Registration No. 33-17423
File No. 811-5339
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. 14 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 15 [X]
(Check appropriate box or boxes.)
________________________________
CONCORDE FUNDS, INC.
(Exact name of Registrant as Specified in Charter)
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(Address of Principal Executive Offices) (Zip Code)
(972) 387-8258
(Registrant's Telephone Number, including Area Code)
Gary B. Wood, Ph.D. Copy to:
Concorde Financial Corporation Richard L. Teigen
1500 Three Lincoln Centre Foley & Lardner
5430 LBJ Freeway 777 East Wisconsin Avenue
Dallas, Texas 75240
Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
__________________________________
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
It is proposed that this filing become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[X] on January 30, 1998 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)
[_] on (date) pursuant to paragraph (a) of Rule 485
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485
If applicable, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
CONCORDE FUNDS, 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 A MESSAGE FROM THE PRESIDENT OF CONCORDE
FINANCIAL CORPORATION; EXPENSES
3. Condensed Financial FINANCIAL HIGHLIGHTS; WHAT HAS BEEN THE
Information FUNDS' PERFORMANCE?
4. General Description of WHAT IS CONCORDE FUNDS, INC.?; WHAT ARE
Registrant THE FUNDS' INVESTMENT OBJECTIVES AND
POLICIES?; DO THE FUNDS HAVE ANY
INVESTMENT LIMITATIONS OR STRATEGIES
DESIGNED TO REDUCE RISK?; MAY THE FUNDS
ENGAGE IN OTHER INVESTMENT PRACTICES?
5. Management of the Fund WHO MANAGES THE FUNDS?; WHAT ABOUT
BROKERAGE TRANSACTIONS?; GENERAL
INFORMATION ABOUT THE FUNDS
5A. Management's Discussion WHAT HAS BEEN THE FUNDS' PERFORMANCE?
of Fund Performance
6. Capital Stock and Other WHAT REPORTS WILL I RECEIVE?; WHAT ABOUT
Securities DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND
TAXES?; GENERAL INFORMATION ABOUT THE
FUNDS
7. Purchase of Securities HOW IS A FUND'S SHARE PRICE DETERMINED?;
Being Offered HOW DO I OPEN AN ACCOUNT AND PURCHASE
SHARES?; WHAT RETIREMENT PLANS DO THE
FUNDS OFFER?; MAY SHAREHOLDERS REINVEST
DIVIDENDS? MAY SHAREHOLDERS EXCHANGE
SHARES?
8. Redemption or HOW DO I SELL MY SHARES? MAY SHAREHOLDERS
Repurchase EXCHANGE SHARES?
9. Pending 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 General Information
History
13. Investment Objectives Included in Prospectus under "WHAT ARE THE
and Policies FUNDS' INVESTMENT OBJECTIVES AND
POLICIES?"; Investment Restrictions;
Description of Bond Ratings; Investment
Policies and Practices
14. Management of the Fund Directors and Officers of the Corporation
15. Control Persons and Directors and Officers of the Corporation;
Principal Holders of Principal Shareholders
Securities
16. Investment Advisory and Investment Advisor; Custodian; Independent
Other Services Certified Public Accountants
17. Brokerage Allocation Allocation of Portfolio Brokerage
and Other Practices
18. Capital Stock and Other Included in Prospectus under "GENERAL
Securities INFORMATION ABOUT THE FUNDS"
19. Purchase, Redemption Included in Prospectus under "HOW IS A
and Pricing of FUND'S SHARE PRICE DETERMINED?"; "HOW DO
Securities Being I OPEN AN ACCOUNT AND PURCHASE SHARES?";
Offered "WHAT RETIREMENT PLANS DO THE FUNDS
OFFER?"; "MAY SHAREHOLDERS REINVEST
DIVIDENDS?"; "HOW DO I SELL MY SHARES?";
Determination of Net Asset Value and
Performance; Redemption of Fund Shares
20. Tax Status Taxes
21. Underwriters *
22. Calculation of Determination of Net Asset Value and
Performance Data Performance
23. Financial Statements Financial Statements
<PAGE>
<PAGE> 1
[CONCORDE LOGO]
[CONCORDE LOGO]
JANUARY 30, 1998
CONCORDE FUNDS, INC.
1500 THREE LINCOLN CENTRE
5430 LBJ FREEWAY
DALLAS, TEXAS 75240
TELEPHONE: (972) 387-8258
(FUND INFORMATION)
(800) 294-1699 (ACCOUNT INFORMATION)
CONCORDE FUNDS, INC., (the "FUNDS") is a no load, open-end, diversified
management investment company offering shares in two separate mutual funds, each
with a different investment objective. Concorde Value Fund seeks to produce long
term growth of capital, without exposing capital to undue risk. Concorde Value
Fund will invest principally in undervalued common stocks. Concorde Income Fund
seeks current income, primarily through investing in a diversified portfolio of
income producing securities. Growth of capital is a secondary objective.
- --------------------------------------------------------------------------------
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 FUNDS that
prospective investors should know before investing. Please read this Prospectus
and retain it for future reference. Additional information about the FUNDS has
been filed with the Securities and Exchange Commission in the form of a
Statement of Additional Information, dated January 30, 1998, which is
incorporated by reference in the Prospectus. Copies of the Statement of
Additional Information will be provided without charge upon request to the FUNDS
at the above address or telephone number.
<PAGE> 2
A MESSAGE FROM THE PRESIDENT OF
CONCORDE INVESTMENT MANAGEMENT
Concorde Investment Management, the investment advisor for Concorde Funds,
Inc., serves as investment advisor and financial counsellor to individuals,
trusts, and qualified plans. In managing assets, our organization's focus has
always been to concentrate on appropriate risk and return. This focus is present
in our managing of the assets of Concorde Value Fund, and the newest member of
our fund family, Concorde Income Fund.
CONCORDE VALUE FUND. In managing equity investments, we believe the best
investment policy is to buy quality, well-managed companies at a discount to
their intrinsic value. We are prepared to hold them for long-term total returns
regardless of what the consensus view of the overall stock market's value
happens to be.
CONCORDE INCOME FUND. In managing a diversified income-oriented portfolio,
we primarily seek current income but also intend to take advantage of
opportunities for capital appreciation and growth of investment income. We
believe this can best be achieved by considering traditional income-producing
securities as well as securities which provide inducements to participate in the
potential growth of an issuer.
We at Concorde Investment Management pledge our commitment to the highest
possible standard of professional performance for the benefit of investors in
Concorde Value Fund and Concorde Income Fund.
Sincerely
/s/ GARY B. WOOD, Ph.D.
Gary B. Wood, Ph.D.
President
ii
<PAGE> 3
EXPENSES
The following information is provided in order to assist you in understanding
the various costs and expenses that, as an investor in a FUND, you will bear
directly or indirectly. It should not be considered to be a representation of
past or future expenses. Actual expenses may be greater or lesser than those
shown. "Annual Operating Expenses" for the VALUE FUND and INCOME FUND are based
on actual expenses incurred for the fiscal year ending September 30, 1997. The
example assumes a 5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. The hypothetical rate of return for each
FUND is not intended to be representative of past or future performance.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
VALUE INCOME
FUND FUND
----- ------
<S> <C> <C>
Maximum sales load imposed on purchases..................... None None
Maximum sales load imposed on dividends..................... None None
Deferred sales load......................................... None None
Redemption fee.............................................. None* None*
Exchange fee................................................ None None
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
VALUE INCOME
FUND FUND
----- ------
<S> <C> <C>
Management fees............................................. 0.90% 0.70%
12b-1 fees.................................................. None None
Other expenses (net of reimbursements)...................... 0.70% 1.29%
Total fund operating expenses (net of reimbursements)....... 1.60% 1.99%
</TABLE>
* A fee of $12.00 is charged for each wire redemption.
EXAMPLE
<TABLE>
<CAPTION>
VALUE INCOME
FUND FUND
----- ------
<S> <C> <C>
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............................................. $ 16 $ 20
3 years............................................ $ 51 $ 63
5 years............................................ $ 88 $108
10 years........................................... $191 $233
</TABLE>
1
<PAGE> 4
FINANCIAL HIGHLIGHTS
The following financial highlights for the VALUE FUND for the periods ended
September 30, 1988 through 1996 and for the Income Fund for the period from
January 22, 1996 (inception) through September 30, 1996 have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The financial
highlights for the FUNDS for the year ended September 30, 1997 have been audited
by Kinder & Wyman, P.C. The financial highlights should be read in conjunction
with the financial statements and related notes included in the FUNDS' Annual
Report to Shareholders.
CONCORDE VALUE FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30
------------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year....... $14.95 $13.33 $12.28 $13.11 $11.13 $10.51
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income.................. 0.06 0.07 0.06 0.04 0.07 0.16
Net realized and unrealized gains
(losses) on investments.............. 5.66 1.73 1.47 0.55 2.05 0.71
------ ------ ------ ------ ------ ------
Total from investment operations..... 5.72 1.80 1.53 0.59 2.12 0.87
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income... (0.09) (0.06) (0.06) (0.03) (0.14) (0.25)
Distributions from net realized
gains................................ (0.92) (0.12) (0.42) (1.39) (0.00) (0.00)
------ ------ ------ ------ ------ ------
Total from distributions............. (1.01) (0.18) (0.48) (1.42) (0.14) (0.25)
------ ------ ------ ------ ------ ------
Net asset value, end of year (period).... $19.66 $13.33 $12.28 $13.11 $11.13 $10.51
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN..................... 40.58% 13.64% 13.32% 5.04% 19.16% 8.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's).......... $17,532 $12,580 $12,235 $12,003 $12,630 $12,532
Ratio of expenses to average net assets..... 1.60% 1.62% 1.74% 1.69% 1.64% 1.68%
Ratio of net investment income to average
net assets................................. 0.38% 0.53% 0.52% 0.33% 0.54% 1.50%
Portfolio turnover rate..................... 30.62% 26.10% 22.42% 75.43% 71.69% 51.69%
Average commission rate paid................ $0.0711 $0.0551
Shares outstanding at end of year
(period)................................... 891,633 841,293 917,929 977,095 963,554 1,126,309
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30
-----------------------------------------
1991 1990 1989 1988*
--------- --------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year....... $ 8.35 $12.61 $11.29 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income.................. 0.24 0.19 0.16 0.06
Net realized and unrealized gains
(losses) on investments.............. 2.12 (3.55) 1.32 1.23
------ ------ ------ ------
Total from investment operations..... 2.36 (3.36) 1.48 1.29
------ ------ ------ ------
Less distributions:
Dividends from net investment income... (0.20) (0.38) (0.13) (0.00)
Distributions from net realized
gains................................ (0.00) (0.52) (0.03) (0.00)
------ ------ ------ ------
Total from distributions............. (0.20) (0.90) (0.16) (0.00)
------ ------ ------ ------
Net asset value, end of year (period).... $ 8.35 $12.61 $11.29
====== ====== ====== ======
TOTAL INVESTMENT RETURN..................... 28.79% -28.04% 13.25% 12.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's).......... $13,649 $11,735 $12,527 $7,416
Ratio of expenses to average net assets..... 1.78% 1.75% 1.93% 2.13%
Ratio of net investment income to average
net assets................................. 2.47% 1.88% 1.32% 0.49%
Portfolio turnover rate..................... 25.36% 48.83% 32.34% 13.40%
Average commission rate paid................
Shares outstanding at end of year
(period)................................... 1,298,530 1,405,070 993,752 657,085
</TABLE>
- ---------------
* Period from December 4, 1987 (commencement of operations) through September
30, 1988. Total investment return and other ratios are not annualized.
CONCORDE INCOME FUND
<TABLE>
<CAPTION>
JANUARY 22, 1996
(INCEPTION)
THROUGH
SEPTEMBER 30,
1997 1996*
------- ----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..................... $ 9.94 $10.00
------ ------
Income (loss) from investment operations:
Net investment income.................................. 0.49 0.25
Net realized and unrealized gains (losses) on
investments........................................... 0.52 (0.18)
------ ------
Total from investment operations..................... 1.01 0.07
------ ------
Less distributions:
Dividends from net investment income................... (0.54) (0.13)
Distributions from net realized gains.................. 0.00 0.00
------ ------
Total from distributions............................. (0.54) (0.13)
------ ------
Net asset value, end of period........................... $10.41 $ 9.94
====== ======
TOTAL INVESTMENT RETURN..................................... 10.41% 0.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..................... $ 3,920 $ 2,217
Ratio of expenses to average net assets.................. 1.99% 2.01%
Ratio of net investment income to average net assets..... 4.86% 2.51%
Portfolio turnover rate.................................. 20.07% 29.77%
Average commission rate paid............................. $0.0794 $0.1403
Shares outstanding at end of period...................... 376,468 223,052
</TABLE>
- ---------------
* Total investment return and other ratios are not annualized.
2
<PAGE> 5
WHAT IS CONCORDE FUNDS, INC.?
Concorde Funds, Inc. (the "FUNDS") is a no-load open-end diversified
management investment company registered under the Investment Company Act of
1940. It was incorporated under the laws of Texas on September 21, 1987. On
November 21, 1995, the FUNDS' corporate name was changed from Concorde Value
Fund, Inc. to Concorde Funds, Inc. and it became a series investment company
with two separate series of common stock, each of which is a separate mutual
fund, namely, Concorde Value Fund (the "VALUE FUND") and Concorde Income Fund
(the "INCOME FUND"). Each FUND is described in this Prospectus in order to help
you compare the similarities and differences between the FUNDS so that you can
determine which FUND, or whether a combination of the FUNDS, best meets your
personal investment objectives. The VALUE FUND is the continuation of the
original Concorde Value Fund, Inc. As an open-end investment company the FUNDS
obtain their assets by continuously selling their shares to the public. Proceeds
from the sale of shares are invested by a FUND in securities of other companies.
In this way, the FUND:
- - Combines the resources of many investors, with each individual investor having
an interest in every one of the securities owned by the FUND;
- - Provides each individual investor with diversification by investing in the
securities of many different companies in a variety of industries; and
- - Furnishes professional portfolio management to select and watch over
investments. See "WHO MANAGES THE FUNDS?" for a discussion of the FUNDS'
investment advisor.
A FUND will redeem any of its outstanding shares on demand of the owner at the
next determined net asset value of the shares. There are no sales, redemption or
Rule 12b-1 distribution charges.
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES?
VALUE FUND. The VALUE FUND's investment objective is to produce long-term
growth of capital, without exposing capital to undue risks. The VALUE FUND will
invest principally in undervalued common stocks. The VALUE FUND's investment
advisor, Concorde Financial Corporation, which does business under the name
Concorde Investment Management (the "Advisor"), considers the following
valuation criteria, among other considerations, in determining that a common
stock is undervalued: (a) price/earnings ratio; (b) price/cash flow ratio; (c)
price/intrinsic value ratio; (d) dividend yield; (e) price/sales ratio; or (f)
total capitalization/cash flow ratio. When analyzing the above criteria, the
Advisor may consider and compare the relative value of a common stock with the
following: (a) all common stocks within a particular broad-based universe; (b)
all common stocks within a particular company's industry group; or (c) a common
stock's own historical valuation history. The Advisor will use its judgment to
determine the appropriate combination of valuation criteria, among other
factors, in assessing if a common stock is undervalued. By investing in
undervalued stocks, the Advisor believes that the VALUE FUND can be in a
position to outperform the market while reducing its risk of underperforming the
market. However in investing in undervalued stocks there is the risk that
improving fundamentals may not be recognized as quickly as anticipated by the
Advisor. Therefore, there can be no assurances that the VALUE FUND's investment
objective will be achieved or that the VALUE FUND's portfolio will not decline
in value.
In selecting common stocks, the Advisor relies primarily on publicly available
information as well as research information supplied by brokerage firms. The
Advisor
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<PAGE> 6
studies the financial statements of the issuer and other issuers in the same
industry. No strict formulas are used in determining whether the characteristics
of an undervalued stock are present.
No minimum or maximum percentage of the VALUE FUND's assets is required to be
invested in common stocks or any other type of security. During times when a
high level of securities prices generally prevails there may be a scarcity of
common stocks available that meet the Advisor's investment criteria. At these
times the VALUE FUND may invest in preferred stocks, particularly those which
are convertible into common stock, fixed-income securities such as U.S. Treasury
Bonds and investment grade, nonconvertible corporate bonds and debentures.
Additionally, investments in nonconvertible preferred stocks and debt securities
may be made during times when there is perceived to be a potential for growth of
capital (i.e., during periods of declining interest rates when the market value
of such securities generally increases). The VALUE FUND will limit its
investments in nonconvertible corporate bonds and debentures to those which have
been assigned one of the highest four ratings of either Standard & Poor's
Corporation (AAA, AA, A and BBB) or Moody's Investors Service, Inc. (Aaa, Aa, A
and Baa). A description of the foregoing ratings is set forth in the Statement
of Additional Information under the caption "Description of Bond Ratings."
INCOME FUND. The INCOME FUND'S primary investment objective is to produce
current income. Growth of capital is a secondary objective and will be sought
only when compatible with the primary objective. The INCOME FUND will attempt to
achieve its investment objectives by investing primarily in a diversified
portfolio of U.S. dollar denominated investment grade debt securities selected
for their income characteristics relative to the risk involved. The INCOME FUND
intends to invest between 20% and 50% of its assets in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities with
maturities ranging from two to ten years. The balance of the portfolio will be
invested in other approved securities as the Advisor determines according to
market conditions including the following: dividend paying common stocks
(including common stocks of real estate investment trusts and royalty trusts);
preferred stocks; convertible securities; corporate debt securities, including
commercial paper; mortgage and other asset backed securities; U.S. bank
obligations, including banker's acceptances and certificates of deposit;
repurchase agreements; U.S. state and local government securities; foreign
securities; and exchange-traded master limited partnerships. During periods of
rising interest rates, a greater percentage of the INCOME FUND'S assets may be
invested in securities that are less sensitive to interest rate changes.
The INCOME FUND's principal objective is to obtain current income. However,
unlike funds investing solely for income, the INCOME FUND intends also to take
advantage of opportunities for modest capital appreciation and growth of
investment income. The INCOME FUND may purchase securities which are convertible
into, or exchangeable for, common stock when the Advisor believes they offer the
potential for higher total return than nonconvertible securities. It may also
purchase income securities that carry warrants or common stock purchase rights
attached as an added inducement to participate in the potential growth of an
issuer.
The INCOME FUND has adopted an investment policy pursuant to which it will not
purchase debt securities of any issuer if such purchase would at that time cause
more than 20% of the value of the INCOME FUND'S assets to be invested in debt
securities rated less than investment grade. Investment grade securities are (i)
corporate bonds, debentures or notes rated at least BBB by Standard & Poor's
Corporation ("S&P"), or Baa by Moody's Investors Service, Inc. ("Moody's") at
the time of acquisition; and (ii) any type of
4
<PAGE> 7
unrated debt security that the Advisor determines at the time of acquisition to
be of a quality comparable to the foregoing. If a security held by the INCOME
FUND falls below a Baa rating by Moody's and a BBB rating by S&P, the INCOME
FUND will consider all circumstances deemed relevant in determining whether to
hold the security. Securities rated BBB by S&P or Baa by Moody's, although
investment grade, exhibit speculative characteristics and are more sensitive
than higher rated securities to changes in economic conditions. A description of
the foregoing ratings is set forth in the Statement of Additional Information.
The INCOME FUND may invest up to 20% of its assets in debt securities that are
rated below investment grade. The INCOME FUND, however, will not invest in any
debt securities rated lower than B at the time of purchase by S&P and Moody's.
Investments in high yield securities (i.e., less than investment grade), while
producing greater income and opportunity for gain than investments in higher
rated securities, entail relatively greater risk of loss of income or principal.
Lower grade obligations are commonly referred to as "Junk Bonds". Market prices
of high yield, lower grade obligations may fluctuate more than market prices of
higher rated securities. Lower grade, fixed income securities tend to reflect
short-term corporate and market developments to a greater extent than higher
rated obligations which, assuming no change in their fundamental quality, react
primarily to fluctuations in the general level of interest rates. For further
information about securities rated below investment grade, see "May the Funds
Engage in Other Investment Practices -- Low Rated Securities."
The values of the securities held by the INCOME FUND are subject to price
fluctuations resulting from various factors, including rising or declining
interest rates ("market risks") and the ability of the issuers of such
investments to make scheduled interest and principal payments ("financial
risks"). The Advisor attempts to minimize these risks when selecting investments
by taking into account interest rates, terms and marketability of obligations,
as well as the capitalization, earnings, liquidity and other indicators of the
issuer's financial condition.
The INCOME FUND may invest in zero coupon U.S. government and corporate debt
securities which do not pay current interest, but are purchased at a discount
from their face value. The market prices of zero coupon securities generally are
more volatile than the prices of securities that pay interest periodically and
in cash, and are likely to respond to changes in interest rates to a greater
degree than do other types of debt securities having similar maturities and
credit quality. The INCOME FUND may also invest in closed-end investment
companies, restricted securities, covered call options on common stock,
warrants, put bonds and variable rate securities. See "May the Funds Engage In
Other Investment Practices" for a discussion of other investment restrictions
and practices.
The FUNDS' investment objectives and the foregoing investment policies are not
fundamental and the FUNDS' Board of Directors may change the investment
objectives and such policies without shareholder approval. A change in a FUND'S
investment objective may result in the FUND having an investment objective
different from the investment objective which a shareholder considered
appropriate at the time of investment in the FUND.
DO THE FUNDS HAVE ANY INVESTMENT LIMITATIONS OR STRATEGIES DESIGNED TO REDUCE
RISK?
Each FUND has adopted certain investment limitations designed to reduce its
exposure to risk of loss of capital. The FUNDS will not purchase securities on
margin; participate in a joint-trading account; sell securities short; buy, sell
or write put or call options, except for hedging purposes as described in the
following section, or engage in futures trading. The
5
<PAGE> 8
FUNDS are subject to additional investment
limitations as follows:
- - Neither FUND will purchase more than 10% of the voting securities of any
issuer.
- - Neither FUND will invest more than 5% of its assets in the securities of
companies that have a continuous operating history of less than three years.*
- - Neither FUND will 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
the securities of any one issuer, exclusive of U.S. Government Securities.
- - The VALUE FUND will not invest more than 5% of its net assets in warrants.
- - Neither FUND will invest more than 25% of its assets in any one industry.
- - The VALUE FUND will not lend money (except by purchasing publicly distributed
debt securities) or lend its portfolio securities.
- - Neither FUND will borrow money except from a bank and only for temporary or
emergency purposes, and in no event in excess of 5% of the value of its total
assets, or pledge any of its assets except to secure borrowings and only to an
extent not greater than 10% of the value of the FUND's net assets.
The investment limitations described above are discussed in further detail in
the Statement of Additional Information. Except as discussed below, these
investment limitations and others set forth in the Statement of Additional
Information are fundamental policies and may be changed only with the approval
of the shareholders of the appropriate FUND as described in the Statement of
Additional Information. The Restriction marked with an asterisk (*) above is not
a fundamental policy for the INCOME FUND. Non-fundamental investment policies
may be changed without shareholder approval.
MAY THE FUNDS ENGAGE IN OTHER INVESTMENT PRACTICES?
In order to achieve their investment objectives, the FUNDS may engage in the
following investment practices in addition to those previously discussed.
PORTFOLIO LENDING. In order to realize additional income, the INCOME FUND may
lend its portfolio securities to unaffiliated persons who are deemed to be
creditworthy (principally to broker/dealers). The loans must be secured
continuously by cash collateral or U.S. government securities maintained on a
current basis in an amount at least equal to the market value, determined daily,
of the securities loaned. Cash collateral will be invested in money market
instruments. During the existence of the loan, the INCOME FUND will continue to
receive the equivalent of the interest and dividends paid by the issuer on the
securities loaned and one or more of the negotiated loan fees, interest on
securities used as collateral or interest on the securities purchased with the
collateral, either of which type of interest may be shared with the borrower.
The INCOME FUND will have the right to call the loan and obtain the securities
loaned at any time on three days' notice, including the right to call the loan
to enable the INCOME FUND to vote the securities. Such loans may not exceed 10%
of the net assets of the INCOME FUND.
PORTFOLIO TURNOVER. Consistent with the FUNDS' investment objectives, the
Advisor will not engage in trading for short-term profits, but when the
circumstances warrant, securities may be sold without regard to the length of
time held. The VALUE FUND will typically hold a stock until it reaches a
valuation level such that the Advisor believes that the stock is no longer
undervalued. The Advisor is prepared to hold stocks for several years or longer,
if necessary. The Advisor intends to purchase a given security whenever it
believes it will contribute to the stated objective of a FUND, even if the same
security has only recently been sold. In selling a given security, the Advisor
keeps in mind
6
<PAGE> 9
that profits from sales of securities are taxable to certain shareholders.
Subject to those considerations, a FUND may sell a given security, no matter for
how long or for how short a period it has been held in the portfolio, and no
matter whether the sale is at a gain or at a loss, if the Advisor believes that
it is not fulfilling its purpose. Since investment decisions are based on the
anticipated contribution of the security in question to the applicable FUND's
objectives, the rate of portfolio turnover is irrelevant when the Advisor
believes a change is in order to achieve those objectives, and each of the
FUND's annual portfolio turnover rate may vary from year to year.
It is expected that the VALUE FUND usually will have an annual portfolio
turnover rate of less than 75% and the INCOME FUND usually will have an annual
portfolio turnover rate of less than 50%, although the annual portfolio turnover
rate of each FUND may vary widely from year to year depending upon market
conditions. The annual portfolio turnover rate indicates changes in a FUND's
portfolio and is calculated by dividing the lesser of purchases or sales of
portfolio securities (excluding securities having maturities at acquisition of
one year or less) for the fiscal year by the monthly average of the value of the
portfolio securities (excluding securities having maturities at acquisition of
one year or less) owned by the FUND during the fiscal year.
High portfolio turnover (i.e., over 100%) may involve correspondingly greater
brokerage commissions and other transaction costs, which are borne directly by
the FUNDS. In addition, high portfolio turnover may result in increased
short-term capital gains which, when distributed to shareholders, are taxed at
ordinary income rates.
REPURCHASE AGREEMENTS AND OTHER SHORT-TERM INVESTMENTS. Each of the FUNDS may
enter into repurchase agreements with banks or certain non-bank broker/dealers.
In a repurchase agreement, the FUND buys an interest-bearing security at one
price and simultaneously agrees to sell it back at a mutually agreed upon time
and price. The repurchase price reflects an agreed-upon interest rate during the
time the FUND's money is invested in the security. Since the security purchased
constitutes security for the repurchase obligation, a repurchase agreement can
be considered as a loan collateralized by the security purchased. The FUND's
risk is the ability of the seller to pay the agreed-upon price on the delivery
date. If the seller defaults, the FUND may incur costs in disposing of the
collateral, which would reduce the amount realized thereon. If the seller seeks
relief under the bankruptcy laws, the disposition of the collateral may be
delayed or limited. To the extent the value of the security decreases, the FUND
could experience a loss. The FUNDS' Board of Directors has established
procedures to evaluate the creditworthiness of the other parties to repurchase
agreements.
In addition, each of the FUNDS may invest in commercial paper and other cash
equivalents rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's, commercial
paper master notes (which are demand instruments bearing interest at rates which
are fixed to known lending rates and automatically adjusted when such lending
rates change) of issuers whose commercial paper is rated A-1 or A-2 by S&P or
Prime-1 or Prime-2 by Moody's and unrated debt securities which are deemed by
the Advisor to be of comparable quality. Each of the FUNDS may also invest in
United States Treasury bills and notes, and certificates of deposit of domestic
branches of U.S. banks or of Canadian banks, provided in each case that the
banks have total deposits in excess of $1,000,000,000. The FUNDS will invest in
repurchase agreements and other short-term investments only for temporary
defensive purposes or to maintain liquidity to pay potential redemption
requests. However, when investing for temporary defensive purposes, up to 100%
of a FUND's assets may be invested in such securities.
ILLIQUID SECURITIES. The INCOME FUND may invest up to 15% of its net assets in
illiquid
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<PAGE> 10
securities, which may include restricted securities, repurchase agreements
maturing in more than seven days and other securities that are not readily
marketable. Securities eligible to be resold to qualified institutional
investors pursuant to Rule 144A under the Securities Act of 1933 may be
considered liquid by the INCOME FUND in accordance with guidelines approved by
the FUNDS' Board of Directors. Such guidelines take into account trading ability
for such securities, any contractual restrictions and the availability of
reliable pricing information, among other factors. Investing in Rule 144A
securities could have the effect of increasing the level of the INCOME FUND's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these securities. Risks associated with
illiquid securities include the potential inability of the INCOME FUND to
promptly sell a portfolio security after its decision to sell and, with respect
to illiquid restricted securities, the INCOME FUND may be required to pay all or
a part of the registration expenses to sell the restricted security. For further
information about illiquid securities, see the Statement of Additional
Information.
LOW-RATED SECURITIES. The INCOME FUND may invest up to 20% of its assets in
securities that are rated below investment grade (i.e., rated lower than BBB by
S&P and Baa by Moody's) or in unrated securities judged by the Advisor to be of
comparable quality. The INCOME FUND, however, will not invest in any securities
rated lower than B at the time of purchase. Debt rated BB, B, CCC, CC and C and
debt rated Ba, B, Caa, Ca and C are regarded by S&P and Moody's, respectively,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation. For
S&P, BB indicates the lowest degree of speculation and C the highest. For
Moody's, Ba indicates the lowest degree of speculation and C the highest. For
additional information on the ratings used by S&P and Moody's and a description
of low-rated securities, see the Statement of Additional Information.
Low-rated securities generally offer a higher yield than that available from
higher-rated securities. However, low-rated securities involve higher risks, in
that they are especially subject to adverse changes in general economic
conditions and in the industries in which the issuers are engaged, to changes in
the financial condition of the issuers and to price fluctuations in response to
changes in interest rates. During periods of economic downturn or rising
interest rates, highly leveraged issuers may experience financial stress which
could adversely affect their ability to make payments of principal and interest
and increase the possibility of default. In addition, the market for low-rated
securities has expanded rapidly in recent years.
The market for low-rated securities is generally thinner and less active than
that for higher quality securities, which would limit the INCOME FUND's ability
to sell such securities at fair value in response to changes in the economy or
the financial markets. While such securities may have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposure to adverse conditions. The Advisor will seek to reduce the risks
associated with investing in such securities by limiting the INCOME FUND's
holdings in such securities and by the depth of its own credit analysis. For
additional information about the risks of investing in low-rated securities, see
the Statement of Additional Information.
MORTGAGE-BACKED SECURITIES. The INCOME FUND may invest in mortgage-backed
securities. Mortgage-backed securities are securities that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans secured by real property. Mortgage-backed securities are subject
to prepayment risks in addition to market risks and financial risks.
Mortgage-backed securities include guaranteed government agency mortgage-
8
<PAGE> 11
backed securities, which represent participation interests in pools of
residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
government or one of its agencies or instrumentalities. Such securities are
ownership interests in the underlying mortgage loans and provide for monthly
payments that are a "pass-through" of the monthly interest and principal
payments (including any prepayments) made by the individual borrowers on the
pooled mortgage loans, net of any fees paid to the guarantor of such securities
and the servicer of the underlying mortgage loans.
Mortgaged-backed securities also include collateralized mortgage obligations
("CMOs"). CMOs are securities collateralized by mortgages or mortgage-backed
securities. CMOs are issued with a variety of classes or series, which have
different maturities, and are often retired in sequence. CMOs may be issued by
governmental or non-governmental entities such as banks and other mortgage
lenders. Securities issued by entities other than governmental entities may
offer a higher yield but also may be subject to greater price fluctuations than
securities issued by governmental entities.
The INCOME FUND does not intend to invest in those mortgage-backed securities,
such as certain classes of CMOs and other types of mortgage pass-through
securities, which are designed to be highly sensitive to changes in prepayment
and interest rates and can subject the shareholder to extreme reductions of
yield and loss of principal.
ASSET-BACKED SECURITIES. The INCOME FUND may invest in asset-backed
securities. The securitization techniques used to develop mortgage-backed
securities are also applied to a broad range of assets, primarily credit card
and automobile receivables. Other types of asset-backed securities may be
developed in the future. In general, the collateral supporting asset-backed
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments. Asset backed securities present certain
risks that are not presented by mortgage-backed securities. Primarily, these
securities do not have the benefit of the same security interest in the related
collateral as do mortgage-backed securities.
FOREIGN SECURITIES. The FUNDS may invest in securities of foreign issuers
which may be U.S. dollar-denominated or denominated in foreign currencies. Each
FUND may invest up to 15% of its total assets in securities of foreign issuers
that are U.S. dollar-denominated. The INCOME FUND may invest up to 10% and the
VALUE FUND may invest up to 5% of its total assets in securities of foreign
issuers denominated in foreign currencies. Securities of foreign issuers in the
form of American Depository Receipts ("ADRs") that are regularly traded on
recognized U.S. exchanges or in the U.S. over-the-counter market are not
considered foreign securities for purposes of these limitations. A FUND,
however, will not invest more than 20% of its total assets in such ADRs and will
only invest in ADRs that are issuer sponsored. Investments in securities of
foreign issuers involve risks which are in addition to the usual risks inherent
in domestic investments. The value of a FUND's foreign investments may be
significantly affected by changes in currency exchange rates, and the FUND may
incur certain costs in converting securities denominated in foreign currencies
to U.S. dollars. In many countries, there is less publicly available information
about issuers than is available in the reports and ratings published about
companies in the United States. Additionally, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards. Dividends and
interest on foreign securities may be subject to foreign withholding taxes which
would reduce a FUND's income without providing a tax credit for the FUND's
shareholders. Although the FUNDS intend to invest in securities of foreign
issuers domiciled in nations in which the Advisor considers as having stable and
friendly governments, there is a possibility of expropriation, confiscatory
taxation, currency
9
<PAGE> 12
blockage or political or social instability which could affect investments in
those nations.
MUNICIPAL SECURITIES. The INCOME FUND may invest up to 5% of its net assets in
debt obligations issued by or on behalf of the governments of states,
territories or possessions of the United States, the District of Columbia and
their political subdivisions, agencies and instrumentalities, certain intrastate
agencies and certain territories of the United States. The INCOME FUND may
invest in both taxable and federal income tax-exempt municipal securities.
SECURITIES OF OTHER REGISTERED INVESTMENT COMPANIES. The FUNDS may invest up
to 10% of their net assets in shares of registered investment companies. The
FUNDS will not purchase or otherwise acquire shares of any registered investment
company (except as part of a plan of merger, consolidation or reorganization
approved by the shareholders of the FUNDS) if (a) the FUND and its affiliated
persons would own more than 3% of any class of securities of such registered
company; or (b) more than 5% of its net assets would be invested in the shares
of any one registered investment company.
Any investment in a registered investment company involves investment risk.
Additionally, an investor could invest directly in the registered investment
companies in which the FUND invests. By investing indirectly through a FUND, an
investor bears not only his or her proportionate share of the expenses of the
FUND (including operating costs and investment advisory fees) but also indirect
similar expenses of the registered investment companies in which the FUND
invests. An investor may also indirectly bear expenses paid by registered
investment companies in which the FUND invests related to the distribution of
such registered investment company's shares.
HEDGING INSTRUMENTS. Although the INCOME FUND does not presently intend to do
so, the FUNDS may purchase stock index put options to hedge against a loss in
its stock portfolio caused by a general decline in the stock market. If the
index declines over the life of the option contract, the put option becomes more
valuable and the FUND will enter into a closing contract. The realized gain
would offset the presumed unrealized loss in the FUND's portfolio. If the market
rises over the life of the option contract, the option will become worthless and
expire unexercised. In such event the FUND's loss on the option contract will be
limited to the premium paid.
The FUNDS may write (i.e., sell) covered call options and purchase call
options to close out previously written call options but only if (i) the
investments to which the call relates are common stock or other securities that
have equity characteristics; and (ii) the calls are listed on a domestic
securities exchange or quoted on the Nasdaq Stock Market. For a call to be
"covered," either (a) the FUND must own the underlying security or have an
absolute and immediate right to acquire that security without payment of
additional cash consideration, or for an additional consideration held as set
forth in (b), upon conversion or exchange of other securities held in its
portfolio; or (b) the FUND must maintain in a segregated account cash or liquid
securities adequate to purchase the securities, in each case until the FUND
enters into a closing purchase transaction as to that call.
WHAT REPORTS WILL I RECEIVE?
As a shareholder of the FUNDS you will be provided at least semi-annually with
a report showing each FUND's portfolio and other information. Annually, after
the close of the FUNDS' September 30 fiscal year, you will be provided with an
annual report containing audited financial statements.
An individual account statement will be sent to you by Firstar Trust Company
after each purchase, including reinvestment of dividends, or redemption of
shares of a FUND. You will also receive an annual statement after the end of the
calendar year listing all your transactions in FUND shares during the year.
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<PAGE> 13
If you have questions about your account, you may call Firstar Trust Company
at (800) 294-1699. If you have general questions about the FUNDS or want more
information, you may call us at (972) 387-8258 or write to us at CONCORDE FUNDS,
INC., 1500 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240,
Attention: Corporate Secretary.
WHO MANAGES THE FUNDS?
As a Texas corporation, the business and affairs of the FUNDS are managed by
its Board of Directors. Each FUND has entered into an investment advisory
agreement (the "Agreement") with the Advisor, Concorde Investment Management,
1500 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240, under which
the Advisor furnishes continuous investment advisory services and management to
the FUNDS. The Advisor was formed in 1981 as an investment advisor, and since
then has advised private accounts. Gary B. Wood, Ph.D., has been President of
the Advisor since its inception, and the FUNDS' President and Senior Manager of
the management team which has advised the FUNDS since inception. The management
team for the VALUE FUND currently is comprised of Dr. Wood and John A. Stetter,
co-managers, and Dennis R. Beall, analyst. John A. Stetter has been the FUNDS'
secretary since January 1998 and a Portfolio Manager with the Advisor since
1994. From 1988 until 1994, he was the President of his own investment advisory
firm. Dennis R. Beall is a Portfolio Manager with the Advisor and has been a
mergers and acquisitions and investment analyst with the Advisor since 1988. The
management team for the INCOME FUND currently is comprised of Dr. Wood and John
A. Stetter. The Advisor is controlled by Gary B. Wood, Ph.D.
The Advisor supervises and manages the investment portfolio of each of the
FUNDS and, subject to such policies as the Board of Directors of the FUNDS may
determine, directs the purchase or sale of investment securities in the
day-to-day management of the FUNDS. Under the Agreement, the Advisor, at its own
expense and without separate reimbursement from the FUNDS, furnishes office
space and all necessary office facilities, equipment, and executive personnel
for managing the FUNDS and maintaining its organization; bears all sales and
promotional expenses of the FUNDS, other than expenses incurred in complying
with the laws regulating the issue or sale of securities; and pays salaries and
fees of all officers and directors of the FUNDS (except the fees paid to
disinterested directors as such term is defined under the Investment Company Act
of 1940). For the foregoing, the Advisor receives a monthly fee at the annual
rate of 0.9% of the daily net assets of the VALUE FUND and 0.7% of the daily net
assets of the INCOME FUND. The Advisor may voluntarily waive all or any portion
of the advisory fees otherwise payable by the INCOME FUND. Such a waiver may be
terminated at any time in the Advisor's discretion.
HOW IS A FUND'S SHARE PRICE DETERMINED?
The net asset value (or "price") per share of each FUND is determined by
dividing the total value of the FUND's investments and other assets less any
liabilities, by the number of outstanding shares of the FUND. The net asset
value per share is determined once daily on each day that the New York Stock
Exchange is open, as of the close of regular trading on the Exchange (normally
3:00 P.M. Central time). Purchase orders for FUND shares accepted or FUND shares
tendered for redemption prior to the close of regular trading on a day the New
York Stock Exchange is open for trading will be valued as of the close of
trading, and purchase orders accepted and FUND shares tendered for redemption
after that time will be valued as of the close of regular trading on the next
trading day.
Portfolio securities that are listed on a national securities exchange or
quoted on the Nasdaq Stock Market are valued at the last
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<PAGE> 14
sale price on the day the valuation is made, or if not traded on the valuation
date, the most recent bid price. Other securities for which market quotations
are readily available are valued at the latest quoted bid price. Debt securities
are valued at the latest bid prices furnished by independent pricing services.
Options purchased or written by the FUNDS are valued at the closing current bid
price, when available. Other assets and securities for which no quotations are
readily available are valued at fair value as determined in good faith by the
Board of Directors. Short-term instruments (those with remaining maturities of
60 days or less) are valued at amortized cost, which approximates market.
HOW DO I OPEN AN ACCOUNT AND PURCHASE SHARES?
BY MAIL. Please complete and sign the New Account Application form included
with this Prospectus and send it, together with your check or money order ($500
minimum for each FUND), made payable to Concorde Funds, Inc., to: CONCORDE
FUNDS, INC., c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. Note: A different procedure is used for establishing Individual
Retirement Accounts ($500 minimum) and other retirement plans ($500 minimum).
Please call (972) 387-8258 for details. All purchases must be made in U.S.
dollars and checks must be drawn on U.S. banks. No cash will be accepted.
Firstar Trust Company will charge a $20 fee against a shareholder's account for
any check returned to it for insufficient funds. The shareholder will also be
responsible for any losses suffered by the FUNDS as a result.
BY OVERNIGHT OR EXPRESS MAIL. Please use the following address to insure
proper delivery: Firstar Trust Company, Mutual Fund Services, 3rd Floor, 615 E.
Michigan Street, Milwaukee, Wisconsin 53202.
BY WIRE. To establish a new account by wire please first call Firstar Trust
Company, (800) 294-1699, to obtain a confirmation number. This will ensure
prompt and accurate handling of your investment. A completed New Account
Application form must also be sent to the FUNDS at the address above immediately
after your investment is made so the necessary remaining information can be
recorded to your account. Your purchase request should be wired through the
Federal Reserve Bank as follows:
Firstar Bank Milwaukee, N.A.
ABA Number 075000022
For credit to Firstar Trust M.F.S.
Account Number 112-952-137
For further credit to Concorde Funds, Inc.
(Your account name and account number)
(Shareholder Account Name)
(Shareholder Account Number)
The FUNDS and Firstar Trust Company are not responsible for the consequences
of delays resulting from the banking or Federal Reserve Wire System or from
incomplete wiring instructions.
ADDITIONAL INVESTMENTS. You may add to your account at any time by purchasing
shares by mail (minimum $100) or by wire (minimum $500) according to the
aforementioned wiring instructions. You must notify Firstar Trust Company at
(800) 294-1699 prior to sending your wire. A remittance form which is attached
to your individual account statement should accompany any investments made
through the mail, when possible. All purchase requests must include your account
registration number in order to assure that your funds are credited properly.
As a no-load mutual fund, there are no sales commissions, so all of your
investment is used to purchase shares. All shares purchased will be credited to
your account and confirmed by a statement mailed to your address. The FUNDS do
not issue stock certificates for shares purchased. You may also invest in the
FUNDS by purchasing shares through a registered broker-dealer, who may charge
you a fee, either at the time of purchase or redemption. The fee, if charged, is
retained by the broker-dealer and not remitted to the FUNDS or the Advisor. The
FUNDS may
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accept telephone orders from broker-dealers who have been previously approved by
the FUNDS. It is the responsibility of the registered broker-dealer to promptly
remit purchase and redemption orders to Firstar Trust Company.
In addition, you may purchase shares of the FUNDS through programs of services
offered or administered by broker-dealers, financial institutions or other
service providers ("Processing Intermediaries") that have entered into
agreements with the FUNDS. Such Processing Intermediaries may become
shareholders of record and may use procedures and impose restrictions in
addition to or different from those applicable to shareholders who invest
directly in the FUNDS. Certain services of the FUNDS may not be available or may
be modified in connection with the programs provided by Processing
Intermediaries. The FUNDS may only accept requests to purchase additional shares
into an account in which the Processing Intermediary is the shareholder of
record from the Processing Intermediary.
The FUNDS may authorize one or more Processing Intermediaries (and other
Processing Intermediaries properly designated thereby) to accept purchase orders
on the FUNDS' behalf. In such event, a FUND will be deemed to have received a
purchase order when the Processing Intermediary accepts the customer order, and
the order will be priced at the FUND'S net asset value next computed after it is
accepted by the Processing Intermediary.
Processing Intermediaries may charge fees or assess other charges for the
services they provide to their customers. Any such fee or charge paid directly
by shareholders is retained by the Processing Intermediary and is not remitted
to the FUNDS or the Adviser. Additionally, the Adviser and/or the FUNDS may pay
fees to Processing Intermediaries to compensate them for the services they
provide. Program materials provided by the Processing Intermediary should be
read in conjunction with the Prospectus before investing in this manner. Shares
of the FUNDS may be purchased through Processing Intermediaries without regard
to a FUND'S minimum purchase requirement.
ALL APPLICATIONS ARE SUBJECT TO ACCEPTANCE BY THE FUNDS, AND ARE NOT BINDING
UNTIL SO ACCEPTED. THE FUNDS DO NOT ACCEPT TELEPHONE ORDERS FOR PURCHASE OF
SHARES AND RESERVE THE RIGHT TO REJECT APPLICATIONS IN WHOLE OR IN PART. The
minimum purchase amounts set forth above are subject to change at any time and
may be waived for purchases by the Advisor's employees and their family members.
Shareholders will be advised at least 30 days in advance of any increases in
such minimum amounts and the FUNDS' prospectus will be appropriately
supplemented. Applications without Social Security or Tax Identification numbers
will not be accepted.
HOW DO I SELL MY SHARES?
At any time during normal business hours you may request the FUNDS to redeem
your shares in whole or in part. Written redemption requests must be directed to
CONCORDE FUNDS, INC., c/o Firstar Trust Company, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701. If a redemption request is inadvertently sent to the FUNDS
at its corporate address, 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 which are subject to any special
conditions or which specify an effective date other than as provided herein
cannot be honored.
A redemption request must be received in "Good Order" by Firstar Trust Company
for the request to be processed. "Good Order" means the request for redemption
must include:
- - Your letter of instruction specifying the name of the FUND and either the
number of shares or the dollar amount of shares to be redeemed. The letter of
instruction must
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<PAGE> 16
be signed by all registered shareholders exactly as the shares are registered
and must include your account registration number and the additional
requirements listed below that apply to the particular account.
<TABLE>
<CAPTION>
TYPE OF REGISTRATION REQUIREMENTS
- -------------------- ------------
<S> <C>
Individual, Joint Tenants, Redemption request signed
Sole Proprietorship, by all person(s) required
Custodial (Uniform Gift to to sign for the account,
Minors Act), General Partners exactly as it is
registered.
Corporations, Associations Redemption request and a
corporate resolution,
signed by person(s)
required to sign for the
account, accompanied by
signature guarantee(s).
</TABLE>
<TABLE>
<CAPTION>
TYPE OF REGISTRATION REQUIREMENTS
- -------------------- ------------
<S> <C>
Trusts Redemption request signed
by the trustee(s) with a
signature guarantee. (If
the Trustee's name is not
registered on the
account, a copy of the
trust document certified
within the last 60 days
is also required).
</TABLE>
- - Signature guarantees if proceeds of redemption are to be sent by wire
transfer, to a person other than the registered holder, to an address other
than the address of record, and if a redemption request includes a change of
address within 15 days of request. Transfers of shares also require signature
guarantees. Signature guarantees may be obtained from any commercial bank or
trust company in the United States or a member of the New York Stock Exchange
and some savings and loan associations.
Shareholders who have an IRA or other retirement plan must indicate on their
redemption request whether or not to withhold federal income tax. Redemption
requests not indicating an election to have federal tax withheld will be subject
to withholding. If you are uncertain of the redemption requirements, please
contact, in advance, Firstar Trust Company.
The redemption price per share for each FUND is the next determined net asset
value after Firstar Trust Company receives a redemption request in "Good Order".
The amount paid will depend on the market value of the investments in the
appropriate FUND's portfolio at the time of determination of net asset value,
and may be more or less than the cost of the shares redeemed. Payment for shares
redeemed will be mailed to you typically within one or two days, but no later
than the seventh day after receipt by Firstar Trust Company of the redemption
request in "Good Order" unless a FUND is requested to redeem shares for which it
may not yet have received good payment (e.g. cash, bank money order or certified
check on a U.S. bank.) In such event the FUND may delay the mailing of a
redemption check until such time as it has assured itself that good payment for
the purchase price of the shares has been collected. (It will normally take up
to 3 days to clear local personal or corporate checks and up to 7 days to clear
other personal and corporate checks.) Wire transfers may be arranged through
Firstar Trust Company who will assess a $12.00 wiring charge against your
account.
You may redeem shares of the FUNDS by telephone. To redeem shares by
telephone, you must check the appropriate box on the New Account Application as
the FUNDS do not make this feature available to shareholders automatically. Once
this feature has been requested, you may redeem shares by phoning Firstar Trust
Company at 1-800-294-1699 or 1-414-765-4124 and giving the account name, account
number and either the number of shares or the dollar amount to be redeemed. For
your protection, you may be asked to give the social security number or tax
identification number listed on the account as further verification. Proceeds
redeemed by telephone will be mailed or wired only to your address or bank of
record as shown on the records of Firstar Trust Company. Telephone redemptions
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<PAGE> 17
must be in amounts of $1,000 or more. If the proceeds are sent by wire, a $12.00
wire fee will apply. If the proceeds are sent by Electronic Funds Transfer
(EFT), there is no charge to the shareholder. Transfers via EFT generally take
up to three business days to reach your bank account.
In order to arrange for telephone redemptions after a FUND account has been
opened or to change the bank, account or address designated to receive
redemption proceeds, you must send a written request to Firstar Trust Company.
The request must be signed by each registered holder of the account with the
signatures guaranteed by a commercial bank or trust company in the United
States, a member firm of the New York Stock Exchange or other eligible guarantor
institution. Further documentation may be requested from corporations,
executors, administrators, trustees and guardians.
The FUNDS reserve the right to refuse a telephone redemption if they believe
it is advisable to do so. Procedures for redeeming shares of the FUNDS by
telephone may be modified or terminated by the FUNDS at any time. Neither the
FUNDS nor Firstar Trust Company will be liable for following instructions for
telephone redemption transactions which they reasonably believe to be genuine,
provided reasonable procedures are used to confirm the genuineness of the
telephone instructions, but may be liable for unauthorized transactions if they
fail to follow such procedures. These procedures include requiring you to
provide some form of personal identification prior to acting upon your telephone
instructions and recording all telephone calls.
Shares of the FUNDS purchased through programs of services offered or
administered by Processing Intermediaries that have entered into agreements with
a FUND may be required to be redeemed through such programs. Such Processing
Intermediaries may become shareholders of record and may use procedures and
impose restrictions in addition to or different from those applicable to
shareholders who redeem shares directly through the FUNDS. The FUNDS may only
accept redemption requests from an account in which the Processing Intermediary
is the shareholder of record from the Processing Intermediary. The FUNDS may
authorize one or more Processing Intermediaries (and other Processing
Intermediaries properly designated thereby) to accept redemption requests on the
FUNDS' behalf. In such event, a FUND will be deemed to have received a
redemption request when the Processing Intermediary accepts the customer
request, and the redemption price will be the FUND'S net asset value next
computed after the customer redemption request is accepted by the Processing
Intermediary.
You should be aware that during periods of substantial economic or market
change, telephone or wire redemptions may be difficult to implement. If you are
unable to contact Firstar Trust Company by telephone, you may redeem shares by
delivering the redemption request to Firstar Trust Company by mail as described
above.
The FUNDS reserve the right to redeem the shares held in any account if at the
time of any transfer or redemption of shares in the account, the value of the
remaining shares in the account falls below $250. You will be notified in
writing that the value of your account is less than the minimum and allowed at
least 60 days to make an additional investment. The receipt of proceeds from the
redemption of shares held in an Individual Retirement Account will constitute a
taxable distribution of benefits from the IRA unless a qualifying rollover
contribution is made. Involuntary redemptions will not be made because the value
of shares in an account falls below $250 solely because of a decline in a FUND's
net asset value.
Your right to redeem shares of the FUNDS will be suspended and your right to
payment postponed for more than seven days for any period during which the New
York Stock Exchange is closed because of financial conditions or any other
extraordinary reason
15
<PAGE> 18
and may be suspended for any period during which (a) trading on the New York
Stock Exchange is restricted pursuant to rules and regulations of the Securities
and Exchange Commission, (b) the Securities and Exchange Commission has by order
permitted such suspension or (c) such emergency, as defined by rules and
regulations of the Securities and Exchange Commission, exists as a result of
which it is not reasonably practicable for a FUND to dispose of its securities
or fairly to determine the value of its net assets.
MAY SHAREHOLDERS EXCHANGE SHARES?
You may exchange your shares for shares in the other FUND at any time. The
registration of the account from which the exchange is being made and the amount
to which the exchange is made must be identical. State securities laws may
restrict your ability to make exchanges.
Exchange requests are subject to a $500 minimum, except for telephone
exchanges which are subject to a $1,000 minimum. The value to be exchanged and
the price of the shares being purchased will be the net asset value next
determined after receipt of instructions for the exchange. AN EXCHANGE FROM ONE
FUND TO ANOTHER IS TREATED THE SAME AS AN ORDINARY SALE AND PURCHASE FOR FEDERAL
INCOME TAX PURPOSES AND YOU WILL REALIZE A CAPITAL GAIN OR LOSS. THIS IS NOT A
TAX-FREE EXCHANGE. There are no fees charged on exchange requests. Exchange
requests should be directed to Firstar Trust Company. The FUNDS reserve the
right to modify or terminate the exchange privilege upon 60 days' written notice
to each shareholder prior to the modification or termination taking effect. The
responsibility of the FUNDS and Firstar Trust Company for the authenticity of
telephone exchange instructions is limited as described under "How Do I Sell My
Shares."
WHAT ABOUT DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES?
Each FUND intends normally to distribute substantially all of its net
investment income and net realized capital gains to its shareholders so as to
avoid paying income tax on its net investment income and net realized capital
gains or being subject to a federal excise tax on undistributed net investment
income or net realized capital gains. The INCOME FUND will pay dividends
quarterly. The record date for such dividends normally will be in March, June,
September and December. The record date for the VALUE FUND's dividends normally
will be in December.
For federal income tax purposes, distributions by the FUNDS, whether invested
by you in additional shares or received by you in cash, will be taxable to you
as either ordinary income or capital gains. You will be notified annually as to
the federal tax status of dividends and distributions, including the eligibility
of dividends for the dividends received deduction for corporations.
In addition to federal taxes, you may also be subject to state and local
taxes, depending on the laws of your home state and locality.
MAY SHAREHOLDERS REINVEST DIVIDENDS?
You may elect to have all dividends and capital gains distributions reinvested
or paid in cash. Please refer to the share purchase application form
accompanying this Prospectus for further information. If you do not specify an
election, all dividends and capital gains distributions will automatically be
reinvested in full and fractional shares of the appropriate FUND calculated to
the nearest 1,000th of a share. Shares are purchased at the net asset value in
effect on the business day after the dividend record date and are credited to
your account on the dividend payment date. Cash dividends are also paid on such
date. You will be advised of the number of shares purchased and the price
following each reinvestment. An election to reinvest or receive dividends and
distributions in cash will apply to all shares of the FUND registered in your
name, including those previously purchased.
16
<PAGE> 19
You may change an election at any time by notifying the FUNDS in writing. If
such a notice is received between a dividend declaration date and payment date,
it will become effective on the day following the payment date. The FUNDS may
modify or terminate its dividend reinvestment program at any time on thirty
days' notice to participants.
WHAT RETIREMENT PLANS DO THE FUNDS OFFER?
The FUNDS offer the following retirement plans that may fit your needs and
allow you to shelter some of your income from taxes:
- - INDIVIDUAL RETIREMENT ACCOUNTS ("IRA"). Individual shareholders may establish
their own tax-sheltered IRA. The FUNDS offer both a traditional IRA and a Roth
IRA (sometimes known as American Dream IRA).
- - SIMPLIFIED EMPLOYEE PENSION PLAN (SEP/IRA). The SEP/IRA is a pension plan in
which the employer contributes to an IRA. The SEP/IRA is also available to
self-employed individuals.
- - RETIREMENT PLANS. The plans, including both a profit-sharing plan and a
pension plan, are available for use by sole proprietors, partnerships and
corporations.
- - 403(B)(7) PLAN. The 403(b)(7) plan is available for use by employees of
certain educational, non-profit hospital and charitable corporations.
- - 401(K) PLAN. The 401(k) plan is a cash or deferred arrangement profit-sharing
plan available to employers of all sizes to benefit their employees.
Contact the FUNDS for complete information kits, including forms, concerning
the above plans, their benefits, provisions and fees. Consultation with a
competent financial and tax advisor regarding these plans is recommended.
WHAT ABOUT BROKERAGE TRANSACTIONS?
Each Agreement authorizes the Advisor to select the brokers or dealers that
will execute the purchases and sales of the FUNDS' portfolio securities. In
placing purchase and sale orders for the FUNDS, it is the policy of the Advisor
to seek the best execution of orders at the most favorable price in light of the
overall quality of brokerage and research services provided.
Each Agreement permits the Advisor to cause the FUNDS to pay a broker which
provides brokerage and research services to the Advisor a commission for
effecting securities transactions in excess of the amount another broker would
have charged for executing the transaction, provided the Advisor believes this
to be in the best interests of the FUNDS. Although the FUNDS do not intend to
market shares through intermediary broker-dealers, the FUNDS may place portfolio
orders with broker-dealers who recommend the purchase of shares to clients if
the Advisor believes the commissions and transaction quality are comparable to
that available from other brokers and allocate portfolio brokerage on that
basis.
GENERAL INFORMATION ABOUT THE FUNDS
DESCRIPTION OF SHARES AND VOTING RIGHTS. The FUNDS' authorized capital
consists of a single class of 30,000,000 shares of Common Stock, $1.00 par
value. The Common Stock is divisible into an unlimited number of "series," each
of which is a separate FUND. Each share of a FUND represents an equal
proportionate interest in that FUND. Shareholders are entitled: (i) to one vote
per full share of Common Stock; (ii) to such distributions as may be declared by
the FUNDS' Board of Directors out of funds legally available; and (iii) upon
liquidation, to participate ratably in the assets available for distribution.
There are no conversion or sinking fund provisions applicable to the shares, and
the holders have no preemptive rights and may not
17
<PAGE> 20
cumulate their votes in the election of directors. Consequently, the holders of
more than 50% of the shares of Common Stock voting for the election of directors
can elect the entire Board of Directors and in such event the holders of the
remaining shares voting for the election of directors will not be able to elect
any person or persons to the Board of Directors. The shares are redeemable and
are transferable. All shares issued and sold by the FUNDS will be fully paid and
non-assessable. Fractional shares of Common Stock entitle the holder to the same
rights as whole shares.
The Board of Directors may classify or reclassify any unissued shares of the
FUNDS and may designate or redesignate the name of any outstanding series of
shares of the FUNDS. As a general matter, shares are voted in the aggregate and
not by series, except where voting by series would be required by Texas law or
the Investment Company Act of 1940 (e.g., a change in investment policy or
approval of an investment advisory agreement). All consideration received from
the sale of shares of any series of the FUNDS' shares, together with all income,
earnings, profits and proceeds thereof, belong to that series and will be
charged with the liabilities in respect of that series and of that series' share
of the general liabilities of the FUNDS in the proportion that the total net
assets of the series bear to the total net assets of all series of the FUNDS'
shares. The net asset value of a share of any series is based on the assets
belonging to that series less the liabilities charged to that series and
dividends may be paid on shares of any series of Common Stock only out of
lawfully available assets belonging to that series. In the event of liquidation
or dissolution of the FUNDS, the holders of each series will be entitled out of
the assets of the FUNDS available for distribution, to the assets belonging to
that series.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT. Firstar Trust Company,
Milwaukee, Wisconsin, is the custodian for all securities and cash of the FUNDS
and serves as the FUNDS' transfer and dividend disbursing agent.
WHAT HAS BEEN THE FUNDS' PERFORMANCE?
PERFORMANCE INFORMATION.
The FUNDS may provide performance data from time to time in advertisements,
reports to shareholders and other communications with shareholders.
FUND performance may be shown by presenting one or more performance
measurements, including "average annual total return", "total return",
"cumulative total return" and "yield."
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a FUND for the
stated period, assuming the reinvestment of all dividends. Thus, these figures
reflect the change in the value of an investment in a FUND during a specified
period. Average annual total return figures are annualized and, therefore,
represent the average annual percentage change over the period in question.
Total return figures are not annualized and represent the aggregate percentage
of dollar value change over the period in question. Cumulative total return
reflects a FUND's performance over a stated period of time.
A FUND's yield is a measure of the net investment income per share earned by
the FUND over a specified one-month period expressed as a percentage of the
maximum offering price of the FUND's shares at the end of the period. Yield is
an annualized figure, which means that it is assumed that the FUND generates the
same level of net investment income over a one-year period. Net investment
income is assumed to be compounded semiannually when it is annualized.
18
<PAGE> 21
The FUNDS may also compare their performance to other mutual funds with
similar investment objectives and to the industry as a whole as reported by
Lipper Analytical Services, Inc., Morningstar OnDisc, Money, Forbes, Business
Week and Barron's magazines and The Wall Street Journal. (Lipper Analytical
Services, Inc. and Morningstar OnDisc are independent ranking services that rank
mutual funds based upon total return performance.) The FUNDS may also compare
their performance to the Dow Jones Industrial Average, NASDAQ Composite Index,
NASDAQ Industrials Index, Value Line Composite Index, the Standard & Poor's 500
Stock Index, the Standard & Poor's/Barra Value Index, the Consumer Price Index
and the Lehman Brothers Intermediate Government/Corporate Index.
The calculations in the graphs displayed below assume reinvestment of all
dividends and reflect the effect of all recurring fees.
Concorde Value Fund
Performance Comparison
9/30/97 Value of $10,000 Invested on 12/4/87
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Concorde Concorde
Year S&P 500 Value Fund Year S&P 500 Value Fund
- -------- ------- ---------- ------ ------- ----------
<S> <C> <C> <C> <C> <C>
12/04/87 $10,000 $10,000 Nov-92 $22,208 $13,539
Dec-87 $10,761 $ 9,800 Dec-92 $22,482 $14,212
Jan-88 $11,214 $10,540 Jan-93 $22,670 $14,481
Feb-88 $11,737 $11,290 Feb-93 $22,979 $14,457
Mar-88 $11,374 $11,601 Mar-93 $23,464 $14,843
Apr-88 $11,500 $11,371 Apr-93 $22,896 $14,704
May-88 $11,600 $11,081 May-93 $23,507 $14,938
Jun-88 $12,133 $12,172 Jun-93 $23,676 $14,938
Jul-88 $12,087 $12,191 Jul-93 $23,481 $14,950
Aug-88 $11,676 $11,111 Aug-93 $24,371 $15,289
Sep-88 $12,173 $11,291 Sep-93 $24,183 $16,324
Oct-88 $12,511 $11,081 Oct-93 $24,684 $16,523
Nov-88 $12,333 $10,791 Nov-93 $24,449 $15,371
Dec-88 $12,548 $11,175 Dec-93 $24,745 $15,703
Jan-89 $13,467 $11,672 Jan-94 $25,587 $16,031
Feb-89 $13,132 $11,936 Feb-94 $24,893 $15,978
Mar-89 $13,438 $12,290 Mar-94 $23,810 $16,611
Apr-89 $14,135 $12,574 Apr-94 $24,115 $15,467
May-89 $14,707 $13,132 May-94 $24,508 $15,625
Jun-89 $14,624 $12,605 Jun-94 $23,908 $15,506
Jul-89 $15,944 $13,051 Jul-94 $24,692 $15,782
Aug-89 $16,257 $13,213 Aug-94 $25,702 $16,373
Sep-89 $16,190 $12,787 Sep-94 $25,075 $16,098
Oct-89 $15,814 $11,701 Oct-94 $25,636 $16,059
Nov-89 $16,137 $11,590 Nov-94 $24,703 $15,482
Dec-89 $16,524 $11,670 Dec-94 $25,069 $15,081
Jan-90 $15,415 $10,921 Jan-95 $25,718 $15,054
Feb-90 $15,614 $11,086 Feb-95 $26,718 $15,245
Mar-90 $16,028 $11,427 Mar-95 $27,507 $15,642
Apr-90 $15,627 $11,009 Apr-95 $28,315 $16,066
May-90 $17,151 $11,516 May-95 $29,445 $16,477
Jun-90 $17,034 $11,604 Jun-95 $30,128 $17,078
Jul-90 $16,980 $11,307 Jul-95 $31,128 $17,873
Aug-90 $15,445 $10,018 Aug-95 $31,203 $17,887
Sep-90 $14,693 $ 9,203 Sep-95 $32,520 $18,243
Oct-90 $14,630 $ 8,607 Oct-95 $32,403 $17,927
Nov-90 $15,575 $ 9,192 Nov-95 $33,822 $18,612
Dec-90 $16,009 $ 9,721 Dec-95 $34,475 $18,713
Jan-91 $16,707 $10,635 Jan-96 $35,647 $18,823
Feb-91 $17,902 $11,436 Feb-96 $35,979 $19,322
Mar-91 $18,335 $11,605 Mar-96 $36,324 $19,710
Apr-91 $18,379 $11,515 Apr-96 $36,858 $20,085
May-91 $19,173 $11,830 May-96 $37,805 $20,543
Jun-91 $18,295 $11,808 Jun-96 $37,949 $20,306
Jul-91 $19,147 $12,033 Jul-96 $36,272 $19,433
Aug-91 $19,601 $12,067 Aug-96 $37,037 $20,084
Sep-91 $19,274 $11,852 Sep-96 $39,119 $20,737
Oct-91 $19,532 $12,055 Oct-96 $40,198 $21,195
Nov-91 $18,745 $11,682 Nov-96 $43,233 $22,193
Dec-91 $20,889 $12,395 Dec-96 $42,377 $22,085
Jan-92 $20,501 $12,718 Jan-97 $45,021 $23,390
Feb-92 $20,767 $13,261 Feb-97 $45,377 $23,257
Mar-92 $20,362 $13,284 Mar-97 $43,517 $22,426
Apr-92 $20,961 $13,422 Apr-97 $46,110 $23,790
May-92 $21,064 $13,503 May-97 $48,914 $25,006
Jun-92 $20,750 $13,006 Jun-97 $51,105 $26,088
Jul-92 $21,599 $13,318 Jul-97 $55,168 $27,985
Aug-92 $21,156 $13,053 Aug-97 $52,079 $27,364
Sep-92 $21,405 $12,857 Sep-97 $54,927 $29,142
Oct-92 $21,478 $13,042
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Return
Since Inception %
--------------- ------
<S> <C>
1 Year 40.53%
3 Years 21.85%
5 Years 17.76%
Since Inception 11.49%
</TABLE>
19
<PAGE> 22
MANAGEMENT'S DISCUSSION OF VALUE FUND PERFORMANCE. The VALUE FUND produced a
total return of 40.53% for the fiscal year ended September 30, 1997. This
performance compared favorably to total returns of 40.43% for the S&P 500 Index,
39.21% for the S&P Large Cap Barra Value Index, and 38.86% for the S&P MidCap
400 Barra Value Index. For the same period, the Wilshire MidCap Value Index rose
37.64%, the NASDAQ Composite was up 37.39%, and the Russell 2000 rose 33.19%.
The VALUE FUND generated positive total returns during each calendar quarter
for the second consecutive year in tandem with the strong domestic equity
market. Cash was reduced from 21% to 11% of the total portfolio as several new
stocks were purchased. Conglomerates, energy and natural resources, finance and
insurance, industrial cyclicals and technology were the primary contributors to
the annual performance. The only group to generate a negative contribution was
entertainment; Hasbro, a toy manufacturer and new addition to the VALUE FUND,
was down slightly from original cost basis.
Individual stocks contributing significantly to total return, as a result of
outstanding earnings, included Tyco International, Total, Weatherford Enterra,
Lehman Brothers, State Street, Magna International, Timken, Dallas Semiconductor
and Intel. Pepsico and Tele-Communications, Inc. realized significant gains
because of corporate restructuring. Alex Brown was a solid performer when
Bankers Trust concluded the purchase of the brokerage firm at a very favorable
price to stockholders.
Stocks with negative returns included Fedders Corporation, Salomon, Inc., St.
Jude Medical, Proffitt's, TCI Satellite Entertainment, and Oak Industries.
Fedders is a new holding with a small unrealized loss as of September 30, 1997.
St. Jude Medical and Oak Industries experienced fundamental deterioration and
were sold from the portfolio; Salomon, Proffitts and TCI Satellite also under-
performed and were sold.
The graph displayed above shows that the VALUE FUND's performance since
December 4, 1987 (inception) has lagged the performance of the S&P 500, a
broad-based market index. More recently, the VALUE FUND has performed more in
line with the S&P 500 Index and selected value indices as indicated above. The
S&P 500 is an index representing the aggregate market value of the common equity
of 500 stocks primarily traded on the NYSE (New York Stock Exchange), and they
tend to be larger-cap stocks. The stocks in the VALUE FUND's portfolio are
small-, medium- and large-capitalization, and the FUND is currently considered a
medium capitalization fund. As a result, its stocks more closely match the
stocks in these selected value indices, based on capitalization and other
factors which the Advisor uses to determine that an individual stock is
undervalued. (See "WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES?").
20
<PAGE> 23
CONCORDE INCOME FUND
PERFORMANCE COMPARISON
9/30/97 Value of $10,000 Invested on 1/22/96
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Income
Year Index Fund
- ------------------------------------------------
<S> <C> <C>
1/22/96 $10,000 $10,000
$10,112 $10,020
$9,994 $9,900
Mar 96 $9,943 $9,900
$9,908 $9,839
$9,900 $9,770
Jan 96 $10,005 $9,880
$10,035 $9,790
$10,043 $9,890
Sep 96 $10,183 $10,071
$10,363 $10,193
$10,500 $10,476
Dec 96 $10,432 $10,403
$10,473 $10,444
$10,493 $10,465
Mar 97 $10,421 $10,267
$10,544 $10,351
$10,631 $10,488
Jun 97 $10,728 $10,621
$10,946 $10,939
$10,891 $10,833
Sep 97 $11,017 $11,118
</TABLE>
Average Annual Total Return
<TABLE>
<S> <C>
1 Year 10.41%
3 Years n/a
Since Inception 6.48%
</TABLE>
The Lehman Brothers Intermediate Government/Corporate Index contains a group
of bonds with maturities between 1.00 and 9.99 years. The group is a subset of
approximately 4,000 publicly issued corporate and U.S. Government debt rated Baa
or better, and each issue has at least $100 million par amount outstanding.
MANAGEMENT'S DISCUSSION OF INCOME FUND PERFORMANCE. In pursuing its primary
investment objective of current income and secondary investment objective of
capital appreciation, the INCOME FUND produced a total return of 10.41% for the
fiscal year ending 9/30/97. Investment income (interest and dividends) and
capital appreciation contributed equally to the fiscal year performance. The
average maturity of the US Treasury and Agency bonds in the portfolio was
positioned between 6 and 7 years. As a result of the Advisor's caution towards
the equity market, the portfolio held a higher weighting in fixed income
securities compared to equity-oriented securities. This posture should provide
stability if and when the equity markets incur a major correction, and will
create an opportunity to purchase additional income-oriented stocks and
convertibles at more attractive prices.
During the fiscal year, interest rates in the 5-to-10 year maturity range
dropped 25 (0.25%) to 40 (0.40%) basis points. As a result, the fixed income
component of the portfolio generated modest capital appreciation, in addition to
interest income. The INCOME FUND maintained a position in corporate preferred
stocks throughout the year; these stocks are sensitive to changes in corporate
bond rates and are held primarily for their current yield. The yield spreads on
low- and below-investment grade bonds did not warrant investment during the
year.
21
<PAGE> 24
The equity portion of the portfolio generated most of the capital appreciation
in the INCOME FUND, reflected by the stock market's strong gains during the
period. Many of the income-oriented equities were financial issues, which are
affected by fluctuations in the bond market. Notable contributors included
Atlantic Richfield, Bankers Trust, Capstead Mortgage, First Industrial Realty
Trust, Hospitality Property Trust and ICO Inc. Exchangeable Preferred.
Individual issues generating negative returns included Fedders Convertible
Preferred, Ashland, Inc. Convertible Preferred and Hanson PLC. The performance
of these issues was generally based on company specific performance.
22
<PAGE> 25
DIRECTORS OF THE FUND
JOHN R. BRADFORD, Ph.D.
Vice President of Development of Compliance Services Group, Inc.
GILBERT F. HARTWELL
Chairman of the Board of Hartwell's Office World, Inc.
JOHN H. WILSON
President of U.S. Equity Corporation
GARY B. WOOD, Ph.D.
President, Treasurer and a director of Concorde Investment Management and
Concorde Capital Corporation; Chairman of the Board and a director of OmniMed
Corporation and International Hospital Corporation
OFFICERS OF THE FUND
GARY B. WOOD, Ph.D.
President and Treasurer
JOHN A. STETTER
Secretary
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Firstar Trust Company
Mutual Fund Services, 3rd Floor
615 East Michigan Street
Milwaukee, Wisconsin 53202
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Kinder & Wyman, P.C.
511 E. John Carpenter Freeway
Suite 200
Irving, Texas 75062
LEGAL COUNSEL
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
- --------------------------------------------------------------------------------
SPECIAL SERVICES AVAILABLE
Individual Retirement Accounts ("IRA"), including Traditional IRA and Roth IRA
Simplified Employee Pension Plan ("SEP/IRA")
Defined Contribution Retirement Plans
(Profit Sharing Plan and Pension Plan for
sole proprietors, partnerships and corporations)
Section 401(k) Plan
Section 403(b)(7) Plan
Dividend Reinvestment Plan
<PAGE> 26
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<PAGE> 27
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<PAGE> 28
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<PAGE> 29
Table of Contents
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
A MESSAGE FROM THE PRESIDENT
OF CONCORDE INVESTMENT MANAGEMENT.... ii
EXPENSES............................... 1
FINANCIAL HIGHLIGHTS................... 2
WHAT IS CONCORDE FUNDS, INC.? ......... 3
WHAT ARE THE FUNDS' INVESTMENT
OBJECTIVES AND POLICIES?............. 3
DO THE FUNDS HAVE ANY INVESTMENT
LIMITATIONS OR STRATEGIES DESIGNED TO
REDUCE RISK?......................... 5
MAY THE FUNDS ENGAGE IN OTHER
INVESTMENT PRACTICES?................ 6
WHAT REPORTS WILL I RECEIVE?........... 10
WHO MANAGES THE FUNDS?................. 11
HOW IS A FUND'S SHARE PRICE
DETERMINED?.......................... 11
HOW DO I OPEN AN ACCOUNT AND PURCHASE
SHARES?.............................. 12
HOW DO I SELL MY SHARES?............... 13
MAY SHAREHOLDERS EXCHANGE SHARES?...... 16
WHAT ABOUT DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES?............. 16
MAY SHAREHOLDERS REINVEST DIVIDENDS?... 16
WHAT RETIREMENT PLANS DO THE FUNDS
OFFER?............................... 17
WHAT ABOUT BROKERAGE TRANSACTIONS?..... 17
GENERAL INFORMATION ABOUT THE FUNDS.... 17
WHAT HAS BEEN THE FUNDS'
PERFORMANCE?......................... 18
</TABLE>
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 January 30, 1998, and, if given or made, such
information or representation may not be relied upon as having been authorized
by Concorde Funds, Inc. This Prospectus does not constitute an offer to sell
securities in any state or jurisdiction in which such offering may not lawfully
be made.
[CONCORDE LOGO]
APPLICATION AND PROSPECTUS
Dallas, Texas
January 30, 1998
<PAGE> 30
<TABLE>
<S> <C> <C>
[CONCORDE LOGO] NEW ACCOUNT APPLICATION
PLEASE MAIL IN THE ENCLOSED RETURN ENVELOPE TO:
CONCORDE FUNDS, C/O FIRSTAR TRUST COMPANY
POST OFFICE BOX 701, MILWAUKEE, WISCONSIN 53201-0701
NEW ACCOUNT REGISTRATION (PLEASE TYPE OR PRINT)
Note: Do not use this application for IRAs, SEPs or if establishing one of the Fund's prototype retirement plans. Please
call 1-800-294-1699 or 1-972-387-8258 for the appropriate application.
- ----------------------------------------------------------------------------------------------------------------------------------
Owner (Individual, Corporation, Partnership, Trust) Social Security/Taxpayer I.D. Number
- ----------------------------------------------------------------------------------------------------------------------------------
Co-Owner* (if any) Social Security/Taxpayer I.D. Number
- ----------------------------------------------------------------------------------------------------------------------------------
Mailing Address (Individuals should provide their residence address)
( )
- ----------------------------------------------------------------------------------------------------------------------------------
City State Zip Code Daytime Phone
*Indicate nature of co-ownership:
[ ] Community Property (No Right of Survivorship)
[ ] Joint Tenants with Rights of Survivorship
[ ] Tenants in Common
[ ] Other (Please specify):
---------------------------------------------------------------------------------------------------
Any registration in the names of two or more co-owners will be without right of survivorship, unless otherwise specified. Shares may
be registered in the name of a custodian for a minor under applicable state law. In such cases, the name of the state should be
indicated, and the taxpayer identification or social security number should be that of the minor. Shares registered in the name of a
trust should also identify the name(s) of Trustee(s) and Trust date.
INITIAL INVESTMENT (MINIMUM $500)
Please establish my account in [ ] Concorde Value Fund [ ] Concorde Income Fund. (Share certificates will not issued.)
[ ] By Check: I have enclosed a check made payable to Concorde Value Fund or Concorde Income Fund for $
--------------------------
[ ] By Wire: $
------------------------------------------------------ --------------------------------------------------------
Amount Date of Wire
A. Call 1-800-294-1699 to insure proper credit
B. Complete and return this application
C. Wire your investment through any Federal Reserve bank, as follows:
Firstar Bank Milwaukee, N.A. ABA Number 075000022
For credit to Firstar Trust M.F.S. Account Number 112-952-137
For further credit to Concorde Funds,
---------------------------------------------------------------------------
(Your Account Name)
ELECTION REGARDING DISTRIBUTIONS
If no option is checked, all distributions will be reinvested.
[ ] I would like all distributions to be reinvested in my account.
[ ] I would like dividends to be paid in cash and capital gains reinvested.
[ ] I would like all distributions to be paid to me in cash.
TELEPHONE REDEMPTION (OPTIONAL)
[ ] Permits the redemption of a minimum of $1,000. The proceeds will be mailed to the address above or deposited to your bank
account.
[ ] Via Wire* [ ] Electronic Funds Transfer
-----------------------------------------------------------------------------------------------------------------------------
Name on Bank Account
-----------------------------------------------------------------------------------------------------------------------------
Bank Name Account Number
-----------------------------------------------------------------------------------------------------------------------------
Bank Address
To ensure proper crediting to your bank account, please attach a deposit slip for the accounts shown above.
* A $12.00 fee will be applied to any redemption when the proceeds are wired.
SIGNATURE AND CERTIFICATION
I have received and read the Prospectus for Concorde Funds, Inc., ("Fund"). I understand the Fund's investment objectives and
policies and agree to be bound by the terms of the Prospectus. I am of legal age in my state of residence and have full authority to
purchase shares of the Fund and to establish and use any related privileges.
UNDER THE PENALTY OF PERJURY, I CERTIFY THAT (1) THE SOCIAL SECURITY NUMBER OR TAXPAYER IDENTIFICATION NUMBER SHOWN ON THIS FORM IS
MY CORRECT TAXPAYER IDENTIFICATION NUMBER, AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE I HAVE NOT BEEN NOTIFIED BY
THE INTERNAL REVENUE SERVICE (IRS) THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR
DIVIDENDS, OR THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. THE IRS DOES NOT REQUIRE YOUR CONSENT TO
ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
- ----------------------------------------------------------------------------------------------------------------------------------
Signature of Individual Date
- ----------------------------------------------------------------------------------------------------------------------------------
Signature of Joint Owner Date
- ----------------------------------------------------------------------------------------------------------------------------------
Signature of Authorized Officers, Partners, Trustees or Others Date
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION January 30, 1998
CONCORDE FUNDS, INC.
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
* Answer negative or inapplicable
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of Concorde Funds, Inc.
dated January 30, 1998. Requests for copies of the prospectus should be
made in writing to Concorde Funds, Inc., 1500 Three Lincoln Centre, 5430
LBJ Freeway, Dallas, Texas 75240, Attention: Corporate Secretary or by
calling (972) 387-8258.
<PAGE>
CONCORDE FUNDS, INC.
Table of Contents
Page No.
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . B-1
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . B-1
INVESTMENT POLICIES AND PRACTICES . . . . . . . . . . . . . . . . . . B-4
DIRECTORS AND OFFICERS OF THE CORPORATION . . . . . . . . . . . . . . B-16
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . B-18
INVESTMENT ADVISOR . . . . . . . . . . . . . . . . . . . . . . . . . B-20
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE . . . . . . . . . . B-21
REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . B-24
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . B-24
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . B-27
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . B-27
SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . B-27
DESCRIPTION OF BOND RATINGS . . . . . . . . . . . . . . . . . . . . . B-29
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 January 30, 1998 and, if
given or made, such information or representations may not be relied upon
as having been authorized by Concorde Funds, Inc.
This Statement of Additional Information does not constitute an
offer to sell securities.
<PAGE>
GENERAL INFORMATION
Concorde Funds, Inc. (the "Corporation") was incorporated under
the laws of Texas on September 21, 1987. The Corporation was called
"Concorde Value Fund, Inc." from September 21, 1987 until November 21,
1995. The Corporation is authorized to establish and operate one or more
separate series of mutual funds. The Corporation currently consists of
two separate funds namely "Concorde Value Fund" (the "VALUE FUND") and
"Concord Income Fund" (the "INCOME FUND") (collectively, the "FUNDS" or
individually, "FUND"). The VALUE FUND is the continuation of the original
Concorde Value Fund, Inc.
INVESTMENT RESTRICTIONS
As set forth in the prospectus dated January 31, 1998 of the
FUNDS under the caption "WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES AND
POLICIES?", the investment objective of the VALUE FUND is to produce long-
term growth of capital, without exposing capital to undue risk. The VALUE
FUND invests principally in undervalued common stocks. The investment
objective of the INCOME FUND is to produce current income, primarily
through investing in a diversified portfolio of income providing
securities. Growth of capital is a secondary objective of the INCOME
FUND. Consistent with these investment objectives, each of the FUNDS has
adopted certain investment restrictions which are matters of fundamental
policy and cannot be changed without approval of the holders of the lesser
of: (i) 67% of the FUND's shares present or represented at a shareholders
meeting at which the holders of more than 50% of such shares are present
or represented; or (ii) more than 50% of the outstanding shares of the
FUND as follows:
1. The FUNDS will not sell securities short, buy securities on
margin, purchase warrants, participate in a joint-trading account or deal
in options; provided, however, that the FUNDS may invest in and commit
their assets to writing and purchasing put and call options on securities
and stock indexes to the extent permitted by the Investment Company Act of
1940, as amended.
2. The VALUE FUND's investments in warrants, valued at the
lower of cost or market, will not exceed 5% of the value of the VALUE
FUND's net assets and of such 5% not more than 2% of the Value Fund's net
assets at the time of purchase may be invested in warrants that are not
listed on the New York or American Stock Exchanges. Warrants are options
to purchase securities at a specified price, valid for a specified period
of time. Warrants are pure speculation in that they have no voting
rights, pay no dividends and have no rights with respect to the assets of
the corporation issuing them. If the VALUE FUND does not exercise a
warrant, its loss will be the purchase price of the warrant.
3. Neither FUND will borrow money or issue senior securities,
except for temporary bank borrowings or for emergency or extraordinary
purposes (but not for the purpose of purchase of investments) and then
only in an amount not in excess of 5% of the value of its total assets,
and will not pledge any of its assets except to secure borrowings and then
only to an extent not greater than 10% of the value of the FUND's net
assets. Neither FUND will purchase securities while it has any
outstanding borrowings.
4. The VALUE FUND will not lend money (except by purchasing
publicly distributed debt securities) and will not lend its portfolio
securities. The INCOME FUND will not make loans, except it may acquire
debt securities from the issuer or others which are publicly distributed
or are of a type normally acquired by institutional investors and except
that it may make loans of portfolio securities if any such loans are
secured continuously by collateral at least equal to the market value of
the securities loaned in the form of cash and/or securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
provided that no such loan will be made if upon the making of that loan
more than 10% of the value of the INCOME FUND'S total assets would be the
subject of such loans.
5. Neither FUND will make investments for the purpose of
exercising control or management of any company.
6. Each FUND will limit its purchases of securities of any
issuer (other than the United States or an instrumentality of the United
States) in such a manner that it will satisfy at all times the
requirements of Sections 5(b)(1) of the Investment Company Act of 1940
(i.e., that at least 75% of the value of its total assets is represented
by cash and cash items (including receivables), U.S. Government
Securities, securities of other investment companies and other securities
for the purpose of the foregoing limited in respect to any one issuer to
an amount not greater than 5% of the value of the total assets of the FUND
and not more than 10% of the outstanding voting securities of such
issuer.)
7. Neither FUND will concentrate 25% or more of the value of
its assets, determined at the time an investment is made, exclusive of
U.S. government securities, in securities issued by companies engaged in
the same industry.
8. Neither FUND will purchase from or sell to any of its
officers or directors or firms for which any of them is an officer or
director any securities except shares of the FUNDS.
9. Neither FUND will acquire or retain any security issued by
a company if any of the directors or officers of the Corporation, or
directors, officers or other affiliated persons of its investment advisor,
beneficially own more than 1/2% of such company's securities and all of
the above persons owning more than 1/2% own together more than 5% of its
securities.
10. Neither FUND will act as an underwriter or distributor of
securities other than shares of the FUNDS and the VALUE FUND will not
purchase any securities which are restricted from sale to the public
without registration under the Securities Act of 1933, as amended. The
INCOME FUND may invest in restricted securities subject to the limitations
set forth in investment restriction 14.
11. Neither FUND will purchase or sell real estate or real
estate mortgage loans; provided, however, that the INCOME FUND may invest
in mortgage-backed securities.
12. Neither FUND will purchase or sell commodities or
commodities contracts.
13. The VALUE FUND will not invest more than 5% of its total
assets in securities of issuers which have a record of less than three
years of continuous operation, including the operation of any predecessor
business of a company which came into existence as a result of any merger,
consolidation, reorganization or purchase of substantially all of the
assets of such predecessor business.
14. The VALUE FUND's investments in illiquid and/or not readily
marketable securities (including repurchase agreements maturing in more
than seven days) will not exceed 10% of its total assets and the INCOME
FUND'S investments in such illiquid securities will not exceed 15% of its
total assets.
15. Neither FUND will invest in oil, gas and other mineral
leases, or enter into arbitrage transactions.
The FUNDS have adopted certain other investment restrictions
which are not fundamental policies and which may be changed by the
Corporation's Board of Directors without shareholder approval. These
additional restrictions are as follows:
1. The INCOME FUND'S investments in warrants will be limited
to 5% of the INCOME FUND'S net assets. Included within that amount, but
not to exceed 2% of the total value of the INCOME FUND'S net assets, may
be warrants that are not listed on the New York Stock Exchange or the
American Stock Exchange.
2. The INCOME FUND will not invest more than 5% of its total
assets in securities of any issuer which has a record of less than three
(3) years of continuous operation, including the operation of any
predecessor business of a company which came into existence as a result of
a merger, consolidation, reorganization or purchase of substantially all
of the assets of such predecessor business.
3. Neither FUND will purchase securities of other investment
companies except (a) as part of a plan of merger, consolidation or
reorganization approved by the shareholders of the FUND or (b) securities
of registered closed-end investment companies on the open market where no
commission or profit results, other than the usual and customary broker's
commission and where as a result of such purchase the FUND would hold less
than 3% of any class of securities, including voting securities, of any
registered closed-end investment company and less than 10% of the FUND's
net assets, taken at current value, would be invested in securities of
registered closed-end investment companies. The Advisor will not waive
its investment advisory fee with respect to those FUND assets, if any,
invested in registered closed-end investment companies.
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 a FUND's assets will not constitute a violation of
that restriction.
INVESTMENT POLICIES AND PRACTICES
Lending Portfolio Securities
The INCOME FUND may lend a portion of its portfolio securities
although the INCOME FUND will not engage in any such transaction if it
would cause more than 10% of its net assets to be subject to such loans.
Income may be earned on collateral received to secure the loans. Cash
collateral would be invested in money market instruments. U.S. Government
securities collateral would yield interest or earn discount. Part of this
income might be shared with the borrower. Alternatively, the INCOME FUND
could allow the borrower to receive the income from the collateral and
charge the borrower a fee. In either event, the INCOME FUND would receive
the amount of dividends or interest paid on the loaned securities.
Usually these loans would be made to brokers, dealers or
financial institutions. Loans would be fully secured by collateral
deposited with the INCOME FUND's custodian in the form of cash and/or
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. This collateral must be increased within one business
day in the event that its value shall become less than the market value of
the loaned securities. While there may be delays in recovery or even loss
of rights in the collateral should the borrower fail financially, the
loans will be made only to firms deemed by Concorde Financial Corporation,
the FUNDS' investment advisor (the "Advisor"), to be of good standing.
Loans will not be made unless, in the judgment of the Advisor, the
consideration which can be earned from such loans justifies the risk.
The borrower, upon notice, must redeliver the loaned securities
within three business days. In the event that voting rights with respect
to the loaned securities pass to the borrower and a material proposal
affecting the securities arises, the loan may be called or the INCOME FUND
will otherwise secure or be granted a valid proxy in time for it to vote
on the proposal.
In making such loans, the INCOME FUND may utilize the services
of a loan broker and pay a fee therefor. The INCOME FUND may incur
additional custodian fees for services in connection with the lending of
securities.
Mortgage-Backed Securities
The INCOME FUND may invest in Mortgage-Backed Securities, which
are securities that directly or indirectly represent a participation in,
or are secured by and payable from, mortgage loans secured by real
property. Mortgage-Backed Securities include: (i) Guaranteed Government
Agency Mortgage-Backed Securities; (ii) Privately-Issued Mortgage-Backed
Securities; and (iii) collateralized mortgage obligations and multiclass
pass-through securities. These securities are described below.
Guaranteed Government Agency Mortgage-Backed Securities.
Mortgage-Backed Securities include Guaranteed Government Mortgage-Backed
Securities, which represent participation interests in pools of
residential mortgage loans originated by United States governmental or
private lenders and guaranteed, to the extent provided in such securities,
by the United States government or one of its agencies or
instrumentalities. Such securities, with the exception of collateralized
mortgage obligations, are ownership interests in the underlying mortgage
loans and provide for monthly payments that are a "pass-through" of the
monthly interest and principal payments (including any prepayments) made
by the individual borrowers on the pooled mortgage loans, net of any fees
paid to the guarantor of such securities and the servicer of the
underlying mortgage loans.
The Guaranteed Government Agency Mortgage-Backed Securities in
which the INCOME FUND may invest will include those issued or guaranteed
by the Government National Mortgage Association ("Ginnie Mae"), the
Federal National Mortgage Association ("Fannie Mae") and the Federal Home
Loan Mortgage Corporation ("Freddie Mac"). As more fully described below,
these securities may include collateralized mortgage obligations,
multiclass pass-through securities and stripped mortgage-backed
securities.
Ginnie Mae Certificates. Ginnie Mae is a wholly-owned corporate
instrumentality of the United States within the Department of Housing and
Urban Development. The National Housing Act of 1934, as amended (the
"Housing Act"), authorizes Ginnie Mae to guarantee the timely payment of
the principal of and interest on certificates that are based on and backed
by a pool of mortgage loans insured by the Federal Housing Administration
Act, or Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed by
the Veterans' Administration under the Servicemen's Readjustment Act of
1944, as amended ("VA Loans"), or by pools of other eligible mortgage
loans. The Housing Act provides that the full faith and credit of the
United States government is pledged to the payment of all amounts that may
be required to be paid under any guarantee. To meet its obligations under
such guarantee, Ginnie Mae is authorized to borrow from the United States
Treasury with no limitations as to amount.
Fannie Mae Certificates. Fannie Mae is a federally chartered
and privately owned corporation organized and existing under the Federal
National Mortgage Association Charter Act. Fannie Mae was originally
established in 1938 as a United States government agency to provide
supplemental liquidity to the mortgage market and was transformed into a
stockholder owned and privately managed corporation by legislation enacted
in 1968. Fannie Mae provides funds to the mortgage market primarily by
purchasing home mortgage loans from local lenders, thereby replenishing
their funds for additional lending. Fannie Mae acquires funds to purchase
home mortgage loans from many capital market investors that originally may
not invest in mortgage loans directly, thereby expanding the total amount
of funds available for housing.
Each Fannie Mae Certificate will entitle the registered holder
thereof to receive amounts representing such holder's pro rata interest in
scheduled principal payments and interest payments (at such Fannie Mae
Certificate's pass-through rate, which is net of any servicing and
guarantee fees on the underlying mortgage loans), and any principal
prepayments, on the mortgage loans in the pool represented by such Fannie
Mae Certificate and such holder's proportionate interest in the full
principal amount of any foreclosed or otherwise finally liquidated
mortgage loan. The full and timely payment of principal of and interest
on each Fannie Mae Certificate will be guaranteed by Fannie Mae, which
guarantee is not backed by the full faith and credit of the United States
government.
Freddie Mac Certificates. Freddie Mac is a corporate
instrumentality of the United States created pursuant to the Emergency
Home Finance Act of 1970, as amended (the "FHLMC Act"). Freddie Mac was
established primarily for the purpose of increasing the availability of
mortgage credit for the financing of needed housing. The principal
activity of Freddie Mac currently consists of the purchase of first lien,
conventional, residential mortgage loans and participation interests in
such mortgage loans and the resale of the mortgage loans so purchased in
the form of mortgage securities, primarily Freddie Mac Certificates.
Freddie Mac guarantees to each registered holder of a Freddie
Mac Certificate the timely payment of interest at the rate provided for by
such Freddie Mac Certificate, whether or not received. Freddie Mac also
guarantees to each registered holder of a Freddie Mac Certificate ultimate
collection of all principal of the related mortgage loans, without any
offset or deduction, but, generally, does not guarantee the timely payment
of scheduled principal. Freddie Mac may remit the amount due on account
of its guarantee of collection of principal at any time after default on
an underlying mortgage loan, but not later than 30 days following (i)
foreclosure sale, (ii) payment of claim by any mortgage insurer, or (iii)
the expiration of any right of redemption, whichever occurs later, but in
any event no later than one year after demand has been made upon the
mortgagor for accelerated payment of principal. The obligations of
Freddie Mac under its guarantee are obligations solely of Freddie Mac and
are not backed by the full faith and credit of the United States
government.
Privately-Issued Mortgage-Backed Securities. Mortgage-Backed
Securities include Privately-Issued Mortgage-Backed Securities, which are
issued by private issuers and represent an interest in or are
collateralized by (i) Mortgage-Backed Securities issued or guaranteed by
the U.S. Government or one of its agencies or instrumentalities
("Privately-Issued Agency Mortgage-Backed Securities"), or (ii) whole
mortgage loans or non-Agency collateralized Mortgage-Backed Securities
("Privately-Issued Non-Agency Mortgage-Backed Securities"). These
securities are structured similarly to the Ginnie Mae, Fannie Mae and
Freddie Mac mortgage pass-through securities described above and are
issued by originators of the investors in mortgage loans, including
savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.
Privately-Issued Agency Mortgage-Backed Securities usually are backed by a
pool of Ginnie Mae, Fannie Mae and Freddie Mac Certificates. Privately-
Issued Non-Agency Mortgage-Backed Securities usually are backed by a pool
of conventional fixed rate or adjustable rate mortgage loans that are not
guaranteed by an entity having the credit status of Ginnie Mae, Fannie Mae
or Freddie Mac, and generally are structured with one or more types of
credit enhancement. As more fully described below, these securities may
include collateralized mortgage obligations, multiclass pass-through
securities and stripped mortgage-backed securities.
Collateralized Mortgage Obligations and Multiclass Pass-Through
Securities. Mortgage-Backed Securities include collateralized mortgage
obligations or "CMOs," which are debt obligations collateralized by
mortgage loans or mortgage pass-through securities. Typically, CMOs are
collateralized by Ginnie Mae, Fannie Mae or Freddie Mac Certificates, but
also may be collateralized by other Mortgage-Backed Securities or whole
loans (such collateral collectively hereinafter referred to as "Mortgage
Assets"). CMOs include multiclass pass-through securities, which can be
equity interests in a trust composed of Mortgage Assets. Payments of
principal of and interest on the Mortgage Assets, and any reinvestment
income thereon, provide the funds to pay debt service on the CMOs or make
scheduled distributions on the multiclass pass-through securities. CMOs
may be issued by agencies or instrumentalities of the United States
government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. The
issuer of a series of CMOs may elect to be treated as a Real Estate
Mortgage Investment Conduit.
In a CMO, a series of bonds or certificates is issued in
multiple classes. Each class of CMOs, often referred to as a "tranche,"
is issued at a specific fixed or floating coupon rate and has a stated
maturity or final distribution date. Principal prepayments on the
Mortgage Assets may cause the CMOs to be retired substantially earlier
than their stated maturities or final distribution dates. Interest is
paid or accrues on classes of the CMOs on a monthly, quarterly or
semiannual basis. The principal of and interest on the Mortgage Assets
may be allocated among the several classes of a CMO series in innumerable
ways, some of which bear substantially more risk than others.
Miscellaneous. The yield characteristics of Mortgage-Backed
Securities differ from traditional debt securities. Among the major
differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans generally may be prepaid at any
time. As a result, if a Fund purchases such a security at a premium, a
prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have
the opposite effect of increasing yield to maturity. Conversely, if a
Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will
reduce, yield to maturity. Certain classes of CMOs and other types of
mortgage pass-through securities, including those whose interest rates
fluctuate based on multiples of a stated index, are designed to be highly
sensitive to changes in prepayment and interest rates and can subject the
holders thereof to extreme reductions of yield and loss of principal.
Prepayments on a pool of mortgage loans are influenced by a
variety of economic, geographic, social and other factors, including
changes in the mortgagors' housing needs, job transfers, unemployment,
mortgagors' net equity in the mortgaged properties and servicing
decisions. Generally, however, prepayments on fixed rate mortgage loans
will increase during a period of falling interest rates and decrease
during a period of rising interest rates. Accordingly, amounts available
for reinvestment by the INCOME FUND are likely to be greater during a
period of declining interest rates and, as a result, likely to be
reinvested at lower interest rates than during a period of rising interest
rates. Mortgage-Backed Securities may decrease in value as a result of
increases in interest rates and may benefit less than other fixed income
securities from declining interest rates because of the risk of
prepayment.
No assurance can be given as to the liquidity of the market for
certain Mortgage-Backed Securities, such as CMOs and multiclass pass-
through securities. Determination as to the liquidity of such securities
will be made in accordance with guidelines established by the
Corporation's Board of Directors. In accordance with such guidelines, the
Advisor will monitor the INCOME FUND's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information.
Interest rates on variable rate Mortgage-Backed Securities are
subject to periodic adjustment based on changes or multiples of changes in
an applicable index. The One-Year Treasury Index and LIBOR are among the
common interest rate indexes. The One Year Treasury Index is the figure
derived from the average weekly quoted yield on U.S. Treasury Securities
adjusted to a constant maturity of one year. LIBOR, the London interbank
offered rate, is the interest rate that the most creditworthy
international banks dealing in U.S. dollar-denominated deposits and loans
charge each other for large dollar-denominated loans. LIBOR is also
usually the base rate for large dollar-denominated loans in the
international market. LIBOR is generally quoted for loans having rate
adjustments at one, three, six or twelve month intervals.
Illiquid Securities
Each of the FUNDS may invest in illiquid securities subject to
the limitations set forth in investment restriction 14. The Board of
Directors of the Corporation or its delegate has the ultimate authority to
determine, to the extent permissible under the federal securities laws,
which securities are liquid or illiquid for purposes of those limitations.
Securities eligible to be resold pursuant to Rule 144A under the
Securities Act may be considered liquid by the Board of Directors.
Restricted securities, which may be purchased only by the INCOME
FUND, may be sold by the INCOME FUND only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act. Where registration is
required, the INCOME FUND may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the INCOME FUND may be permitted
to sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, the INCOME FUND
might obtain a less favorable price than prevailed when it decided to
sell. Restricted securities will be priced at fair value as determined in
good faith by the Board of Directors of the Corporation. If through the
appreciation of restricted securities or the depreciation of unrestricted
securities, the INCOME FUND should be in a position where more than 15% of
the value of its net assets are invested in illiquid assets, including
restricted securities, the INCOME FUND will take such steps as it deemed
advisable, if any, to protect liquidity.
U.S. Government Securities
Each of the FUNDS may invest in securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities which include
Treasury securities which differ only in their interest rates, maturities
and times of issuance. Treasury Bills have initial maturities of one year
or less; Treasury Notes have initial maturities of one to ten years; and
Treasury Bonds generally have initial maturities of greater than ten
years. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities, for example, Ginnie Mae Certificates, are supported
by the full faith and credit of the U.S. Treasury; others, such as those
of the Federal Home Loan Banks, by the right of the issuer to borrower
from the Treasury; others, such as those issued by Fannie Mae, by
discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of
the agency or instrumentality. While the U.S. Government provides
financial support to such U.S. Government sponsored agencies or
instrumentalities, no assurance can be given that it will always do so
since it is not so obligated by law.
High Yield Securities
As set forth in the Prospectus, the INCOME FUND may invest in
high yield, high risk, lower-rated securities, commonly known as "junk
bonds." Investments in such securities are subject to the risk factors
outlined below.
The high yield market is relatively new and at times is subject
to substantial volatility. An economic downturn or increase in interest
rates may have a more significant effect on the high yield securities in
an underlying registered investment company's portfolio and their markets,
as well as on the ability of securities' issuers to repay principal and
interest. Issuers of high yield securities may be of low creditworthiness
and the high yield securities may be subordinated to the claims of senior
lenders. During periods of economic downturn or rising interest rates the
issuers of high yield securities may have greater potential for insolvency
and a higher incidence of high yield bond defaults may be experienced.
The prices of high yield securities have been found to be less
sensitive to interest rate changes than higher-rated investments but are
more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress
which would adversely affect their ability to service their principal and
interest payment obligations, to meet projected business goals, and to
obtain additional financing. If the issuer of a high yield security owned
by the INCOME FUND defaults, the INCOME FUND may incur additional expenses
in seeking recovery. Periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of high yield
securities and the INCOME FUND's net asset value. Yields on high yield
securities will fluctuate over time. Furthermore, in the case of high
yield securities structured as zero coupon or pay-in-kind securities,
their market prices are affected to a greater extent by interest rate
changes and thereby tend to be more volatile than market prices of
securities which pay interest periodically and in cash.
Certain securities held by the INCOME FUND, including high yield
securities, may contain redemption or call provisions. If an issuer
exercises these provisions in a declining interest rate market, the INCOME
FUND would have to replace the security with a lower yield security,
resulting in a decreased return for the investor. Conversely, a high
yield security's value will decrease in a rising interest rate market, as
will the value of the INCOME FUND's assets.
The secondary market for high yield securities may at times
become less liquid or respond to adverse publicity or investor perceptions
making it more difficult for the INCOME FUND to value accurately high
yield securities or dispose of them. To the extent the INCOME FUND owns
or may acquire illiquid or restricted high yield securities, these
securities may involve special registration responsibilities, liabilities
and costs, and liquidity difficulties, and judgment will play a greater
role in valuation because there is less reliable and objective data
available.
Special tax considerations are associated with investing in high
yield bonds structured as zero coupon or pay-in-kind securities. The
INCOME FUND will report the interest on these securities as income even
though it receives no cash interest until the security's maturity or
payment date. Further, the INCOME FUND must distribute substantially all
of its income to its shareholders to qualify for pass-through treatment
under the tax law. Accordingly, the INCOME FUND may have to dispose of
its portfolio securities under disadvantageous circumstances to generate
cash or may have to borrow to satisfy distribution requirements.
Credit ratings evaluate the safety of principal and interest
payments, not the market value risk of high yield securities. Since
credit rating agencies may fail to timely change the credit ratings to
reflect subsequent events, the Advisor will monitor the issuers of high
yield securities in the portfolio to determine if the issuers will have
sufficient cash flow and profits to meet required principal and interest
payments, and to attempt to assure the securities' liquidity so the INCOME
FUND can meet redemption requests. To the extent that the INCOME FUND
invests in high yield securities, the achievement of its investment
objective may be more dependent on its own credit analysis than is the
case for higher quality bonds. The INCOME FUND may retain a portfolio
security whose rating has been changed.
Hedging Instruments
Index Options Transactions. The FUNDS may purchase put and call
options and write call options on stock indexes. A stock index fluctuates
with changes in the market values of the stock included in the index.
Options on stock indexes give the holder the right to receive an amount of
cash upon exercise of the options. Receipt of this cash amount will
depend upon the closing level of the stock index upon which the option is
based being greater than (in the case of a call) or less than (in the case
of a put) the exercise price of the option. The amount of cash received,
if any, will be the difference between the closing price of the index and
the exercise price of the option, multiplied by a specified dollar
multiple. The writer (seller) of the option is obligated, in return for
the premiums received from the purchaser of the option, to make delivery
of this amount to the purchaser. Unlike the options on securities
discussed below, all settlements of index options transactions are in
cash.
Some stock index options are based on a broad market index such
as the S&P 500 Index, the NYSE Composite Index or the AMEX Major Market
Index, or on a narrower index such as the Philadelphia Stock Exchange
Over-the-Counter Index. Options currently are traded on the Chicago Board
of Options Exchange, the AMEX and other exchanges. Over-the-counter index
options, purchased over-the-counter options and the cover for any written
over-the-counter options would be subject to the VALUE FUND's 10%
limitation and the INCOME FUND's 15% limitation on investment in illiquid
securities. See "Illiquid Securities."
Each of the exchanges has established limitations governing the
maximum number of call or put options on the same index which may be
bought or written (sold) by a single investor, whether acting alone or in
concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts
or through one or more brokers). Under these limitations, options
positions of certain other accounts advised by the same investment adviser
are combined for purposes of these limits. Pursuant to these limitations,
an exchange may order the liquidation of positions and may impose other
sanctions or restrictions. These position limits may restrict the number
of listed options which the FUNDS may buy or sell; however, the Advisor
intends to comply with all limitations.
Index options are subject to substantial risks, including the
risk of imperfect correlation between the option price and the value of
the underlying securities comprising the stock index selected and the risk
that there might not be a liquid secondary market for the option. Because
the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the FUNDS will
realize a gain or loss from the purchase of writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indexes, in an industry or market
segment, rather than upon movements in the price of a particular stock.
Trading in index options requires different skills and techniques than are
required for predicting changes in the prices of individual stocks. The
FUNDS will not enter into an option position that exposes a FUND to an
obligation to another party, unless the FUND either (i) owns an offsetting
position in securities or other options; and/or (ii) maintains with the
FUND'S custodian bank (and marks-to-market, on a daily basis) a segregated
account consisting of cash or liquid securities that, when added to the
premiums deposited with respect to the option, are equal to the market
value of the underlying stock index not otherwise covered.
The Advisor may utilize index options as a technique to leverage
the portfolios of the FUNDS. If the Advisor is correct in its assessment
of the future direction of stock prices, the share prices of the FUNDS
will be enhanced. If the Advisor has the FUNDS take a position in options
and stock prices move in a direction contrary to the Advisor's forecast
however, the FUNDS would incur losses greater than the FUNDS would have
incurred without the options position.
Options on Securities. The FUNDS may buy put and call options
and write (sell) call options on securities. By writing a call option and
receiving a premium, a FUND may become obligated during the term of the
option to deliver the securities underlying the option at the exercise
price if the option is exercised. By buying a put option, a FUND has the
right, in return for a premium paid during the term of the option, to sell
the securities underlying the option at the exercise price. By buying a
call option, a FUND has the right, in return for a premium paid during the
term of the option, to purchase the securities underlying the option at
the exercise price. Options on securities written by the FUNDS will be
traded on recognized securities exchanges.
When writing call options on securities, a FUND may cover its
position by owning the underlying security on which the option is written.
Alternatively, the FUND may cover its position by owning a call option on
the underlying security, on a share for share basis, which is deliverable
under the option contract at a price no higher than the exercise price of
the call option written by the FUND or, if higher, by owning such call
option and depositing and maintaining in a segregated account cash or
liquid securities equal in value to the difference between the two
exercise prices. In addition, the FUNDS may cover their position by
depositing and maintaining in a segregated account cash or liquid
securities equal in value to the exercise price of the call option written
by the FUND. The principal reason for the FUNDS to write call options on
stocks held by the FUNDS is to attempt to realize, through the receipt of
premiums, a greater return than would be realized on the underlying
securities alone.
When a FUND wishes to terminate the FUND's obligation with
respect to an option it has written, the FUND may effect a "closing
purchase transaction." The FUND accomplishes this by buying an option of
the same series as the option previously written by the FUND. The effect
of the purchase is that the writer's position will be canceled. However,
a writer may not effect a closing purchase transaction after the writer
has been notified of the exercise of an option. When a FUND is the holder
of an option, it may liquidate its position by effecting a "closing sale
transaction." The FUND accomplishes this by selling an option of the same
series as the option previously purchased by the FUND. There is no
guarantee that either a closing purchase or a closing sale transaction can
be effected. If any call or put option is not exercised or sold, the
option will become worthless on its expiration date.
A FUND will realize a gain (or a loss) on a closing purchase
transaction with respect to a call option previously written by the FUND
if the premium, plus commission costs, paid by the FUND to purchase the
put option is less (or greater) than the premium, less commission costs,
received by the FUND on the sale of the call option. A FUND also will
realize a gain if a call option which the FUND has written lapses
unexercised, because the FUND would retain the premium.
A FUND will realize a gain (or a loss) on a closing sale
transaction with respect to a call or a put option previously purchased by
the FUND if the premium, less commission costs, received by the FUND on
the sale of the call or the put option is greater (or less) than the
premium, plus commission costs, paid by the FUND to purchase the call or
the put option. If a put or a call option which the FUND has purchased
expires out-of-the-money, the option will become worthless on the
expiration date, and the FUND will realize a loss in the amount of the
premium paid, plus commission costs.
Although certain securities exchanges attempt to provide
continuously liquid markets in which holders and writers of options can
close out their positions at any time prior to the expiration of the
option, no assurance can be given that a market will exist at all times
for all outstanding options purchased or sold by the FUNDS. In such
event, the FUNDS would be unable to realize their profits or limit their
losses until the FUNDS would exercise options they hold and the FUNDS
would remain obligated until options they wrote were exercised or expired.
Because option premiums paid or received by the FUNDS are small
in relation to the market value of the investments underlying the options,
buying and selling put and call options can be more speculative than
investing directly in common stocks.
The hours of trading for options may not conform to the hours
during which the underlying securities are traded. To the extent that the
options markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying
markets that cannot be reflected in the options markets. The purchase and
writing of options is a highly specialized activity which involves
investment techniques and risks different from those associated with
ordinary portfolio securities transactions.
Municipal Securities
The INCOME FUND may invest in debt obligations issued by or on
behalf of the governments of states, territories or possessions of the
United States, the District of Columbia and their political subdivisions,
agencies and instrumentalities, certain interstate agencies and certain
territories of the United States. The two principal classifications of
municipal securities are "general obligation" and "revenue" securities.
"General obligation" securities are secured by the issuer's pledge of its
full faith and credit and taxing power for the payment of principal and
interest. "Revenue" securities are usually payable only from the revenues
derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or other specific revenue
source. Industrial development bonds are usually revenue securities, the
credit quality of which is normally directly related to the credit
standing of the industrial user involved. Within these principal
classifications of municipal securities, there are a variety of categories
of municipal securities, including fixed and variable rate securities,
municipal bonds, municipal notes, municipal leases, custodial receipts and
participation certificates. Certain of the municipal securities in which
the INCOME FUND may invest represent relatively recent innovations in the
municipal securities markets. Because the INCOME FUND does not intend to
invest a substantial amount of its assets in municipal securities, the
interest on which is exempt from federal income tax, the INCOME FUND does
not expect to be entitled to pass through to its shareholders the tax-
exempt nature of any interest income attributable to investments in
municipal securities.
DIRECTORS AND OFFICERS OF THE CORPORATION
The name, address, age, principal occupations during the past
five years and certain other information as of November 1, 1997 with
respect to each of the directors and officers of the Corporation are as
follows:
JOHN R. BRADFORD, Ph.D., 75
7619 University Avenue
Suite 2A
Lubbock, Texas 79423
(A DIRECTOR OF THE CORPORATION)
Dr. Bradford is Vice President of Development of Compliance
Services Group, Inc., an international integrated environmental management
consulting and engineering service company.
GILBERT F. HARTWELL, 73
6810 Larkwood Street
Houston, Texas 77074
(A DIRECTOR OF THE CORPORATION)
Mr. Hartwell is a Director of Century Business Machines,
Houston, Texas, an office business machine company and the successor to
Hartwell's Office World, Inc. Mr. Hartwell was the Chairman and founder
of Hartwell's Office World, Inc.
JOHN H. WILSON, 55
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(A DIRECTOR OF THE CORPORATION)
Mr. Wilson is President of U.S. Equity Corporation, a venture
capital firm. Mr. Wilson is also President and a Director of Whitehall
Corporation, which rebuilds, modifies and maintains commercial and
military aircraft. He currently serves on the Board of Directors of
Capital Southwest Corporation, a venture capital firm, Norwood
Promotional Products, Inc., a manufacturer of advertising specialty
products, Encore Wire Corporation, a manufacturer of electrical wire and
cable, and Palm Harbor Homes, Inc., a producer of manufactured homes.
GARY B. WOOD, Ph.D.*, 47
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(PRESIDENT, TREASURER AND A DIRECTOR OF THE CORPORATION)
Dr. Wood is President, Secretary, Treasurer and a director of
the Advisor and Concorde Capital Corporation, an investment advisory firm
affiliated with the Advisor. He is also Chairman of the Board and a
director of OmniMed Corporation, Houston, Texas, a medical equipment
business and has been an officer and director of such corporation and its
predecessor Uro-Tech Management Corporation, Dallas, Texas, since June,
1983. He is also Chairman of the Board of International Hospital
Corporation, Dallas, Texas, a hospital construction and management firm.
Dr. Wood currently serves on the Board of Directors of Harken Energy
Corporation, a public corporation headquartered in Dallas, Texas, and is
Chairman of the Board and a director of Positron Corporation, a public
corporation headquartered in Houston, Texas.
* Dr. Wood is a director who is an "interested person" of the FUND as that
term is defined in the Investment Company Act of 1940.
JOHN A. STETTER, 42
1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
(SECRETARY OF THE CORPORATION)
Mr. Stetter has been a Portfolio Manager for the Advisor since
1994. From 1988 until 1994, he was the President of his own investment
advisory firm.
During the fiscal year ended September 30, 1997 the Corporation
did not pay any directors' fees. The Corporation's standard arrangement
with directors is to reimburse each director for expenses incurred in
connection with attendance at meetings of the Board of Directors.
The table below sets forth the compensation paid by the
Corporation to each of the current directors of the Corporation during the
fiscal year ended September 30, 1997:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Total
Pension or Compensation
Retirement from
Aggregate Benefits Estimated Corporation and
Compensation Accrued as Annual Fund Complex
from Part of Fund Benefits upon Paid to
Corporation Expenses Retirement Director
<S> <C> <C> <C> <C>
John R. Bradford, Ph.D. $0 $0 $0 $0
Gilbert F. Hartwell 0 0 0 0
John H. Wilson 0 0 0 0
Gary B. Wood, Ph.D. 0 0 0 0
</TABLE>
PRINCIPAL SHAREHOLDERS
Set forth below are the names and addresses of all holders of
each FUND's shares who as of December 31, 1997 beneficially owned more
than 5% of the then outstanding shares of a FUND as well as the number of
shares of each FUND beneficially owned by all officers and directors of
the Corporation as a group.
VALUE FUND
Name and Address Number of Shares Percent
of Beneficial Owner of VALUE FUND of Class
Mr. and Mrs. I.D. Bufkin
R.R. 5, Box 390
Brenham, TX 77833 129,696 13.2%
William E. Watson
MDPA Pension Plan
#3 Bent Tree Court
Lufkin, TX 75901 97,758 9.9%
Mr. and Mrs. C.W. Nance
214 North Bay EB
Bullard, TX 75757 104,323 10.6%
Mr. and Mrs. R.S. Cunningham
#2 Saddlewood Estates
Houston, TX 77024 64,685 6.6%
Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94104 704,046 71.8%
Officers and Directors
as a group (5 persons) 13,795 1.4%
_______________
* At December 31, 1997, Charles Schwab & Co. owned of record 704,046
shares of the VALUE FUND or 71.8% of the then outstanding shares. All
of the shares owned by Charles Schwab & Co. were owned of record only
and included the shares held by Mr. and Mrs. I.D. Bufkin, Mr. and Mrs.
C.W. Nance and Mr. and Mrs. R.S. Cunningham.
INCOME FUND
Name and Address of Number of Shares Percent
Beneficial Owner of INCOME FUND of Class
Mr. and Mrs. I.D. Bufkin
R.R. 5, Box 390
Brenham, TX 44833 41,237 10.2%
William E. Watson MDPA
Pension Plan
#3 Bent Tree Court
Lufkin, TX 75901 43,961 10.9%
Mr. and Mrs. W.J. Stetter
4322 Melissa Lane
Dallas, TX 75229 34,310 8.5%
Gerrett B. Lok IRA Rollover
12544 Matisse Lane
Dallas, TX 75230 23,315 5.8%
NationsBank of Texas,
Trustee
Debrahlee G. Kung Trust
5500 Preston Road
Dallas, TX 75205 21,667 5.4%
J.A. Watson IRA Rollover
7235 Lakewood Boulevard
Dallas, TX 75214 24,610 6.1%
Opal Investments L.P.
214 North Bay Drive, EB
Bullard, TX 75757 21,151 5.2%
Charles Schwab & Co.
101 Montgomery Street
San Francisco, CA 94104 304,091 75.2%
Officers and Directors as a
group (5 persons) 2,915 .7%
_______________________
* At December 31, 1997, Charles Schwab & Co. owned of record 304,091
shares of the INCOME FUND or 75.2% of the then outstanding shares. All of
the shares owned by Charles Schwab & Co. were owned of record only and
included shares held by Mr. and Mrs. I.D. Bufkin, Mr. and Mrs. W.J.
Stetter, J.A. Watson IRA Rollover, Gerrett B. Lok IRA Rollover and Opal
Investments L.P.
INVESTMENT ADVISOR
As set forth in the Prospectus under the caption "WHO MANAGES
THE FUNDS?" the investment advisor to the FUNDS is Concorde Financial
Corporation (the "Advisor"). The Advisor is controlled by Gary B. Wood,
Ph.D. Pursuant to an investment advisory agreement between each FUND and
the Advisor (the "Agreement"), the Advisor furnishes continuous investment
advisory and management services to the FUNDS. During the fiscal years
ended September 30, 1997, September 30, 1996 and September 30, 1995 the
VALUE FUND paid the Advisor advisory fees of $131,036, $112,373 and
$104,664, respectively. During the fiscal year ended September 30, 1997
and the period from January 22, 1996 (commencement of operations) through
September 30, 1996, the INCOME FUND paid the Advisor advisory fees of
$21,235 and $9,440, respectively.
Each FUND pays all of its expenses not assumed by the Advisor
including, but not limited to: the costs of preparing and printing its
registration statements required under the Securities Act of 1933 and the
Investment Company Act of 1940 and any amendments thereto; the expense of
registering its shares with the Securities and Exchange Commission and in
the various states; the printing and distribution cost of prospectuses
mailed to existing shareholders; the cost of director and officer
liability insurance, reports to shareholders, reports to government
authorities and proxy statements; interest charges; brokerage commissions
and expenses incurred in connection with portfolio transactions. The FUND
also pays: the fees of directors who are not interested persons of the
Corporation; compensation of administrative and clerical personnel;
association membership dues; auditing and accounting services; legal fees
and expenses; fees and expenses of any custodian or trustees having
custody of a FUND's assets; expenses of calculating the net asset value
and repurchasing and redeeming shares; charges and expenses of dividend
disbursing agents; registrars and stock transfer agents, including the
cost of keeping all necessary shareholder records and accounts and
handling any problems related thereto.
The Advisor has undertaken to reimburse each FUND to the extent
that the aggregate annual operating expenses, including the investment
advisory fee but excluding interest, taxes, brokerage commissions and
extraordinary items, exceed that percentage of the average net assets 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 shares of
the FUND are qualified for sale. If the states in which the shares of the
FUND are qualified for sale impose no such restrictions, the Advisor will
not be obligated to reimburse the FUND. As of the date of this Statement
of Additional Information the shares of the FUNDS are not qualified for
sale in any state which imposes an expense limitation. Each FUND monitors
its expense ratio on a monthly basis. If the accrued amount of the
expenses of the FUND exceeds an applicable expense limitation, the FUND
will create an account receivable from the Advisor for the amount of such
excess. In such a situation, the monthly payment of the Advisor's fee
will be reduced by the amount of such excess, subject to adjustment month
by month during the balance of the FUND's fiscal year if accrued expenses
thereafter fall below this limit. The adjustment will be reconciled at
the end of the fiscal year and not carried forward. During the fiscal
year ended September 30, 1997 and the period from January 22, 1996
(commencement of operations) through September 30, 1996, the Adviser
reimbursed the INCOME FUND $38,502 and $22,663, respectively, for excess
expenses during such periods.
Each Agreement will remain in effect as long as its continuance
is specifically approved at least annually, by (i) the Board of Directors
of the Corporation, or by the vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding shares of the
Corporation, and (ii) by the vote of a majority of the directors of the
Corporation who are not parties to the Agreement or interested persons of
the Advisor, cast in person at a meeting called for the purpose of voting
on such approval. Each Agreement provides that it may be terminated at
any time without the payment of any penalty, by the Board of Directors of
the Corporation or by vote of a majority of a FUND's shareholders, on
sixty days written notice to the Advisor, and by the Advisor on the same
notice to the FUND and that it shall be automatically terminated if it is
assigned.
Each Agreement provides that the Advisor will not be liable to
the FUND or its shareholders for anything other than willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations or
duties. The Agreement also provides that the Advisor and its officers,
directors and employees may engage in other businesses, devote time and
attention to any other business whether of a similar or dissimilar nature,
and render investment advisory services to others.
DETERMINATION OF NET ASSET VALUE AND PERFORMANCE
As set forth in the Prospectus under the caption "HOW IS A
FUND'S SHARE PRICE DETERMINED?" 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 New York Stock Exchange is open for
trading Monday through Friday except 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 Saturday, the New York Stock
Exchange will not be open for trading on the preceding Friday and when any
such holiday 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. The New York Stock Exchange also may be closed on national days
of mourning.
The FUNDS may occasionally advertise performance data such as
total return or, with respect to the INCOME FUND only, yield. To
facilitate the comparability of these statistics from one mutual fund to
another, the Securities and Exchange Commission has developed guidelines
for the calculation of these statistics. Any total rate of return
quotation for a FUND will be for a period of three or more months and will
assume the reinvestment of all dividends and capital gains distributions
which were made by the FUND during that period. Any period total rate of
return quotation of a FUND will be calculated by dividing the net change
in value of a hypothetical shareholder account established by an initial
payment of $1,000 at the beginning of the period by $1000. The net change
in the value of a shareholder account is determined by subtracting $1,000
from the product obtained by multiplying the net asset value per share at
the end of the period by the sum obtained by adding (A) the number of
shares purchased at the beginning of the period plus (B) the number of
shares purchased during the period with reinvested dividends and
distributions. Any average annual compounded total rate of return
quotation of a FUND will be calculated by dividing the redeemable value at
the end of the period (i.e. the product referred to in the preceding
sentence) by $1,000. A root equal to the period, measured in years, in
question is then determined and 1 is subtracted from such root to
determine the average annual compounded total rate of return.
The foregoing computation may also be expressed by 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.
A yield quotation is based upon a 30 day period and is
computed by dividing the net investment income per share earned during a
30-day (or one-month) period by the net asset value per share on the last
day of the period and annualizing the result on a semiannual basis by
adding one to the quotient, raising the sum to the power of six,
subtracting one from the result and then doubling the difference. The
INCOME FUND's net investment income per share earned during the period is
based on the average daily number of shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned
during the period minus expenses accrued for the period, net of
reimbursements.
This calculation can be expressed as follows:
a-b
Yield = 2[(----+1)6-1]
cd
Where: a= dividends and interest earned during the period.
b= expenses accrued for the period (net of
reimbursements).
c= the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d= maximum offering price per share on the last day of
the period.
The total return of the VALUE FUND for the period December 4,
1987, the day the VALUE FUND commenced operations, through September 30,
1997 was 191.28%. An initial investment of $1,000 in the VALUE FUND at
December 4, 1987 would have been worth $2,913 as of September 30, 1997.
The average annual compounded rate of return of the VALUE FUND over this
period was 11.49%. The average annual compounded rate of return of the
VALUE FUND for the 5-year period ended September 30, 1997 was 17.76%. The
VALUE FUND's compounded rate of return for the 1-year period ended
September 30, 1997 was 40.53%.
The INCOME FUND'S total return for the period from January 22,
1996, the day the INCOME FUND commenced operations, through September 30,
1997 was 11.20%. An initial investment of $1,000 in the INCOME FUND at
January 22, 1996 would have been worth $1,115 as of September 30, 1997.
The average annual compounded rate of return of the INCOME FUND over this
period was 6.48%. The INCOME FUND's compounded rate of return for the
1-year period ended September 30, 1997 was 10.41%.
The foregoing performance results are based on historical
earnings and should not be considered as representative of the performance
of the FUNDS in the future. Such performance results for the INCOME FUND
also reflect reimbursements made by the Advisor during the period from
January 22, 1996 (commencement of operations) through September 30, 1997
to keep aggregate annual operating expenses at or below 2% of daily net
assets. For example, the INCOME FUND's ratio of total expenses to
average net assets for the year ended September 30, 1997 was 1.99% and,
absent reimbursements, 3.27%. An investment in a FUND will fluctuate in
value and at redemption its value may be more or less than the initial
investment.
REDEMPTION OF FUND SHARES
Subject to a FUND's compliance with applicable regulations, each
FUND has reserved the right to pay the redemption price of shares
redeemed, either totally or partially, by a distribution in kind of
securities (instead of cash) from the FUND's portfolio. The securities so
distributed would be valued at the same amount as that assigned to them in
calculating the net asset value for the shares redeemed. If a holder of
FUND shares receives a distribution in kind, he would incur brokerage
charges when converting the securities to cash. Holders of FUND shares
who in any 90 day period redeem no more than the lesser of $250,000 or 1%
of the FUND's net assets at the beginning of the 90 day period will be
paid the redemption price in cash.
ALLOCATION OF PORTFOLIO BROKERAGE
Decisions to buy and sell securities for the FUNDS are made by
the Advisor subject to review by the Corporation's Board of Directors. In
placing purchase and sale orders for portfolio securities for a FUND, it
is the policy of the Advisor to seek the best execution of orders at the
most favorable price in light of the overall quality of brokerage and
research services provided, as described in this and the following
paragraph. In selecting brokers to effect portfolio transactions, the
determination of what is expected to result in best execution at the most
favorable price involves a number of largely judgmental considerations.
Among these are the Advisor's evaluation of the broker's efficiency in
executing and clearing transactions, block trading capability (including
the broker's willingness to position securities) and the broker's
financial strength and stability. The most favorable price to a FUND
means the best net price without regard to the mix between purchase or
sale price and commission, if any. For example, over-the-counter
securities may be purchased and sold directly with principal market makers
who retain the difference in their cost in the security and its selling
price or from non-principal market makers who are paid commissions
directly. A FUND may allocate portfolio brokerage on the basis of
recommendations to purchase shares of the FUND made by brokers if the
Advisor reasonably believes the commissions and transaction quality are
comparable to that available from other brokers.
In allocating brokerage business for the FUNDS, the Advisor also
takes 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
Advisor believes these services have substantial value, they are
considered supplemental to the Advisor's own efforts in the performance of
its duties under the Agreement. Other clients of the Advisor may
indirectly benefit from the availability of these services to the Advisor,
and the FUNDS may indirectly benefit from services available to the
Advisor as a result of transactions for other clients. The Agreement
provides that the Advisor may cause a FUND to pay a broker which provides
brokerage and research services to the Advisor a commission for effecting
a securities transaction in excess of the amount another broker would have
charged for effecting the transaction, if the Advisor 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 Advisor's
overall responsibilities with respect to the FUND and the other accounts
as to which he exercises investment discretion. Brokerage commissions
paid by the VALUE FUND during the fiscal years ended September 30, 1997,
September 30, 1996 and September 30, 1995 to brokers totaled $28,624 on
transactions involving securities having a total market value of
$8,983,205, $14,755 on transactions involving securities having a total
market value of $6,955,104 and $26,409 on transactions involving
securities having a total market value of $8,166,815, respectively.
Brokerage commissions paid by the INCOME FUND during the fiscal year ended
September 30, 1997 and the period from January 22, 1996 (commencement of
operations) through September 30, 1996 to brokers totaled $4,210 on
transactions involving securities having a total market value of
$1,019,905 and $4,548 on transactions involving securities having a total
market value of $2,761,110, respectively. All of such brokers provided
research services to the Advisor.
CUSTODIAN
Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, acts as custodian for the FUNDS. As such, Firstar Trust
Company holds all securities and cash of the FUNDS, 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 Corporation. Firstar Trust Company does not
exercise any supervisory function over the management of the FUNDS, the
purchase and sale of securities or the payment of distributions to
stockholders. Firstar Trust Company also acts as the FUNDS' fund
accountant, transfer agent and dividend disbursing agent. Firstar Trust
Company has entered into a fund accounting services agreement with the
FUNDS pursuant to which it acts as fund accountant. As fund accountant
Firstar Trust Company maintains and keeps current the books, accounts,
journals and other records of original entry relating to the business of
each FUND and calculates each FUND's net asset value on a daily basis. In
consideration of such services, the FUNDS pays monthly to Firstar Trust
Company a fee based on its average daily net assets, with a minimum annual
amount, and reimburses it for its out-of-pocket expenses. During the
fiscal years ended September 30, 1997, September 30, 1996 and
September 30, 1995, the VALUE FUND paid Firstar Trust Company $23,890,
$25,054 and $24,216, respectively, pursuant to the fund accounting
services agreement. During the fiscal year ended September 30, 1997 and
the period from January 22, 1996 (commencement of operations) through
September 30, 1996, the INCOME FUND paid Firstar Trust Company $24,385 and
$12,641, respectively.
TAXES
As set forth in the Prospectus under the caption "WHAT ABOUT
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES?" the FUNDS 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").
Dividends from a FUND's net investment income and distributions
from the FUND's net realized capital gains are taxable to shareholders,
whether received in cash or in additional shares of Common Stock. The 70%
dividends-received deduction for corporations may apply to such dividends
and distributions, subject to proportionate reductions if the aggregate
dividends received by the FUND from domestic corporations in any year are
less than 100% of the net investment company income taxable distributions
made by the FUND.
Any dividend or capital gains distribution paid shortly after a
purchase of shares of Common Stock, will have the effect of reducing the
per share net asset value of such shares by the amount of the dividend or
distribution. Furthermore, if the net asset value of the shares of Common
Stock immediately after a dividend or distribution is less than the cost
of such shares to the shareholder, the dividend or distribution will be
taxable to the shareholder even though it results in a return of capital
to him.
Shareholders may realize a capital gain or capital loss in any
year in which they redeem shares of Common Stock. The gain or loss is the
difference between the shareholder's basis (cost) and the redemption price
of the shares redeemed.
The FUNDS may be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividend payments and redemption
proceeds if a shareholder fails to furnish the FUNDS with his Social
Security or other taxpayer identification number and certify under penalty
of perjury that such number is correct and that he is not subject to
backup withholding due to the under reporting of income. The
certification form is included as part of the share purchase application
and should be completed when the account is opened.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Kinder & Wyman, P.C., Dallas, Texas, has been selected as the
independent certified public accountants for the FUNDS. The selection of
the FUNDS' independent certified public accountants is subject to annual
ratification by the FUNDS' shareholders.
FINANCIAL STATEMENTS
The following audited financial statements are incorporated by
reference to the Concorde Funds, Inc. Annual Report dated September 30,
1997 (File No. 811-5339), as filed with the Securities and Exchange
Commission on November 24, 1997:
Concorde Value Fund
Financial Highlights
Investments in Securities
Covered Call Options Written
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
Concorde Income Fund
Financial Highlights
Investments in Securities
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
SHAREHOLDER MEETINGS
The Texas Business Corporation Act permits registered investment
companies, such as the Corporation, 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 Corporation 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 shareholders under said
Act.
The Corporation's Bylaws also contain procedures for the removal
of directors by its shareholders. At any meeting of shareholders duly
called and held at which a quorum is present, the shareholders 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
vote not less than 10% of the FUNDS' outstanding shares, the Secretary of
the Corporation shall promptly call a meeting of shareholders for the
purpose of voting upon the question of removal of any director. Whenever
ten or more shareholders of record who have been such for at least six
months preceding the date of application, and who hold in the aggregate
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 Secretary in writing, stating that they wish to communicate
with other shareholders with a view to obtaining signatures to a request
for a meeting of shareholders 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 shareholders
as recorded on the books of the Corporation; or (2) inform such applicants
as to the approximate number of shareholders 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 shareholders 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 directors to the effect that in their opinion
either such material contains untrue statements of factor 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 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 shareholders with reasonable promptness after the
entry of such order and the renewal of such tender.
DESCRIPTION OF BOND RATINGS
As set forth in the Prospectus under the caption "WHAT ARE THE
FUNDS' INVESTMENT OBJECTIVES AND POLICIES?" the FUNDS may invest in
publicly distributed debt securities assigned one of the highest four
ratings of either Standard & Poor's Corporation or Moody's Investors
Service, Inc., and the INCOME FUND may invest up to 20% of its assets in
debt securities that are rated below investment grade, but not lower than
a B rating. A brief description of the ratings symbols and their meanings
follows.
Standard & Poor's Corporation. A Standard & Poor's corporate or
municipal debt rating is a current assessment of the creditworthiness of
an obligor with respect to a specific obligation. This assessment may
take into consideration obligors such as guarantors, insurers or lessees.
The debt rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market price or
suitability for a particular investor.
The ratings are based on current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform any audit in connection with
any rating and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes
in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default - capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. Nature of and provisions of the obligation;
III. Protection afforded by, and relative position of the
obligation in the event of bankruptcy, reorganization or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights;
AAA - Debt rated AAA has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in the
higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by larger
uncertainties or major risk exposures to adverse conditions.
Moody's Investors Service, Inc.
Aaa - Bonds which are rated Aaa are judged to be the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by
a large, or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds which are Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude, or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations; (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of time
may be small.
Caa - Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's bond rating symbols may contain numerical modifiers of a
generic rating classification. The modifier 1 indicates that the bond
ranks at the higher end of its category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
<PAGE>
PART C - 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 Concorde Funds,
Inc. Annual Report dated September 30, 1997 (File No. 811-5339)
(as filed with the Securities and Exchange Commission on
November 24, 1997) in Part B
Concorde Value Fund
Financial Highlights
Investments in Securities
Covered Call Options Written
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
Concorde Income Fund
Financial Highlights
Investments in Securities
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
(b.) Exhibits
(1) Registrant's Articles of Incorporation, as amended.
(2) Registrant's Amended and Restated By-Laws; Exhibit 2 to
Amendment No. 11 to Registrant's Registration Statement on
Form N-1A ("Amendment No. 11") is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933.
(3) None
(4) None
(5.1) Investment Advisory Agreement for the VALUE FUND; Exhibit
5.1 to Amendment No. 14 to Registrant's Registration
Statement on Form N-1A (Amendment No. 14) is incorporated
by reference pursuant to Rule 411 under the Securities Act
of 1933.
(5.2) Investment Advisory Agreement for the INCOME FUND;
Exhibit 5.2 to Amendment No. 11 is incorporated by
reference pursuant to Rule 411 under the Securities Act of
1933.
(6) None
(7) None
(8) Custodian Agreement with Firstar Trust Company; Exhibit 8
to Amendment 14 is incorporated by reference pursuant to
Rule 411 under the Securities Act of 1933.
(9) Shareholder Servicing Agent Agreement with Firstar Trust
Company; Exhibit 9 to Amendment No. 14 is incorporated by
reference pursuant to Rule 411 under the Securities Act of
1933.
(9.1) Fund Accounting Services Agreement with Firstar Trust
Company; Exhibit 9.1 to Amendment No. 14 is incorporated by
reference pursuant to Rule 411 under the Securities Act of
1933.
(10) Opinion of Foley & Lardner, counsel for Registrant; Exhibit
10 to Amendment No. 12 to Registrant's Registration
Statement on Form N-1A ("Amendment No. 12") is incorporated
by reference pursuant to Rule 411 under the Securities Act
of 1933.
(11.1) Consent of Kinder & Wyman, P.C.
(11.2) Consent of KPMG Peat Marwick LLP.
(12) None.
(13) Subscription Agreement.
(14.1) Individual Retirement Account.
(14.2) Simplified Employee Pension Plan.
(14.3) Defined Contribution Retirement Plan.
(14.4) Prototype 403(b)(7) plan.
(15) None.
(16) Schedule for computation of performance quotation; Exhibit
16 to Amendment No. 12 is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933.
(17) Financial Data Schedule.
(18) None.
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant is not controlled by any person. Registrant neither
controls any person nor is under common control with any person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of December 31, 1997
Series A Common Stock (VALUE FUND) 63
Series B Common Stock (INCOME FUND) 12
Item 27. Indemnification
Section 2.02 of the Texas Business Corporation Act and Article
VII, Section 7 of the Registrant's By-Laws provide for the indemnification
of Registrant's directors and officers in a variety of circumstances,
which may include liabilities under the Securities Act of 1933.
The By-Laws provide that any director, officer, agent or
employee of Registrant and any person similarly serving another enterprise
at the request of Registrant is entitled to indemnification against
expenses, judgments, fines and amounts paid in settlement reasonably
incurred in any threatened, pending or completed proceeding if such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and with respect to any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful; provided that Registrant may not indemnify any such person in
relation to matters to which such person shall be adjudged in such action,
suit or proceeding to be liable for gross negligence, willful misfeasance,
bad faith or reckless disregard of the duties and obligations involved in
the conduct of his office. Unless ordered by a court, the determination
that indemnification of an individual is proper is to be made by (i) 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 nor
interested persons of Registrant as defined in Section 2(a)(19) of the
Investment Company Act of 1940; (ii) if such a quorum cannot be obtained,
by a majority vote of a committee consisting of not less than two of such
directors; (iii) if the required quorum is not obtainable and the
committee cannot be established or if a quorum of disinterested directors
so direct, by independent legal counsel in a written opinion; or (iv) by
the shareholders.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 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 Advisor
Information with respect to Dr. Wood is incorporated by
reference to page B-17 of the Statement of Additional Information 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 either
Registrant's Treasurer, Gary B. Wood, Ph.D., at Registrant's corporate
offices, 1500 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240,
or Registrant's custodian, fund accountant, transfer agent and dividend
disbursing agent, Firstar Trust Company, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
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
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.
With respect to shareholder meetings, Registrant undertakes as
follows:
(a) Upon the written request of the holders of shares
entitled to vote not less than 10% of the FUNDS' outstanding
shares, to call a meeting of shareholders for the purpose of
voting upon the question of removal of any director; and
(b) Whenever ten or more shareholders of record who have
been such for at least six months preceding the date of
application, and who hold in the aggregate 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 Secretary in writing, stating that they wish to
communicate with other shareholders with a view to obtaining
signatures to a request for a meeting of shareholders 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 shareholders
as recorded on the books of the Corporation; or (2) inform such
applicants as to the approximate number of shareholders 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 shareholders 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 directors to the
effect that in their opinion either such material contains
untrue statements of factor 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 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 shareholders with reasonable
promptness after the entry of such order and the renewal of such
tender.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Amended Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amended Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Dallas and
State of Texas on the 26th day of January, 1998.
CONCORDE FUNDS, INC.
(Registrant)
By: /s/ Gary B. Wood, Ph.D.
Gary B. Wood, Ph.D.
President
Pursuant to the requirements of the Securities Act of 1933, this
Amended Registration Statement has been signed below by the following
persons in the capacities and on the date(s) indicated.
Name Title Date
/s/ Gary B. Wood, Ph.D. Principal Executive, January 26, 1998
Gary B. Wood, Ph.D. Financial and
Accounting Officer
and Director
/s/ Gilbert F. Hartwell Director January 26, 1998
Gilbert F. Hartwell
/s/ John H. Wilson Director January 26, 1998
John H. Wilson
/s/ John R. Bradford, Ph.D. Director January 26, 1998
John R. Bradford, Ph.D.
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(1) Registrant's Articles of Incorporation,
as amended
(2) Registrant's Amended and Restated By-Laws*
(3) None
(4) None
(5.1) Investment Advisory Agreement for the
VALUE FUND*
(5.2) Investment Advisory Agreement for the
INCOME FUND*
(6) None
(7) None
(8) Custodian Agreement with First Wisconsin
Trust Company*
(9) Shareholder Servicing Agent Agreement with
First Wisconsin Trust Company*
(9.1) Fund Accounting Services Agreement with
Firstar Trust Company*
(10) Opinion of Foley & Lardner, Counsel for
Registrant*
(11.1) Consent of Kinder & Wyman, P.C.
(11.2) Consent of KPMG Peat Marwick LLP
(12) None
(13) Subscription Agreement
(14.1) Individual Retirement Account
(14.2) Simplified Employee Pension Plan
(14.3) Defined Contribution Retirement Plan
(14.4) Prototype 403(b)(7) plan
(15) None
(16) Schedule for computation of performance
quotation*
(17) Financial Data Schedule
(18) None
_______________
* Incorporated by reference.
Exhibit 1
ARTICLES OF INCORPORATION
OF
CONCORDE FUNDS, INC.
(as amended)
The undersigned, a natural person of the age of eighteen years
or more, acting as sole incorporator of a corporation under the Texas
Business Corporation Act (the "Act"), hereby adopts the following Articles
of Incorporation for such corporation:
ARTICLE I
The name of the corporation (which is hereinafter called the
"Corporation") is CONCORDE FUNDS, INC.
ARTICLE II
The period of existence is perpetual.
ARTICLE III
The purpose or purposes for which the Corporation is organized
are:
A. To engage in the business of a diversified open-end
management investment company.
B. To hold, invest and reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to purchase or
otherwise acquire, hold for investment or otherwise, sell, assign,
negotiate, transfer, exchange or otherwise dispose of or turn to account
or realize upon, securities (which term "securities" shall for the
purposes of this Article III, without limitation of the generality
thereof, be deemed to include any stocks, 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
interest therein, or in any property or assets) created or issued by any
person, firms, associations, corporations, syndicates, combinations,
organizations, governments or subdivisions thereof.
C. To deposit its funds from time to time in such checking
account or accounts as may be reasonably required, and to deposit its
funds at interest in a bank, savings bank or trust company in good
standing organized under the laws of the United States of America or any
state thereof, or of the District of Columbia.
D. To enter into, make and perform contracts of every kind and
description.
E. To hold property without restriction or limit as to amount.
F. To conduct research and investigations with respect to
securities, organizations and business conditions in the United States and
elsewhere; to secure information and advice pertaining to the investment
and employment of the assets and funds of the Corporation and to pay
compensation to others for the furnishing of any or all of the foregoing.
G. To exercise in respect of all securities, property and
assets owned by it, all rights, powers and privileges which could be
exercised by any natural person owning the same securities, property or
assets.
H. To acquire all or any part of the good will, property or
business of any firm, person, association or corporation heretofore or
hereafter engaged in any business similar to any business which this
Corporation has the power to conduct, and to hold, utilize, enjoy, and in
any manner dispose of the whole or part of the rights, property and
business so acquired and to assume in connection therewith any liabilities
of any such person, firm, association or corporation.
I. To purchase, receive, or otherwise acquire, hold, own,
pledge, transfer, or otherwise dispose of shares of its own capital stock,
out of stated capital or any restricted surplus, as contemplated by
Article 2.03(G) of the Act.
J. To carry out all or any part of the aforesaid objects and
purposes and to conduct its business in all or any of its branches in any
or all states, territories, districts and possessions of the United States
of America and in foreign countries; to maintain offices and agencies in
any and all states, territories, districts and possessions of the United
States of America and in foreign countries.
K. To transact any or all lawful business for which
corporations may be incorporated under the Act.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to, or
inference from, the terms of any clause of this or any other Article of
these Articles of Incorporation, or any amendment thereto, and shall each
be regarded as independent and construed as powers as well as objects and
purposes.
The Corporation shall be authorized to exercise and enjoy all
the powers, rights and privileges granted to or conferred upon
corporations of a similar character by the laws of the State of Texas now
or hereafter enacted, and the enumeration of the foregoing powers shall
not be deemed to exclude any powers, rights or privileges so granted or
conferred.
ARTICLE IV
A. The aggregate number of shares which the Corporation shall
have authority to issue is Thirty Million (30,000,000), consisting of one
class only, designated as "Common Stock," of the par value of $1.00 per
share and of the aggregate par value of Thirty Million
Dollars ($30,000,000).
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 Texas, 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 par
value thereof. 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 rights of redemption as
provided in the Bylaws, each holder of the Common Stock of the
Corporation, upon request to the Corporation and after complying with any
and all redemption procedures set forth in the Bylaws or otherwise
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. Payment of the redemption price
for such shares may be paid in cash or assets of the Corporation other
than cash in accordance with procedures set forth in the Bylaws or
otherwise established by the Board of Directors. 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 One Thousand
Dollars ($1,000), 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.
ARTICLE V
Holders of shares of capital stock of the Corporation shall not
have any preemptive right to acquire additional, unissued or treasury
shares of the Corporation, or securities of the Corporation convertible
into or carrying a right to subscribe to or acquire such shares.
ARTICLE VI
The Corporation will not commence business until it has received
for the issuance of shares of Common Stock consideration of the value of
at least One Thousand Dollars ($1,000), consisting of money, labor done or
property actually received.
ARTICLE VII
The number of directors constituting the Board of directors
shall initially be five (5), and the names and addresses of the initial
directors are:
Name Address
Hugh E. Hackney Suite 1400, Bryan Tower
Dallas, Texas 75201
Gilbert F. Hartwell 6810 Larkwood Street
Houston, Texas 77074
Margaret T. Miller 1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
J. Richard Rolater 1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
Gary B. Wood, Ph.D. 1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
Thereafter, the number of directors shall be such number (not less than
three) as is fixed from time to time by the Bylaws of the Corporation.
ARTICLE VIII
The post office address of the initial registered office of the
Corporation is 1500 Three Lincoln Centre, 5430 LBJ Freeway, Dallas,
Texas 75240, and the name of is initial registered agent at such address
is Gary B. Wood, Ph.D.
ARTICLE IX
The name and address of the sole incorporator is:
Name Address
Gary B. Wood, Ph.D. 1500 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
ARTICLE X
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 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 XI
The Corporation reserves the right to enter into, from time to
time, investment advisory and administration 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 agreements 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 distributors, custodians, transfer
agents, registrars and/or dividend disbursing agents for the stock and
assets of the Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation of each such distributor, custodian,
transfer agent, registrar and/or dividend disbursing agent.
Executed this ____ day of _________, 1987.
_______________________________________
Gary B. Wood, Ph.D.
Sole Incorporator
<PAGE>
STATEMENT OF CREATION
OF SERIES OF SHARES OF COMMON STOCK
OF
CONCORDE VALUE FUND, INC.
_______________
The undersigned officer of Concorde Value Fund, Inc., a Texas
corporation registered as an open-end investment company under the
Investment Company Act of 1940 (the "Corporation"), does hereby certify:
FIRST: That the name of the corporation is CONCORDE VALUE FUND,
INC. (the "Corporation").
SECOND: That, pursuant to Article 2.12.C of the Texas Business
Corporation Act, the Board of Directors of the Corporation adopted the
following resolutions to establish series of shares of the Corporation's
Common Stock:
RESOLVED, that pursuant to Article 2.12C.(1) of the Texas
Business Corporation Act, the following number of authorized and
unissued shares of Common Stock of the Corporation be, and
hereby are, divided into and classified as the series set forth
below, with each representing interests in the respective fund
set forth next to the respective series, and each such series
having all of the preferences, limitations and relative rights
set forth below:
Series Fund Shares
A Concorde Value Fund 9,000,000
B Concorde Income Fund 10,000,000
FURTHER RESOLVED, that all shares of Common Stock of the
Corporation issued and outstanding immediately prior to the
effective date of these resolutions as an amendment to the
Corporation's Articles of Incorporation shall be reclassified as
Series A Common Stock and shall have all of the preferences,
limitations and relative rights of such series.
FURTHER RESOLVED, that each series of Common Stock now or
hereafter created shall have the following preferences,
conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or
conditions of redemption:
1. Each holder of shares of Common Stock of the
Corporation, irrespective of the series, shall be
entitled to one (1) vote for each full share (and a
fractional vote for each fractional share) then
standing in his or her name on the books of the
Corporation; provided, however, that shares of any
series of Common Stock 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, shall not be voted at any
meeting of shareholders. On any matter submitted to a
vote of shareholders all shares of the Corporation's
Common Stock then issued and outstanding and entitled
to vote, irrespective of the series, shall be voted in
the aggregate and not by series, except that: (a)
when otherwise expressly provided by the Texas
Business Corporation Act, the Investment Company Act
of 1940 and the regulations thereunder, or other
applicable law, shares shall be voted by individual
series; and (b) when the matter to be acted upon does
not affect any interest of a particular series of the
Corporation's Common Stock, then only shares of the
affected series shall be entitled to vote thereon. At
all elections of directors of the Corporation, each
shareholder shall be entitled to vote the shares owned
of record by him or her for as many persons as there
are directors to be elected, but shall not be entitled
to exercise any right of cumulative voting.
2. All consideration received by the
Corporation for the issue or sale of shares of any
series of the Corporation's Common Stock, together
with all assets in which such consideration is
invested and reinvested, income, earnings, profits and
proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation thereof, and any
such funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be,
shall irrevocably belong to the series of the
Corporation's Common Stock with respect to which such
assets, payment or funds were received by the
Corporation for all purposes, subject only to the
rights of creditors, and shall be so handled upon the
books of account of the Corporation. Such
consideration, assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation thereof, and any
assets derived from any reinvestment of such proceeds
in whatever form, are herein referred to as "assets
belonging to" such series. Any assets, income,
earnings, profits and proceeds thereof, funds or
payments which are not readily attributable to any
particular series of the Corporation's Common Stock
shall be allocable among any one or more series of the
Corporation's Common Stock in such a manner and on
such basis as the Board of Directors, in its sole
discretion, shall deem fair and equitable. The power
to make such allocations may be delegated by the Board
of Directors from time to time to one or more of the
officers of the Corporation.
3. The assets belonging to any series of the
Corporation's Common Stock shall be charged with the
liabilities in respect of such series of the
Corporation's Common Stock, and shall also be charged
with the share of the general liabilities of the
Corporation allocated to such series determined as
hereinafter provided. The determination of the Board
of Directors shall be conclusive as to: (a) the
amount of such liabilities, including the amount of
accrued expenses and reserves; (b) any allocation of
the same to a given series, and (c) whether the same
are allocable to one or more series. The liabilities
so allocated to a series are herein referred to as
"liabilities belonging to" such series. Any
liabilities which are not readily attributable to any
particular series of the Corporation's Common Stock
shall be allocable among any one or more series of the
Corporation's Common Stock in such manner and on such
basis as the Board of Directors, in its sole
discretion, shall deem fair and equitable. The power
to make such allocations may be delegated by the Board
of Directors from time to time to one or more of the
officers of the Corporation.
4. Shares of a series of the Corporation's
Common Stock shall be entitled to such dividends and
distributions, in stock or in cash or both, as may be
declared from time to time by the Board of Directors,
acting in its sole discretion, with respect to such
series; provided, however, that dividends and
distributions on shares of a series of the
Corporation's Common Stock shall be paid only out of
the lawfully available "assets belonging to" such
series as such phrase is defined herein.
5. In the event of the liquidation or
dissolution of the Corporation, shareholders of a
series of the Corporation's Common Stock shall be
entitled to receive, as a series, out of the assets of
the Corporation available for distribution to
shareholders, but other than general assets not
belonging to any particular series, the assets
belonging to such series, and the assets so
distributable to the holders of any series of the
Corporation's Common Stock shall be distributed among
such holders in proportion to the number of shares of
such series of the Corporation's Common Stock held by
them and recorded on the books of the Corporation. In
the event that there are any general assets not
belonging to any particular series of the
Corporation's Common Stock and available for
distribution, such distribution shall be made to the
holders of all series of the Corporation's Common
Stock in proportion to the net asset value of the
respective series of the Corporation's Common Stock
determined as set forth in the Bylaws of the
Corporation.
6. Each holder of shares of the Corporation's
Common Stock, irrespective of the series, may, upon
request to the Corporation accompanied by surrender of
the appropriate stock certificate or certificates, if
any, in proper form for transfer and after complying
with any other conversion procedures established by
the Board of Directors, convert such shares into
shares of any other series of the Corporation's Common
Stock on the basis of their relative net asset values
(determined in accordance with the Bylaws of the
Corporation) less a conversion charge or discount
determined by the Board of Directors. Any fee so
imposed shall be uniform as to all shareholders.
THIRD: That the Board of Directors of the Corporation duly
adopted said resolutions by unanimous written consent dated October 13,
1995.
FOURTH: That the resolutions were duly adopted by all necessary
action on the part of the Corporation.
Dated as of this 17th day of November, 1995
CONCORDE VALUE FUND, INC.
By: /s/ Gary B. Wood
Gary B. Wood, Ph.D.
President
Exhibit 11.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Concorde Funds, Inc.:
We consent to the use of our report incorporated by reference in the
Statement of Additional Information and to the reference to our firm under
the heading "Financial Highlights" in the Prospectus and under the heading
"Independent Certified Public Accountants" in the Statement of Additional
Information, included in the Concorde Funds, Inc. Form N-1A as of January
26, 1998.
Kinder & Wyman, P.C.
Dallas, Texas
January 26, 1998
Exhibit 11.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Shareholders
Concorde Value Fund, Inc.:
We consent to the use of our report dated November 4, 1996, with respect
to the statement of changes in net assets for the year ended September 30,
1996 and the financial highlights for each of the years in the four-year
period ended September 30, 1996, of Concorde Value Fund, Inc., in the
Statement of Additional Information and the reference to our firm under
the heading "Financial Highlights" in the Prospectus, included in the
Concorde Funds, Inc. Form N-1A dated January 30, 1998.
KPMG Peat Marwick LLP
Dallas, Texas
January 30, 1998
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Shareholders
Concorde Income Fund, Inc.:
We consent to the use of our report dated November 4, 1996, with respect
to the statement of changes in net assets and the financial highlights of
Concorde Income Fund, Inc. for the period January 22, 1996 (inception)
through September 30 1996, in the Statement of Additional Information and
the reference to our firm under the heading "Financial Highlights" in the
Prospectus, included in the Concorde Funds, Inc. Form N-1A dated January
30, 1998.
KPMG Peat Marwick LLP
Dallas, Texas
January 30, 1998
EXHIBIT 13
SUBSCRIPTION AGREEMENT
Concorde Value Fund, Inc.
5430 LBJ Freeway
1500 Three Lincoln Centre
Dallas, TX 75240
Gentlemen:
The undersigned hereby subscribes to 10,000 shares of the Common
Stock, $1.00 par value, of Concorde Value Fund, Inc., and agrees to pay to
said corporation the sum of $100,000 in cash.
It is understood that upon acceptance hereof by said corporation
and the receipt of the aforementioned consideration, the shares subscribed
for shall be issued to the undersigned and that said shares shall be
deemed to be fully paid and nonassessable.
The undersigned agrees that the shares are being purchased for
investment with no present intention of reselling or redeeming said
shares, and further agrees that the proceeds of the redemption of such
shares will be reduced in accordance with Footnote 3 on page 13 of the
Statement of Additional Information included in Amendment No. 1 to the
Registration Statement on Form N-1A of Concorde Value Fund, Inc.
Dated and effective as of this ____ day of November, 1987.
Hartwell's Office World, Inc.,
Profit Sharing Plan for the benefit of
Gilbert F. Hartwell
By _________________________________
Gilbert F. Hartwell, Trustee
The foregoing subscription is hereby accepted. Dated and
effective as of this ____ day of _________, 1987.
CONCORDE VALUE FUND, INC.
By: _________________________________
Gary B. Wood, Ph.D.,
President
Attest: ___________________________
Margaret T. Miller,
Secretary
CONCORDE FINANCIAL CORPORATION
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
1. 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 Concorde Financial
Corporation 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 Concorde Financial Corporation, 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>
CONCORDE FINANCIAL CORPORATION
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 Concorde Financial
Corporation 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 Concorde Financial Corporation, 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>
CONCORDE FINANCIAL CORPORATION
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.
4. 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:
a. 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.
b. 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 Concorde Financial
Corporation 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 Concorde Financial Corporation, 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>
CONCORDE FINANCIAL CORPORATION SIMPLE PLAN
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 the calendar year.
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
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.
(ii) For any calendar year, the Employer may make 2% nonelective
contributions instead of matching contributions only if:
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
(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 ___________________________
CONCORDE FINANCIAL CORPORATION
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).
The amount is adjusted annually. The IRS announces the increase, if
any, in a news release and in the Internal Revenue Bulletin.
Employer's Signature and date Name and title
<PAGE>
CONCORDE FINANCIAL CORPORATION
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.CThe 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.CThe SEP rules permit you to make an annual contributio
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.
The amount is adjusted annually. The IRS announces the increase, if any, in
a news release and in the Internal Revenue Bulletin.
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.
CONCORDE\WPF8925B 07/01/97 MCW/GHD/jem
CONCORDE FINANCIAL CORPORATION
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001
Pension Plan AA - Plan No. 01-002
<PAGE>
CONCORDE FINANCIAL CORPORATION
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
Profit Sharing Plan AA - Plan No. 01-001
Pension Plan AA - Plan No. 01-002
<PAGE>
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>
CONCORDE FINANCIAL CORPORATION
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ARTICLE I.
INTRODUCTION
This Plan, which is made available by Concorde Financial
Corporation 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 Concorde Financial
Corporation.
Section 2.20. "Investment Company" means Concorde Value 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 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 cancelled 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.
(d) 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.
(e) 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).
(f) 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>
CONCORDE\WPH1929 12/02/96 GHD/jem
CONCORDE FINANCIAL CORPORATION
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT
[STANDARDIZED]
(PENSION PLAN)
The undersigned Employer, hereby adopts and establishes the
Concorde Financial Corporation 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 (check 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)(1)).
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:
(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:
An 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 4 above.
(B) For any self-employed individual, Compensation means Earned
Income.
6. EMPLOYER PENSION CONTRIBUTIONS
(A) The Employer Pension Contribution for each Plan Year shall be
____% (not more than 25%) of the aggregate Compensation and
Earned Income of eligible Participants. This contribution will
be reduced by the amount of any forfeitures allocated to the
accounts of Participants for such Plan Year.
(B) Allocation Formulas
The Employer Pension Contributions shall be allocated pursuant
to the following formula (check one):
[_] Compensation Formula
Employer Pension Contributions shall be allocated
based on each eligible Participant's total
Compensation for the Plan Year.
Note: If the Integration Formula is elected under the Profit
Sharing Plan, the Compensation Formula must be elected under
this Plan.
[_] Integration Formula
Employer Pension Contributions (and forfeitures)
shall be allocated based on each eligible
Participant's Compensation in excess of the
Integration Level and total Compensation for the
Plan Year, subject to the limitations set forth in
Section 4.2(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 allocated 3% of their total Compensation and any
remaining contribution may be allocated pursuant to the
Integration Formula.
7. VESTING
(A) A Participant shall have a nonforfeitable and fully vested
interest in his Employer Pension 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:
Vested
Years of Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(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. 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.
9. LOANS TO PARTICIPANTS
[] Participant may borrow from their Plan Account,
subject to the limitations of Section 8.7 of the
Plan.
[] Loans to Participants are not permitted.
10. NORMAL RETIREMENT AGE
The Normal Retirement Age Shall be age ___ [insert an age not to
exceed 65].
11. 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 Profit Sharing
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.
12. 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:
13. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Trustee shall establish individual
Trust Accounts for each Participant.
[_] The Trustee shall establish a single Trust 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.
14. TRUSTEE
The undersigned as Employer hereby appoints Firstar Trust Company as
Trustee.
15. FEES
The Trustee 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 Trustee with advance notice
from time to time. 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
Trustee fees included will be deducted equally from each
Participant'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 Trustee for
the services performed.
16. FUNDING WAIVER
In the event the Employer obtains a funding waiver under Code Section
412 from the Internal Revenue Service, the Employer shall amend the
Plan by adding language which will override the affected provisions
of the Plan and this Adoption Agreement (attach appropriate
overriding language to this Adoption Agreement to comply with the
Code).
Note: An Employer that amends the Plan because of a waiver of the
minimum funding requirements under Code Section 412 will no longer
participate in this prototype Plan and will be considered to have
adopted an individually designed plan.
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 such prospectus by depositing
contributions with the Trustee.
The Employer acknowledges that if it has ever maintained or later
adopts any plan (including after December 31, 1985, a welfare benefit
fund, as defined in Code Section 419(e), which provides
post-retirement medical benefits allocated to separate accounts for
key employees, as defined in Code Section 419A(d)(3) or an individual
medical account, as defined in Code Section 415(l)(2)) in addition to
this Plan (or the Profit Sharing 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 401. 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:
Concorde Financial Corporation
5430 LBJ Freeway
1500 Three Lincoln Centre
Dallas, Texas 75240
(214) 437-1500
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:
TRUSTEE ACCEPTANCE
The undersigned hereby accepts appointment as Trustee under the
Plan.
FIRSTAR TRUST COMPANY
By:
Date:
<PAGE>
CONCORDE\WPH1928 12/02/96 GHD/jem
CONCORDE FINANCIAL CORPORATION
PROTOTYPE DEFINED CONTRIBUTION RETIREMENT PLAN
ADOPTION AGREEMENT
[STANDARDIZED]
(PROFIT-SHARING PLAN)
The undersigned Employer, hereby adopts and establishes the
Concorde Financial Corporation 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:
An 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 Integration 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 allocated 3% of their total Compensation and
any remaining contributions may be allocated pursuant to
the Integration 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:
Vested
Years of Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(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 Deferral 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 Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(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. LOANS TO PARTICIPANTS
[] Participants may borrow from their plan account, subject
to the limitations of Section 8.7 of the Plan.
[] Loans to Participants are not permitted.
12. NORMAL RETIREMENT AGE
The Normal Retirement Age shall be age ___ [insert an age not to
exceed 65].
13. 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.
14. 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:
15. ESTABLISHMENT OF ACCOUNTS
(A) Unless elected below, the Trustee shall establish individual
Trust Accounts for each Participant.
[] The Trustee shall establish a single Trust 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.
16. TRUSTEE
The undersigned as Employer hereby appoints Firstar Trust Company as
Trustee.
17. FEES
The Trustee 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 Trustee 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 Trustee fees included will be
deducted equally from each Participant'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 Trustee for
the services performed.
18. 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 such prospectus by depositing
contributions with the Trustee.
The Employer acknowledges that if it has ever maintained or later
adopts any plan (including after December 31, 1985, a welfare benefit
fund, as defined in Code Section 419(e), which provides
post-retirement medical benefits allocated to separate accounts for
key employees, as defined in Code Section 419A(d)(3) or an individual
medical account, as defined in Code Section 415(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 401. 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.
19. ADDITIONAL INFORMATION
This Plan is sponsored by:
Concorde Financial Corporation
5430 LBJ Freeway
1500 Three Lincoln Centre
Dallas, Texas 75240
(214) 437-1500
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:
TRUSTEE ACCEPTANCE
The undersigned hereby accepts appointment as Trustee under the
Plan.
FIRSTAR TRUST COMPANY
By:
Date:
#245398.1 MCW/jem
CONCORDE FINANCIAL CORPORATION
SECTION 403(B)(7) CUSTODIAL ACCOUNT AGREEMENT
<PAGE>
CONCORDE FINANCIAL CORPORATION
SECTION 403(B)(7) CUSTODIAL ACCOUNT AGREEMENT
Introduction
The Concorde Financial Corporation Section 403(b)(7) Custodial
Account Agreement ("Custodial Account Agreement" or "Agreement") is
intended for use in connection with Section 403(b)(7) arrangements where
the parties desire that all or part of the contributions made to the
arrangement be invested in shares of one or more of the portfolios of
Concorde Financial Corporation managed by Concorde Financial Corporation
(the "Investment Advisor"). The Custodial Account Agreement, and all
funds held under the Agreement, are intended to comply with, and be
administered in accordance with, the provisions of the Internal Revenue
Code of 1986 ("Code") and, to the extent applicable, the Employee
Retirement Income Security Act of 1974 ("ERISA"), as such laws may be
amended and in effect from time to time.
Article I. Eligibility and Participation.
Eligible Employees
Section 403(b)(7) of the Code provides special retirement plan
rules applicable to employees of an Employer that is:
(1) an organization described in Section 501(c)(3) of the Code
and that is exempt from tax under Section 501(a) of the
Code; or
(2) an educational organization as defined in Section
170(b)(1)(A)(ii) of the Code if the education organization
is maintained by a State or a political subdivision of a
State or an agency or instrumentality of either.
Adoption of Custodial Account Agreement
An Employee who performs services for an organization described
in (1) or (2) above may adopt this Custodial Account Agreement. The
Employee adopts the Custodial Account Agreement by completing and signing
the Account Application and by delivering it (via first class mail or
recognized courier service) to the Custodian. The Custodial Account
Agreement will become effective upon written acceptance of the Account
Application by the Custodian (or by its delegate or agent). Although the
Employer is not required to sign the Account Application, the Employer
will be deemed to have established the Custodial Account for the benefit
of the Employee as of the date on which the Employer transmits a
contribution (including, without limitation, a Salary Reduction
contribution) to the Custodian for the benefit of the Employee's account.
Incorporation of Documents
The Account Application and (if contributions will be made on a
salary reduction basis) the Salary Reduction Agreement between the
Employer and the Employee, are incorporated by reference and made a part
of the Custodial Account Agreement.
Article II. Contributions.
In General
Subject to the special limitations described in this Article II,
the Employer may contribute to the Custodial Account (in cash) for any
taxable year, provided that the amount of the contribution does not
represent an "excess contribution" as defined in Section 4973(c) of the
Code.
Limitation on Salary Reduction Contributions.
The amount contributed to an Employee's Custodial Account in any
calendar year as a Salary Reduction Contribution shall not exceed the
greater of $10,000 or the limitation on elective deferrals in effect for
such year under Section 402(g) of the Code ($7,000, indexed for cost-of-
living increases). The limitation determined in accordance with the
foregoing sentence is then reduced by the amount of any Salary Reduction
Contributions made during the calendar year by or on behalf of the
Employee under a qualified cash or deferred arrangement under Section
401(k) of the Code, a simplified employee pension under Section 408(k) of
the Code, an eligible deferred compensation plan under Section 457 of the
Code, or another tax deferred annuity or custodial account under Section
403(b) of the Code.
In the case of an individual who has completed at least fifteen
(15) years of service with an educational institution, hospital, home
health service agency, health and welfare service agency, church or
convention or association of churches, or a tax-exempt organization
controlled by a church or convention or association of churches as
described in Section 414(e)(3)(B)(ii) of the Code (collectively referred
to as a "Qualified Organization"), the limitation on Salary Reduction
Contributions for any year as determined above shall be increased by the
least of the following amounts:
(1) $3,000;
(2) the difference (but not less than zero) between $15,000 andany
amounts excluded from gross income in prior years as a result of
this special "catch up" rule; and
(3) the difference (but not less than zero) between (A) $5,000
multiplied by the number of years of service that the individual
has with the Qualified Organization, and (B) the amount of
Salary Reduction Contributions made by the Qualified
Organization on behalf of the individual for prior taxable years
under a qualified cash or deferred arrangement under Section
401(k) of the Code, a simplified employee pension under Section
408(k) of the Code, or another tax deferred annuity or custodial
account under Section 403(b) of the Code.
In the event that an Employee determines that the amount
contributed for any calendar year exceeds the limitation on Salary
Reduction Contributions, and if the Employee notifies the Custodian in
writing of such excess amount no later than March 1 of the following
calendar year, the Custodian will distribute such excess amount (plus any
income attributable thereto) to the Employee not later than April 15 of
the year following the year in which the excess Salary Reduction
Contributions were made. Neither the Investment Advisor nor the Custodian
shall have any responsibility for determining whether excess Salary
Reduction Contributions have been made or, if made, for distributing any
excess amount except in accordance with the specific written instructions
of the Employee.
Limitations on Total Contributions (Employer Non-Elective and Employee
Salary Reduction Contributions.
The maximum amount of contributions (including Salary Reduction
Contributions) that may be contributed to an Employee's Custodial Account
for any taxable year shall not exceed the lesser of the Employee's:
(1) Exclusion Allowance computed in accordance with Section
403(b)(2) of the Code, i.e., generally, twenty percent (20%) of
the Employee's "includable compensation" multiplied by the
Employee's years of service, less all contributions made in
prior years; or
(2) Section 415 Limit, i.e., generally, the lesser of twenty five
percent (25%) of the individual's "compensation" for the
limitation year (the calendar year unless the Employer has
designated a different year) or $30,000 (as adjusted from time
to time in accordance with Section 415(d) of the Code).
Salary Reduction Contributions generally reduce the Employee's
"compensation" and "includable compensation" for purposes of the foregoing
limits.
An Employee who is employed by a Qualified Organization may
elect to calculate his total contribution limit in accordance with one of
the alternative limitations described in Section 415(c)(4) of the Code.
In general, Section 415(c)(4) of the Code permits the Employee to elect:
(1) to insert, in lieu of the Section 415 Limit, on amount equal to
the lesser of (A) $15,000 or (B) twenty five percent (25%) of
the Employee's "includable compensation" plus $4,000;
(2) to disregard the Section 415 Limit, so that the Employee's total
contribution limit will equal the Employee's Exclusion
Allowance; or
(3) for the year in which the Employee terminates employment, to
replace the Section 415 Limit with an amount equal to the lesser
of (A) $30,000 (as adjusted from time to time in accordance with
Section 415(d) of the Code), or (B) the amount of contributions
which could have been, but were not, made under Section 403(b)
during the ten year period ending on the date of the Employee's
termination, determined by taking into account only the
Employee's period of employment with the Employer.
The alternate limitation elections described in Paragraphs (1), (2) and
(3) above are mutually exclusive and irrevocable, so that an Employee who
elects one of the alternate limitations may not thereafter utilize another
of the alternate limits. Further, the alternate limitation described in
Paragraph (3) above may be used only once by an Employee, rather than once
with respect to each Employer.
In the case of contributions other than Salary Reduction
Contributions, an Employee's "compensation" or "includable compensation"
shall not exceed $160,000 or such other limit in effect for such year
under Section 401(a)(17) of the Code.
Limitation on Custodian or Investment Advisor Duties and Responsibilities.
Neither the Investment Advisor nor the Custodian shall be
responsible for determining the amount that may be contributed on behalf
of the Employee, unless such obligation is explicitly undertaken by
separate written agreement. In addition, neither the Investment Advisor
nor the Custodian shall be responsible to recommend or compel Employer
contributions to the Custodial Account. The disposition of excess
contributions will be made in accordance with instructions from the
Employer to the extent such instructions are consistent with applicable
law.
Rollover or Transfer Contributions
The Employee or the Employer may transfer or cause to be
transferred to this Custodial Account, by rollover, direct rollover or
direct transfer, assets available from an existing annuity contract or
custodial account established under Section 403(b) of the Code for which
previous contributions were made on the Employee's behalf. In addition, a
rollover, direct rollover or transfer may be made from an individual
retirement account or annuity established pursuant to Section 408 of the
Code, if the assets in the individual retirement account or annuity are
attributable solely to a previous rollover contribution to the account or
annuity from one or more annuity contracts or custodial accounts
established pursuant to Section 403(b) of the Code. Notwithstanding the
foregoing, if the Employer maintains a written Section 403(b) plan for
which this Custodial Account serves as a funding vehicle, any restrictions
imposed by the terms of such plan upon rollovers, direct rollovers, or
transfers shall, to the extent that they are inconsistent with the
provisions of this paragraph, take precedence over this paragraph.
Article III. Investment of Contributions
Employee Investment Election
All contributions made to the Custodial Account shall be used by
the Custodian to purchase shares of one or more of the portfolios of the
regulated investment company known as Concorde Financial Corporation. For
purposes of this Custodial Account, each such portfolio will be referred
to as an "Investment Company," and the shares of each Investment Company
will be referred to as "Investment Company Shares". The Employee (or the
Employee's beneficiary, executor or administrator) may direct the
Custodian to invest his Custodial Account in the shares of the Investment
Companies or other regulated investment companies as may be made available
by the Investment Advisor in the future. The Employee (or the Employee's
beneficiary, executor or administrator) may direct the Custodian to
transfer all or any part of his Custodial Account assets from one
Investment Company to another at any time. In directing the Custodian the
Employee (or the Employee's beneficiary, executor or administrator) shall
designate a percentage allocation to any or all of the then available
Investment Companies, subject to the rules of such Investment Company with
respect to minimum investment or allocation. Any changes in the
allocation of future contributions or current Custodial Account assets
will be effective only when the Custodian receives appropriate
instructions from the Employee (or the Employee's beneficiary, executor or
administrator). Such instructions may be given by the Employee either in
writing and in such form as may be acceptable to the Custodian, or (if
available) by use of the telephone system maintained for such purpose by
the Custodian or its agent. By giving such instructions to the Custodian,
the Employee will be deemed to have acknowledged receipt of the current
prospectus of any Investment Company in which the Employee instructs the
Custodian to invest. In the event no direction is made, or if the opinion
of the Custodian the directions received are not clear, the Custodian will
invest all contributions in such fund as the Investment Advisor may from
time to time designate, until further notice or clarifying written
instructions are received from the Employee. All dividends and capital
gains shall be reinvested in additional Investment Company Shares. All
Investment Company Shares acquired by the Custodian shall be registered in
the name of the Custodian or its nominee.
Custodian Reliance and Duty
The Custodian and its agents may conclusively rely upon and
shall be protected in acting upon any direction, instruction or order from
the Employee or any other written notice, request, or instrument believed
by it to be genuine and to have been properly executed and, so long as the
Custodian acts in good faith, in taking or omitting to take any other
action.
The Custodian shall have no duty to question the directions of
the Employee (or the Employee's beneficiary, executor or administrator),
regarding the investment of the assets in the Custodial Account or to
advise such persons regarding such investments, nor shall the Custodian,
the Investment Advisor, or any affiliates of either, be liable for any
loss that results from the exercise of control (whether by action or
inaction) over the Custodian Account by the Employee (or the Employee's
beneficiary, executor or administrator).
Article IV. Distribution of Custodial Account
Distribution Events
The Custodian shall have no responsibility for making
distribution from the Custodial Account prior to receipt of an executed
distribution election form, which shall be in such form and completed in
such manner as the Custodian may prescribe. Distribution from the
Employee's Custodial Account shall not be made prior to the date on which
one of the following events has occurred:
(1) The Employee has attained age 59 and 1/2;
(2) The Employee has separated from service with the Employer;
(3) The Employee has become disabled; or
(4) The Employee has died.
To the extent that the Employer's Section 403(b) program allows,
distribution of the portion of the Employee's Custodial Account
attributable to Salary Reduction Contributions (but not including any
earnings thereon) also may be made in the event of the Employee's
financial hardship. A substantial financial hardship shall exist if the
Employee incurs an immediate and heavy financial need that cannot be met
by other resources reasonably available to the Employee. The Employee's
financial hardship must be certified to by the Employer in accordance with
the standards for financial hardship promulgated from time to time by the
Internal Revenue Service for application to Section 403(b) arrangements.
In no event shall the Custodian or the Investment Advisor certify to the
Employee's hardship.
Distributions prior to age 59 and 1/2 may be subject to a ten
percent (10%) additional tax under Section 72(t) of the Code.
The Employer, in its Section 403(b) document, may provide for
distribution later than the time of the foregoing events, and to the
extent that the events specified in the Employer's plan are consistent
with the minimum distribution requirements of Section 403(b)(10) of the
Code, the terms of the Employer's plan shall govern. The Employer's plan
may not, however, specify payment prior to the occurrence of one or more
of the events described above.
For purposes of Paragraph (3) above, the Employee shall be
considered disabled if he is disabled within the meaning of Section
72(m)(7) of the Code, meaning that the Employee is unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
be of long continued and indefinite duration.
Form of Distribution
The Employee may elect a form of distribution from among the
following alternatives:
(1) A single sum payment in cash;
(2) A specified dollar amount as directed by the Employee from time
to time;
(3) Monthly, quarterly, or annual installment payments over a period
not extending beyond the life expectancy of the Employee; or
(4) Monthly, quarterly, or annual installment payments over a period
not extending beyond the joint and last survivor life expectancy
of the Employee and his beneficiary.
Such election shall be made in writing in such form as shall be
acceptable to the Custodian. After attaining age 702, certain
restrictions may apply to the Employee's ability to change the period over
which payments are made. In no event shall the Custodian or the Investment
Advisor have any responsibility for determining, or giving advice with
respect to, the form of benefit, life expectancies or minimum distribution
requirements.
If the Employee fails to elect any of the methods of
distribution described above within the time specified for such election,
the Custodian may distribute the Employee's Custodial Account in the form
of a single sum cash payment by the April 1 following the calendar year in
which the Employee attains age 702. Except as otherwise required by
Section 403(b)(10) of the Code, the amount of the monthly, quarterly or
annual installment payments shall be determined by dividing the entire
interest of the Employee in the Custodial Account at the close of the
prior year by the number of years remaining in the period specified by the
Employee's election.
Minimum Distribution Requirements
The Employee must receive distributions from the Custodial
Account in accordance with Regulations prescribed by the Secretary of the
Treasury pursuant to Section 403(b)(10) of the Code which are hereby
incorporated by reference, or in the absence of such regulations, in
accordance with Section 401(a)(9) of the Code. In general, these
provisions require that certain minimum distributions must commence not
later than the April 1 of the calendar following the calendar year in
which the Employee has both retired and attained age 702 (the "required
beginning date"). For any Employee who attained age 702 prior to January
1, 1988, the Employee's "required beginning date" is the April 1 of the
calendar year following the calendar year of the Employee's retirement or
attainment of age 702, whichever occurs later. Certain accounts in
existence prior to January 1, 1987 may be subject to special treatment.
Life expectancies are computed by use of Tables V and VI of
Section 1.72-9 of the Income Tax Regulations, or any updated tables
published by the Internal Revenue Service for this purpose. Unless the
Employee (or his spouse) elects not to have life expectancy recalculated,
the Employee's life expectancy (and the life expectancy of the Employee's
spouse, if applicable) will be recalculated annually using their attained
ages as of their birthdays in the year for which the minimum annual
payment is being determined. The life expectancy of the designated
beneficiary (other than the spouse) will not be recalculated. Any such
election to recalculate or not to recalculate life expectancies shall be
irrevocable as to the Employee and spouse as of the required beginning
date, and may not thereafter be changed. The minimum annual payment may
be made in a series of installments (e.g., monthly, quarterly, etc.) as
long as the total payments for the year made by the date required are not
less than the minimum amounts required.
If the Employee dies before his entire interest in the Custodial
Account is distributed to him, the remaining undistributed balance of such
interest shall be distributed to the beneficiary or beneficiaries, if any,
designated by the Employee. If no valid designation of a beneficiary
shall have been made, distribution shall be made to the Employee's
surviving spouse, or the Employee's estate, in that order.
If the Employee dies on or after the required beginning date,
the beneficiary must continue to receive distributions at least as rapidly
as under the payment method in effect at the Employee's death.
If the Employee dies prior to the required beginning date, the
beneficiary may elect, in writing, to receive the distribution in one of
the following forms:
(a) A single sum payment in cash made by the December 31 of the
year containing the fifth anniversary of the Employee's
death; or
(b) Monthly, quarterly, or annual payments commencing not later
than the December 31 following the year of the Employee's
death over a period not to exceed the life expectancy of
the beneficiary.
Notwithstanding the foregoing, if the beneficiary is the Employee's
spouse, distributions may be delayed until the December 31 of the year in
which the Employee would have attained age 702. A beneficiary must
receive distributions from the Custodial Account in accordance with the
regulations prescribed by the Secretary of the Treasury pursuant to
Section 403(b)(10) of the Code, including the incidental death benefit
requirements, which are hereby incorporated by reference, or in the
absence of such Regulations, in accordance with Section 401(a)(9) of the
Code and the regulations thereunder.
Beneficiary
The Employee may designate a beneficiary or beneficiaries (which
may include a trust or the Employee's estate), and may, in addition, name
a contingent beneficiary. Such designation shall be made in writing in a
form acceptable to the Custodian. The Employee may, at any time, revoke
his or her designation of a beneficiary or change the beneficiary by
filing notice of such revocation or change with the Custodian, provided
that no such designation or change in designation executed by the Employee
prior to death may be filed with the Custodian more than thirty (30) days
following the Employee's death. Notwithstanding the foregoing, in the
event the Employee is married at the time of his death, the beneficiary
shall be the Employee's surviving spouse unless such spouse has consented
in writing to the designation of an alternative beneficiary after notice
of the spouse's rights and such consent was witnessed by a notary public
or representative of the Employer. In the event no valid designation of
beneficiary is on file with the Employer or the Custodian at the date of
death or no designated beneficiary survives the Employee, the Employee's
spouse shall be deemed the beneficiary; in the further event the Employee
is unmarried or his spouse does not survive him, the Employee's estate
shall be deemed to be his beneficiary.
Direct Rollover Option
In the case of any distribution from this Custodial Account that
constitutes an "eligible rollover distribution" as defined in Section
402(c)(4) of the Code, the Custodian shall provide the Employee or
beneficiary with the option of (A) receiving the distribution directly,
(B) having the distribution transferred to an individual retirement
account or eligible 403(b) program that accepts such "direct rollovers",
or (C) to the extent required under regulations issued by the Secretary of
the Treasury, a combination of (A) and (B).
If the Employee or beneficiary timely elects the transfer option
and provides the Custodian with such information as the Custodian may
prescribe regarding the transferee plan or account, including the name of
the transferee plan or account and identity of the trustee or custodian,
the distribution amount shall be transferred to the successor trustee or
custodian in a "direct rollover" in accordance with Sections 403(b)(10)
and 401(a)(31) of the Code. The Custodian may elect to accomplish the
"direct rollover" by delivering to the Employee or beneficiary a check,
for the full amount of the distribution, but made payable to the trustee
or custodian of the transferee plan or account. The Employee or
beneficiary shall then be responsible for delivering the check to the
trustee or custodian or the transferee plan.
If the Employee or beneficiary elects payments made directly to
the Employee or beneficiary, distribution shall be accomplished by
delivering to the Employee or beneficiary a check, for the amount of the
distribution less applicable required withholding, made payable to the
Employee or beneficiary.
If the Employee or beneficiary fails to make a timely election,
or if the participant or beneficiary elects the transfer option but fails
to provide the Custodian with appropriate information to enable the
Custodian to implement the transfer, the Custodian shall, subject to
applicable consent requirements, cause the Employee's or beneficiary's
distribution to be paid directly to the Employee or beneficiary, less
applicable required withholding.
The Custodian need not offer the "direct rollover" option in the
case of any distribution that has been exempted from the "direct rollover"
requirements under rules and regulations issued (whether in proposed,
temporary or final form) by the Secretary of the Treasury. In addition,
the Custodian may promulgate additional rules and regulations, including
rules and regulations governing the time by which elections must be made,
that it determines to be necessary or desirable to the administer this
provision.
The Custodian shall not be responsible for the tax consequences
resulting from an Employee's election between receiving a distribution
directly or having the distribution transferred to an individual
retirement account or eligible 403(b) program in a "direct rollover."
Responsibilities of Custodian
The Custodian does not assume and shall not have any
responsibility to make any distribution except in accordance with written
instructions received by the Custodian. In addition, no distribution
shall be made unless and until the Custodian shall have been furnished
with all certificates, signature guarantees and other documents (including
proof of any legal representative's authority) that the Custodian may have
requested.
Tax Withholding
Any distribution made by the Custodian from the Custodial
Account shall be subject to withholding in accordance with applicable law.
Article V. Administration
In General
The Custodian shall perform solely the duties assigned to the
Custodian hereunder; provided that the Custodian may contract with
affiliates of the Custodian or other parties for the performance of
certain services. The Custodian shall not be deemed to be a fiduciary in
carrying out the following duties:
(a) Receiving contributions pursuant to the provisions of the
Custodial Account.
(b) Holding, investing and reinvesting the contributions in
Investment Company Shares.
(c) Registering any property held by the Custodian in its own name,
or in nominee or bearer form that will pass delivery.
(d) Making distributions from the Custodial Account in cash.
Voting
The Custodian shall mail to the Employee all proxies, proxy
soliciting materials, and periodic reports or other communications that
may come into the Custodian's possession by reason of its custody of
Investment Company Shares. The Employee shall vote the proxy,
notwithstanding the fact that the Custodian may be the registered owner of
the Investment Company Shares, and the Custodian shall have no further
liability or responsibility with respect to the voting of such shares.
Reports
The Custodian shall keep accurate and detailed account of its
receipts, investments and disbursements. As soon as practicable after
December 31st each year, and whenever required by Regulations adopted by
the Internal Revenue Service under the Act or the Code, the Custodian
shall file with the Employee a written report of the Custodian's
transactions relating to the Custodial Account during the period from the
last previous accounting, and shall file such other reports with the
Internal Revenue Service as may be required by its Regulations (but not
including any reports that may be required to be filed by the Employer).
Unless the Employee sends the Custodian written objection to a
report within sixty (60) days after its receipt, the Employee shall be
deemed to have approved such report, and, in such case the Custodian shall
be forever released and discharged with respect to all matters and things
included therein. The Custodian may seek a judicial settlement of its
accounts. In any such proceeding the only necessary party thereto in
addition to the Custodian shall be the Employee.
Written Notices
All written notices or communications to the Employee or the
Employer shall be effective when sent by first class mail to the last
known address of the Employee or the Employer on the Custodian's records.
All written notices or communications to the Custodian shall be mailed or
delivered to the Custodian at its designated mailing address, and no such
written notice of communications shall be effective until the Custodian's
actual receipt thereof. The Custodian shall be entitled to rely
conclusively upon, and shall be fully protected in any action taken by it
in good faith in reliance upon the authenticity of signatures contained in
all written notices or other communications which it receives and which
appear to have been sent by the Employee, the Employer, or any other
person.
Indemnification and Limitation on Liability
The Employee, Employer, and Custodian intend that the Custodian
shall have and exercise no discretion, authority or responsibility as to
any investment in connection with the Custodial Account, and the Custodian
shall not be responsible in any way for the tax treatment of any
contribution or distribution, or for any other action or nonaction taken
pursuant to the Employee's or Employer's direction or that of the
Employee's beneficiary, executor or administrator. The Employee who
directs the investment of his or her Custodial Account shall bear sole
responsibility for the suitability of any directed investment and for any
adverse consequences arising from such an investment.
The Custodian shall have no responsibilities other than those
provided for herein or in ERISA or Code and shall not be liable for a
mistake in judgment, for any action taken (or not taken) in good faith, or
for any loss that is not a result of its gross negligence, except as
provided in ERISA or the Code.
The Employee (and the Employee's beneficiary, executor or
administrator) shall indemnify and hold the Custodian harmless from and
against any liability that the Custodian, the Investment Advisor, their
agents, affiliates, successors, assigns, officers, directors and employees
may incur in connection with the Custodial Account, unless arising from
the Custodian's own gross negligence or willful misconduct or from a
violation of the provisions of ERISA or Regulations promulgated
thereunder.
The Custodian shall be under no duty to question any direction
of the Employee with respect to the investment of contributions, or to
make suggestions to the Employee with respect to the investment, retention
or disposition of any contributions or assets held in the Custodial
Account. The Custodian and Investment Advisor shall have no duty to give
effect to an investment direction from anyone other than the Employee (or
the Employee's beneficiary, executor or administrator). However, the
Custodian and Investment Advisor may, in their discretion, establish
procedures pursuant to which the Employee (or the Employee's beneficiary,
executor or administrator) may delegate to a third party any or all of the
Employee's power and duties hereunder, not including the authority to
execute the Account Application or a beneficiary designation form.
Expenses
The Custodian shall be paid out of the Custodial Account for
expenses of administration, including the fees of counsel employed by the
Custodian relating directly to administration of or claims against or on
behalf of the Custodial Account, taxes, and its fees for maintaining the
Custodial Account which are set forth in the Application or in accordance
with any schedule of fees subsequently adopted by the Custodian. The
Custodian may sell Investment Company Shares and use the proceeds of sale
to pay the foregoing expenses.
Resignation and Removal
The Investment Advisor may remove the Custodian at any time.
The Custodian may resign as Custodian of any Employee's Custodial Account
upon sixty (60) days' prior notice to the Investment Advisor.
Upon the removal or resignation of the Custodian, the Investment
Advisor may, but shall not be required to, appoint a successor custodian
under this Custodial Agreement, provided that the successor custodian
satisfies the requirements of Section 401(f)(2) of the Code. The
Custodian shall transfer the assets of the Custodial Account, together
with copies of relevant books and records, to the successor custodian,
provided that the Custodian is authorized to reserve such sum of money or
property as it may deem advisable for payment of any fees or other
liabilities constituting a charge on or against the assets of the
Custodial Account. The Custodian shall not be liable for the acts or
omissions of any successor to it. If no successor custodian is appointed
by the Investment Advisor, the Custodial Account shall be terminated in
accordance with Article VII.
Article VI. The Investment Advisor
The Employee and the Employer delegate to the Investment Advisor
the following powers with respect to the Custodial Account: to remove the
Custodian and select a successor Custodian; and to amend the Custodial
Account as provided in Article VII hereof.
The powers herein delegated to the Investment Advisor shall be
exercised by such officer thereof as the Investment Advisor may designate
from time to time.
Neither an Investment Company, the Investment Advisor, nor any
officer, director, board, committee, employee or member of any Investment
Company or of the Investment Advisor shall have any responsibility with
regard to the administration of this Custodial Account (or any Employer
plan that utilizes this Custodial Account as a funding vehicle) except as
provided in this Article VI, and none of them shall incur any liability of
any nature to the Employee or beneficiary or other person in connection
with any act done or omitted to be done in good faith in the exercise of
any power or authority herein delegated to the Investment Advisor.
The Employee and the Employer agree to indemnify and hold the
Investment Companies and the Investment Advisor harmless from and against
any and all liabilities and expenses, including attorneys' and
accountants' fees, incurred in connection with the exercise of, or
omission to exercise, any of the powers delegated to it under this
Article, except such liabilities and expense as may arise from the
Investment Advisor's and/or Investment Company's willful gross negligence
or misconduct.
If the Investment Advisor shall hereafter determine that it is
no longer desirable for it to continue to exercise any of the powers
hereby delegated to it, it may relieve itself of any further
responsibilities hereunder by notice in writing to the Employee at least
sixty (60) days prior to the date on which it proposes to discontinue the
exercise of the powers delegated to it.
Article VII. Amendment and Termination
The Employee, the Employer and the Custodian delegate to the
Investment Advisor the power to amend this Custodian Account (including
retroactive amendments).
The Employee or the Employer may amend the Account Application
by submitting to the Custodian a copy of such amended Account Application,
and evidence satisfactory to the Custodian that the Employer's Section
403(b)(7) program, as amended by such amended Application, will continue
to qualify under the provisions of Section 403(b)(7) of the Code.
No amendment shall be effective if it would cause or permit:
(a) any part of the Custodial Account to be diverted to any purpose that
is not for the exclusive benefit of the Employee and his beneficiaries;
(b) the Employee to be deprived of any portion of his interest in the
Custodial Account; or (c) the imposition of an additional duty on the
Custodian without its consent.
The Employer reserves the right to terminate further
contributions to this Custodial Account. The Employee may terminate or
change the rate of further Salary Reduction Contributions to the Custodial
Account by entering into a revised agreement with his or her Employer, so
long as the form and the timing of the revised agreement is in accordance
with the rules applicable to Section 403(b) arrangements. The Employee
also reserves the right to transfer the assets of his Custodial Account to
such other form of Section 403(b) retirement plan as he or she may
determine, upon written instructions to the Custodian in such form as the
Custodian may reasonably require. The appointment of the successor
custodian in accordance with Article VI shall not be a termination of the
Custodial Account, nor shall the amendment of the Custodial Account by the
Investment Advisor be a termination of the Account.
Following termination of the Custodial Account, the Custodian
shall distribute all assets of the Custodial Account to the Employee.
There shall be no liability on the part of the Custodian or the Investment
Advisor for any tax consequences to the Employee (or the Employee's
beneficiary, executor or administrator) resulting from such termination
distribution.
Article VIII. Discrimination Requirements
Non-Discrimination Requirements
Section 403(b) of the Code generally requires that tax sheltered
annuity and custodial account arrangements (other than arrangements
maintained by a church or convention or association of churches) satisfy
certain participation and non-discrimination requirements.
In general, Salary Reduction Contributions made pursuant to an
Employee's election are eligible for exclusion from income only if the
Employer has established a program that provides all employees the
opportunity to make Salary Reduction Contributions of at least $200 per
year. For this purpose, the Employer may exclude from consideration (1)
employees who fail to satisfy minimum age and service requirements (to the
extent such requirements are adopted by the Employer in accordance with
Section 403(b)(12) and 410(b) of the Code for use in its plan); (2)
employees who are participants in an eligible deferred compensation plan
under Section 457 of the Code, qualified cash or deferred arrangement
under Section 401(k) of the Code (to the extent the Employer may maintain
such a plan) or another Section 403(b) plan or arrangement; (3) employees
normally working less than 20 hours per week; (4) employees who are non-
resident aliens; (5) certain student employees performing services
described in Section 3121(w)(3)(A) of the Code; and (6) any other
employees that may be excluded in accordance with rules and regulations
promulgated by the Secretary of the Treasury.
Non-elective contributions made by the Eligible Employer must
satisfy the participation and nondiscrimination requirements of Section
403(b)(12)(A)(i) of the Code.
Responsibility for Compliance With Discrimination Standards
Neither the Custodian nor the Investment Advisor shall have any
responsibility for determining whether contributions that are or may be
made to this Custodial Account are being made pursuant to a plan that
satisfies applicable non-discrimination requirements under the Code or any
other law, or for advising the Employee, the Employer, or any other person
with respect to such requirements. Further, neither the Custodian nor the
Investment Advisor shall have any responsibility or liability for adverse
tax consequences or any other consequences that may result from
contributions being made to this Custodial Account where the underlying
Employer plan or program fails to satisfy applicable legal requirements.
Article IX. Miscellaneous Provisions
Qualified Domestic Relations Order
In the case of a Custodial Account that is part of an "employee
pension benefit plan" under ERISA, the Custodian shall make distributions
in accordance with the terms of a "qualified domestic relations order" as
defined in Section 206(d) of ERISA, provided that the Employer (or its
duly appointed plan administrator) shall be responsible for determining
the qualified status of the order and distribution shall be made by the
Custodian only upon receipt of written direction from the Employer (or its
duly appointed plan administrator) that the order is a "qualified domestic
relations order" for purposes of ERISA.
Assignment and Alteration
The interest of the Employee in the Custodial Account shall be
held for the exclusive benefit of the Employee or his or her beneficiary,
and shall not be assigned or transferred by the Employee, nor shall it be
subject to alienation, assignment, garnishment, attachment, execution or
levy of any kind, except as described above in connection with "qualified
domestic relations orders", except with regard to payment of the expenses
of the Custodian or its agent as authorized by the provisions of this
Custodial Agreement, and except as otherwise required by law.
Governing Law
This Custodial Agreement shall be governed by the laws of the
state in which the Custodian is incorporated, except to the extent that
such laws are superseded by federal laws or regulations.
Effect on Other 403(b) Arrangements
This Custodial Account shall not prevent the Employee or the
Employer from making contributions toward another Section 403(b) annuity
contract or Section 403(b)(7) custodial account, provided that the
aggregate contributions to or under such annuity contracts or custodial
accounts and under this Custodial Account shall not exceed the maximum
permissible amounts as determined pursuant to Article III hereof. Neither
the Custodian nor the Investment Advisor shall have any responsibility for
monitoring compliance with the maximum contribution limitations.
Establishment of Custodial Account by Former Employee
To the extent authorized by the Internal Revenue Service as
being permissible under Section 403(b) of the Code, a former Employee who
is eligible for a distribution from his or her Employer's Section 403(b)
program may, without the consent of his or her former Employer, adopt this
Custodial Account for the purpose of receiving a rollover contribution
from the prior Employer's Section 403(b) Plan, or from the Custodial
Account through which such plan is funded. In any such event, however, no
additional Salary Reduction Contributions or Employer non-elective
contributions shall be made to this Custodial Account unless a subsequent
employer consents to the former Employee's adoption of the Custodial
Account.
Definitions
As used in this Custodial Account Agreement, the following terms
have the meaning set forth below, unless a different meaning is clearly
required by the context.
(1) "Code" means the Internal Revenue Code of 1986, as amended.
(2) "Custodial Account" means the custodial account established
hereunder for the benefit of the Employee.
(3) "Custodian" shall mean the designated custodian, or its
successors.
(4) "Employee" means the person named in the Account
Application.
(5) "Employer" means the employer organization named in the
Account Application.
(6) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(7) "Investment Advisor" shall mean Concorde Financial
Corporation, or any successor or affiliate thereto.
(8) "Investment Company" means the portfolios of Concorde
Financial Corporation or such other regulated investment
companies whose investment advisor is Concorde Financial
Corporation, or its successors or affiliates, and whose
shares are authorized (under the terms of the prospectus of
the investment company, and subject to any limitations
imposed by the Employer's plan) for purchase under this
Agreement.
(9) "Salary Reduction Contributions" means contributions made
pursuant to a written agreement between the Employee and
the Employer, and by which the Employee's salary for future
services is reduced and the amount of such reduction is
contributed by the Employer to the Custodial Account.
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