser. The Adviser shall for all purposes
herein be considered an independent contractor and shall not, unless
expressly authorized and empowered by the Fund, have authority to act for
or represent the Fund in any way, form or manner. Any authority granted
by the Fund to the Adviser shall be in the form of a resolution or
resolutions adopted by the Board of Directors of the Fund.
5. Compensation of Adviser. For the services to be furnished
during any month by the Adviser hereunder, the Fund shall pay the Adviser
as a basic advisory fee as soon as practical after the last day of such
month an amount equal to 1/12th of .7% (.0583%) of the average of the net
asset value of the Fund determined as of the close of business on each
business day throughout the month (hereinafter called "average asset
value").
In case of termination of this Agreement during any month, the
fee for that month shall be reduced proportionately on the basis of the
number of calendar days during which it is in effect and the fee computed
upon the average asset value of the business days during which it is so in
effect.
6. Rights and Powers of Adviser. Adviser's rights and powers
with respect to acting for and on behalf of the Fund, including the rights
and powers of Adviser's officers and directors, shall be as follows:
(a) Directors, officers, agents and stockholders
of the Fund are or may at any time or times be
interested in the Adviser as officers, directors,
agents, shareholders or otherwise. Correspondingly,
directors, officers, agents and stockholders of the
Adviser are or may at any time or times be interested
in the Fund as directors, officers, agents and as
shareholders or otherwise, but nothing herein shall be
deemed to require the Fund to take any action contrary
to its Articles of Incorporation or any applicable
statute or regulation. The Adviser shall, if it so
elects, also have the right to be a shareholder in the
Fund.
(b) Except for an initial investment in Fund
shares not in excess of $100,000, the Adviser shall
not take any long or short positions in the stock of
the Fund and that insofar as it can control the
situation it shall prevent any and all of its
officers, directors, agents or stockholders from
taking any long or short position in the stock of the
Fund. This prohibition shall not in any way be
considered to prevent the Adviser or any officer,
director, agent or stockholder of the Adviser from
purchasing and owning stock of the Fund for investment
purposes. The Adviser shall notify the Fund of any
sales of shares of the Fund made by the Adviser within
two months after purchase by the Adviser of shares of
the Fund.
(c) The services of the Adviser to the Fund are
not to be deemed exclusive and Adviser shall be free
to render similar services to others as long as its
services for others does not in any way hinder,
preclude or prevent the Adviser from performing its
duties and obligations under this Agreement. In the
absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or
duties hereunder on the part of the Adviser, the
Adviser shall not be subject to liability to the Fund
or to any shareholder of the Fund for any act or
omission in the course of, or connected with,
rendering services hereunder or for any losses that
may be sustained in the purchase, holding or sale of
any security.
7. Termination of Agreement. The following shall apply with
respect to the termination of this Agreement.
(a) This Agreement shall continue in force and
effect until the first meeting of shareholders of the
Fund following the effective date of its Registration
Statement on Form N-1A covering the initial offering
of shares of the Fund, at which time it shall be
submitted for approval to the shareholders of the
Fund, and subject thereafter to being continued in
force and effect from year to year if specifically
approved each year by the Board of Directors of the
Fund or by the affirmative vote of a majority of the
Fund's outstanding voting securities. In addition to
the foregoing, each renewal of this Agreement must be
approved by the vote of a majority of the Fund's
directors 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. Prior to voting on the renewal of this
Agreement, the Board of Directors of the Fund shall
request and evaluate, and the Adviser shall furnish,
such information as may reasonably be necessary to
enable the Fund's Board of Directors to evaluate the
terms of this Agreement.
(b) Notwithstanding whatever may be provided
herein to the contrary, this Agreement may be
terminated at any time, without payment of any
penalty, by vote of a majority of the Board of
Directors of the Fund, or by vote of a majority of the
outstanding voting securities of the Fund, or by the
Adviser, in each case, upon sixty (60) days' written
notice to the other party and shall terminate
automatically in the event of its assignment.
8. Amendment. This Agreement may be amended by mutual consent
of the parties, provided that the terms of each such amendment shall be
approved by the Board of Directors or by a vote of a majority of the then
outstanding voting securities of the Fund. If such amendment is proposed
in order to comply with the recommendations or requirements of the
Securities and Exchange Commission or state regulatory bodies or other
governmental authority, or to obtain any advantage under state or federal
laws, the Fund shall notify the Adviser of the form of amendment which it
deems necessary or advisable and the reasons therefor, and if the Adviser
declines to assent to such amendment, the Fund may terminate this
Agreement forthwith.
9. 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.
10. Assignment. This Agreement shall neither be assignable nor
subject to pledge or hypothecation and in the event of assignment, pledge
or hypothecation shall automatically terminate. For purposes of
determining whether an "assignment" has occurred, the definition of
"assignment" in Section 2(a)(4) of the Investment Company Act of 1940
shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
PERRITT CAPITAL GROWTH FUND, INC.
By:___________________________
President
[CORPORATE SEAL] Attest:_______________________
Secretary
PERRITT INVESTMENTS, INC.
By:___________________________
President
[CORPORATE SEAL] Attest:_______________________
Secretary
EXHIBIT 8
CUSTODIAN AGREEMENT WITH BANK
THIS AGREEMENT made this ____ day of _________, 1987, between
PERRITT CAPITAL GROWTH FUND, INC., a Maryland corporation (hereinafter
called the "Corporation"), and FIRST WISCONSIN TRUST COMPANY, a
corporation organized under the laws of the State of Wisconsin
(hereinafter called "Custodian").
W I T N E S S E T H :
WHEREAS, the Corporation desires that its securities and cash
shall be hereafter held and administered by Custodian pursuant to the
terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Corporation and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stock, shares,
bonds, debentures, notes, mortgages or other obligations and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the
Corporation by any two of the President, Vice President, Secretary and the
Treasurer of the Corporation, or any other persons duly authorized to sign
by the Board of Directors of the Corporation.
2. Names, Titles and Signatures of Corporation's Officers
An officer of the Corporation will certify to Custodian the
names and signatures of those persons authorized to sign the officers'
certificates described in Section 1 hereof, and the names of the members
of the Board of Directors, together with any changes which may occur from
time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of the Corporation, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Corporation. Custodian
shall make payments of cash to, or for the account of, the Corporation
from such cash only (a) for the purchase of securities for the portfolio
of the Corporation upon the delivery of such securities to Custodian,
registered in the name of the Corporation or of the nominee of Custodian
referred to in Section 7 or in proper form for transfer; (b) for the
purchase or redemption of shares of the common stock of the Corporation
upon delivery thereof to Custodian; (c) for the payment of interest,
dividends, taxes, management or supervisory fees or operating expenses
(including, without limitation thereto, fees for legal, accounting,
auditing and custodian services and expenses for printing and postage);
(d) for payments in connection with the conversion, exchange or surrender
of securities owned or subscribed to by the Corporation held by or to be
delivered to Custodian; or (e) for other proper corporate purposes.
Before making any such payment Custodian shall receive (and may rely upon)
an officers' certificate requesting such payment and stating that it is
for a purpose permitted under the term of items (a), (b), (c) or (d) of
this Subsection A, and also, in respect of item (e), upon receipt of an
officers' certificate specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or persons to whom
such payment is to be made.
An officers' certificate need not proceed the disbursement of
cash for the purpose of purchasing a money market instrument if any one of
the corporation's officers issues oral instructions to the Custodian and
an appropriate officers' certificate is received by the Custodian within
two (2) business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Corporation.
4. Receipt of Securities
Custodian shall hold in a separate account, and physically
segregated at all times from those of any other persons, firms or
corporations, pursuant to the provisions hereof, all securities received
by it from or for the account of the Corporation. All such securities are
to be held or disposed of by Custodian for, and subject at all times to
the instructions of, the Corporation pursuant to the terms of this
Agreement. The Custodian shall have no power or authority to assign,
hypothecate, pledge or otherwise dispose of any such securities and
investments, except pursuant to the direction of the Corporation and only
for the account of the Corporation as set forth in Section 5 of this
Agreement.
5. Transfer, Exchange Redelivery, etc. of Securities
Custodian shall have sole power to release or delivery any
securities of the Corporation held by it pursuant to this Agreement.
Custodian agrees to transfer, exchange or deliver securities held by it
hereunder only (a) for sales of such securities for the account of the
Corporation upon receipt by Custodian of payment therefor; (b) when such
securities are called, redeemed or retired or otherwise become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom; (d) in exchange for or upon
conversion into other securities alone or other securities and cash
whether pursuant to any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise; (e) upon conversion of
such securities pursuant to their terms into other securities; (f) upon
exercise of subscription, purchase or other similar rights represented by
such securities; (g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities; (h) for the purpose of
redeeming in kind shares of common stock of the corporation upon delivery
thereof to Custodian; or (i) for other proper corporate purposes. As to
any deliveries made by Custodian pursuant to items (a), (b), (d), (e), (f)
and (g), securities or cash receivable in exchange therefor shall be
deliverable to Custodian. Before making any such transfer, exchange or
delivery, Custodian shall receive (and may rely upon) an officers'
certificate requesting such transfer, exchange or delivery, and stating
that it is for a purpose permitted under the terms of items (a), (b), (c),
(d), (e), (f), (g) or (h) of this Section 5 and also, in respect of
Item (i), upon receipt of an officers' certificate specifying the
securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purposes to be proper corporation
purposes, and naming the person or persons to whom delivery of such
securities shall be made.
An officers' certificate need not proceed such transfer,
exchange or delivery of money market instruments if any one of the
corporation's officers issues oral instructions to the Custodian and an
appropriate officers' certificate is received by the Custodian within
two (2) business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall:
(a) present for payment all coupons and other income items
held by it for the account of the Corporation which call for
payment upon presentation and hold the cash received by it upon
such payment for the account of the Corporation;
(b) collect interest and cash dividends received, with
notice to the Corporation, for the account of the Corporation;
(c) hold for the account of the Corporation hereunder all
stock dividends, rights and similar securities issued with
respect to any securities held by it hereunder; and
(d) execute as agent on behalf of the Corporation all
necessary ownership certificates required by the Internal
Revenue Code or the Income Tax Regulations of the United States
Treasury Department or under the laws of any state now or
hereafter in effect, inserting the Corporation's name on such
certificates as the owner of the securities covered thereby, to
the extent it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulation of the Treasury Department issued
thereunder or in any provision of any subsequent Federal tax law exempting
such transaction from liability for stock transfer taxes, and shall
execute and deliver all such certificates in connection therewith as may
be required by such laws or Regulations or under the laws of any state.
Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Corporation shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Corporation and
which may from time to time be registered in the name of the Corporation.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Corporation,
except in accordance with the instructions contained in an officers'
certificate. Custodian shall deliver, or cause to be executed and
delivered, to the Corporation all notices, proxies and proxy soliciting
materials with relation to such securities, such proxies to be executed by
the registered holder of such securities (if registered otherwise than in
the name of the Corporation), but without indicating the manner in which
such proxies are to be voted.
9. Transfer Tax and Other Disbursements
The Corporation shall pay or reimburse Custodian from time to
time for any transfer taxes payable upon transfer of securities made
hereunder, and for all other necessary and proper disbursements and
expenses made or incurred by Custodian in the performance of this
Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provision of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfer and/or
deliveries of any such securities.
10. Miscellaneous
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board of Directors, and may rely on the genuineness of any such
document which it may in good faith believe to have been validly executed.
The Corporation agrees to indemnify and hold harmless Custodian
and its nominee from all taxes, changes, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to actor willful misconduct. Custodian is authorized to
charge any account of the Corporation for such items. In the event of any
advance of cash for any purpose made by Custodian resulting from orders or
instructions of the Corporation, or in the event that Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of
this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any
property at any time held for the account of the Corporation shall be
security therefor.
11. Reports by Custodian
Custodian shall furnish the Corporation weekly with a statement
summarizing all transactions and entries for the account of the
Corporation. Custodian shall furnish the Corporation at the end of every
month with a list of the portfolio securities showing the aggregate cost
of each issue. Custodian shall furnish the Corporation, at the close of
each quarter of the Corporation's fiscal year, with a list showing the
cost of the securities held by it for the Corporation hereunder, adjusted
for all commitments confirmed by the Corporation as of such close,
certified by a duly authorized officer of the Custodian. The books and
records of Custodian pertaining to its actions under this Agreement shall
be open to inspection and audit at reasonable times by officers of and
auditors employed by the Corporation.
12. Termination or Assignment
This Agreement may be terminated by the Corporation, or by
Custodian, on sixty days' notice, given in writing and sent by registered
mail to Custodian at P.O. Box _____, Milwaukee, Wisconsin 53201, or to
the Corporation at 205 West Wacker Drive, Chicago, Illinois 60606, as the
case may be. Upon any termination of this Agreement, pending appointment
of a successor to Custodian or a vote of the shareholders of the
Corporation to dissolve or to function without a Custodian of its cash,
securities and other property, Custodian shall not deliver cash,
securities or other property of the Corporation to the Corporation, but
may deliver them to a bank or trust company in the City of Milwaukee of
its own selection, having an aggregate capital, surplus and undivided
profits, as shown by its last published report of not less than two
million dollars ($2,000,000) as a Custodian for the Corporation to be held
under terms similar to those of this Agreement; provided, however, that
Custodian shall not be required to make any such delivery or payment until
full payment shall have been made by the Corporation of all liabilities
constituting a charge on or against the properties then held by Custodian
or on or against Custodian, and until full payment shall have been made to
Custodian of all its fees, compensation, costs and expenses, subject to
the provisions of Section 10 of this Agreement.
13. Subcustodian
Custodian is hereby authorized to engage another bank or trust
company as a subcustodian for all of any part of the Fund's assets, so
long as any such bank or trust company is a bank or trust company
organized under the laws of any state of the United States or under the
laws of the United States having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
Two Million Dollars ($2,000,000) and provided further that, if the
Custodian utilizes the services of a subcustodian, the Custodian shall
remain fully liable and responsible for any losses caused to the Fund by
the subcustodian as fully as if the Custodian was directly responsible for
any such losses under the terms of the Custodian Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Corporation, authorized or approved by a resolution of its
Board of Directors.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement
to be executed and their respective corporate seals to be affixed hereto
as of the date first above written by their respective officers thereunto
duly authorized.
Executed in several counterparts, each of which is an original.
PERRITT CAPITAL GROWTH FUND,
INC.
("Corporation")
By: _________________________________
President
Attest: ___________________________
Secretary
FIRST WISCONSIN TRUST COMPANY
("Custodian")
By: _________________________________
President
Attest: ___________________________
Secretary
EXHIBIT 9
SHAREHOLDER SERVICING AGENT AGREEMENT
THIS AGREEMENT made and entered into on this ____ day of
_________, 1987, by and between PERRITT CAPITAL GROWTH FUND, INC., a
Maryland corporation (hereinafter sometimes referred to as the "Fund"),
and FIRST WISCONSIN TRUST COMPANY, a corporation organized under the laws
of the State of Wisconsin (hereinafter referred to as "Agent").
W I T N E S S E T H :
WHEREAS, the Fund is in the process of registering with the
Securities and Exchange Commission as an open-end management investment
company under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things,
is in the business of administering transfer and dividend disbursing agent
functions for the benefit of tits customers.
NOW, THEREFORE, the Fund and the Agent do mutually promise and
agree as follows:
1. Employment. The Fund hereby employs Agent to act as
Shareholder Servicing Agent for the Fund. Agent 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 Agent. Agent 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 capital stock of the Fund upon receipt of payment; to redeem
or repurchase on behalf of the Fund shares of capital stock of the Fund
upon receipt of certificates properly endorsed or properly executed
written requests as described in the Prospectus of the Fund and to act as
dividend disbursing agent for the Fund.
3. Duties of Agent. Agent 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 the Agent.
C. Transfer shares of capital stock 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.
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,
including, but not necessarily limited to, address
changes and changes in plans (such as systematic
withdrawal, dividend reinvestment, etc.).
I. Prepare and mail a year-to-date confirmation
and statement as each transaction is recorded in a
shareholder account as follows: original to
shareholder, with copy to the Fund. 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.
K. Reports to the Fund:
Daily ----- copies of confirmation
year-to-date statements
with new share balances
and transaction journal
with analysis of
accounts.
Monthly ----- analysis of transactions
and accounts by types.
Quarterly --- state sales analysis;
sales by size; analysis
of systematic
withdrawals, Keogh, IRA
and 403(b)(7) plans;
print-out of shareholder
balances.
L. Daily control and reconciliation of Fund
shares with Agent's records and the Fund office
records.
M. Prepare address labels or confirmations for
four reports to shareholders 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 annual Form 1099 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.
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. Agent 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 Agent in writing.
5. Compensation to Agent. Agent shall be compensated for its
services hereunder as may from time to time be agreed upon in writing
between the two parties. The Fund will reimburse Agent 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 Agent and invoiced to the Fund as mutually agreed upon.
6. Rights and Powers of Agent. Agent's rights and powers with
respect to acting for and on behalf of the Fund, including rights and
powers of Agent'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 Agent 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.
B. Directors, officers, agents and shareholders
of the Fund are or may at any time or times be
interested in Agent as officers, directors, agents,
shareholders, or otherwise. Correspondingly,
directors, officers, agents and shareholders of Agent
are or may at any time or times be interested in the
Fund as directors, officers, agents, shareholders or
otherwise. Agent shall, if it so elects, also have
the right to be a shareholder of the Fund.
C. The services of Agent to the Fund are not to
be deemed exclusive and Agent shall be free to render
similar services to others as long as its services for
others does not in any manner or way hinder, preclude
or prevent Agent from performing its duties and
obligations under this Agreement.
D. The Fund will indemnify the Agent 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 without
negligence and in good faith, and for any act,
omission, delay or refusal made by the Agent 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
____________, 1987.
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 Agent upon ninety (90)
days' written notice to the other party.
9. Amendment. This Agreement may be amended by 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 Agent of the form of amendment which it deems necessary or
advisable and the reasons therefor, and if Agent 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.
PERRITT CAPITAL GROWTH FUND,
INC.
By: _________________________________
Attest: ___________________________
FIRST WISCONSIN TRUST COMPANY
By: _________________________________
Attest: ____________________________
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have issued our report dated December 18, 1997 accompanying the
financial statements of Perritt Capital Growth Fund, Inc., contained in
the Registration Statement and Prospectus. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus.
/s/ Checkers, Simon & Rosner LLP
Chicago, Illinois
February 23, 1998
EXHIBIT 13
PERRITT CAPITAL GROWTH FUND, INC.
STOCK SUBSCRIPTION AGREEMENT
To the Board of Directors of Perritt Capital Growth Fund, Inc:
The undersigned hereby subscribes to Ten Thousand (10,000)
shares of Common Stock, $.01 par value per share, of Perritt Capital
Growth Fund, Inc. ("Common Stock") in consideration for which the
undersigned agrees to transfer to you upon demand cash in the amount of
One Hundred Thousand Dollars ($100,000).
It is understood that the certificate representing Ten
Thousand (10,000) shares of Common Stock shall be issued to the
undersigned forthwith upon receipt by you of payment therefore, and said
shares shall be deemed fully paid and nonassessable.
Dated and effective this ____ day of August, 1987.
_____________________________(SEAL)
Gerald W. Perritt
ACCEPTANCE
The foregoing subscription is hereby accepted. Dated and
effective as of this ____ day of August, 1987.
PERRITT CAPITAL GROWTH FUND,
INC.
By: ______________________________
President
Attest: ___________________________
Secretary
Exhibit 14.1
02/26/98 MCW/GHD/jem
PERRITT CAPITAL MANAGEMENT, INC.
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001
Pension Plan AA - Plan No. 01-002
<PAGE>
PERRITT CAPITAL MANAGEMENT, INC.
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001
Pension Plan AA - Plan No. 01-002
<PAGE>
PERRITT CAPITAL MANAGEMENT, INC.
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
Table of Contents
ARTICLE I INTRODUCTION . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III PARTICIPATION . . . . . . . . . . . . . . . . . . . . 10
Section 3.1. Participation at Effective Date . . . . . . . . . . . 10
Section 3.2. Participation after Effective Date . . . . . . . . . . 10
Section 3.3. Reentry . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.4. Participation by an Owner-Employee of More Than One
Trade or Business . . . . . . . . . . . . . . . . . . 10
ARTICLE IV CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 12
Section 4.1. Employer Profit Sharing Contributions . . . . . . . . 12
Section 4.2. Employer Pension Contributions . . . . . . . . . . . . 14
Section 4.3. Participant Voluntary Contributions . . . . . . . . . 14
Section 4.4. Time for Making Contributions . . . . . . . . . . . . 15
Section 4.5. Leased Employees . . . . . . . . . . . . . . . . . . . 15
Section 4.6. Rollovers and Transfers . . . . . . . . . . . . . . . 15
ARTICLE V. CASH OR DEFERRED ARRANGEMENT (CODE SECTION 401(k)) . . 16
Section 5.1. Cash or Deferred Arrangement (Code Section 401(k)) . . 16
Section 5.2. Elective Deferrals . . . . . . . . . . . . . . . . . . 16
Section 5.3. Matching Contributions . . . . . . . . . . . . . . . . 21
Section 5.4. Qualified Matching Contributions and Qualified
Non-Elective Contributions . . . . . . . . . . . . . . 24
Section 5.5. Special Distribution Rules . . . . . . . . . . . . . . 25
Section 5.6. Definitions . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI SECTION 415 LIMITATIONS . . . . . . . . . . . . . . . 31
Section 6.1. Employers Maintaining Only this Plan . . . . . . . . . 31
Section 6.2. Employers Maintaining Other Master or Prototype
Defined Contribution Plans . . . . . . . . . . . . . . 32
Section 6.3. Employers Maintaining Other Defined Contribution
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.4. Employers Maintaining Defined Benefit Plans . . . . . 33
Section 6.5. Definitions . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . . . . 37
Section 7.1. Separate Accounts . . . . . . . . . . . . . . . . . . 37
Section 7.2. Vesting . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.3. Computation of Vesting Service . . . . . . . . . . . . 37
Section 7.4. Allocation of Forfeitures . . . . . . . . . . . . . . 38
ARTICLE VIII PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . 39
Section 8.1. Benefits Payable Under the Plan . . . . . . . . . . . 39
Section 8.2. Manner of Distributions . . . . . . . . . . . . . . . 40
Section 8.3. Commencement of Payments . . . . . . . . . . . . . . . 44
Section 8.4. Payment of Small Amounts . . . . . . . . . . . . . . . 48
Section 8.5. Persons Under Legal or Other Disability . . . . . . . 49
Section 8.6. Withdrawals from Profit Sharing Plan . . . . . . . . . 49
Section 8.7. Transfer of Benefits to Eligible Retirement Plan . . . 50
ARTICLE IX ESTABLISHMENT OF CUSTODIAL ACCOUNT; INVESTMENTS . . . 51
Section 9.1. Custodial Account . . . . . . . . . . . . . . . . . . 51
Section 9.2. Receipt of Contributions . . . . . . . . . . . . . . . 51
Section 9.3. Investment of Account Assets . . . . . . . . . . . . . 51
Section 9.4. Exclusive Benefit . . . . . . . . . . . . . . . . . . 52
Section 9.5. Expenses . . . . . . . . . . . . . . . . . . . . . . . 52
Section 9.6. Voting . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 9.7. Reports of the Custodian and Administrator . . . . . . 52
Section 9.8. Limitation of Custodian's Duties and Liability . . . . 53
ARTICLE X AMENDMENT AND TERMINATION . . . . . . . . . . . . . . 55
Section 10.1. Amendment . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.2. Termination . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE XI FIDUCIARY RESPONSIBILITIES . . . . . . . . . . . . . . 57
Section 11.1. Administrator . . . . . . . . . . . . . . . . . . . . 57
Section 11.2. Powers of Administrator . . . . . . . . . . . . . . . 57
Section 11.3. Records and Reports . . . . . . . . . . . . . . . . . 57
Section 11.4. Other Administrative Provisions . . . . . . . . . . . 57
Section 11.5. Claims Procedure . . . . . . . . . . . . . . . . . . . 58
Section 11.6. Claims Review Procedure . . . . . . . . . . . . . . . 58
ARTICLE XII AMENDMENT AND CONTINUATION OF ORIGINAL PLAN . . . . . 60
ARTICLE XIII TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . 62
Section 13.1. Effect of Top-Heavy Status . . . . . . . . . . . . . . 62
Section 13.2. Additional Definitions . . . . . . . . . . . . . . . . 62
Section 13.3. Minimum Allocations . . . . . . . . . . . . . . . . . 64
Section 13.4. Benefit Limit Change . . . . . . . . . . . . . . . . . 65
ARTICLE XIV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 66
Section 14.1. Rights of Employees and Participants . . . . . . . . . 66
Section 14.2. Merger With Other Plans . . . . . . . . . . . . . . . 66
Section 14.3. Non-Alienation of Benefits . . . . . . . . . . . . . . 66
Section 14.4. Failure to Qualify . . . . . . . . . . . . . . . . . . 66
Section 14.5. Mistake of Fact; Disallowance of Deduction . . . . . . 67
Section 14.6. Participation under Prototype Plan . . . . . . . . . . 67
Section 14.7. Gender . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 14.8. Headings . . . . . . . . . . . . . . . . . . . . . . . 67
Section 14.9. Governing Law . . . . . . . . . . . . . . . . . . . . 67
<PAGE>
PERRITT CAPITAL MANAGEMENT, INC.
PROTOTYPE DEFINED CONTRIBUTION
RETIREMENT PLAN
ARTICLE I
INTRODUCTION
This Plan, which is made available by Perritt 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
Section 2.1. "Account" means the account or accounts
maintained by the Custodian for a Participant, as described in Article
VII.
Section 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.
Section 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.
Section 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.
Section 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.
Section 2.6. "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.
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.
In addition to other applicable limitations set forth in the
plan, and notwithstanding any other provision of the plan to the contrary,
for plan years beginning on or after January 1, 1994, the annual
Compensation of each employee taken into account under the plan shall not
exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section 401(a)(17)(B)
of the Internal Revenue Code. The cost-of-living adjustment in effect for
a calendar year applies to any period, not exceeding 12 months, over which
compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any
reference in this plan to the limitation under section 401(a)(17) of the
Code shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If Compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the
first day of the first plan year beginning on or after January 1, 1994,
the OBRA '93 annual compensation limit is $150,000.
Section 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.
Section 2.8. "Custodian" means Firstar Trust Company, or any
successor thereto.
Section 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.
Section 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.
Section 2.11. "Effective Date" means the date as of which this
Plan is initially effective as indicated in item 3 of the Adoption
Agreement.
Section 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.
Section 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.
Section 2.14. "Employer" means any entity adopting the Plan.
Section 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).
Section 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).
Section 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.
Section 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 computation period in which the duties
are performed; and
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence. No
more than 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 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.
Section 2.19. "Investment Advisor" means Perritt Capital
Management, Inc.
Section 2.20. "Investment Company" means Perritt Capital Growth
Fund, Inc. and any other regulated investment company(ies) designated by
the Investment Advisor.
Section 2.21. "Investment Company Shares" means the shares of
each Investment Company.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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).
Section 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).
Section 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.
Section 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.
Section 2.33. "Profit Sharing Plan" means the features 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).
Section 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).
Section 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.
Section 2.36. "Valuation Date" means the last day of each Plan
Year and such other times as shall be determined by the Administrator.
Section 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.
Section 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
Section 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.
Section 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.
Section 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.
Section 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 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
Section 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)(1) 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.
Section 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.
(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.
Section 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.
Section 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.
Section 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.
Section 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 Participant 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))
Section 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.
Section 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 Participant 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 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 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 Elective 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.
Section 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
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 Plan. 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 pro rata 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).
Section 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 NonElective
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.
Section 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 Participant's eviction from, or foreclosure on the mortgage of, the
Participant'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.
Section 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 Plan 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 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 compensation 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
receiving Compensation and Plan contributions or benefits equal to the sum
of such Compensation and contributions or benefits of the Family Member
and five percent 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
Section 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.
Section 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 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 Amounts attributed to this Plan shall be
disposed of as provided in Section 6.1(d).
Section 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.
Section 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.
Section 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)(5));
(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 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 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 Article 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(1)(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(1)(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
Section 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.
Section 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.
Section 7.3. Computation of Vesting Service. All of a
Participant's Years of Service with the Employer shall be counted to
determine the 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 canceled hereunder.
Section 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
Section 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.
Section 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
Participant 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 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. This amendment is effective on the first day of the
first plan year beginning on or after December 12, 1994, or, if later, 90
days after December 12, 1994. Notwithstanding any provision of this plan
to the contrary, to the extent that any optional form of benefit under
this plan permits a distribution prior to the employee's retirement,
death, disability, or severance from employment, and prior to plan
termination, the optional form of benefit is not available with respect to
benefits attributable to assets (including the post-transfer earnings
thereon) and liabilities that are transferred, within the meaning of
section 414(l) of the Internal Revenue Code, to this plan from a money
purchase pension plan qualified under section 401(a) of the Internal
Revenue Code (other than any portion of those assets and liabilities
attributable to voluntary employee contributions).
(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 elapsed since the date life expectancy
was first calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and, if life expectancy is being recalculated,
such succeeding calendar year.
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 described 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.
Section 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 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 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; provided that if a distribution is one to which
Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply,
such distribution may commence less than 30 days after the notice required
under Section 1.411(a)-11(c) of the Income Tax Regulations is given,
provided that:
(1) the 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.
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) 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.
Section 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.
Section 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.
Section 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 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.
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.
ARTICLE IX
ESTABLISHMENT OF
CUSTODIAL ACCOUNT; INVESTMENTS
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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 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.
Section 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 liable 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
Section 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 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.
Section 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
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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 claim is deemed denied pursuant to Section 10.5. The
claimant shall be permitted to review pertinent documents. A decisions
shall be rendered by the Employer and communicated to the claimant not
later than sixty (60) days after receipt of claimant's written request for
review. However, if the Employer finds it necessary, due to special
circumstances (for example, the need to hold a hearing), to extend this
period and so notifies the claimant in writing, the decision shall be
rendered as soon as practicable, but in no event later than one hundred
and twenty (120) days after the claimant's request for review. The
employer's decision shall 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 immediately 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
Section 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.
Section 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 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.
Section 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.
Section 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
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
<PAGE>
PERRITT CAPITAL MANAGEMENT, INC.
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT
[STANDARDIZED]
(PROFIT-SHARING PLAN)
The undersigned Employer hereby adopts and establishes the Perritt
Capital Management, Inc. Prototype Defined Contribution Retirement Plan.
This Plan is subject to the terms set forth below in this Adoption
Agreement.
1. EMPLOYER INFORMATION
Name:
Address:
Telephone Number: (___) Employer Identification Number:
Type of Entity: [_] Corporation [_] Partnership
[_] Sole Proprietorship [_] Other (please describe)
Employer's Taxable Year is [_] calendar year or [_] fiscal year beginning
_____________________.
2. PLAN INFORMATION
Plan Administrator (if other than the Employer):
Name:
Address:
Telephone Number: (___) Plan Year is the [_] calendar year,
[_] Employer's fiscal year, or [_] year beginning __________________.
3. EFFECTIVE DATE
Execution of this Adoption Agreement (elect one):
[_] Establishes a new plan. [_]Is an amendment to an Original Plan. This
amendment is effective ____________, 19__.
[_] Is an amendment to an Original Plan under which no further
contributions will be made or participation permitted (a "frozen
plan"). This amendment is effective ______________, 19__. (You need
not complete items 4, 5 or 6 and check item 7(A)(l).)
The Effective Date of the Plan is ____________, 19__. (If this is an
amended plan enter the date the Original Plan first started.)
4. ELIGIBILITY REQUIREMENTS
(A) Please check one:
[_] An Employee need not complete any waiting period.
[_] In order to become a Participant, an Employee must satisfy
the following Age and Service Requirements (please fill in
the blanks):
(1) An Employee must complete ____ (enter 1 or 2 years) Year(s) of
Employment. If more than 1 year is selected, you must also
check item 7(A)(1).
A Year of Employment shall mean the 12 consecutive month period
beginning on the date an Employee first performs an Hour of
Service or an anniversary thereof during which the Employee has
completed _________ (insert 1,000 or less) Hours of Service.
Hours of Service shall be determined on the basis of the method
elected below. Only one method may be elected. The method
elected shall be applied to all Employees covered under the
Plan.
[_] On the basis of actual hours for which an Employee is paid
or entitled to payment.
[_] On the basis of days worked:
An Employee shall be credited with 10 Hours of Service if
the Employee would be credited with at least 1 Hour of
Service during the day.
[_] On the basis of weeks worked:
An Employee shall be credited with 45 Hours of Service if
the Employee would be credited with at least 1 Hour of
Service during the week.
[_] On the basis of months worked:Employee shall be credited
with 190 Hours of Service if the Employee would be credited
with at least 1 Hour of Service during the month.
(2) An Employee must attain age _____ (not greater than age 21).
(B) Union Employees shall be:
[_] Included as eligible employees.
[_] Excluded from participation in the Plan.
Note: Union Employees must be covered by a collective
bargaining agreement between the Employer and employee
representatives under which retirement benefits were the
subject of good faith bargaining. The term "employee
representatives" does not include any organization more than
one-half of whose members are officers, executives or owners
of the Employer.
5. COMPENSATION
(A) A Participant's "Compensation" shall include (check one):
[_] All taxable earnings for the Plan Year.
[_] Only amounts earned after completion of the eligibility
requirements selected in item 4 above.
(B) For any self-employed individual, Compensation means Earned
Income.
6. EMPLOYER PROFIT SHARING CONTRIBUTIONS
(A) The Employer Profit Sharing Contributions for each Plan Year
shall be
(check one):
[_] A discretionary amount determined by the Employer, but not
more than 15% of the aggregate Compensation and Earned
Income of Participants eligible to share in such
contribution for the Plan Year.
[_] An amount equal to ____% (not more than 15%) of the
aggregate Compensation and Earned Income of Participants
eligible to share in such contribution for the Plan Year.
(B) Employer Profit Sharing Contributions:
[_] Shall be made out of Net Profits.[_]May be made without
regard to Net Profits.
(C) Allocation Formulas
The Employer Profit Sharing Contributions (and) forfeitures)
shall be allocated to the accounts of eligible Participants
pursuant to the following formula
(elect one):
(1) [_] Compensation Formula
Employer Profit Sharing Contributions (and forfeitures) shall be
allocated based on each eligible Participant's total Compensation for
the Plan Year.
NOTE: If the Integration Formula is selected under the Pension Plan,
the Compensation Formula must be selected under this Plan.
(2) [_] Integration Formula
Employer Profit Sharing Contributions (and forfeitures) shall be
allocated based on each eligible Participant's Compensation in
excess of the Intregration Level and total Compensation for the
Plan Year, subject to the limitation set forth in Section 4.1(b)
of the Plan.
[_] The Integration Level shall be the taxable wage base for
FICA tax purposes.
[_] The Integration Level shall be $_________ (not to exceed
the FICA taxable wage base).
NOTE: If the Plan is top-heavy all eligible Participants must first
be al1ocated 3% of their total Compensation and any remaining
contributions may be allocated pursuant to the Intregration Formula.
7. VESTING
(A) A Participant shall have a nonforfeitable and fully vested
interest in his Employer Profit Sharing Contribution Account
under the following vesting schedule (check one):
(1) [_] A Participant shall at all times have a nonforfeitable
and fully vested interest.
(2) [_] A Participant shall be fully vested after _____ (not
more than 3) Years of Service.
(3) [_] A Participant shall become vested in accordance with the
following schedule:
Years of Less than 2 2 3 4 5 6 or more
Service
Vested 0% 20% 40% 60% 80% 100%
Percentage
(B) A "Year of Service" shall mean any Plan Year in which an Employee
completes at least ____ (insert 1,000 or less) Hours of Service.
Years of Service shall include all Years of Service with the
Employer except as noted below (check one, both or none).
(1) [_] All Years of Service prior to the effective date of this
Plan (or a predecessor plan) shall be excluded.
(2) [_] All Years of Service before the Plan Year in which the
Participant attained age 18 shall be excluded.
8. CASH OR DEFERRED ARRANGEMENT (Section 401(k))
Please check one:
[_] This Plan will include a cash or deferred arrangement (complete
the remainder of this Section). The Effective Date of this Cash
or Deferred Arrangement (Section 401(k)) is ________________,
19__.
[_] This Plan will not include a cash or deferred arrangement (do
not complete the remainder of this Section).
(A) Elective Deferrals.
(1) An Employee shall be eligible to make Elective Deferrals
under Article V of the Plan upon satisfying the following
eligibility requirements:
[_] An Employee must complete _____ (not greater than 1 year)
Years of Employment.
[_] An Employee must attain age ____ (not greater than
21).[_]Union Employees are excluded from making Elective
Deferrals.
[_] All Employees are eligible to make Elective Deferrals.
(2) An Employee may elect to make Elective Deferrals to the Plan
equal to a percentage of regular salary or wages for a pay
period as specified in a salary reduction agreement. The
maximum percentage of Elective Deferrals shall be _____%.
[_] Elective Deferrals may be based on cash bonuses paid to
the Employee. The maximum percentage of such Elective
Deferrals shall be _____%.
(3) An Employee may change the rate of his Elective Deferrals:
[_] On the first day of each Plan Year.[_]And on the
following additional dates:______________________
(4) [_] Recharacterization of excess contributions will be
available only for non-highly compensated employees.
(B) Matching Contributions
(1) [_] The percentage of Elective Deferrral contributions which
are matched is:[_]____%.
[_] of the first _____% of Elective Deferrals.[_]A
percentage determined by the Employer, but will not be
more than 100%.
(2) Matching Contributions are made:
[_] Each pay period in which Elective Deferrals are made.
[_] At the end of the Plan Year for Employees meeting the
requirements for annual contributions.
(3) Matching Contributions will vest under the following schedule
(elect one):
[_] Employee shall at all times have a nonforfeitable and
fully vested interest in any Matching Contributions.
[_] An Employee shall be fully vested in any Matching
Contributions after ____ (not more than 3) Years of
Service.
[_] An Employee shall become vested in any Matching
Contributions in accordance with the following schedule:
Nonforfeitable
Years of Less than 2 2 3 4 5 6 or more
Service
Vested 0% 20% 40% 60% 80% 100%
Percentage
(C) Special Contributions
[_] The Employer may make Qualified Matching Contributions
subject to Section 5.4 of the Plan.
[_] The Employer may make Qualified Non-Elective Contributions,
subject to Section 5.4 of the Plan.
Note: These special contributions are used to satisfy the
nondiscrimination tests which apply to elective deferral and
matching contributions.
(D) Hardship Withdrawals
[_] Withdrawals on account of financial hardship are allowed in
accordance with Section 5.5(a) of the Plan.
[_] Withdrawals on account of financial hardship are not allowed.
9. PARTICIPANT AFTER-TAX CONTRIBUTIONS
Participant Voluntary Contributions (check one):
[_] Participant Voluntary Contributions are permitted.
[_] Participant Voluntary Contributions are permitted only for
non-highly compensated employees.
[_] Participant Voluntary Contributions are not permitted.
10. WITHDRAWAL OF EMPLOYER PROFIT SHARING CONTRIBUTIONS
[_] A Participant who has participated in the Plan for at least 5
years may withdraw up to _____% of his vested Employer Profit
Sharing Contribution Account after attaining age 59-1/2 or on
account of a financial hardship in accordance with Section 8.6
of the Plan.
Note: Withdrawals are not permitted if the Integration Formula
is selected in item 6(C)(2).
[_] Withdrawals are not permitted.
11. NORMAL RETIREMENT AGE
The Normal Retirement Age shall be age ___ [insert an age not to
exceed 65].
12. LIMITATION ON ALLOCATIONS
"Limitation Year", if other than a calendar year, shall mean the 12
consecutive month period ending on the last day of
_______________________.
Follow these instructions only if the Employer maintains (or has ever
maintained) another qualified plan (other than the Pension Plan)
which is either (i) a qualified defined contribution plan other than
a Master or Prototype Plan or (ii) a qualified defined benefit plan
in which any Participant in this Plan is (or was) a participant or
could become a participant, or if the Employer maintains a welfare
benefit fund or an individual medical account.
To comply with Internal Revenue Code requirements, please attach
appropriate provisions that limit the amount of Annual Additions
allocated to any Participant's Account.
If you do not attach the appropriate provisions, Sections 6.3. and
6.4 of the Plan will automatically apply.
13. TOP-HEAVY PROVISIONS
The interest rate and mortality assumptions for determining Top-Heavy
status shall be the assumptions designated under Section 13.2(h) of
the Plan, unless different assumptions are selected below.
The interest rate and mortality assumptions for determining present
values to compute the Top-Heavy ratio shall be:
Interest Rate: _____% Mortality Table:
_____________________________
14. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Custodian shall establish individual
Custodial Accounts for each Participant.
[_] The Custodian shall establish a single Custodial Account in
the name of the Employer and the Employer shall keep all
records for the individual Participants.
(B) Unless elected below, a Participant shall be permitted to direct
the investment of his Account balance.
[_] Participant self-direction of the investment of his Account
balance is not permitted.
15. CUSTODIAN
The undersigned as Employer hereby appoints First Wisconsin Trust
Company as Custodian.
16. FEES
The Custodian shall receive fees for its services in respect to each
Participant's Account in accordance with the attached fee schedule.
The fee schedule may be changed by the Custodian with advance notice.
If not separately included, any acceptance fee listed in the attached
schedule will be deducted from the initial contribution received from
the Employer. Any acceptance or other Custodian fees included will
be deducted equally from each Owner-Employee's contribution or
Account. Annual maintenance fees for each Participant's Account and
any fees directly related to activity in that Participant's Account
shall be deducted annually and activity fees will be deducted at the
time incurred. Sufficient Investment Company Shares will be redeemed
to cover this fee.
Extraordinary services 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.
17. REPRESENTATION OF EMPLOYER
The Employer represents that it has consulted its legal and tax
advisors with respect to the Plan. The Employer acknowledges that it
may not continue participation under the Plan if it fails to attain
or maintain tax qualification of the Plan or if it amends the Plan
other than by a change in the Adoption Agreement. The Employer
agrees that whenever a Participant Contribution is made, the Employer
will determine that the Participant has received the appropriate
current Investment Company prospectus. The Employer represents that
the Participant has received suchprospectus by depositing
contributions with the Custodian.
The Employer acknowledges that if it has ever maintained or later
adopts any plan (including after December 3l, l985, a welfare benefit
fund, as defined in Code Section 4l9(e), which provides
post-retirement medical benefits allocated to separate accounts for
key employees, as defined in Code Section 4l9A(d)(3) or an individual
medical account, as defined in Code Section 4l5(l)(2)) in addition to
this Plan (or the Pension Plan), it may not rely on an opinion letter
issued by the National Office of the Internal Revenue Service as
evidence that this Plan is qualified under Code Section 40l. If the
Employer adopts or maintains multiple plans and wishes reliance that
the Plan is qualified, application for an individual determination
letter should be made to the appropriate District Office of the
Internal Revenue Service.
18. ADDITIONAL INFORMATION
This Plan is sponsored by:
Perritt Capital Management, Inc.
680 North Lakeshore Drive
Tower Residence, Suite 2038
Chicago, Illinois 60611
(312) 649-6940
Further information regarding this Plan may be obtained by contacting
the Plan Sponsor at the address or telephone number listed above.
The Plan Sponsor will inform the undersigned Employer of any
amendments made to this Plan or of the discontinuance or abandonment
of this Plan.
Failure to properly fill out this Adoption Agreement may result in
disqualification of this Plan.
This Adoption Agreement can only be used with Plan document No. 01.
Signature of Employer:
Name of person signing above (please print):
Date:
CUSTODIAN ACCEPTANCE
The undersigned hereby accepts appointment as Custodian under the
Plan.
FIRST WISCONSIN TRUST COMPANY
By:_______________________________ Date: ____________________________
Exhibit 14.2
PERRITT INVESTMENTS, INC.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
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 distributions are
required to begin to the Depositor under Paragraph 3, or to the surviving
spouse under Paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Depositor and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The Depositor's entire interest in the custodial account
must be, or begin to be, distributed by the Depositor's required beginning
date, (April 1 following the calendar year end in which the Depositor
reaches age 70 1/2). By that date, the Depositor may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a
specified period that may not be longer than the Depositor's life
expectancy.
(e) Equal or substantially equal annual payments over a
specified period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
4. If the Depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the Depositor dies on or after distribution of his or
her interest has begun, distribution must continue to be made in
accordance with Paragraph 3.
(b) If the Depositor dies before distribution of his or her
interest has begun, the entire remaining interest will, at the election of
the Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing
the fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments
over the life or life expectancy of the designated
beneficiary or beneficiaries starting by December 31 of the
year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving
spouse, then this distribution is not required to begin
before December 31 of the year in which the Depositor would
have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting
the requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(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 designed
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.
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 Perritt 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 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 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 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.
2. Amendment and Termination. (a) The Custodian 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 or her beneficiaries.
(b) The Depositor may terminate the custodial account at any
time by delivering to the Custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the Depositor or his or her beneficiaries of its entire
balance.
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 and 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 set forth in a schedule provided to the
Depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the Depositor, or reinvested or transferred in
accordance with the Depositor's instructions.
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 his or her 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 at Perritt Investments, Inc., c/o Firstar
Trust Company, Mutual Fund Services, 615 East Michigan Street, 3rd Floor,
P.O. Box 701, Milwaukee, WI 53201-0701, or the Depositor at his 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;
(b) If the spouse shall predecease the Depositor or if the
Depositor does not have a spouse, then to the personal representative of
the Depositor's estate.
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.
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. 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.
10. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
<PAGE>
PERRITT INVESTMENTS, INC.
ROTH INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing a Roth IRA
(under Section 408A of the Internal Revenue Code) between the depositor
and the custodian.
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion
IRA, then, except in the case of a rollover contribution described in
section 408A(e), the custodian will accept only cash contributions and
only up to a maximum amount of $2,000 for any tax year of the depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the same
tax year will be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to
$0 between certain levels of adjusted gross income (AGI). For a single
depositor, the $2,000 annual contribution is phased out between AGI of
$95,000 and $110,000; for a married depositor who files jointly, between
AGI of $150,000 and $160,000; and for a married depositor who files
separately, between $0 and $10,000. In the case of a conversion, the
custodian will not accept IRA Conversion Contributions in a tax year if
the depositor's AGI for that tax year exceeds $100,000 or if the depositor
is married and files a separate return. Adjusted gross income is defined
in section 408A(c)(3) and does not include IRA Conversion Contributions.
ARTICLE III
The depositor's interest in the balance in the custodial account
if nonforfeitable.
ARTICLE IV
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of section 408(m) except as otherwise
permitted by section 408(m)(3), which provides an exception for certain
gold, silver, and platinum coins, coins issued under the laws of any
state, and certain bullion.
ARTICLE V
1. If the depositor dies before his or her entire interest is
distributed to him or her and the grantor's surviving spouse is not the
sole beneficiary, the entire remaining interest will, at the election of
the depositor or, if the depositor has not so elected, at the election of
the beneficiary or beneficiaries, either.
(a) Be distributed by December 31 of the year containing the
fifth anniversary of the depositor's death, or
(b) Be distributed over the life expectancy of the designated
beneficiary starting no later than December 31 of the year following the
year of the depositor's death.
If distributions do not begin by the date described in (b),
distribution method (a) will apply.
2. In the case of distribution method 1.(b) above, to
determine the minimum annual payment for each year, divide the grantor's
entire interest in the trust as of the close of business on December 31 of
the preceding year by the life expectancy of the designated beneficiary
using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence
and subtract 1 for each subsequent year.
3. If the depositor's spouse is the sole beneficiary on the
depositor's date of death, such spouse will then be treated as the
depositor.
ARTICLE VI
1. The depositor agrees to provide the custodian with
information necessary for the custodian to prepare any reports required
under section 408(i) and 408A(d)(3)(E), regulations sections 1.408-5 and
1.408-6, and under guidance published by the Internal Revenue Service.
2. The custodian agrees to submit reports to the Internal
Revenue Service and the depositor prescribed by the Internal Revenue
Service.
ARTICLE VII
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through IV and this sentence
will be controlling. Any additional articles that are not consistent with
section 408A, the related regulations, and other published guidance will
be invalid.
ARTICLE VIII
This Agreement will be amended from time to time to comply with
the provisions of the Code, related regulations, and other published
guidance. Other amendments may be made with the consent of the persons
whose signatures appear below.
ARTICLE IX
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 Perritt 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 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 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 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.
2. Amendment and Termination. (a) The custodian 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 or her beneficiaries.
(b) The depositor may terminate the custodial account at any
time by delivering to the custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the depositor or his or her beneficiaries of its entire
balance.
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 and 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 set forth in a schedule provided to the
depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the depositor, or reinvested or transferred in
accordance with the depositor's instructions.
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 his or her 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 at Perritt Investments, Inc., c/o Firstar
Trust Company, Mutual Fund Services, 615 East Michigan Street, 3rd Floor,
P.O. Box 701, Milwaukee, WI 53201-0701, or the depositor at his 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;
(b) If the spouse shall predecease the depositor or if the
depositor does not have a spouse, then to the personal representative of
the depositor's estate.
6. 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.
7. Rollover Contributions and Transfers. Subject to the
restrictions in Article I, 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.
8. Conflict in Provisions. To the extent that any provisions
of this Article VIII shall conflict with the provisions of Articles V, VI
and/or VIII, the provisions of this Article IX shall govern.
9. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
<PAGE>
PERRITT INVESTMENTS, INC.
EDUCATION INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The depositor whose name appears above is establishing an
education individual retirement custodial account under section 530 for
the benefit of the designated beneficiary whose name appears above
exclusively to pay for the qualified higher education expenses, within the
meaning of section 530(b)(2), of such designated beneficiary.
The custodian named above has provided the depositor with a
concise statement disclosing the provisions governing section 530. This
disclosure statement must include an explanation of the statutory
requirements applicable to, and the income tax consequences of
establishing and maintaining an account under, section 530. Providing the
depositor with a copy of Notice 97-60, 1997-46 I.R.B. 8 (November 17,
1997) is considered a sufficient disclosure statement. The custodian also
will provide a copy of this form and the disclosure statement to the
responsible individual, as defined in Article VI below, if the responsible
individual is not the same person as the depositor.
The depositor assigned the custodial account
_______________________ dollars ($____________) in cash.
The depositor and the custodian make the following agreement:
ARTICLE I
The custodian may accept additional cash contributions. These
contributions may be from the depositor, or from any other individual, for
the benefit of the designated beneficiary, provided the designated
beneficiary has not attained the age of 18 as of the date such
contributions are made. Total contributions that are not rollover
contributions described in section 530(d)(5) are limited to a maximum
amount of $500 for the taxable year.
ARTICLE II
The maximum aggregate contribution that an individual may make
to the custodial account in any year may not exceed the $500 in total
contributions that the custodial account can receive. In addition, the
maximum aggregate contribution that an individual may make to the
custodial account in any year is phased out for unmarried individuals who
have modified adjusted gross income (AGI) between $95,000 and $110,000 for
the year of the contribution and for married individuals who file joint
returns with modified AGI between $150,000 and $160,000 for the year of
the contribution. Unmarried individuals with modified AGI above $110,000
for the year and married individuals who file joint returns and have
modified AGI above $160,000 for the year may not make a contribution for
that year. Modified AGI is defined in section 530(c)(2).
ARTICLE III
No part of the custodial account 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 investment fund (within
the meaning of section 530(b)(1)(D)).
ARTICLE IV
1. Any balance to the credit of the designated beneficiary on
the date on which such designated beneficiary attains age 30 shall be
distributed to the designated beneficiary within 30 days of such date.
2. Any balance to the credit of the designated beneficiary
shall be distributed to the estate of the designated beneficiary within 30
days of the date of such designated beneficiary's death.
ARTICLE V
The depositor shall have the power to direct the custodian
regarding the investment of the above-listed amount assigned to the
custodial account (including earnings thereon) in the investment choices
offered by the custodian. The responsible individual, however, shall have
the power to redirect the custodian regarding the investment of such
amounts, as well as the power to direct the custodian regarding the
investment of all additional contributions (including earnings thereon) to
the custodial account. In the event that the responsible individual does
not direct the custodian regarding the investment of additional
contributions (including earnings thereon), the initial investment
direction of the depositor also will govern all additional contributions
made to the custodial account until such time as the responsible
individual otherwise directs the custodian. Unless otherwise provided in
this agreement, the responsible individual also shall have the power to
direct the custodian regarding the administration, management, and
distribution of the account.
ARTICLE VI
The "responsible individual" named by the depositor shall be a
parent or guardian of the designated beneficiary. The custodial account
shall have only one responsible individual at any time. If the
responsible individual becomes incapacitated or dies while the designated
beneficiary is a minor under state law, the successor responsible
individual shall be the person named to succeed in that capacity by the
preceding responsible individual in a witnessed writing or, if no
successor is so named, the successor responsible individual shall be the
designated beneficiary's other parent or successor guardian. Unless
otherwise directed by checking the option below, at the time that the
designated beneficiary attains the age of majority under state law, the
designated beneficiary becomes the responsible individual.
______ Option (This provision is effective only if checked):
The responsible individual shall continue to serve as the responsible
individual for the custodial account after the designated beneficiary
attains the age of majority under state law and until such time as all
assets have been distributed from the custodial account and the custodial
account terminates. If the responsible individual becomes incapacitated
or dies after the designated beneficiary reaches the age of majority under
state law, the responsible individual shall be the designated beneficiary.
ARTICLE VII
The responsible individual ____ may or ____ may not change the
beneficiary designated under this agreement to another member of the
designated beneficiary's family described in section 529(e)(2) in
accordance with the custodian's procedures.
ARTICLE VIII
1. The depositor agrees to provide the custodian with the
information necessary for the custodian to prepare any reports required
under section 530(h).
2. The custodian agrees to submit reports to the Internal
Revenue Service and the responsible individual as prescribed by the
Internal Revenue Service.
ARTICLE IX
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through IV will be controlling.
Any additional articles that are not consistent with section 530 and
related regulations will be invalid.
ARTICLE X
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 depositor and the custodian whose
signatures appear below.
ARTICLE XI
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 Perritt Investments,
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 designated beneficiary's account number and shall be accompanied by a
signed statement directing the investment of that contribution into the
designated beneficiary's account. The custodian may return to the
contributor, without liability for interest thereon, any contribution
which is not accompanied by such information and such 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 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 in
additional like shares or in cash, 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
designated beneficiary shall be the beneficial owner of all Investment
Company Shares held in the custodial account and the custodian shall not
vote any such shares, except upon written direction of the responsible
individual. The custodian agrees to forward to the responsible individual
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 responsible individual 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.
(f) To the extent a responsible individual for the designated
beneficiary makes or has power to make decisions as to the investment of
the designated beneficiary's account, that party acknowledges that such
decisions are binding and nonvoidable.
2. Amendment and Termination. (a) The custodian may amend
the Custodial Account (including retroactive amendments) by delivering to
the responsible individual written notice of such amendment setting forth
the substance and effective date of the amendment. The responsible
individual shall be deemed to have consented to any such amendment not
objected to in writing by the responsible individual 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 designated
beneficiary or his or her estate.
(b) The responsible individual may terminate the custodial
account at any time by delivering to the custodian a written notice of
such termination.
(c) The custodial account shall automatically terminate upon
distribution to the designated beneficiary or his or her estate of its
entire balance.
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 and 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 beneficiary or
his or her estate.
The custodian's fees are set forth in a schedule provided to the
responsible individual. Extraordinary charges resulting from unusual
administrative responsibilities not contemplated by the schedule will be
subject to such additional charges as will reasonably compensate the
custodian. Fees for refund of excess contributions, transferring to a
successor trustee or custodian, or redemption/reinvestment of Investment
Company Shares will be deducted from the refund or redemption proceeds and
the remaining balance will be remitted to the designated beneficiary, or
reinvested or transferred in accordance with the responsible individual's
instructions.
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
responsible individual 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 at Perritt Capital Management, Inc., c/o
Firstar Trust Company, Mutual Fund Services, 615 East Michigan Street, 3rd
floor, P.O. Box 701, Milwaukee, WI 53201-0701 or the responsible
individual at his most recent address shown in the custodian's records.
The responsible individual agrees to advise the custodian promptly, in
writing, of any change of address.
5. Monitoring of Contribution Limitations Information. The
custodian shall not be responsible for monitoring the amount of
contributions made to the designated beneficiary's account or the income
levels of any depositor or contributor for purposes of assuring compliance
with applicable state or federal tax laws.
6. 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. However, the responsible individual
may change the designated beneficiary under the agreement to another
member of the designated beneficiary's family described in Internal
Revenue Code Section 529(e)(2) in accordance with the custodian's
procedures.
7. 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.
8. Conflict in Provisions. To the extent that any provisions
of this Article XI on the Education IRA Application shall conflict with
the provisions of Articles V through VIII or X, the provisions of this
Article XI shall govern.
9. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
PERRITT INVESTMENTS, INC.
SIMPLE INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The participant whose name appears above is establishing a
savings incentive match plan for employees of small employers individual
retirement account (SIMPLE IRA) under sections 408(a) and 408(p) to
provide for his or her retirement and for the support of his or her
beneficiaries after death.
The custodian named above has given the participant the
disclosure statement required under Regulations section 1.408-6.
The participant and the custodian make the following agreement:
ARTICLE I
The custodian will accept cash contributions made on behalf of
the participant by the participant's employer under the terms of a SIMPLE
plan described in section 408(p). In addition, the custodian will accept
transfers or rollovers from other SIMPLE IRAs of the participant. No
other contributions will be accepted by the custodian.
ARTICLE II
The participant's interest in the balance in the custodial
account is nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of section 408(a)(5)).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of section 408(m)) except as otherwise
permitted by section 408(m)(3), which provides an exception for certain
gold, silver, and platinum coins, coins issued under the laws of any
state, and certain bullion.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the
contrary, the distribution of the participant's interest in the custodial
account shall be made in accordance with the following requirements and
shall otherwise comply with section 408(a)(6) and Proposed Regulations
section 1.408-8, including the incidental death benefit provisions of
Proposed Regulations section 1.401(a)(9)-2, the provisions of which are
incorporated by reference.
2. Unless otherwise elected by the time distributions are
required to begin to the participant under paragraph 3, or to the
surviving spouse under paragraph 4, other than in the case of a life
annuity, life expectancies shall be recalculated annually. Such election
shall be irrevocable as to the participant and the surviving spouse and
shall apply to all subsequent years. The life expectancy of a nonspouse
beneficiary may not be recalculated.
3. The participant's entire interest in the custodial account
must be, or begin to be, distributed by the participant's requested
beginning date (April 1 following the calendar year end in which the
participant reaches age 70-1/2). By that date, the participant may elect, in
a manner acceptable to the custodian, to have the balance in the custodial
account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or
substantially equal monthly, quarterly, or annual payments over the life
of the participant.
(c) An annuity contract that provides equal or
substantially equal monthly, quarterly, or annual payments over the joint
and last survivor lives of the participant and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a
specified period that may not be longer than the participant's life
expectancy.
(e) Equal or substantially equal annual payments over a
specified period that may not be longer than the joint life and last
survivor expectancy of the participant and his or her designated
beneficiary.
(f) If the participant dies before his or her entire
interest is distributed to him or her, the entire remaining interest will
be distributed as follows:
(g) If the participant dies on or after distribution of
his or her interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(h) If the participant dies before distribution of his or
her interest has begun, the entire remaining interest will, at the
election of the participant or, if the participant has not so elected, at
the election of the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the
year containing the fifth anniversary of the
participant's death, or
(ii) Be distributed in equal or substantially
equal payments over the life or life
expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the
year following the year of the participant's
death. If, however, the beneficiary is the
participant's surviving spouse, then this
distribution is not required to begin before
December 31 of the year in which the
participant would have reached age 70-1/2.
(c) Except where distribution in the form of an annuity
meeting the requirements of section 408(b0(3) and its related regulations
has irrevocably commenced, distributions are treated as having begun on
the participant's required beginning date, even though payments may
actually have been made before that date.
(d) If the participant dies before his or her entire
interest has been distributed and if the beneficiary is other than the
surviving spouse, no additional cash contributions or rollover
contributions may be accepted in the account.
5. In the case of a distribution over life expectancy in equal
or substantially equal annual payments, to determine the minimum annual
payment for each year, divide the participant's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the participant (or the joint
life and last survivor expectancy of the participant and the participant's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the participant and
designated beneficiary as of their birthdays in the year the participant
reaches age 70-1/2. In the case of a distribution in accordance with
paragraph 4(b)(ii), determine life expectancy using the attained age of
the designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may
use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements described above. This
method permits an individual to satisfy these requirements by taking from
one individual retirement account the amount required to satisfy the
requirement for another.
ARTICLE V
1. The participant agrees to provide the custodian with
information necessary for the custodian to prepare any report required
under sections 408(i) and 408(l)(2) and Regulations sections 1.408-5 and
1.408-6.
2. The custodian agrees to submit reports to the Internal
Revenue Service and the participant as prescribed by the Internal Revenue
Service.
3. The custodian also agrees to provide the participant's
employer the summary description described in section 408(l)(2) unless
this SIMPLE IRA is a transfer SIMPLE IRA.
ARTICLE VI
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through III and this sentence
will be controlling. Any additional articles that are not consistent with
sections 408(a) and 408(p) and the related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with
the provisions of the Code and related regulations. Other amendments may
be made with the consent of the persons whose signatures appear 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 Perritt 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 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 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
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.
2. Amendment and Termination. (a) The Custodian 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 or her beneficiaries.
(b) The Depositor may terminate the custodial account at
any time by delivering to the Custodian a written notice of such
termination.
(c) The custodial account shall automatically terminate
upon distribution to the Depositor or his or her beneficiaries of its
entire balance.
(d) 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 and 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 set forth in a schedule provided to the
Depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the Depositor, or reinvested or transferred in
accordance with the Depositor's instructions.
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 his or her 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 at Perritt Investments, Inc., c/o
Firstar Trust Company, Mutual Fund Services, 615 East Michigan Street, 3rd
Floor, P.O. Box 701, Milwaukee, WI 53201-0701, or the Depositor at his
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;
(b) If the spouse shall predecease the Depositor or if the
Depositor does not have a spouse, then to the personal representative of
the Depositor's estate.
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.
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. 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.
10. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
<PAGE>
PERRITT INVESTMENTS, INC.
Article I Employee Requirements (Complete appropriate box(es) and
blanks-see instructions)
1 General Eligibility Requirements. The Employer agrees to permit
salary reduction contributions to be made in each calendar year to the
SIMPLE IRA established by each employee who meets the following
requirements (select either 1a or 1b):
a [_] Full Eligibility. All employees are eligible.
b [_] Limited Eligibility. Eligibility is limited to employees who
are described in both (i) and (ii) below:
(i) Current compensation. Employees who are reasonably
expected to receive at least $_____________ in compensation (not to exceed
$5,000) for the calendar year.
(ii) Prior compensation. Employees who have received at
least $___________ in compensation (not to exceed $5,000) during any
_______ calendar year(s) (insert 0, 1, or 2) preceding the calendar year.
2 Excludable Employees (OPTIONAL)
[_] The Employer elects to exclude employees covered under a
collective bargaining agreement for which retirement benefits were the
subject of good faith bargaining.
Article II-Salary Reduction Agreements (Complete the box and blank, if
appropriate-see instructions.)
1 Salary Reduction Election. An eligible employee may make a salary
reduction election to have his or her compensation for each pay period
reduced by a percentage. The total amount of the reduction in the
employee's compensation cannot exceed $6,000* for any calendar year.
2 Timing of Salary Reduction Elections
a For a calendar year, an eligible employee may make or modify a salary
reduction election during the 60-day period immediately preceding January
1 of that year. However, of for the year in which the employee becomes
eligible to make salary reduction contributions, the period during which
the employee may make or modify the election is a 60-day period that
includes either the date the employee becomes eligible or the day before.
b In addition to the election in 2a, eligible employees may make salary
reduction elections or modify prior elections _______________ (If the
Employer chooses this option, insert a period or periods (e.g. semi-
annually, quarterly, monthly, or daily) that will apply uniformly to all
eligible employees.)
c No salary reduction election may apply to compensation that an
employee received, or had a right to immediately receive, before execution
of the salary reduction election.
d An employee may terminate a salary reduction election at any time
during the calendar year. [_] If this box is checked, an employee who
terminates a salary reduction election not in accordance with 2b may not
resume salary reduction contributions during the calendar year.
Article III-Contributions (Complete the blank, if appropriate-see
instructions.)
1 Salary Reduction Contributions. The amount by which an employee
agrees to reduce his or her compensation will be contributed by the
Employer to the employee's SIMPLE IRA.
2 Other Contributions
a Matching Contributions
(i) For each calendar year, the Employer will contribute a matching
contribution to each eligible employee's SIMPLE IRA equal to the
employee's salary education contributions up to a limit of 3% of the
employee's compensation for the calendar year.
(ii) The Employer may reduce the 3% limit for the calendar year in
(i) only if:
(1) The limit is not reduced below 1%; (2) The limit is not
reduced for more than 2 calendar years during the 5-year period ending
with the calendar year the reduction is effective; and (3) Each employee
is notified of the reduced limit within a reasonable period of time before
the employees' 60-day election period for the calendar year (described in
Article II, item 2a).
b Nonelective Contributions
(i) For any calendar year, instead of making matching contributions
the Employer may make nonelective contributions equal to 2% of
compensation for the calendar year to the SIMPLE IRA of each eligible
employee who has at least $______________ (not more than $5,000) in
compensation for the calendar year. No more than $160,000 in compensation
can be taken into account in determining the nonelective contribution for
each eligible employee.
__________________
*This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
(ii) For any calendar year, the Employer may make 2% nonelective
contributions instead of matching contributions only if:
(1) Each eligible employee is notified that a 2% nonelective
contribution will be made instead of a matching contribution; and
(2) This notification is provided within a reasonable period of time
before the employees' 60-day election period for the calendar year
(described in Article II, item 2a).
Time and Manner of Contributions
a The Employer will make the salary reduction contributions
(described in 1 above) for each eligible employee to the SIMPLE IRA
established at the financial institution selected by that employee no
later than 30 days after the end of the month in which the money is
withheld from the employee's pay. See instructions.
b The Employer will make the matching or nonelective contributions
(described in 2a and 2b above) for each eligible employee to the SIMPLE
IRA established at the financial institution selected by that employee no
later than the due date for filing the Employer's tax return, including
extensions, for the taxable year that includes the last day of the
calendar year for which the contributions are made.
Article IV-Other Requirements and Provisions
1 Contributions in General. The Employer will make no contributions to
the SIMPLE IRAs other than salary reduction contributions (described in
Article III, item 1) and matching or nonelective contributions (described
in Article III, items 2a and 2b).
2 Vesting Requirements. All contributions made under this SIMPLE plan
are fully vested and nonforfeitable.
3 No Withdrawal Restrictions. The Employer may not require the
employee to retain any portion of the contributions in his or her SIMPLE
IRA or otherwise impose any withdrawal restrictions.
4 Selection of IRA Trustee. The employer must permit each eligible
employee to select the financial institution that will serve as the
trustee, custodian, or issuer of the SIMPLE IRA to which the employer will
make all contributions on behalf of that employee.
5 Amendments To This SIMPLE Plan. This SIMPLE plan may not be amended
except to modify the entries inserted in the blanks or boxes provided in
Articles I, II, III, VI, and VII.
6 Effects of Withdrawals and Rollovers
a An amount withdrawn from the SIMPLE IRA is generally includible
in gross income. However, a SIMPLE IRA balance may be rolled over or
transferred on a tax-free basis to another IRA designed solely to hold
funds under a SIMPLE plan. In addition, an individual may roll over or
transfer his or her SIMPLE IRA balance to any IRA on a tax-free basis
after a 2-year period has expired since the individual first participate
in a SIMPLE plan. Any rollover or transfer must comply with the
requirements under section 408.
b If an individual withdraws an amount from a SIMPLE IRA during
the 2-year period beginning when the individual first participate in a
SIMPLE plan and the amount is subject to the additional tax on early
distributions under section 72(t), this additional tax is increased from
10% to 25%.
Article V-Definitions
1 Compensation
a General Definition of Compensation. Compensation means the sum
of wages, tips, and other compensation from the Employer subject to
federal income tax withholding (as described in section 6051(a)(3)) and
the employee's salary reduction contributions made under this plan, and if
applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a
section 403(b) annuity contract and compensation deferred under a section
45 plan required to be reported by the Employer on Form W-2 (as described
in section 6051(a)(8)).
b Compensation for Self-Employed Individuals. For self-employed
individuals, compensation means that net earnings from self-employment
determined under section 1402(a) prior to subtracting any contributions
made pursuant to this plan on behalf of the individual.
2 Employee. Employee means a common-law employee of the Employer. The
term employee also includes a self-employed individual and a leased
employee described in section 414(n) but does not include a nonresident
alien who received no earned income from the Employer that constitutes
income from sources within the United States.
Eligible Employee. An eligible employee means an employee who satisfies
the conditions in Article I, item 1 and is not excluded under Article I,
item 2.
4 SIMPLE IRA. A SIMPLE IRA is an individual retirement account
described in section 408(a), or an individual retirement annuity described
in section 408(b), to which the only contributions that can be made are
contributions under SIMPLE plan and rollovers or transfers from another
SIMPLE IRA.
Article VI-Procedures for Withdrawal. (The employer will provide each
employee with the procedures for withdrawals of contributions received by
the financial institution selected by that employee, and that financial
institution's name and address (by attaching that information or inserting
it in the space below) unless: (1) that financial institution's
procedures are unavailable, or (2) that financial institution provides the
procedures directly to the employee. See Employee Notification section in
the instructions.
Article VII-Effective Date
This SIMPLE plan is effective _________________________________ (See
instructions.)
* * * *
Name of Employer By: Signature Date
Address of Employer Name and title
Model Notification to Eligible Employees
I. Opportunity to Participate in the SIMPLE Plan
You are eligible to make salary reduction contributions to the
___________ SIMPLE plan. This notice and the attached summary description
provide you with information that you should consider before you decide
whether to start, continue, or change your salary reduction agreement.
II. Employer Contribution Election
For the ______ calendar year, the employer elects to contribute to
your SIMPLE IRA (employer must select either (1), (2) or (3)):
(1) A matching contribution equal to your salary reduction
contributions up to a limit of 3% of your compensation for the
year.
(2) A matching contribution equal to your salary reduction
contributions up to a limit of ______% (employer must insert a
number from 1 to 3 and is subject to certain restrictions) of
your compensation for the year; or
(3) A nonelective contribution equal to 2% of your compensation for
the year (limited to $160,000) if you are an employee who makes
at least $__________ (employer must insert an amount that is
$5,000 or less) in compensation for the year.
III. Administrative Procedures
If you decide to start or change your salary reduction agreement, you
must complete the salary reduction agreement and return it to
___________________________________ (employer should designate a place or
individual) by _____________________ (employer should insert a date that
is not less than 60 days after notice is given).
IV. Employee Selection of Financial Institution
You must select the financial institution that will serve as the
trustee, custodian, issuer or your SIMPLE IRA and notify your employer of
your selection.
Model Salary Reduction Agreement
I. Salary Reduction Election
Subject to the requirements of the SIMPLE plan of
___________________________ (name of employer) I authorize __________% or
$____________ (which equals ________% of my current rate of pay) to be
withheld from my pay for each pay period and contributed to my SIMPLE IRA
as a salary reduction contribution.
II. Maximum Salary Reduction
I understand that the total amount of my salary reduction
contributions in any calendar year cannot exceed $6,000.
III. Date Salary Reduction Begins
I understand that my salary reduction contributions will start as
soon as permitted under the SIMPLE plan and as soon as administratively
feasible or, if later, ____________. (Fill in the date you want the
salary reduction contributions to begin. The date must be after you sign
this agreement).
IV. Employee Selection of Financial Institution
I select the following financial institution to serve as the trustee,
custodian, or issuer of my SIMPLE IRA.
____________________________________________
Name of financial institution
____________________________________________
Address of financial institution
____________________________________________
SIMPLE IRA account name and number
I understand that I must establish a SIMPLE IRA to receive any
contributions made on my behalf under this SIMPLE plan. If the
information regarding my SIMPLE IRA is incomplete when I first submit my
salary reduction agreement, I realize that it must be completed by the
date contributions must be made under the SIMPLE plan. If I fail to
update my agreement to provide this information by that date, I understand
that my employer may select a financial institution of my SIMPLE IRA.
V. Duration of Election
This salary reduction agreement replaces any earlier agreement and
will remain in effect as long as I remain an eligible employee under the
SIMPLE plan or until I provide my employer with a request to end my salary
reduction contributions or provide a new salary reduction agreement as
permitted under this SIMPLE plan.
Signature of employee ___________________________
Date ___________________________
PERRITT INVESTMENTS, INC. SIMPLIFIED EMPLOYEE PENSION
Instructions
Section references are to the Internal Revenue Code unless otherwise
noted.
Purpose of Form
Form 5305-SEP (Model SEP) is used by an employer to make an agreement to
provide benefits to all eligible employees under a SEP described in
section 408(k). Do not file this form with the IRS. See Pub. 560,
Retirement Plans for the Self-Employed, and Pub. 590, Individual
Retirement Arrangements (IRAs).
Instructions to the Employer
Simplified Employee Pension.CA SEP is a written arrangement (a plan) that
provides you with a simplified way to make contributions toward your
employees' retirement income. Under a SEP, you can contribute to an
employee's individual retirement account or annuity (IRA). You make
contributions directly to an IRA set up by or for each employee with a
bank, insurance company, or other qualified financial institution. When
using Form 5305-SEP to establish a SEP, the IRA must be a Model IRA
established on an IRS form or a master or prototype IRA for which the IRS
has issued a favorable opinion letter. Making the agreement on Form 5305-
SEP does not establish an employer IRA described in section 408(c).
When Not To Use Form 5305-SEP.CDo not use this form if you:
1. Currently maintain any other qualified retirement plan. This
does not prevent you from maintaining another SEP.
2. Previously maintained a defined benefit plan that is now
terminated.
3. Have any eligible employees for whom IRAs have not been
established.
4. Use the services of leased employees (described in section
414(n)).
5. Are a member of an affiliated service group (described in
section 414(m)), a controlled group of corporations (described in section
414(b)), or trades or businesses under common control (described in
sections 414(c) and 414(o)), unless all eligible employees of all the
members of such groups,trades, or businesses, participate in the SEP.
6. Will not pay the cost of the SEP contributions. Do not use Form
5305-SEP for a SEP that provides for elective employee contributions even
if the contributions are made under a salary reduction agreement.
Use Form 5305A-SEP, or a nonmodel SEP if you permit elective
deferrals to a SEP.
Note: SEPs permitting elective deferrals cannot be established after
1996.
Eligible Employees.CAll eligible employees must be allowed to participate
in the SEP. An eligible employee is any employee who: (1) is at least 21
years old, and (2) has performed "service" for you in at least 3 of the
immediately preceding 5 years.
Note: You can establish less restrictive eligibility requirements, but
not more restrictive ones.
Service is any work performed for you for any period of time, however
short. If you are a member of an affiliated service group, a controlled
group of corporations,or trades or businesses under common control,
service includes any work performed for any period of time for any other
member of such group,trades, or businesses.
Excludable Employees.--The following employees do not have to be covered by
the SEP: (1) employees covered by a collective bargaining agreement whose
retirement benefits were bargained for in good faith by you and their
union, (2) nonresident alien employees who did not earn U.S.source income
from you, and (3) employees who received less than $400* in compensation
during the year.
Contribution Limits.--The SEP rules permit you to make an annual
contribution of up to 15% of the employee's compensation or $300,000*,
whichever is less. Compensation, for this purpose, does not include
employer contributions to the SEP or the employee's compensation in excess
of $160,000*. If you also maintain a Model Elective SEP or any other SEP
that permits employees to make elective deferrals, contributions to the
two SEPs together may not exceed the smaller of $300,000* or 15% of
compensation for any employee.
Contributions cannot discriminate in favor of highly compensated
employees. You are not required to make contributions every year. But
you must contribute to the SEP-IRAs of all of the eligible employees who
actually performed services during the year of the contribution. This
includes eligible employees who die or quit working before the
contribution is made.
You may also not integrate your SEP contributions with, or offset
them by, contributions made under the Federal Insurance Contributions Act
(FICA).
If this SEP is intended to meet the top-heavy minimum contribution
rules of section 416, but it does not cover all your employees who
participate in your elective SEP, then you must make minimum contributions
to IRAs established on behalf of those employees.
Deducting Contributions.--You may deduct contributions to a SEP subject to
the limits of section 404(h). This SEP is maintained on a calendar year
basis and contributions to the SEP are deductible for your tax year with
or within which the calendar year ends. Contributions made for a
particular tax year must be made by the due date of your income tax return
(including extensions) for that tax year.
Completing the Agreement.--This agreement is considered adopted when:
! IRAs have been established for all your eligible employees;
! You have completed all blanks on the agreement form without
modification; and
! You have given all your eligible employees the following information:
1. A copy of Form 5305-SEP.
2. A statement that IRAs other than the IRAs into which employer
SEP contributions will be made may provide different rates of return and
different terms concerning, among other things, transfers and withdrawals
of funds from the IRAs.
3. A statement that, in addition to the information provided to an
employee at the time the employee becomes eligible to participate, the
administrator of the SEP must furnish each participant within 30 days of
the effective date of any amendment to the SEP, a copy of the amendment
and a written explanation of its effects.
4. A statement that the administrator will give written
notification to each participant of any employer contributions made under
the SEP to that participant's IRA by the later of January 31 of the year
following the year for which a contribution is made or 30 days after the
contribution is made.
Employers who have established a SEP using Form 5305-SEP and have
furnished each eligible employee with a copy of the completed Form 5305-
SEP and provided the other documents and disclosures described in
Instructions to the Employer and Information for the Employee, are not
required to file the annual information returns, Forms 5500, 5500-C/R, or
5500-EZ for the SEP. However, under Title I of ERISA, this relief from
the annual reporting requirements may not be available to an employer who
selects, recommends, or influences its employees to choose IRAs into which
contributions will be made under the SEP, if those IRAs are subject to
provisions that impose any limits on a participant's ability to withdraw
funds (other than restrictions imposed by the Code that apply to all
IRAs). For additional information on Title I requirements, see the
Department of Labor regulation at 29 CFR 2520.104-48.
Information for the Employee
The information below explains what a SEP is, how contributions are made,
and how to treat your employer's contributions for tax purposes. For more
information, see Pub. 590.
Simplified Employee Pension.--A SEP is a written arrangement (a plan) that
allows an employer to make contributions toward your retirement.
Contributions are made to an individual retirement account/annuity (IRA).
Contributions must be made to either a Model IRA executed on an IRS form
or a master or prototype IRA for which the IRS has issued a favorable
opinion letter.
An employer is not required to make SEP contributions. If a
contribution is made, it must be allocated to all the eligible employees
according to the SEP agreement. The Model SEP (Form 5305-SEP) specifies
that the contribution for each eligible employee will be the same
percentage of compensation (excluding compensation higher than $160,000*)
for all employees.
Your employer will provide you with a copy of the agreement
containing participation rules and a description of how employer
contributions may be made to your IRA. Your employer must also provide
you with a copy of the completed Form 5305-SEP and a yearly statement
showing any contributions to your IRA.
All amounts contributed to your IRA by your employer belong to you
even after you stop working for that employer.
Contribution Limits.--Your employer will determine the amount to be
contributed to your IRA each year. However, the amount for any year is
limited to the smaller of $30,000* or 15% of your compensation (currently
limited to $160,000) for that year. Compensation does not include any
amount that is contributed by your employer to your IRA under the SEP.
Your employer is not required to make contributions every year or to
maintain a particular level of contributions.
Tax Treatment of Contributions.--Employer contributions to your SEP-IRA
are excluded from your income unless there are contributions in excess of
the applicable limit. Employer contributions within these limits will not
be included on your Form W-2.
Employee Contributions.--You may contribute the smaller of $2,000 or 100%
of your compensation to an IRA. However, the amount you can deduct may be
reduced or eliminated because, as a participant in a SEP, you are covered
by an employer retirement plan.
SEP Participation.--If your employer does not require you to participate
in a SEP as a condition of employment, and you elect not to participate,
all other employees of your employer may be prohibited from participating.
If one or more eligible employees do not participate and the employer
tries to establish a SEP for the remaining employees, it could cause
adverse tax consequences for the participating employees.
An employer may not adopt this IRS Model SEP if the employer
maintains another qualified retirement plan or has ever maintained a
qualified defined benefit plan. This does not prevent your employer from
adopting this IRS Model SEP and also maintaining an IRS Model Elective SEP
or other SEP. However, if you work for several employers, you may be
covered by a SEP of one employer and a different SEP or pension or profit-
sharing plan of another employer.
SEP-IRA Amounts--Rollover or Transfer to Another IRA.--You can withdraw or
receive funds from your SEP-IRA if within 60 days of receipt, you place
those funds in another IRA or SEP-IRA. This is called a "rollover" and
can be done without penalty only once in any 1-year period. However,
there are no restrictions on the number of times you may make "transfers"
if you arrange to have these funds transferred between the trustees or the
custodians so that you never have possession of the funds.
Withdrawals.--You may withdraw your employer's contribution at any time,
but any amount withdrawn is includible in your income unless rolled over.
Also, if withdrawals occur before you reach age 592, you may be subject to
a tax on early withdrawal.
Excess SEP Contributions.--Contributions exceeding the yearly limitations
may be withdrawn without penalty by the due date (plus extensions) for
filing your tax return (normally April 15), but is includible in your
gross income. Excess contributions left in your SEP-IRA account after
that time may have adverse tax consequences. Withdrawals of those
contributions may be taxed as premature withdrawals.
Financial Institution Requirements.--The financial institution where your
IRA is maintained must provide you with a disclosure statement that
contains the following information in plain, nontechnical language:
1. The law that relates to your IRA.
2. The tax consequences of various options concerning your IRA.
3. Participation eligibility rules, and rules on the deductibility
of retirement savings.
4. Situations and procedures for revoking your IRA, including the
name, address, and telephone number of the person designated to receive
notice of revocation. (This information must be clearly displayed at the
beginning of the disclosure statement.)
5. A discussion of the penalties that may be assessed because of
prohibited activities concerning your IRA.
6. Financial disclosure that provides the following information:
a. Projects value growth rates of your IRA under various
contribution and retirement schedules, or describes the method of
determining annual earnings and charges that may be assessed.
b. Describes whether, and for when, the growth projections are
guaranteed, or a statement of the earnings rate and the terms on which the
projections are based.
c. States the sales commission for each year expressed as a
percentage of $1,000.
In addition, the financial institution must provide you with a
financial statement each year. You may want to keep these statements to
evaluate your IRA's investment performance.
<PAGE>
PERRITT INVESTMENTS, INC.
SIMPLIFIED EMPLOYEE PENSION-INDIVIDUAL
RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT
(Under Section 408(k) of the Internal Revenue Code)
_____________________________ makes the following agreement under
(Name of employer)
Section 408(k) of the Internal Revenue Code and the instructions to this
form.
Article I--Eligibility Requirements (Check appropriate boxes--see
Instructions.)
The employer agrees to provide for discretionary contributions in each
calendar year to the individual retirement account or individual
retirement annuity (IRA) of all employees who are at least ______ years
old (not to exceed 21 years old) and have performed services for the
employer in at least ______ years (not to exceed 3 years) of the
immediately preceding 5 years. This simplified employee pension (SEP) G
includes G does not include employees covered under a collective
bargaining agreement, G includes G does not include certain nonresident
aliens, and G includes G does not include employees whose total
compensation during the year is less than $400*.
Article II--SEP Requirements (See Instructions.)
The employer agrees that contributions made on behalf of each eligible
employee will be:
A. Based only on the first $160,000* of compensation.
B. Made in an amount that is the same percentage of compensation for
every employee.
C. Limited annually to the smaller of $30,000* or 15% of
compensation.
D. Paid to the employee's IRA trustee, custodian, or insurance company
(for an annuity contract).
_________________________________ __________________________
Employer's Signature and date Name and title
______________
*This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
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