<PAGE> 1
As filed with the Securities and Exchange Commission on April 29, 1998
1933 Act Registration No. 33-25137
1940 Act File No. 811-5682
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ x ]
Pre-Effective Amendment No. [ x ]
Post-Effective Amendment No. 11 [ x ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ x ]
Amendment No. 13 [ x ]
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
(Exact Name of Registrant as Specified in Charter)
600 Fifth Avenue, New York, New York 10020
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(888) 226-5504
Copy to:
R. Patrick Shepherd, Esq. Kristin H. Ives, Esq.
J. C. Bradford & Co. LLC Baker & Hostetler LLP
330 Commerce Street Capital Square
Nashville, Tennessee 37201 Suite 2100
(Name and Address of Agent 65 East State Street
for Service) Columbus, Ohio 43215
Approximate Date of Proposed Public Offering: Immediately upon effectiveness
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
---
X on April 30, 1998, pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
---
on (date) pursuant to paragraph (a)(1)
---
75 days after filing pursuant to paragraph (a)(2)
---
on (date) pursuant to paragraph (a)(2) of Rule 485
---
<PAGE> 2
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:
Shares of capital stock, par value $.001 per share.
-2-
<PAGE> 3
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
Registration Statement on Form N-1A
-----------------------------------
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
-----------------------------------
<TABLE>
<CAPTION>
Form N-1A
Item No. Prospectus Heading
- -------- ------------------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . Fund Expenses
3. Condensed Financial Information. . . . . . Financial Highlights; Yield
Information
4. General Description of
Registrant . . . . . . . . . . . . . . . Cover Page; The Fund;
Investment Objective and
Policies
5. Management of the Fund . . . . . . . . . . Management
5A. Management's Discussion of Fund
Performance. . . . . . . . . . . . . . . Not Applicable
6. Capital Stock and Other
Securities . . . . . . . . . . . . . . . Description of Shares;
Determination of Net Asset
Value; Dividends and
Distributions; Taxes; Other
Information
7. Purchase of Securities Being
Offered. . . . . . . . . . . . . . . . . Cover Page; Fund Expenses;
Purchase and Redemption of
Shares; Distribution of
Shares; Determination of Net
Asset Value
8. Redemption or Repurchase . . . . . . . . . Fund Expenses; Purchase and
Redemption of Shares
9. Pending Legal Proceedings. . . . . . . . . None
</TABLE>
<PAGE> 4
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
600 FIFTH AVENUE
NEW YORK, NEW YORK 10020
(888) 226-5504
The Bradford Funds, Inc. (the "Company") is an open-end, diversified
management investment company authorized to issue shares of multiple portfolios.
The Company is currently offering shares of one portfolio, The Bradford Money
Fund (the "Money Fund" or the "Fund"). The investment objective of the Money
Fund is to provide as high a level of current interest income as is consistent
with maintaining liquidity and stability of principal. It seeks to achieve this
objective by investing in high quality, U.S. dollar-denominated money market
instruments such as short-term U.S. Government securities, bank certificates of
deposit, commercial paper and repurchase agreements.
For more detailed information on how to purchase or redeem shares of the
Fund, please refer to the section of this Prospectus entitled "Purchase and
Redemption of Shares."
THE SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, NOR ARE SUCH SHARES FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND INVOLVES
CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE FUND
WILL ATTEMPT TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00 PER SHARE, ALTHOUGH
THERE CAN BE NO ASSURANCE THAT IT WILL ALWAYS BE ABLE TO DO SO.
J.C. Bradford & Co. LLC acts as distributor and transfer agent for the
Fund's shares, and Bradford Capital Management, Ltd. serves as investment
adviser for the Fund.
This Prospectus contains concise information that a prospective investor
should know before investing. Please read it carefully and keep it for future
reference. A Statement of Additional Information, dated April 30, 1998, has been
filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. It may be obtained free of charge upon oral or
written request of the Fund at the address and telephone number set forth above.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PROSPECTUS APRIL 30, 1998
<PAGE> 5
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses............................................... 2
Financial Highlights........................................ 3
Yield Information........................................... 4
The Fund.................................................... 4
Investment Objective and Policies........................... 4
Purchase and Redemption of Shares........................... 8
Determination of Net Asset Value............................ 11
Management.................................................. 11
Distribution of Shares...................................... 13
Dividends and Distributions................................. 14
Taxes....................................................... 14
Description of Shares....................................... 14
Other Information........................................... 15
</TABLE>
FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchases......................... None
Maximum Sales Charge on Reinvested Dividends.............. None
Redemption Fees or Deferred Sales Charge.................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Advisory Fee.............................................. .35%(1)
Rule 12b-1 (Distribution Plan) Fees....................... .20%
Other Expenses............................................ .19%
Administration Fee..................................... .04%
Transfer Agency Fees................................... .10%
Other.................................................. .05%
Total Fund Operating Expenses........................ .74%(1)
====
</TABLE>
The purpose of the above table is to assist investors in understanding the
various costs and expenses that an investor in shares of the Money Fund can be
expected to bear directly (shareholder transaction expenses) or indirectly
(annual operating expenses). "Other Expenses" includes such expenses as
custodial, transfer agent and administration fees and audit, legal, printing and
other business operating expenses, but excludes extraordinary expenses or any
fees charged by J.C. Bradford & Co. LLC to its customer accounts which may have
invested in shares of the Money Fund. For further details, see "MANAGEMENT" and
"DISTRIBUTION OF SHARES."
- ---------------
(1)For the year ended December 31, 1997 and the year ending December 31,
1998, Bradford Capital Management, Ltd., as investment adviser, has agreed with
the Company to waive five basis points or charge only 0.30% on the Fund's
average daily net assets in excess of $1 billion. Absent such voluntary fee
reduction, Advisory Fees and Total Fund Operating Expenses for the year ended
December 31, 1997 would have been .36% and .75%, respectively. (See
"MANAGEMENT -- Investment Adviser.")
2
<PAGE> 6
The following example applies the above-stated expenses to a hypothetical
$1,000 investment in the Fund over the time periods shown below, assuming a 5%
annual rate of return on the investment and also assuming that the shares were
redeemed at the end of each stated period and that all dividends and
distributions were reinvested. The amounts of expenses shown below are
cumulative for the periods shown.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$8 $24 $41 $92
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. EXPENSES ARE SUBJECT TO CHANGE AND ACTUAL EXPENSES MAY BE LESS OR
GREATER THAN THOSE ILLUSTRATED ABOVE.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following Financial Highlights with respect to a share of the Fund
outstanding during the periods indicated has been derived from financial
statements audited by Deloitte & Touche LLP, independent auditors for the
Company, whose report thereon, insofar as it relates to each of the years in the
five year period ended December 31, 1997, is included in the Statement of
Additional Information and may be obtained by shareholders. Further financial
information is included in the Statement of Additional Information.
SELECTED FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income..... .0485 .0468 .0515 .0343 .0247 .0308
Net Realized Gain on
Investments............. -- -- -- -- -- .0001
---------- ---------- ---------- -------- -------- --------
Total From Investment
Operations.......... .0485 .0468 .0515 .0343 .0247 .0309
---------- ---------- ---------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividend to Shareholders
from Net Investment
Income.................. (.0485) (.0468) (.0515) (.0343) (.0247) (.0308)
Dividend to Shareholders
from Net Realized
Gains................... -- -- -- -- -- (.0001)
---------- ---------- ---------- -------- -------- --------
Total Distributions (.0485) (.0468) (.0515) (.0343) (.0247) (.0309)
---------- ---------- ---------- -------- -------- --------
Net Asset Value, End of
Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ======== ======== ========
TOTAL RETURN............... 4.96% 4.78% 5.28% 3.48% 2.50% 3.13%
RATIO/SUPPLEMENT DATA:
Net Assets, End of Period
(in thousands).......... $1,563,288 $1,234,321 $1,009,370 $677,177 $719,337 $652,622
Ratio of Expenses to
Average Daily Net Assets .74%(b) .77%(b) .80%(b) .80%(b) .81%(b) .85%
Ratio of Net Investment
Income to Average Daily
Net Assets.............. 4.87%(b) 4.68%(b) 5.15%(b) 3.39%(b) 2.47%(b) 3.08%
<CAPTION>
FOR THE PERIOD
FEBRUARY 8,
FOR THE FOR THE 1989(A)
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1990 1989
------------ ------------ --------------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period................. $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income..... .0531 .0736 .0747
Net Realized Gain on
Investments............. -- -- --
-------- -------- --------
Total From Investment
Operations.......... .0531 .0736 .0747
-------- -------- --------
LESS DISTRIBUTIONS:
Dividend to Shareholders
from Net Investment
Income.................. (.0531) (.0736) (.0747)
Dividend to Shareholders
from Net Realized
Gains................... -- -- --
-------- -------- --------
Total Distributions (.0531) (.0736) (.0747)
-------- -------- --------
Net Asset Value, End of
Period.................... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
TOTAL RETURN............... 5.44% 7.61% 8.73%(c)
RATIO/SUPPLEMENT DATA:
Net Assets, End of Period
(in thousands).......... $605,089 $542,724 $470,485
Ratio of Expenses to
Average Daily Net Assets .88% .92% .97%(c)
Ratio of Net Investment
Income to Average Daily
Net Assets.............. 5.31% 7.36% 8.33%(c)
</TABLE>
- ------------
(a) Commencement of Operations
(b) During the period a portion of the Advisory and/or Distribution fees was
voluntarily reduced. If such voluntary fee reductions had not occurred, the
Ratio of Expenses to Average Daily Net Assets would have been .75%, .78%,
.81%, .83% and .84%, respectively, and the Ratio of Net Investment Income
to Average Daily Net Assets would have been 4.85%, 4.67%, 5.14%, 3.36% and
2.44%, respectively.
(c) Annualized.
3
<PAGE> 7
YIELD INFORMATION
- --------------------------------------------------------------------------------
The yield of any investment is generally a function of investment
objective, portfolio quality and maturity, and operating expenses. The yield on
shares of the Money Fund will fluctuate and the yield for any given period is
not an indication or representation of future results. Any fees charged by J.C.
Bradford & Co. LLC or any of its affiliates to its customer accounts which may
have invested in shares of the Money Fund will not be included in such yield
calculations; such fees, if included, would reduce the actual yields from those
quoted.
From time to time the Money Fund may advertise "yield" and "effective
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "yield" of the Money Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that seven days
is assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment.
THE FUND
- --------------------------------------------------------------------------------
The Bradford Funds, Inc. (the "Company") is an open-end diversified
management investment company authorized to issue shares of multiple portfolios.
The Company is currently offering shares of one investment portfolio, The
Bradford Money Fund (the "Money Fund" or the "Fund"). Accordingly, the "Company"
and the "Money Fund" (or the "Fund") are used interchangeably in this
Prospectus, unless the context indicates otherwise. The directors of the Company
may determine to offer shares of additional portfolios in the future.
The Company was incorporated in Maryland on October 26, 1988, and commenced
operations on February 8, 1989.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
GENERAL
The Money Fund's investment objective is to provide as high a level of
current interest income as is consistent with maintaining liquidity and
stability of principal. There is no assurance that the investment objective of
the Money Fund will be achieved.
Portfolio obligations held by the Money Fund will have remaining maturities
of 397 days (13 months) or less (except that portfolio securities which are
subject to repurchase agreements may bear maturities exceeding 397 days if such
agreements call for delivery in 397 days or less). The dollar-weighted average
maturity of the Money Fund will be 90 days or less. In pursuing its investment
objective, the Fund may invest in a broad range of high quality, U.S. dollar-
denominated instruments, such as short-term U.S. Government securities, bank
certificates of deposit, commercial paper and repurchase agreements, that may be
available in the money markets and that meet the requirements set forth in the
following paragraph ("Money Market Instruments").
All instruments at the time of purchase (i) will be determined by the
Fund's adviser, pursuant to guidelines established by the Company's Board of
Directors, to present minimum credit risk and (ii) will be "Eligible Securities"
as defined in the rules under the Investment Company Act of 1940, as amended
(the "1940 Act"). "Eligible Securities" include (i) securities rated by at least
two major rating organizations ("Rating Agencies") in one of the two highest
4
<PAGE> 8
short-term rating categories for short-term debt obligations (or, for securities
rated by only one Rating Agency, so rated by such Rating Agency), (ii)
securities issued by an issuer that has received one of the two highest
short-term ratings from the Rating Agencies with respect to another class of
securities which are comparable to the securities to be purchased, and (iii) for
securities that are unrated, those determined to be of comparable quality
pursuant to guidelines established by the Company's Board of Directors. Pursuant
to the rules under the 1940 Act, the Fund is also required to diversify its
investments so that, with certain exceptions and except for United States
Government securities, (a) not more than 5% of its total assets is invested in
securities of any one issuer, (b) not more than 5% of its total assets is
invested in securities of issuers rated by Rating Agencies at the time of
investment in the second highest rating category for short-term debt obligations
or deemed to be of comparable quality to securities rated in the second highest
rating category for short-term debt obligations ("Second Tier Securities") and
(c) not more than the greater of 1% or one million dollars is invested in the
securities of any one issuer that are Second Tier Securities; however, the Fund
does not currently intend to invest in any Second Tier Securities.
The Rating Agencies and their respective short-term rating categories are
described in the Appendix to the Statement of Additional Information.
MONEY MARKET INSTRUMENTS
The following descriptions illustrate the types of Money Market Instruments
in which the Fund may invest.
(1) GOVERNMENT OBLIGATIONS. The Money Fund may purchase obligations issued
or guaranteed by the U.S. Government or its agencies and instrumentalities
("U.S. Government securities"). Obligations of certain agencies and
instrumentalities of the U.S. Government (e.g., U.S. Treasury notes and bills)
are backed by the full faith and credit of the United States. Others are backed
by the right of the issuer to borrow from the U.S. Treasury (e.g., obligations
of the Private Export Funding Corporation) or are backed only by the credit of
the agency or instrumentality issuing the obligation (e.g., obligations of the
Federal Home Loan Bank and the Farm Credit System). In addition, the Money Fund
may purchase obligations issued by institutions organized by two or more
sovereign governments for a specific purpose (e.g., obligations of the World
Bank).
The Fund may also invest in separately traded principal and interest
components of securities issued or guaranteed by the U.S. Treasury. The
principal and interest components of selected securities are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities Program ("STRIPS"). Under the STRIPS program, the principal and
interest components are individually numbered and separately issued by the U.S.
Treasury at the request of depository financial institutions, which then trade
the component parts independently.
(2) BANK OBLIGATIONS. The Money Fund may purchase U.S. dollar-denominated
bank obligations, such as certificates of deposit, bankers' acceptances and time
deposits, including instruments issued or supported by the credit of U.S. or
foreign banks or savings institutions. Such investments will be limited to banks
having total assets at the time of purchase in excess of $10 billion. The Fund
may invest in obligations of foreign banks, domestic branches of foreign banks
and foreign branches of U.S. banks which the investment adviser believes present
minimal credit risk and which are Eligible Securities. Such investments may
nevertheless entail risks that are different from those of investments in U.S.
banks and domestic branches thereof due to differences in political, regulatory
and economic systems and conditions.
(3) COMMERCIAL PAPER AND OTHER CORPORATE OBLIGATIONS. The Money Fund may
purchase commercial paper rated (at the time of purchase) in accordance with the
guidelines set forth above under "General." The Money Fund may also purchase
unrated commercial paper or other corporate obligations, provided that such
obligations are due within 397 days of the date of purchase and are determined
by the Fund's investment adviser to be of comparable quality pursuant to
guidelines approved by the Company's Board of Directors. Such guidelines
provide, for instance,
5
<PAGE> 9
that unrated instruments may be purchased when the Fund's investment adviser has
determined that such instruments are of sufficient quality to ensure that the
instruments are comparable to instruments that are rated within the allowed
ratings.
The Money Fund may also purchase Europaper and Eurobonds (with remaining
maturities of 397 days or less), which are U.S. dollar denominated debt
securities of a foreign issuer, in each case, so long as such securities, at the
time of purchase, meet the guidelines set forth above under "General."
Investments in foreign securities, such as Europaper and Eurobonds, may subject
the Fund to investment risks that differ in some respects from those related to
investment in securities of U.S. domestic issuers. Such risks include future
adverse political and economic developments, the possible imposition of
withholding taxes on interest or other investment income, possible seizure,
nationalization, or expropriation of foreign investments, the possible
establishment of exchange controls or taxation at the source, less stringent
disclosure or auditing requirements or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
or interest on such securities or the purchase or sale thereof. The Fund will
purchase such foreign securities only when the Fund's adviser believes that the
risks associated with such securities are minimal.
Commercial paper issues in which the Money Fund may invest include
securities issued by corporations without registration under the Securities Act
of 1933 (the "1933 Act") in reliance on the exemption from such registration
afforded by Section 3(a)(3) thereof, and commercial paper issued in reliance on
the so-called "private placement" exemption from registration which is afforded
by Section 4(2) of the 1933 Act ("Section 4(2) paper"). Section 4(2) paper is
restricted as to disposition under the Federal securities laws, and generally is
sold to institutional investors such as the Fund who agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale must also generally be made in an exempt transaction. Section 4(2)
paper is normally resold to other institutional investors through or with the
assistance of the issuer or investment dealers who make a market in Section 4(2)
paper, thus providing liquidity. Pursuant to procedures adopted by the Board of
Directors of the Company, the Fund's investment adviser may determine Section
4(2) paper to be liquid if such paper is readily saleable.
(4) VARIABLE RATE NOTES. The Money Fund may purchase variable rate demand
notes, which are unsecured instruments that permit the indebtedness thereunder
to vary (subject to an agreed maximum) and provide for periodic adjustments in
the interest rate. Although the notes are not normally traded and there may be
no active secondary market in the notes, the Fund will be able (at any time or
during specified periods not exceeding thirteen months, depending upon the note
involved) to demand payment of any such note. The Money Fund may also acquire
variable rate notes. A variable rate note is one whose terms provide for the
adjustment of its interest rate on set dates and which, upon such adjustment,
can reasonably be expected to have a market value that approximates its
amortized cost. Variable rate demand notes and variable rate notes are not
typically rated by credit rating agencies, but the notes must be determined by
the Fund's investment adviser to be of comparable quality to the Fund's other
commercial paper investments pursuant to the guidelines of the Company's Board
of Directors referred to above. The Money Fund invests in variable rate demand
notes and variable rate notes only when the Fund's investment adviser believes
the investment to involve minimal credit risk.
(5) REPURCHASE AGREEMENTS. The Money Fund may enter into repurchase
agreements with respect to U.S. Government securities. A repurchase agreement
involves the Fund's purchase of securities subject to the seller's agreement, at
the time of sale, to repurchase the securities at an agreed upon time and place.
Although the securities held by the Money Fund subject to a repurchase agreement
may have stated maturities exceeding 397 days, the repurchase agreement must
call for delivery in less than 397 days. The Fund may enter into repurchase
agreements only with banks whose securities would be acceptable for purchase by
the Fund and non-bank dealers of U.S.
6
<PAGE> 10
Government securities that are listed on the Federal Reserve Bank of New York's
list of reporting dealers. The Fund's investment adviser will consider the
creditworthiness of a seller when determining to have the Fund enter into a
repurchase agreement. The Fund's adviser will continue to monitor the
creditworthiness of the seller during the term of the repurchase agreement. The
seller under a repurchase agreement will be required to maintain securities in a
segregated account having a value (marked to market daily) not less than 100% of
the repurchase price (including an amount representing accrued interest).
Default by the seller would, however, expose the Fund to possible losses which
may include a decline in value of such securities to an amount less than 100% of
the repurchase price and any loss resulting from any delay in foreclosing on
such securities.
OTHER INVESTMENT PRACTICES
The following is a description of other types of investment practices in
which the Money Fund may engage:
(1) REVERSE REPURCHASE AGREEMENTS. The Money Fund may enter into
reverse repurchase agreements with respect to portfolio securities for
temporary purposes such as the funding of redemption requests. Reverse
repurchase agreements are repurchase agreements in which the Fund is the
seller of, rather than the purchaser of, securities and agrees to
repurchase them at an agreed upon time and place. At the time the Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account liquid assets such as U.S. Government securities or other
liquid high quality debt securities having a value equal to or greater than
the repurchase price (including an amount representing accrued interest)
and will subsequently monitor the account to ensure that such value is
maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by the Fund may decline below the price of the
securities the Fund is obligated to repurchase. The use of reverse
repurchase agreements is considered to be borrowing by the Fund under the
1940 Act.
(2) WHEN-ISSUED SECURITIES. The Money Fund may purchase money market
Instruments on a "when-issued" basis. When-issued securities are securities
purchased for delivery beyond the normal settlement date at a stated price
and yield. The Fund will generally not pay for such securities or start
earning interest on them until they are received. Securities purchased on a
when-issued basis are recorded as an asset (with the purchase price being
recorded as a liability) at the time the commitment is entered into and are
subject to changes in value prior to delivery based upon changes in the
general level of interest rates. The Fund expects that commitments to
purchase when-issued securities will not exceed 25% of the value of its
total assets absent unusual market conditions. The Fund does not intend to
purchase when-issued securities for speculative purposes but only in
furtherance of its investment objective.
OTHER INFORMATION
The Money Fund will limit its purchase of illiquid obligations to 10% of
the value of the Fund's total assets. Illiquid obligations include time deposits
with maturities longer than seven days, Section 4(2) paper which is not
determined to be liquid, and repurchase agreements with maturities longer than
seven days.
INVESTMENT RESTRICTIONS
The Money Fund's policies described above may be changed by the Company's
Board of Directors without the affirmative vote of the holders of a "majority of
the outstanding shares" of the Fund as defined in the Statement of Additional
Information. The Fund may not, however, change its investment objective or
certain of its investment restrictions, including those summarized below,
without such a vote of shareholders. A more detailed description of the
following investment restrictions, together with other investment restrictions
that cannot be changed without such a vote of shareholders, is contained in the
Statement of Additional Information under "Investment Objective and Policies."
7
<PAGE> 11
The Money Fund may not:
(1) Borrow money, except from banks for temporary purposes and except
for reverse repurchase agreements, and then in amounts not in excess of 10%
of the value of the Fund's assets; or mortgage, pledge or hypothecate any
of its assets except in connection with any such borrowing and in amounts
not in excess of 10% of the value of the Fund's assets; or purchase
portfolio securities while borrowings in excess of 5% of the value of the
Fund's assets are outstanding;
(2) Invest 25% or more of its total assets in the securities of
issuers in any particular industry (other than U.S. Government securities
or repurchase agreements relating thereto or obligations of domestic
branches of U.S. banks and those U.S. branches of foreign banks that are
subject to the same regulation as U.S. banks); or
(3) Purchase securities of any one issuer, other than U.S. Government
securities and repurchase agreements relating thereto, if immediately after
such purchase more than 5% of the value of its total assets would be
invested in the securities of such issuer, or more than 10% of the
outstanding securities of any class (taking all debt issues of an issuer as
a single class) or more than 10% of the outstanding voting securities of
such issuer would be owned by the Fund, except that up to 25% of the value
of the Fund's total assets may be invested without regard to such 5%
limitation.
Notwithstanding the foregoing paragraph, in order to maintain a stable net
asset value per share, the Money Fund follows the practice of limiting its
investment in the securities of any one issuer in the manner prescribed by Rule
2a-7 of the 1940 Act. Those limitations are described above under "INVESTMENT
OBJECTIVE AND POLICIES -- General."
If a percentage restriction is adhered to at the time of an investment,
borrowing or other designated action, a later increase or decrease in percentage
resulting from changes in values or assets will not constitute a violation of
such restriction.
PURCHASE AND REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
PURCHASE PROCEDURES
GENERAL. Shares of the Money Fund are offered without a sales charge on a
continuous basis by J.C. Bradford & Co. LLC, the Fund's Distributor ("Bradford"
or the "Distributor") exclusively to customers of Bradford and other
broker-dealers which may in the future enter into dealer agreements with the
Distributor. All investments must be made through your Bradford account
executive or such other broker-dealers. The Distributor's principal office is
located at 330 Commerce Street, Nashville, Tennessee 37201.
The minimum initial investment in the Fund is $250 ($100 for retirement
accounts), with no minimum subsequent investment. These minimums, however, are
not applicable to purchases made under a cash management program offered by
Bradford or another broker-dealer. See "Purchases Pursuant to BCM Program"
below. The Distributor in its sole discretion may accept or reject any order for
purchases of shares.
In the interests of economy and convenience, share certificates will not be
issued. All purchases and redemptions of shares and dividend reinvestments will
be confirmed to the shareholder in the individual account statement which will
generally be sent to all shareholders monthly by Bradford or other participating
broker-dealers.
Shares of the Money Fund are offered at the net asset value per share next
determined following receipt of an order by the Fund. The net asset value per
share for the Fund is normally expected to be $1.00. See "DETERMINATION OF NET
ASSET VALUE."
8
<PAGE> 12
PURCHASES PURSUANT TO BRADFORD'S REGULAR SECURITIES ACCOUNT. Purchases of
shares of the Fund may be made through a regular cash securities account
maintained with Bradford. Such an account may be opened and maintained at no
charge to investors. Bradford accountholders may elect optional check writing
privileges. See "Redemption Procedures -- Redemption by Check." Any available
cash in an account with at least the minimum required investment in the Money
Fund is automatically invested at least once a week in additional shares of the
Money Fund or in shares of one of two other no-load mutual funds designated by
the accountholder and made available in connection with the account. If,
however, the available cash in an account exceeds certain levels, such cash will
be automatically invested in the Money Fund as of the Valuation Time (as defined
below under "DETERMINATION OF NET ASSET VALUE") (a) on that business day if such
cash is as a result of a securities transaction or (b) on the following business
day if such cash is a result of any other transactions. Shares begin earning
dividends as of the date purchased.
Shares of the Fund are redeemed automatically at net asset value as
necessary to satisfy debit balances resulting from settlement of securities
transactions, to satisfy checks written in connection with the check writing
privilege or otherwise arising under the account. See "Redemption
Procedures -- Redemption by Check." Bradford reserves the right to waive or
modify criteria for participation in an account or to terminate participation in
an account for any reason.
PURCHASES PURSUANT TO BCM PROGRAM. Shares of the Money Fund may be
purchased in connection with the BCM program pursuant to which available cash
will be automatically invested periodically in shares of the Fund. The BCM
program is an integrated financial services account under which participants
maintain a conventional margin account known as a Securities Account that may be
used to purchase and sell securities and options on margin or on a fully-paid
basis. Participants must pay all customary transaction fees incurred in the use
of a margin account, including normal brokerage fees for securities and options
transactions and interest on margin loans, if any. Available cash in the
Securities Account is automatically invested daily in shares of the Money Fund,
in shares of one of two other no-load mutual funds designated by the participant
and made available in connection with the account, or in the Bradford credit-
interest program. Available cash is transmitted to the Fund for investment as of
the Valuation Time (a) on that business day if such cash is as a result of a
securities transaction or (b) on the following business day if such cash is a
result of any other transactions. Shares begin earning dividends as of the date
purchased.
Shares of the Fund are redeemed automatically at net asset value as
necessary to satisfy debit balances resulting from settlement of securities
transactions or otherwise arising under the BCM program as a result, for
example, of transactions made using the program's optional Visa Gold Card or to
satisfy checks written in connection with the program's check writing privilege
on an account maintained at Bankers Trust Company ("BTC"). Bradford will charge
participants in the BCM program an annual administrative fee to cover fees and
administrative and processing costs incurred in connection with the services
provided by BTC, as well as the cost of establishing, maintaining and servicing
the BCM program. See the BCM Program Agreement, available from your Bradford
account executive, for the specific terms and conditions of the Visa Gold card
and check writing features. Currently such administrative fee ranges from $50 to
$150, depending upon the type of account. The fee is subject to change at any
time.
Bradford reserves the right to waive or modify criteria for participation
in the BCM program or to terminate participation in the BCM program for any
reason. For more information on the BCM program, contact your Bradford account
executive.
Bradford is the only firm which currently proposes to offer purchases of
the Money Fund's Shares pursuant to such a program. Other brokerage firms may
offer similar arrangements in the future. The manner and frequency with which
such automatic purchases will be effected will depend upon the terms of the
particular program. (For a summary of the manner and frequency with which
automatic purchases will be effected under the BCM program, see the third
preceding paragraph.) Purchases made under such a program will be effected
through your brokerage account at the participating brokerage firm. Investments
made pursuant to such a program are not subject to the Fund's minimum investment
requirements; however, a participating brokerage firm may impose its own minimum
initial and subsequent investment
9
<PAGE> 13
requirements. Under such a program, shares of the Fund are automatically
redeemed as necessary to satisfy a participant's debit balance in the account
with the participating firm. Additional requirements or charges not described in
this Prospectus may be imposed by participating brokerage firms, but are not
imposed by the Fund. Investors are referred to descriptions of brokerage firms'
programs for specific information regarding services offered and applicable
charges.
RETIREMENT PLANS. The Distributor maintains prototype plans for Individual
Retirement Accounts ("IRAs") and Simplified Employee Pension Accounts and a
prototype defined contribution plan with adoption agreements for a profit-
sharing plan feature, a money purchase pension plan feature, and a cash or
deferred arrangement (401(k) plan). The Distributor will act as custodian for
such accounts. Money Fund shares may be purchased in conjunction with any such
account. For further information as to applications and annual fees, contact the
Distributor or your Bradford account executive.
REDEMPTION PROCEDURES
AUTOMATIC REDEMPTION. Bradford will redeem each day a sufficient number of
shares of the Money Fund to cover debit balances created by transactions through
the BCM program or in regular accounts. For debit balances resulting from the
settlement of securities transactions, Fund shares will be redeemed as of the
Valuation Time on the date of settlement, and for all other transactions that
result in a debit balance or charge (except those described below), Fund shares
will be redeemed at the Valuation Time on the following business day. Bradford
also reserves the right to redeem shares of the Money Fund held in an Account
which Bradford has terminated as described above under "Purchase
Procedures -- Purchases Pursuant to the BCM Program."
REDEMPTION BY REQUEST. Shares of the Money Fund, in any amount, may be
redeemed at any time at their current net asset value next determined after a
request is received by the Fund. To redeem shares of the Money Fund, an investor
must make a redemption request orally or in writing through his or her Bradford
account executive or other broker-dealer. Immediately following the receipt of
such a request, the account executive or broker-dealer will transmit such
request to the Distributor, which will forward requests for redemption to the
Fund by 12:00 noon on each business day.
REDEMPTION BY CHECK. As discussed above under "Purchases Pursuant to BCM
Program," check writing privileges are included in the BCM program, and may be
available through a brokerage account or similar program at a participating
brokerage firm. Upon request, the Money Fund will provide any investor who does
not have check writing privileges in connection with his or her brokerage
account with forms of drafts ("checks") payable through BTC. These checks may be
made payable to the order of anyone, and are subject to a minimum amount of
$500. There is no per-check charge. An investor wishing to use this check
writing redemption procedure should complete specimen signature cards available
from his or her Bradford account executive. For a fee imposed by BTC, an
investor will be able to stop payment on a check redemption. The Fund or BTC may
terminate this redemption service at any time upon 30 days' prior notice and
neither shall incur any liability for honoring checks, for effecting redemptions
to pay checks, nor for returning checks which have not been accepted.
When a check is presented to BTC for clearance, Bradford, as transfer
agent, will cause the Money Fund to redeem a sufficient number of full and
fractional shares owned by the shareholder to cover the amount of the check.
This procedure enables the shareholder to continue to receive dividends on those
shares equalling the amount being redeemed by check until such time as the check
is presented to BTC. Checks may not be presented for cash payment at the offices
of BTC because, under rules under the 1940 Act, redemptions may be effected only
at the redemption price next determined after the redemption request is
presented to J.C. Bradford & Co. LLC as the Fund's transfer and dividend
disbursing agent. This limitation does not affect checks used for the payment of
bills or cashed at other banks.
10
<PAGE> 14
ADDITIONAL REDEMPTION INFORMATION. Ordinarily, the Money Fund will make
payment for all shares redeemed within one business day, but in no event (except
as described below) will payment be made more than seven days after receipt by
the Fund of a redemption request. However, payment may be postponed or the right
of redemption (by any of the above-described methods) suspended for more than
seven days under unusual circumstances, such as when trading is not taking place
on the New York Stock Exchange. Payment of redemption proceeds may also be
delayed for a period of up to fifteen days after purchase pending clearance of
any check delivered in payment for those shares.
The Fund imposes no charge when shares are redeemed. The Fund reserves the
right to redeem any account involuntary upon 30 days' prior written notice if
such account falls below the minimum initial investment. Accordingly, a
shareholder making a minimum investment may not redeem any portion of his or her
investment without becoming subject to possible involuntary liquidation.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of the Money Fund for the purpose of pricing
purchase and redemption orders is determined once each day as of the close of
trading (currently 4:00 p.m. Eastern time) on the New York Stock Exchange
("NYSE") (and immediately after the Fund has declared any applicable dividend)
on each day that the NYSE and Investors Fiduciary Trust Company, the Fund's
custodian (the "Custodian"), are both open for business ("Valuation Time").
Currently, the NYSE or the Custodian, or both, are closed on the following
holidays as legally observed: New Year's Day, Martin Luther King's Birthday,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day. The Fund's net
asset value per share is calculated by adding the value of all securities and
other assets of the Fund, subtracting its liabilities and dividing the result by
the number of its outstanding shares.
The Money Fund seeks to maintain a net asset value of $1.00 per share for
purposes of purchases and redemptions, and values its portfolio securities on
the basis of the amortized cost method of valuation described in the Statement
of Additional Information under the heading "VALUATION OF SHARES." There can be
no assurance that net asset value per share will not vary.
MANAGEMENT
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
The business and affairs of the Company and the Money Fund are managed
under the direction of the Company's Board of Directors in accordance with the
laws of Maryland governing corporations.
INVESTMENT ADVISER
Bradford Capital Management, Ltd. (the "Adviser") serves as the investment
adviser for the Money Fund. The address of the Adviser is J.C Bradford Financial
Center, 330 Commerce Street, Nashville, Tennessee 37201.
The Adviser was formed on September 15, 1988, as a Tennessee limited
partnership for the purpose of becoming the Company's investment adviser. J.C.B.
Financial Services, Inc. acts as the general partner to the Adviser (the
"General Partner") and J.C. Bradford & Co. LLC, a Tennessee limited liability
company ("Bradford" or the "Distributor"), is the Adviser's limited partner.
The General Partner is a wholly owned subsidiary of Bradford & Co.,
Incorporated ("Bradford Incorporated"). Bradford Incorporated, through the
General Partner and other subsidiaries, is engaged in various aspects of the
financial
11
<PAGE> 15
services industry. All of the outstanding voting securities of Bradford
Incorporated are owned by various partners of Bradford. Bradford is an
investment firm which conducts a substantial brokerage and investment banking
business and also acts as the Distributor and transfer agent for the Fund.
Subject to the authority of the Company's Board of Directors, the Adviser
furnishes the Money Fund with investment advice and, in general, supervises the
investment program of the Fund. The Adviser furnishes, at its own expense,
office space, equipment and personnel (other than the services of directors of
the Company who are not affiliated persons of the Adviser as defined in the 1940
Act) for supervising the investment program of, and placing orders for the
portfolio transactions for, the Fund.
For the advisory services provided and expenses assumed by it, the Adviser
receives from the Fund a fee, computed daily and payable monthly, at an annual
rate of .40% of the first $500 million of the Fund's daily net assets and .35%
of daily net assets in excess of $500 million. For 1997, the fee approximated
.35% of the Fund's average net assets. The Adviser may in its discretion from
time to time agree to waive voluntarily all or any portion of its advisory fee
or to reimburse the Fund for a portion of the expenses of its operations.
Currently the Adviser has agreed to waive indefinitely 5 basis points or charge
only .30% on the Fund's average daily net assets in excess of $1 billion.
ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Reich & Tang Asset Management L.P., a Delaware limited partnership ("Reich
& Tang"), serves as the Money Fund's administrator and fund accountant. Reich &
Tang was, at March 31, 1998, investment manager, advisor or supervisor with
respect to assets aggregating in excess of $11 billion. Reich and Tang acts as
manager or administrator of seven other registered investment companies and also
advises pension trusts, profit-sharing trusts and endowments. Reich & Tang's
address is 600 Fifth Avenue, New York, New York 10020.
The administrative services to be provided by Reich & Tang include
maintenance of the Fund's books and records, preparation of regulatory filings
and shareholder reports, and computation of net asset values and daily
dividends. For these services to the Fund, Reich & Tang receives a fee, computed
daily and payable monthly, at an annual rate of .10% of the average daily net
assets of the Fund up to $200 million, .07% of the next $200 million of net
assets, .045% of the next $200 million of net assets, .025% of the next $100
million of net assets, and .01% of net assets in excess of $700 million.
Bradford, 330 Commerce Street, Nashville, Tennessee 37201, serves as the
Fund's transfer and dividend disbursing agent.
EXPENSES
The expenses of the Money Fund are deducted from the total income of the
Fund before dividends are paid. These expenses include all expenses of the Fund
which are not expressly assumed by the Adviser, Reich & Tang, the Distributor or
the transfer agent under their respective agreements with the Fund. For 1997,
the Fund's total operating expenses were approximately .74% of its average net
assets.
The Adviser may assume additional expenses of the Fund or waive a portion
of its compensation from time to time, in its discretion, and to the extent that
the Adviser assumes additional expenses of the Fund or the Fund has withheld
payment of any portion of the Adviser's compensation during the fiscal year, the
Adviser may determine at any time prior to the end of such fiscal year whether
or not to be reimbursed by the Fund for such expenses or to waive its
entitlement to such compensation. Assumption of additional expenses or waiver of
a portion of the Adviser's compensation will have the effect of lowering the
Fund's overall expense ratio and of increasing yield to investors.
12
<PAGE> 16
PORTFOLIO TRANSACTIONS AND BROKERAGE
The portfolio securities in which the Money Fund invests are traded
primarily in the over-the-counter market. Where possible, the Fund will deal
directly with the dealers who make a market in the securities involved except in
those circumstances where better prices and execution are available elsewhere.
Such dealers usually are acting as principal for their own account. On occasion,
securities may be purchased directly from the issuer. Such portfolio securities
are generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. The cost of executing portfolio transactions will
primarily consist of dealer spreads and underwriting commissions. Under the 1940
Act, persons affiliated with the Fund are prohibited from dealing with the Fund
as a principal in the purchase and sale of securities unless an exemptive order
allowing such transactions is obtained from the Securities and Exchange
Commission.
In determining which brokers or dealers to use for the portfolio
transactions of the Fund, the Adviser will attempt to obtain the best net price
and the most favorable execution in light of the overall quality of brokerage
and research services provided. In selecting brokers or dealers, the Adviser may
consider a number of factors, including but not limited to, the skill of the
firm's securities traders and the firm's financial responsibility and
administrative efficiency. Non-exchange portfolio transactions for the Fund may
occasionally be effected through the Distributor, on an agency basis. In
effecting a portfolio transaction through the Distributor, the Fund intends to
comply with Section 17(e)(1) of the 1940 Act.
DISTRIBUTION OF SHARES
- --------------------------------------------------------------------------------
Bradford acts as Distributor of the shares of the Money Fund pursuant to a
Plan of Distribution (the "Plan") of the Fund and a related Distribution
Agreement between Bradford and the Company on behalf of the Fund. The Company
has adopted the Plan pursuant to Rule 12b-1 under the 1940 Act. Pursuant to the
Plan and the Distribution Agreement, the Distributor is entitled to
reimbursement each month for its current costs incurred in services related to
the distribution and promotion of the shares of the Fund. These expenses
include, but are not limited to, administrative and sales-related costs
(including reasonable allocations of overhead), compensation paid to account
executives and other directly involved branch office personnel of the
Distributor and to broker-dealers which have entered into sales agreements with
the Distributor, expenses incurred in the printing of prospectuses, statements
of additional information and reports used for sales purposes, expenses of
preparation and printing of sales literature and advertising, and other sales
expenses. Reimbursement may not exceed .20% per annum of the daily net assets of
the Fund. Bradford may periodically reduce all or a portion of the amounts for
which it is entitled to reimbursement under the Plan with respect to the Money
Fund to increase the net income of the Money Fund available for distribution as
dividends. The voluntary reduction of such fee will cause the yield of the Money
Fund to be higher than it would otherwise be in the absence of such fee
reduction.
With respect to shares of the Fund which are sold by an account executive
or other directly involved branch office personnel, compensation may be paid to
such persons pursuant to written agreements in an amount not to exceed .20% per
annum of that portion of the daily net assets of the Fund which is attributable
to shares sold by such persons.
13
<PAGE> 17
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Money Fund will distribute substantially all of its net investment
income and net realized capital gains, if any, to shareholders. All
distributions are reinvested in the form of additional full and fractional
shares of the Money Fund unless a shareholder elects otherwise by notice to
Bradford in writing.
The net investment income earned by the Fund will be declared as a dividend
on a daily basis and paid monthly. Dividends are payable to shareholders of
record immediately prior to the determination of net asset value made as of the
close of trading on the NYSE on days on which there is a determination of net
asset value, and as of 4:00 p.m. (Eastern time) on days on which there is no
determination of net asset value. Net realized capital gains, if any, will be
distributed at least annually.
The net income of the Fund for dividend purposes consists of interest
accrued and discount earned (including both original issue and market discount)
on the Fund's assets, less amortization of market premium and accrued expenses
of the Fund for such period. To effect its policy of maintaining a net asset
value of $1.00 per share, the Fund, under certain circumstances, may withhold
dividends or make distributions from capital or capital gains.
TAXES
- --------------------------------------------------------------------------------
The following discussion is only a brief summary of some of the important
federal income tax considerations generally affecting the Money Fund and
shareholders and is not intended as a substitute for careful tax planning.
Distributions to shareholders may also be subject to state and local taxes
depending on each shareholder's particular situation. Investors in the Fund
should consult their tax advisers with specific reference to their own tax
situation.
The Fund has qualified, and expects to remain qualified, as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). If the Fund so qualifies each year, the Fund will not be
required to pay federal income tax on amounts distributed to shareholders,
provided the Fund distributes at least 90% of its net investment income (i.e.,
net income excluding net mid-term or long-term capital gains) each year. If the
Fund were to fail in any year to comply with the provisions of Subchapter M of
the Code, it would become subject to a corporate-level tax.
Shareholders, unless otherwise exempt, will be subject to federal income
tax on amounts so distributed (except distributions that are treated as a return
of capital), regardless of whether such distributions are reinvested in shares
of the Fund. The Fund does not intend to make distributions that will be
eligible for the corporate dividends received deduction. Distributions out of
the "net capital gain" (the excess of net mid-term or net long-term capital gain
over net short-term capital loss), if any, will be taxed to shareholders as
mid-term or long-term capital gain, respectively, regardless of the length of
time a shareholder has held his shares. The net capital gain of the Fund is
expected to be minimal. All other distributions, to the extent they are taxable,
are taxed to shareholders as ordinary income. Bradford or other participating
broker-dealers will send written notices to shareholders annually regarding the
tax status, as capital gain or ordinary income, of distributions made by the
Fund.
DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
The Company is authorized to issue shares of capital stock, par value $.001
per share, in multiple portfolios at the discretion of the Board of Directors.
To date, the Board has authorized the issuance of shares of only one portfolio,
The Bradford Money Fund. Each share in the Fund is entitled to one vote for the
election of directors and any other matter submitted to a shareholder vote, but
not to cumulate votes in the election of directors. Fractional shares (which are
14
<PAGE> 18
carried out to three decimal places) will have fractional voting rights. All
shares in the Fund are fully paid and non-assessable and have no preemptive or
conversion rights.
Upon liquidation of the Fund, shareholders are entitled to share pro rata
in the net assets belonging to the Fund available for distribution.
As a general matter, the Fund does not intend to hold annual or other
regular meetings of shareholders except as required by the 1940 Act or other
applicable law. Under certain circumstances, shareholders have the right to call
for a meeting of shareholders to consider the removal of one or more directors
or for other purposes.
As of March 31, 1998, to the Fund's knowledge no person held beneficially
25% or more of the outstanding shares of the Fund. All of the Fund's outstanding
shares were then owned of record by Bradford.
OTHER INFORMATION
- --------------------------------------------------------------------------------
REPORTS AND INQUIRIES
Shareholders will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent auditors. Shareholder inquires should be addressed to the Fund at
the address set forth above or to your Bradford account executive.
15
<PAGE> 19
================================================================================
================================================================================
================================================================================
================================================================================
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE
FUND'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY
REFERENCE IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE FUND OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
INVESTMENT ADVISER
BRADFORD CAPITAL MANAGEMENT, LTD.
NASHVILLE, TENNESSEE
TRANSFER AGENT AND DISTRIBUTOR
J.C. BRADFORD & CO. LLC
NASHVILLE, TENNESSEE
CUSTODIAN
INVESTORS FIDUCIARY TRUST COMPANY
KANSAS CITY, MISSOURI
ADMINISTRATOR
REICH & TANG ASSET MANAGEMENT L.P.
NEW YORK, NEW YORK
COUNSEL
BAKER & HOSTETLER LLP
COLUMBUS, OHIO
AUDITORS
DELOITTE & TOUCHE LLP
NASHVILLE, TENNESSEE
------------------------------------------------------------
THE
BRADFORD
MONEY
FUND
PROSPECTUS
------------------------------------------------------------
MEMBERS NEW YORK STOCK EXCHANGE
Member S.I.P.C.
APRIL 30, 1998
<PAGE> 20
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
600 FIFTH AVENUE
NEW YORK, NEW YORK 10020
(888) 226-5504
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional information provides supplementary information
pertaining to the Bradford Funds, Inc. (the "Company"), an open-end, diversified
management investment company currently offering shares in one investment
portfolio, the Bradford Money Fund (the "Money Fund" or "Fund"). This is not a
Prospectus and should be read only in conjunction with the Prospectus of the
fund dated April 30, 1998 (the "Prospectus"). A copy of the Prospectus may be
obtained upon request free of charge from the fund at the address and telephone
number set forth above. This Statement of Additional Information is dated April
30, 1998.
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL ................................................................ B-2
INVESTMENT OBJECTIVE AND POLICIES ...................................... B-2
DIRECTORS AND OFFICERS ................................................. B-9
INVESTMENT ADVISORY, ADMINISTRATION,
SERVICING AND DISTRIBUTION ARRANGEMENTS ........................... B-12
PORTFOLIO TRANSACTIONS ................................................. B-17
PURCHASE AND REDEMPTION INFORMATION .................................... B-19
VALUATION OF SHARES .................................................... B-19
PERFORMANCE INFORMATION ................................................ B-21
TAXES .................................................................. B-22
DESCRIPTION OF SHARES .................................................. B-25
MISCELLANEOUS .......................................................... B-26
FINANCIAL STATEMENTS ................................................... B-28
APPENDIX ............................................................... A-1
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or this Statement of Additional
Information in connection with the offering made by the Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Fund or its distributor. The Prospectus does not
constitute an offering by the Fund or by the distributor in any jurisdiction in
which such offering may not lawfully be made.
<PAGE> 21
GENERAL
The Bradford Funds, Inc. (the "Company") is an open-end, diversified
management investment company currently offering shares in one investment
portfolio, The Bradford Money Fund (the "Money Fund" or the "Fund").
Accordingly, the "Company" and the "Money Fund" (or the "Fund") are used
interchangeably in this Statement of Additional Information, unless the context
indicates otherwise. The Board of Directors of the Company may determine to
offer shares of additional portfolios in the future. The shares of the Money
Fund are offered by the Prospectus dated April 30, 1998. The Company commenced
operations on February 8, 1989.
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objective and policies of the Money Fund. A
description of ratings of short-term commercial paper is set forth in the
Appendix hereto.
Additional Information on Money Fund Investments.
(1) U.S. Government Obligations. Examples of types of U.S. Government
obligations in which the Fund may invest include U.S. Treasury bills, Treasury
notes and Treasury bonds and the obligations of Federal Home Loan Banks, Federal
Farm Credit Banks, Federal Land Banks, the Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association, General
Services Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks and Maritime Administration.
(2) Bank Obligations. Investments in bank obligations may include
obligations of foreign banks, domestic branches of foreign banks and foreign
branches of domestic banks. Such investments may entail risks that are different
from those of investments in U.S. banks and domestic branches thereof, such as
unfavorable political and economic conditions, possible withholding taxes on
interest income, seizure or nationalization of foreign deposits, currency
controls, interest limitations, or other governmental restrictions which might
affect the payment of principal or interest on the securities held in the Fund.
Additionally, these institutions may be subject to less stringent reserve
requirements and different accounting, auditing, reporting and recordkeeping
requirements than those applicable to domestic branches of U.S. banks. For
purposes of the Money Fund's investment policies with respect to bank
obligations, the total assets of a bank or savings institution will be deemed to
include the assets of its domestic and foreign branches.
B-2
<PAGE> 22
(3) Commercial Paper. "Section 4(2) paper," as described in the Prospectus,
is commercial paper which is issued in reliance on the "private placement"
exemption from registration which is afforded by Section 4(2) of the Securities
Act of 1933 (the "1933 Act"). The Fund will not purchase Section 4(2) paper
which has not been determined to be liquid in excess of 10% of the total assets
of the Money Fund. The Company's Board of Directors has delegated to Bradford
Capital Management, Ltd., the Fund's investment adviser (the "Adviser"), the
day-to-day authority to determine whether a particular issue of Section 4(2)
paper, including Section 4(2) paper that is eligible for resale under Rule 144A
under the 1933 Act ("144A Paper"), should be treated as liquid. Rule 144A
provides a safe-harbor exemption from the registration requirements of the 1933
Act for resales to "qualified institutional buyers" as defined in the Rule. With
the exception of registered broker-dealers, a qualified institutional buyer must
generally own and invest on a discretionary basis at least $100 million in
securities.
The Adviser may deem Section 4(2) paper liquid if (i) it believes that,
based on the trading markets for such security, such security can be disposed of
within seven days in the ordinary course of business at approximately the amount
at which the Fund has valued the security and (ii) it is rated by at least two
Rating Agencies (as defined in the Prospectus), or by the only Rating Agency
that has rated the paper, in the highest short-term category, or with respect to
144A paper only, is a comparable unrated security. In making such determination,
the Adviser generally considers any and all factors that it deems relevant,
which may include (i) the credit quality of the issuer; (ii) the frequency of
trades and quotes for the security; (iii) the number of dealers willing to
purchase or sell the security and the number of other potential purchasers; (iv)
dealer undertakings to make a market in the security; and (v) the nature of the
security and the nature of market-place trades. In addition, with respect to
Section 4(2) paper which is not 144A paper, it must not be traded flat or be in
default as to principal or interest.
The Adviser may also consider whether there are any significant differences
between the particular issue of Section 4(2) paper and commercial paper issued
pursuant to the exemption contained in Section 3(a)(3) of the 1933 Act.
Treatment of Section 4(2) paper as liquid could have the effect of
decreasing the level of the Fund's liquidity to the extent that buyers,
including qualified institutional buyers, become, for a time, uninterested in
purchasing these securities.
(4) Variable Rate Notes. The Fund may acquire variable rate demand notes
and variable rate notes (collectively, "variable rate notes"), subject to the
Fund's investment objective, policies and restrictions. Variable amount master
demand notes are unsecured demand notes that permit the indebtedness thereunder
to vary and
B-3
<PAGE> 23
provide for periodic adjustments in the interest rate according to the terms of
the instrument. Because master demand notes are direct lending arrangements
between a Fund and the issuer, they are not normally traded. A variable rate
note is one whose terms provide for the adjustment of its interest rate on set
dates and which, upon such adjustment, can reasonably be expected to have a
market value that approximates its par value. Such notes are frequently not
rated by credit rating agencies; however, unrated variable rate notes purchased
by the Fund will be determined by the Adviser to be of comparable quality at the
time of purchase to rated instruments eligible for purchase under the Fund's
investment policies. In making such determinations, the Adviser will consider
the earning power, cash flow and other liquidity ratios of the issuers of such
notes (such issuers include financial, merchandising, bank holding and other
companies) and will continuously monitor their financial condition. Although
there may be no active secondary market with respect to a particular variable
rate note purchased by the Fund, the Fund may resell the note at any time to a
third party. The absence of an active secondary market, however, could make it
difficult for the Fund to dispose of a variable rate note in the event the
issuer of the note defaulted on its payment obligations and the Fund could, as a
result or for other reasons, suffer a loss to the extent of the default. To the
extent that the Fund is not entitled to receive the principal amount of a note
within seven days of demand, such a note will be treated as an illiquid security
for purposes of calculation of the 10% limitation on the Fund's investment in
illiquid securities as set forth in the Fund's investment restrictions. Variable
rate notes may be secured by bank letters of credit.
Variable rate securities invested in by the Fund may have maturities of
more than 397 days, as follows:
1. An instrument that is issued or guaranteed by the United States
Government or any agency thereof which has a variable rate of interest
readjusted no less frequently than every 762 days will be deemed by the Fund to
have a maturity equal to the period remaining until the next readjustment of the
interest rate.
2. A variable rate security, the principal amount of which, in accordance
with its terms, must unconditionally be paid in 397 calendar days or less, shall
be deemed to have a maturity equal to the earlier of the period remaining until
the next readjustment of the interest rate or the period remaining until the
principal amount can be recovered through demand.
3. A variable rate security, the principal amount of which is scheduled to
be paid in more than 397 calendar days, that is subject to a demand feature,
will be deemed by the Fund to have a maturity equal to the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand.
B-4
<PAGE> 24
As used above, a security is "subject to a demand feature" where the Fund
is entitled to receive the approximate amortized cost of the security, plus
accrued interest, either at any time on no more than 30 days' notice or at
specific intervals not exceeding 397 days and upon no more than 30 days' notice.
(5) Repurchase Agreements. The repurchase price under the repurchase
agreements described in the Prospectus generally equals the price paid by the
Fund plus an amount representing accrued interest negotiated on the basis of
short-term rates existing at the time of purchase (which may be more or less
than the rate on the securities underlying the repurchase agreement). Securities
subject to repurchase agreements will be held by the Fund's custodian in the
Federal Reserve/Treasury book-entry system or by another authorized securities
depository.
If the Fund were required to foreclose upon securities underlying a
repurchase agreement with remaining maturities of greater than 397 days, these
instruments would have to be taken into account in calculating the Fund's
dollar-weighted average portfolio maturity. The Fund would have to dispose of
the securities as soon as possible if they were to cause such average maturity
to exceed ninety days or were to exceed thirteen months to maturity.
(6) Foreign Investment. Investors should recognize that investing in
foreign securities involves certain special considerations which are not
typically associated with investing in domestic securities. As non-U.S.
companies are not generally subject to uniform accounting, auditing and
financial reporting standards and practices comparable to those applicable to
domestic issuers, there may be less publicly available information about certain
foreign securities than about domestic securities. Securities of some foreign
issuers are generally less liquid and more volatile than securities of
comparable domestic companies. There is generally less government supervision
and regulation of securities markets, brokers and listed issuers than in the
U.S. In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect U.S. investments in
those countries.
Unrated Securities.
In those instances in which the Fund purchases securities that are
considered "Unrated Securities" within the meaning of Rule 2a-7, the Board has
delegated to the Adviser
B-5
<PAGE> 25
the responsibility to determine whether such securities are of comparable
quality.
Unrated instruments purchased for the Fund may be considered of comparable
quality when, at the time of purchase (i) the security at the time of issuance
had (A) a maturity of greater than thirteen months but currently has a remaining
maturity of thirteen months or less, and (B) does not have a long-term rating
from any Rating Agency that is not within the three highest rating categories
unless the instrument has received a long-term rating from a Rating Agency in
one of the three highest categories, (ii) the instrument is subject to a
guarantee which (A) has received a rating from a Rating Agency or (B) is issued
by a guarantor that has received a rating with respect to a class of debt
securities that is comparable in priority and security to such guarantee (unless
such guarantee is issued by an affiliate of the issuer of the instrument), (iii)
if the instrument is subject to a demand feature or guarantee, some entity has
undertaken to notify the Fund in the event the demand feature or guarantee is
substituted, and (iv) the issuer thereof is believed by the Adviser to have a
financial condition comparable to those issuing rated securities in which the
Fund may invest, and the unrated instrument has comparable priority and security
and other relevant characteristics to such rated securities, provided that with
respect to instruments other than Government securities (as defined in Section
2(a)(16) of the Investment Company Act of 1940, as amended (the "1940 Act")) not
more than 5% of the Fund's assets may be invested pursuant to subparagraph (iv).
If an instrument has received a rating but is subject to a guarantee that
was not considered or in effect when the instrument (or the issuer) was given
its rating, the Adviser may evaluate the instrument as if it were unrated,
unless the instrument has a rating from a Rating Agency reflecting the existence
of such guarantee.
When-Issued Securities.
"When-issued" and delayed delivery securities include securities purchased
for delivery beyond the normal settlement date at a stated price and yield.
While the Money Fund holds such securities, the Fund will maintain in a
segregated account cash, U.S. Government securities or other liquid, high grade
debt securities of an amount at least equal to the purchase price of the
securities to be purchased. Normally, the custodian for the Fund will set aside
portfolio securities to satisfy a purchase commitment. Because securities
purchased on a when issued basis may fluctuate in value prior to delivery based
upon changes in the general level of interest rates, the Fund may be required
subsequently to place additional assets in the separate account in order to
ensure that the value of the account remains equal to the amount of the Fund's
commitment. Because the Fund's liquidity and ability to manage its portfolio
might be affected when it sets aside cash or portfolio securities to cover such
purchase commitments, the Fund expects that commitments to purchase
"when-issued" securities will not exceed 25% of the value of its total assets
absent unusual market conditions. When the Fund engages in when-issued
transactions, it
B-6
<PAGE> 26
relies on the seller to consummate the trade. Failure of the seller to do so may
result in the Fund's incurring a loss or missing an opportunity to obtain a
price considered to be advantageous.
Investment Restrictions.
The Money Fund may not:
(1) issue senior securities (as defined in the 1940 Act) or borrow money,
except from banks for temporary purposes and for reverse repurchase agreements,
and then in an aggregate amount not in excess of 10% of the value of the Fund's
assets; or mortgage, pledge or hypothecate any of its assets except in
connection with such borrowings and in amounts not in excess of 10% of the value
of the Fund's assets; or purchase portfolio securities while borrowings in
excess of 5% of the value of the Fund's assets are outstanding;
(2) purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities and
repurchase agreements relating thereto) if immediately after such purchase more
than 5% of the Fund's total assets would be invested in the securities of such
issuer, or more than 10% of the outstanding securities of any class (taking all
debt issues of an issuer as a single class) or more than 10% of the outstanding
voting securities of such issuer would be owned by the Fund, except that up to
25% of the value of the Fund's total assets may be invested without regard to
such 5% limitation;
(3) purchase securities on margin, except for short-term credit necessary
for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
an underwriter under Federal securities laws;
(5) make short sales of securities or maintain a short position or write,
purchase or sell put or call options or straddles, spreads or combinations
thereof;
(6) purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein;
(7) purchase or sell commodities or commodity contracts or commodity
futures contracts;
(8) invest in oil, gas or mineral exploration or development programs;
B-7
<PAGE> 27
(9) make loans except that the Fund may purchase or hold debt obligations
in accordance with its investment objective, policies and limitations and may
enter into repurchase agreements;
(10) purchase any securities issued by any other investment company except
in connection with the merger, consolidation, acquisition or reorganization of
all the securities or assets of such an issuer;
(11) make investments for the purpose of exercising control or management;
(12) invest 25% or more of its total assets in the securities of issuers in
any particular industry (other than securities issued or guaranteed by the U.S.
Government or its agencies and instrumentalities, or repurchase agreements
relating thereto, or obligations of domestic branches of U.S. banks and those
U.S. branches of foreign banks that are subject to the same regulation as U.S.
banks); or
(13) invest more than 5% of its total assets in securities of issuers
(including their predecessors) with less than three years of continuous
operations.
If a percentage restriction is satisfied at the time of an investment,
borrowing or other designated action, a later increase or decrease in percentage
resulting from changes in values or assets will not constitute a violation of
such restriction. However, if due to market fluctuations or other reasons the
assets of the Fund fall below 300% of its borrowings, the Fund will, in
accordance with the 1940 Act, reduce the borrowings of the Fund so that such
borrowings have 300% asset coverage.
The foregoing investment limitations cannot be changed without the
affirmative vote of a majority of the outstanding shares of the Fund, as defined
in "DESCRIPTION OF SHARES."
Notwithstanding investment restriction no. 2 above and for purposes of
maintaining a stable net asset value pursuant to Rule 2a-7 under the 1940 Act
(see "VALUATION OF SHARES" below), the Fund will, with respect to 100% of its
total assets, limit its investments in the securities of any one issuer in the
manner provided by such Rule, which limitations are referred to under
"INVESTMENT OBJECTIVE AND POLICIES -- General" in the Prospectus.
With respect to limitation (12) above concerning industry concentration,
neither all finance companies, as a group, nor all utility companies, as a
group, are considered a single industry for purposes of this policy. The Fund
will consider wholly owned finance subsidiaries to be in the industries of their
parent companies if their activities are primarily related to financing the
activities of such parent companies, and will categorize utility
B-8
<PAGE> 28
companies according to their services; for example, gas, gas transmission,
electric and gas, electric and telephone will each be considered a separate
industry. The policy and practices stated in this paragraph may be changed
without the affirmative vote of a majority of the outstanding shares of the
Fund, but any such change may require the approval of the SEC and would be
disclosed in the Prospectus or in the Statement of Additional Information.
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, their business
addresses, ages and principal occupations during the past five years are:
<TABLE>
<CAPTION>
Position(s)
Name, Address Held With Principal Occupation(s)
and Age Company During Past Five Years
- ------------- ----------- -----------------------
<S> <C> <C>
Allan L. Erb* President and Partner in charge of Financial
330 Commerce Street Director Products Department since 1986;
Nashville, TN 37201 General Partner/Voting Member
Age: 51 since 1990.**
Douglas C. Altenbern Director Private investor since October
1025 Chancery Lane 1990; Chairman of Pay Systems
Nashville, TN 37215 of America, Inc. (payroll
Age: 61 processing) since June, 1993.
William Carter* Director Limited Partner/Equity Member
3605 Glenwood Avenue and Regional Manager.**
Suite 100
Raleigh, NC 27612
Age: 51
Richard W. Hanselman Director Private investor since 1986.
3017 Poston Avenue
Nashville, TN 37203
Age: 70
</TABLE>
B-9
<PAGE> 29
<TABLE>
<S> <C> <C>
Edward J. Roach Director Certified Public Accountant
400 Bellevue Parkway and Vice President and
Wilmington, DE 19809 Treasurer of Temporary
Age: 73 Investment Fund, Inc., Trust
for Federal Securities,
Municipal Fund for Temporary
Investment (each from 1981
through 1997), Independence
Square Income Securities,
Inc. (since 1981) and
Municipal Fund for California
Investors, Inc. (from 1983
through 1997); Treasurer of
Chestnut Street Ex-change Fund
(since 1981); and President
and Treasurer of The RBB Fund,
Inc. (since 1988) and
Municipal Fund for New York
Investors, Inc. (from 1983
through 1997; be-came
President in 1995) (each a
management investment
company).
Michael R. Shea* Vice President Director of Taxable Fixed
330 Commerce Street and Director Income Department since 1974;
Nashville, TN 37201 Voting Member/General Partner
Age: 55 since 1981.**
William T. Spitz Director Treasurer and Chief Investment
102 Alumni Hall Officer, Vanderbilt
Vanderbilt University University, since November
Nashville, TN 37240 1985.
Age: 47
R. Patrick Shepherd Vice President General Counsel and Director
330 Commerce St. of Legal and Compliance
Nashville, TN 37201 Departments since 1983; Voting
Age: 42 Member/General Partner since
1987.**
</TABLE>
B-10
<PAGE> 30
<TABLE>
<S> <C> <C>
Judy K. Abroms Vice President Equity Member/Limited Partner
330 Commerce St. since 1994; from 1990 to 1994,
Nashville, TN 37201 Investment Limited Partner.**
Age: 54
Randall R. Harness Secretary and Chief Financial Partner since
330 Commerce St. Treasurer 1976; Voting Member/General
Nashville, TN 37201 Partner since 1981.**
Age: 55
</TABLE>
- ---------------------
* "Interested" director of the Fund as that term is defined in the 1940 Act.
** Positions are with J. C. Bradford & Co. LLC.
Messrs. Erb, Carter, Shea, Harness and Shepherd and Ms. Abroms hold
positions with J. C. Bradford & Co. LLC ("Bradford") as described above and,
except for Mr. Carter, are also officers of the Adviser, serving in comparable
positions to those they hold with the Company. The only other officer of the
Adviser is Robert P. DeBastiani. Mr. DeBastiani has been an Equity
Member/Limited Partner of Bradford since July 1990 and has served as
Institutional Trader for Taxable Fixed Income Securities of Bradford since April
1987. Prior to that he served as a fixed income trader with First American
National Bank, Nashville, Tennessee (August 1986 to April 1987); First Eastern
Bank, Wilkes-Barre, Pennsylvania (April 1984 to August 1986); and Lincoln First
Bank, Rochester, New York (July 1983 to April 1984).
The Fund pays directors who are not "affiliated persons" of the Adviser, as
that term is defined in the 1940 Act, a fee of $6,000 annually plus $1,000 per
meeting attended. Directors who are not affiliated persons of the Adviser are
also reimbursed for any expenses incurred in attending meetings of the Board of
Directors or any committee thereof.
The following table sets forth information regarding all compensation paid
by the Fund to its directors, who are not affiliated "persons" of the Fund, for
their services as directors during the fiscal year ended December 31, 1997. The
Fund has no pension or retirement plans nor does it pay compensation to its
executive officers.
B-11
<PAGE> 31
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Compensation
Name and Position Aggregate Compensation From the Fund and
With the Fund From the Fund the Fund Complex*
- ----------------- ---------------------- ------------------
<S> <C> <C>
Douglas C. Altenbern $9,500 $9,500
Director
Richard W. Hanselman $9,500 $9,500
Director
Edward J. Roach $9,500 $9,500
Director
William T. Spitz $9,500 $9,500
Director
</TABLE>
- ---------------------
*For purposes of this Table, Fund Complex means one or more mutual funds,
including the Money Fund, which have a common investment adviser or affiliated
investment advisers or which hold themselves out to the public as being related.
The Money Fund is currently the only member of its Fund Complex.
The Fund currently has no employees, as substantially all of the services
necessary for the operation of the Fund are performed by the Adviser; Investors
Fiduciary Trust Company ("IFTC"), the Fund's custodian; Reich & Tang Asset
Management L.P. ("R&T"), the Fund's administrator; and Bradford, the Fund's
distributor and transfer and dividend disbursing agent. No officer or employee
of the Adviser, IFTC, R&T or Bradford receives any compensation from the Fund.
Certain of the directors and officers and the organizations with which they
are associated have had in the past, and may in the future have, transactions
with Bradford and its affiliates. The Fund believes that all such transactions
have been and are expected to be in the ordinary course of business and the
terms of such transactions have been and are expected to be substantially the
same as the prevailing terms for comparable transactions of other customers.
INVESTMENT ADVISORY, ADMINISTRATION,
SERVICING AND DISTRIBUTION ARRANGEMENTS
General. Bradford Capital Management, Ltd. serves as the investment adviser
for the Fund. The Adviser is a Tennessee limited partnership. J.C.B. Financial
Services, Inc. acts as the general partner to the Adviser (the "General
Partner") and J. C. Bradford & Co. LLC ("Bradford" or the "Distributor"), the
Fund's distributor, is the Adviser's limited partner.
B-12
<PAGE> 32
The General Partner is a wholly owned subsidiary of Bradford & Co.,
Incorporated ("Bradford Incorporated"). Bradford Incorporated, through the
General Partner and other subsidiaries, is engaged in various aspects of the
financial services industry. All of the outstanding voting securities of
Bradford Incorporated are owned by various partners of Bradford. Bradford is an
investment firm which conducts a substantial brokerage and investment banking
business and also acts as the distributor of the Fund.
Advisory Agreement. The advisory services provided by the Adviser, the fees
received by it for such services and applicable expense limitations are
described in the Prospectus. The Adviser renders advisory services to the Fund
pursuant to an Investment Advisory Agreement dated January 12, 1989. The
Investment Advisory Agreement is hereinafter referred to as the Advisory
Contract.
The Fund bears all of its own expenses not specifically assumed by the
Adviser. These expenses include, but are not limited to, organizational costs,
fees paid to the Adviser and the administrator, fees and expenses of directors
who are not affiliated with the Adviser, taxes, interest, legal fees, custodian
and transfer agency fees, auditing fees, brokerage fees and commissions, fees
and expenses of registering and qualifying the Money Fund and its shares for
distribution under Federal and state securities laws, expenses of preparing,
printing and distributing prospectuses and statements of additional information
annually to existing shareholders, the expense of reports to shareholders,
shareholders' meetings and proxy solicitations, fidelity bond and directors' and
officers' liability insurance premiums, distribution expenses pursuant to the
Rule 12b-1 plan, and other expenses which are not expressly assumed by the
Adviser.
Under the Advisory Contract, the Adviser will not be liable for any error
of judgment, or act or omission, or mistake of law or for any loss suffered by
the Fund in connection with the performance of the Advisory Contract, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its duties or from reckless disregard
of its duties and obligations thereunder.
The Adviser has licensed the name "Bradford" to the Fund on a royalty-free
basis and the Adviser has reserved to itself the right to grant the
non-exclusive right to use the name "Bradford" to any other person. At such time
as the Advisory Contract is no longer in effect, the Adviser may require the
Fund to cease using the name "Bradford."
The Advisory Contract provides that the Adviser may render similar services
to others so long as its services under such Contract are not impaired thereby.
B-13
<PAGE> 33
The Advisory Contract was last approved with respect to the Fund on October
24, 1997, by a vote of the Company's Board of Directors, including a majority of
those directors who are not parties to the Advisory Contract or "interested
persons" (as defined in the 1940 Act) of such parties. The Advisory Contract was
also approved by the Fund's shareholders at their first meeting held on October
18, 1989. The Advisory Contract will, unless sooner terminated pursuant to its
terms, continue in effect until January 12, 1999, and thereafter for successive
one year periods so long as it is approved annually (a) by a majority of the
directors who are not parties to the Advisory Contract or "interested persons"
of the Company or of the Adviser, as defined in the 1940 Act, cast in person at
a meeting called for the purpose of voting on such approval, and (b) either by
the Board of Directors of the Company or by a vote of holders of a majority of
outstanding shares (as defined in "DESCRIPTION OF SHARES") of the Fund. The
Advisory Contract is terminable by vote of the Company's Board of Directors or
by the holders of a majority of the outstanding shares of the Fund (as so
defined), at any time without penalty, on 60 days' written notice to the
Adviser. The Advisory Contract may also be terminated by the Adviser on 60 days'
written notice to the Company. The Advisory Contract terminates automatically in
the event of assignment thereof as defined in the 1940 Act.
For the fiscal years ended December 31, 1995, 1996 and 1997, the Adviser's
fees under the Advisory Contract were $3,359,005, $4,309,221 and $5,228,609,
respectively. The Adviser may, from time to time, voluntarily waive all or a
portion of its investment advisory fees. For the years ended December 31, 1995,
1996 and 1997, the Adviser waived $2,131, $79,731 and $211,230 respectively,
which were payable to it under the Advisory Contract. Such fee waiver causes the
yield of the Fund to be higher than it would be in the absence of such a waiver.
Custodian, Transfer Agency and Administration Agreements. Investors
Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri
64105, is custodian of the Fund's assets pursuant to a Custody Agreement dated
August 15, 1997 (the "Custody Agreement"). Under the Custody Agreement, IFTC (a)
maintains a separate account or accounts in the name of the Fund, (b) holds and
transfers portfolio securities for the account of the Fund, (c) makes receipts
and disbursements of money on behalf of the Fund, (d) collects and receives all
income and other payments and distributions on account of the Fund's portfolio
securities and (e) makes periodic reports to the Company's Board of Directors
concerning the Fund's operations. IFTC is authorized to select one or more banks
or trust companies to serve as sub-custodian on behalf of the Company, provided
that IFTC remains responsible for the performance of all duties under the
Custody Agreement and holds the Company harmless from the acts and omissions of
any sub-custodian.
B-14
<PAGE> 34
Bradford serves as the transfer and dividend disbursing agent for the
Fund's shares pursuant to a Transfer Agency Agreement dated April 26, 1991, as
amended as of February 22, 1993 (the "Transfer Agency Agreement"), under which
Bradford (a) issues and redeems shares of the Fund, (b) pays or arranges for the
payment of dividends and distributions, (c) addresses and mails communications
by the Fund to record owners of shares, including reports to shareholders and
proxy materials for its meetings of shareholders, (d) maintains shareholder
accounts and, if requested, sub-accounts, and (e) makes periodic reports to the
Company's Board of Directors concerning the operations of the Fund. The Fund
pays Bradford a fee at an annual rate of $11.50 for each active Fund account, in
addition to the following fees: check writing fee of $.25 per check; $7.50 for
each stop payment (paid by shareholder); $15.00 per return of check for
nonsufficient funds (paid by shareholder); and $2.00 per check copy (paid by
shareholder). In addition, the Fund reimburses Bradford for its payment of the
following expenses: toll free telephone lines (if required by the Fund),
envelopes, checks, postage, hardware and telephone lines for remote terminals
(if required by the Fund), certificate issuance fees, microfiche and microfilm,
and proxy solicitation expenses (if required by the Fund).
R&T, a Delaware limited partnership, serves as administrator to the
Fund pursuant to an Administrative Services Agreement dated August 15, 1997 (the
"Administrative Services Agreement"), under which R&T provides various
administrative and accounting services. These services include (a) maintenance
of the Fund's books and records, (b) preparation of regulatory filings and
shareholder reports, (c) computation of net asset values and daily dividends,
(d) accounting with respect to income and expense items, cash balances, market
value, yield, portfolio turnover and average maturity of the Fund and its
assets, (e) preparation of financial statements and tax returns, and (f)
reconciliation of trades. For its services to the Fund under the Administrative
Services Agreement, R&T receives a fee computed as described in the Prospectus.
For the period from August 18, 1997 to December 31, 1997, R&T earned $201,543
for such services.
Prior to August 18, 1997, PFPC, Inc. ("PFPC") served as administrator
and fund accountant for the Fund pursuant to an Administration and Account
Services Agreement dated January 13, 1989, as amended. For the fiscal years
ended December 31, 1995 and 1996, and for the period January 1, 1997 through
August 17, 1997, the fees of PFPC as administrator to the Fund were $493,829,
$521,057 and $338,252, respectively.
Distribution Agreement. Pursuant to the terms of the Distribution
Agreement dated January 12, 1989 (the "Distribution Contract"), entered into
between Bradford and the Company on behalf of the Fund, and a Plan of
Distribution (the "Plan"), which was adopted and the continuation of which has
been approved in the
B-15
<PAGE> 35
manner prescribed by Rule 12b-1 under the 1940 Act, Bradford uses its best
efforts to distribute the shares of the Fund, and Bradford is reimbursed for
certain current distribution expenses as described in the Prospectus.
The Plan was last approved by the Company's Board of Directors,
including the directors who are not "interested persons" of the Company (as
defined in the 1940 Act) and who have no direct or indirect financial interest
in the operation of the Plan or any agreements relating to the Plan ("Rule 12b-1
directors"), on October 24, 1997. In approving the Plan, the Company's directors
concluded, in the exercise of reasonable business judgment and in light of their
fiduciary duties under state law, and under Sections 36(a) and (b) of the 1940
Act, that there is a reasonable likelihood that the Plan and the services
provided to the Fund pursuant thereto will benefit the Fund and its
shareholders. The Plan was also approved by the Fund's shareholders on October
18, 1989.
Among other things, the Plan provides that: (a) Bradford is required to
submit quarterly reports to the directors of the Company (which are reviewed by
the directors) regarding all amounts expended under the Plan and the purposes
for which such expenditures were made; (b) the Plan will continue in effect only
so long as it is approved at least annually by the Company's Board of Directors,
including the Rule 12b-1 directors, and any material amendment thereto is
approved by the Company's Board of Directors, including the Rule 12b-1
directors, acting in person at a meeting called for such purpose; (c) the
aggregate amount to be spent by the Fund on the distribution of the Fund's
shares under the Plan shall not be materially increased without the affirmative
vote of the holders of a majority of the Fund's outstanding shares (as defined
in "DESCRIPTION OF SHARES") and (d) while the Plan remains in effect, the
selection and nomination of the Company's directors who are not "interested
persons" of the Company (as defined in the 1940 Act) shall be committed to the
discretion of the directors who are not interested persons of the Company.
For the fiscal year ended December 31, 1997, the Fund reimbursed
Bradford for distribution expenses totalling $2,844,920. Bradford's distribution
expenses for the Fund consisted principally of the following: allocated expenses
of Bradford's money fund operations department; allocated expenses of Bradford's
branch office overhead; allocated expenses of Bradford's financial services
department, including mutual fund sales; statement processing; allocated
expenses of management sales and branch administration, marketing and training
departments; and compensation paid to account executives. Directors and officers
of the Company who are affiliated with Bradford may have a direct or indirect
financial interest in the operation of the Plan. No director of the Company who
is not an "interested person" of the Company (as defined in the 1940 Act) has
any such financial interest. Bradford may, from time to time, voluntarily waive
all or a portion of the fees payable to
B-16
<PAGE> 36
it under the Plan. Any such fee waiver will cause the yield of the Fund to be
higher than it would be in the absence of such a waiver.
PORTFOLIO TRANSACTIONS
The Adviser is responsible for decisions to buy and sell securities for
the Fund, the selection of brokers or dealers to effect the transactions and the
negotiation of brokerage commissions, if any. Transactions are typically
effected with dealers acting as principal for their own account. The Fund did
not pay any brokerage commissions during the three most recent fiscal years.
In determining which brokers to use for the portfolio transactions
effected on an agency basis, the Adviser will attempt to obtain the best net
price and the most favorable execution in light of the overall quality of
brokerage and research services provided. In so selecting brokers, the Adviser
may consider a number of factors, including, but not limited to, the skill of
the firm's securities traders and the firm's financial responsibility and
administrative efficiency.
When consistent with these objectives, brokerage may be placed with
broker-dealers who furnish investment research or services to the Adviser. Such
research or services include advice as to the value of securities; the
advisability of investing in, purchasing or selling securities; and the
availability of securities, or purchasers or sellers of securities; as well as
analyses and reports concerning issues, industries, securities, economic factors
and trends, portfolio strategy and the performance of accounts. This allows the
Adviser to supplement its own investment research activities and enables the
Adviser to obtain the views and information of individuals and research staffs
of many different securities firms prior to making investment decisions for the
Fund. In the event portfolio transactions are effected with brokers or dealers
who furnish research services to the Adviser, the Adviser receives a benefit,
not capable of evaluation in dollar amounts, without providing any direct
monetary benefit to the Fund from these transactions. These services may
indirectly benefit not just the Fund but also other accounts which the Adviser
may manage.
The Adviser is authorized to cause the Fund to pay an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged if the Adviser determines
that such amount of commission is reasonable in relation to the overall quality
of the brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Adviser's overall
responsibilities with respect to the accounts as to which it exercises
investment discretion. Under the terms of the Advisory Contract, the Fund may
not pay any compensation in the form of brokerage commissions to the Distributor
(1) which would exceed the
B-17
<PAGE> 37
amount permitted under Section 17(e) of the 1940 Act and the rules and
regulations thereunder or (2) for research services within the meaning of
Section 28(e) of the Securities Exchange Act of 1934. In payment of brokerage
commissions to the Distributor acting as agent in over-the-counter transactions,
the Adviser intends to comply with Section 17(e)(2)(C) of the 1940 Act which
requires that such commissions not exceed one percent of the purchase or sale
price of the securities involved.
The Fund purchases only securities with remaining maturities of 397
days (13 months) or less and may attempt to maximize yield through portfolio
trading. This may involve selling portfolio instruments and purchasing different
instruments to take advantage of disparities of yield in different segments of
the high-grade money market or among particular instruments within the same
segment of the market. Accordingly, its portfolio turnover rate may be
relatively high. However, because brokerage commissions are not normally paid
with respect to investments made by the Fund, the turnover rate should not
materially adversely affect the Fund's net asset value or net income.
Investment decisions for the Fund and for other investment accounts
that the Adviser may manage in the future, including other portfolios which may
be created by the Company, will be made independently of each other in the light
of differing investment objectives or circumstances. However, the same
investment decision may be made for two or more of such accounts. In such cases,
purchases or sales will be averaged as to price and allocated as to amount
according to a formula deemed equitable to each such account. While in some
cases this practice could have a detrimental effect upon the price or value of
the security as far as the Fund is concerned, in other cases it could be
beneficial to the Fund. The Fund will not purchase securities during the
existence of any underwriting or selling group relating to such security of
which the Adviser or any affiliated person (as defined in the 1940 Act) thereof
is a member except pursuant to procedures adopted by the Company's Board of
Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these
procedures, which will be reviewed by the Company's directors annually, require
that the commission paid in connection with such a purchase be reasonable and
fair, that the purchase be at not more than the public offering price prior to
the end of the first business day after the date of the public offer, and that
the Adviser not participate in or benefit from the sale to the Fund.
The Fund has from time to time during 1997 held securities of its
regular brokers or dealers, as defined in Rule 10b-1 under the 1940 Act, or
their parent companies, including those of Ford Motor Credit Corp., GECC Capital
Markets Group, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., American
Express Credit Corp. and Bear Stearns & Co. At December 31, 1997, the Fund held
the following amounts of commercial paper or notes of Ford Motor Credit
B-18
<PAGE> 38
Co., General Electric Capital Corp., Merrill Lynch & Co., Inc., American Express
Credit Corp. and Bear Stearns Companies, Inc.: $70,003,211, $74,464,952,
$72,796,360, $19,616,125 and $75,389,575, respectively.
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase of the
Fund's shares by making payment in whole or in part in securities chosen by the
Fund and valued in the same way as they would be valued for purposes of
computing the Fund's net asset value. If payment is made in securities, a
shareholder will incur transaction costs in converting these securities into
cash. The Company has elected, however, to be governed by Rule 18f-1 under the
1940 Act so that the Fund is obligated to redeem its shares solely in cash up to
the lesser of $250,000 or 1% of its net asset value during any 90-day period for
any one shareholder of the Fund.
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the New
York Stock Exchange (the "NYSE") is closed (other than customary weekend and
holiday closings), or during which trading on the NYSE is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit.
VALUATION OF SHARES
The method for determining the net asset value per share of the Fund is
summarized in the Prospectus under the heading "DETERMINATION OF NET ASSET
VALUE." The Fund intends to use its best efforts to maintain its net asset value
of $1.00 per share. Net asset value per share, the value of an individual share
in the Fund, is computed by dividing the Fund's net assets by the number of its
outstanding shares. The Fund's "net assets" equal the value of the Fund's
investments and other securities less its liabilities. The Fund's net asset
value per share is computed once each day as of the close of trading (currently
4:00 p.m. Eastern time) on the NYSE on each day, Monday through Friday, when the
NYSE and IFTC are both open for business.
The Fund calculates the value of its portfolio securities by using the
amortized cost method of valuation in accordance with Rule 2a-7 under the 1940
Act. Under this method, the market value of an instrument is approximated by
amortizing the difference between the acquisition cost and value at maturity of
the instrument on a straight-line basis over the remaining life of the
instrument. The effect of changes in the market value of a security as a result
of fluctuating interest rates is not taken
B-19
<PAGE> 39
into account. The market value of debt securities usually reflects yields
generally available on securities of similar quality. When such yields decline,
market values can be expected to increase, and when yields increase, market
values can be expected to decline. The amortized cost method of valuation may
result in the value of a security being higher or lower than its market price,
the price the Fund would receive if the security were sold prior to maturity. In
addition, if a large number of redemptions take place at a time when interest
rates have increased, the Fund may have to sell portfolio securities prior to
maturity and at a price which might be lower than their value under the
amortized cost method of valuation.
Pursuant to Rule 2a-7, the Board of Directors of the Company has
determined, in good faith, that it is in the best interests of the Fund and its
shareholders to maintain a stable net asset value per share by virtue of the
amortized cost method of valuation. The Fund will continue to use this method
only so long as the Board of Directors believes that it fairly reflects net
asset value per share calculated using market quotations. In accordance with
Rule 2a-7, the Board of Directors of the Company has, as a particular
responsibility within the overall duty of care owed to the Fund's shareholders,
established written procedures reasonably designed, taking into account current
market conditions and the Fund's investment objective, to stabilize the Fund's
net asset value per share at a single value. These procedures include the
periodic determination of any deviation of current net asset value per share,
calculated using available market quotations (or an appropriate substitute which
reflects current market conditions), from the Fund's amortized cost price per
share, the periodic review by the Board of the amount of any such deviation and
the method used to calculate any such deviation, the maintenance of records of
such determinations and the Board's review thereof, the prompt consideration by
the Board if any such deviation exceeds 1/2 of 1%, and the taking of such
remedial action by the Board as it deems appropriate where it believes the
extent of any such deviation may result in material dilution or other unfair
results to investors or existing shareholders. Such remedial action may include
redemptions in kind, selling portfolio instruments prior to realizing capital
gains or losses, shortening the average portfolio maturity, withholding
dividends or utilizing a net asset value per share as determined by using
available market quotations. The Fund will, in further compliance with Rule
2a-7, maintain a dollar-weighted average portfolio maturity appropriate to its
objective of maintaining a stable net asset value and not exceeding 90 days;
will not purchase any instrument with a remaining maturity of greater than 397
days (thirteen months); will limit its portfolio investments to those U.S.
dollar-denominated instruments which the Adviser, pursuant to the procedures
established by the Board, determines present minimal credit risks and which are
Eligible Securities (as defined in Rule 2a-7); will generally limit its
investment in the securities of any one issuer to no more than five
B-20
<PAGE> 40
percent of the Fund's assets, measured at the time of purchase; will limit its
investment in securities which are Second Tier Securities (as defined in Rule
2a-7) to no more than five percent of the Fund's assets, with investment in the
Second Tier Securities of any one issuer being limited to the greater of one
million dollars or one percent of the Fund's assets; will, in the event that a
portfolio security goes into default or the rating of a portfolio security is
downgraded so that it no longer is an Eligible Security, and in certain other
circumstances, reassess promptly whether the security presents minimal credit
risks, determine whether continuing to hold the security is in the best interest
of the Fund, and record such actions in the Fund's records; will notify the SEC
if it holds defaulted securities which amount to one half of one percent or more
of the Fund's assets; and will record, maintain and preserve a written copy of
the above-described procedures and a written record of the Board's and the
Adviser's considerations and actions taken in connection with the discharge of
their respective above-described responsibilities.
In determining the approximate market value of portfolio investments,
the Fund may use outside organizations, which may use a matrix or formula method
that takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value. Other assets, if any, are valued at fair value as
determined in good faith by the Company's Board of Directors.
PERFORMANCE INFORMATION
The Fund's current and effective yields are computed using standardized
methods required by the SEC. The annualized yields for the Fund are computed by:
(a) determining the net change in the value of a hypothetical account having a
balance of one share at the beginning of a seven-calendar-day period; (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared and all dividends declared on both the original share and such
additional shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising the sum to
a power equal to 365/7 and subtracting 1.
The yield for the seven day period ending December 31, 1997, for the
Fund was 4.99%, and the effective yield for the same period was 5.12%.
B-21
<PAGE> 41
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yields of the Fund will fluctuate, they cannot be
compared with yields on savings accounts or other investment alternatives that
provide an agreed to or guaranteed fixed yield for a stated period of time.
However, yield information may be useful to an investor considering temporary
investments in money market instruments. In comparing the yield of one money
market fund to another, consideration should be given to each fund's investment
policies, including the types of investments made, lengths of maturities of the
portfolio securities, the method used by each fund to compute the yield and
whether there are any special account charges which may reduce the effective
yield.
The yields on certain obligations, including the money market
instruments in which the Fund invests (such as commercial paper and bank
obligations), are dependent on a variety of factors, including general money
market conditions, conditions in the particular market for the obligation, the
financial condition of the issuer, the size of the offering, the maturity of the
obligation and the ratings of the issue. The ratings issued by the Rating
Agencies, such as Moody's Investors Service and Standard & Poor's Corporation,
represent their respective opinions as to the quality of the obligations they
undertake to rate. Ratings, however, are general and are not absolute standards
of quality. Consequently, obligations with the same rating, maturity and
interest rate may have different market prices. In addition, subsequent to its
purchase by the Fund, an issue may cease to be rated or may have its rating
reduced below the minimum required for purchase. In such an event, the Adviser
will consider whether the Fund should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders, the
yields of the Fund may be quoted and compared to those of other mutual funds
with similar investment objectives. For example, the yield of the Fund may be
compared to the IBC Financial Data, Inc.'s Money Fund Averages, which are
averages compiled by IBC Financial Data, Inc.'s Money Fund Report of Holliston,
MA 01746, a widely recognized independent publication that monitors the
performance of money market funds, or to the data prepared by Lipper Analytical
Services, Inc., a widely recognized independent service that monitors the
performance of mutual funds.
TAXES
The Fund has qualified, and intends to remain qualified, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). As a regulated investment company, the Fund is
generally not subject to U.S. Federal income tax on its income and gains
distributed to shareholders, provided the Fund distributes to its shareholders
at least 90% of its net investment income (i.e., net income exclusive of net
long-term capital gains) each year.
B-22
<PAGE> 42
To so qualify, the Fund must, among other things, (i) derive in each
taxable year at least 90% of its gross income from dividends, interest, payments
with respect to securities loans, and gains from the sale or other disposition
of stock or securities or foreign currencies, or other income derived with
respect to its business of investing in such stock, securities or currencies;
and (ii) diversify its investments so that, at the end of each quarter of its
taxable year, (a) at least 50% of the value of its assets is represented by
cash, cash items, U.S. Government securities, and other securities limited, in
respect of any one issuer, to a value not greater than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities of such issuer
and (b) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than the U.S. Government). In addition, to
utilize the tax provisions specially applicable to regulated investment
companies, the Fund must distribute to its shareholders at least 90% of its
investment company taxable income for the year and 90% of its interest income
which is excludable from income under Section 103(a) of the Code. In general,
the Fund's investment company taxable income will be its taxable income subject
to certain adjustments and excluding the excess of any net long-term capital
gain for the taxable year over the net short-term capital loss, if any, for such
year.
As described in the Prospectus under "Taxes," shareholders (other than
tax-exempt shareholders) are subject to federal income tax on distributions of
income and capital gains, regardless of whether they reinvest such distributions
in shares of the Fund. Distributions of net investment income are taxable to
shareholders as ordinary income. The Fund does not intend to make distributions
that will be eligible for the corporate dividends received deduction.
Distributions of net capital gains (the excess of net mid-term or net
long-capital gains over net short-term capital losses) are taxable to
shareholders as mid-term or long-term capital gains, respectively, regardless of
the length of time shares of the Fund have been held. The net capital gains of
the Fund are expected to be minimal. Shareholders will be advised annually as to
the federal tax status, as capital gain or ordinary income, of distributions
made by the Fund during the year.
Any gain or loss realized upon a taxable disposition of Fund shares by
a shareholder who is not a dealer in securities generally will be treated as
either mid-term or long-term capital gain or loss if the shares have been held
for more than one year, and otherwise as short-term capital gain or loss. The
holding period for mid-term capital gains is more than one year but not more
than eighteen months; the holding period for long-term capital gains is more
than eighteen months. Any loss realized upon a taxable disposition of Fund
shares may be deferred if other Fund shares are purchased (under the dividend
reinvestment plan or otherwise) within 30 days before or after the disposition.
B-23
<PAGE> 43
The Fund may acquire certain securities at a discount. Current federal
income tax law requires that a holder (such as the Fund) of such a security
include in taxable income a portion of the discount which accrues on such
security during the tax year even if the Fund receives no payment in cash on the
security during the year. As a regulated investment company, the Fund must pay
out 90% of its net investment income each year, will be subject to
corporate-level tax to the extent it does not distribute all its income and
gains, and will be subject to a 4% excise tax if the additional distribution
requirement described below is not met. The foregoing rules would apply with
respect to any accrued discount included in the Fund's income, even though the
Fund may not receive cash corresponding to the accrued discount. Distributions
will be made from the cash assets of the Fund or by liquidating portfolio
securities, if necessary. If a distribution of cash necessitates the liquidation
of portfolio securities, the Adviser will select which securities to sell. The
Fund may realize a gain or loss from such sales, and any gain so realized would
also need to be distributed.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income and gains will be subject to tax
at regular corporate rates without any deduction for distributions to
shareholders, and all distributions will be taxable as ordinary dividends to the
extent of the Fund's current and accumulated earnings and profits. Such
distributions will be eligible for the dividends received deduction in the case
of corporate shareholders. However, additional federal income taxes may be
imposed on the Fund if it requalifies in a subsequent taxable year as a
regulated investment company.
A non-deductible 4% excise tax will be imposed on the Fund to the
extent the Fund does not distribute during each calendar year (i) 98% of its
ordinary income for such calendar year, (ii) 98% of its capital gain net income
for the one-year period ending October 31 of such calendar year (or the Fund's
actual taxable year ending December 31, if elected) and (iii) certain other
amounts not distributed in previous years. The Fund intends to distribute its
income and gains in a manner so as to avoid the imposition of such 4% excise
tax.
For purposes of applying the distribution requirements described above,
and for purposes of determining the taxable income of shareholders each year,
dividends declared by the Fund in October, November or December of a year,
payable to shareholders as of a record date in such a month, and paid during the
following January, will be treated for Federal income tax purposes as paid by
the Fund and received by shareholders as of December 31 of the calendar year
declared.
Federal income tax is required to be withheld at the rate of 31% of all
taxable distributions payable to shareholders, including the proceeds of any
redemptions, who fail to provide the Fund with
B-24
<PAGE> 44
their correct taxpayer identification number or to make required certifications,
or who have been notified by the Internal Revenue Service that they are subject
to backup withholding. Corporate shareholders and certain other shareholders
specified in the Code generally are exempt from such backup withholding.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect, which are
subject to change by legislative or administrative action. No determination can
be made as to whether future legislation addressing the federal income tax
consequences to the Fund or its shareholders will be enacted.
The tax consequences to a foreign shareholder of an investment in the
Fund may be different from those described herein. Foreign shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
Distributions to shareholders may also be subject to state and local
taxes, depending on each shareholder's particular situation. Investors are urged
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
DESCRIPTION OF SHARES
The Adviser provided the initial capital for the Fund by purchasing
100,000 shares for $100,000. Such shares were acquired for investment and were
redeemed on February 23, 1994. The organizational expenses of the Fund have
been borne by the Fund and were amortized over a 60-month period and if in the
future additional portfolios are offered by the Company, the organizational
expenses will be allocated among the portfolios in a manner deemed equitable by
the Board of Directors. As of March 31, 1998, to the Fund's knowledge no person
held beneficially 5% or more of the outstanding shares of the Fund, and the
directors and officers of the Company as a group owned less than 1% of such
outstanding shares. All of the Fund's outstanding shares were then owned of
record by Bradford.
As a general matter, the Fund will not hold annual or other meetings of
shareholders. Under the Company's Articles of Incorporation and By-Laws, an
annual meeting of shareholders is not required to be held in any year in which
the Fund is not required under the 1940 Act to submit for shareholder approval
(i) the election of director(s), (ii) any contract with an investment adviser or
principal underwriter (as such terms are defined in the 1940 Act) or any renewal
or amendment thereof, or (iii) the selection of the Fund's independent public
accountants. Each duly elected director serves until the election and
qualification of his successor, if any, or until such director sooner dies,
resigns,
B-25
<PAGE> 45
retires or is removed by the shareholders. Under certain circumstances
shareholders have the right to call for a meeting of shareholders to consider
the removal of one or more directors. The Company will assist in shareholder
communication in such matters.
Should the Fund in the future offer shares of one or more other
portfolios, the Articles of Incorporation provide that on any matter submitted
to a vote of the shareholders of the Company, all shares entitled to vote,
irrespective of portfolio, would be voted in the aggregate and not by portfolio
except that (a) as to any matter with respect to which a separate vote of any
portfolio is required by the 1940 Act (such as the Fund's Rule 12b-1 Plan) or
other applicable law, such requirements as to a separate vote by that portfolio
would apply in lieu of the aggregate voting as described above, and (b) as to
any matter which does not affect the interest of all portfolios, only
shareholders of the affected portfolio or portfolios would be entitled to vote
thereon.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of such Act or applicable state law, or otherwise,
to the holders of the outstanding voting securities of an investment company
such as the Company shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding shares (as
defined below) of each portfolio affected by such matter. Rule 18f-2 further
provides that a portfolio shall be deemed to be affected by a matter unless it
is clear that the interests of each portfolio in the matter are identical or
that the matter does not affect any interest of such portfolio. However, such
Rule exempts the selection of independent public accountants and the election of
directors from its separate voting requirements.
As used in the Prospectus and in this Statement of Additional
Information, the term "majority of the outstanding shares" of the Company or a
particular portfolio of the Company means the vote of the lesser of (i) 67% or
more of the shares of the Company or such portfolio present at a meeting, if the
holders of more than 50% of the outstanding shares of the Company or such
portfolio are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Company or such portfolio.
For information relating to possible mandatory redemption of shares at
the election of the Fund, see the discussion under "PURCHASE AND REDEMPTION OF
SHARES -- Redemption Procedures" in the Prospectus.
MISCELLANEOUS
Counsel. The law firm of Baker & Hostetler LLP, Capital Square, Suite
2100, 65 East State Street, Columbus, Ohio 43215, serves as counsel to the
Company and will pass upon the legality of the shares offered hereby.
B-26
<PAGE> 46
Independent Auditors. Deloitte & Touche LLP, SunTrust Center,
Nashville, Tennessee 37219, serves as the Company's independent auditors. The
financial statements of the Fund appearing in this Statement of Additional
Information have been audited by Deloitte & Touche LLP, as set forth in their
report appearing elsewhere herein, and have been included in reliance on their
report given on their authority as experts in accounting and auditing.
Year 2000 Matters. Each of R&T, the Adviser and Bradford have advised
the Fund that it has examined its systems as they relate to the services
provided to and the operation of the Fund and that to the best of its knowledge
it is not aware of any material operational or financial obstacles presented by
the Year 2000 issue. The Year 2000 issue refers to existing computer programs
that use two digits to identify a year in a date field and therefore would read
the year 2000 to be the year 1900. As a result, such computer applications
could fail or create erroneous results by or at the year 2000. There can be no
assurance, however, that the Fund or its service providers will not experience
problems or difficulties as a result of the Year 2000 issue.
B-27
<PAGE> 47
FINANCIAL STATEMENTS
B-28
<PAGE> 48
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE PAR
OF PORTFOLIO MATURITY (000) VALUE
------------ ----------- --------- ------------
<S> <C> <C> <C> <C>
AGENCY OBLIGATIONS..................................... 28.56%
Federal Farm Credit Bank
6.21% 04/21/98 $ 1,000 $ 1,001,499
5.48% 05/01/98 12,000 11,989,527
Federal Home Loan Bank
5.58% 03/04/98 15,000 14,855,721
Federal Home Loan Mortgage Corporation
5.60% 03/06/98 18,000 17,820,800
5.63% 03/10/98 10,000 9,893,656
5.60% 03/13/98 15,000 14,834,333
Federal National Mortgage Association
5.50% 01/05/98 12,000 11,992,667
5.48% 02/05/98 15,000 14,920,083
5.47% 02/06/98 6,000 5,967,180
5.45% 02/09/98 18,500 18,390,773
5.47% 02/09/98 10,000 9,940,742
5.55% 03/02/98 10,000 9,907,500
5.57% 03/03/98 15,000 14,858,429
5.58% 03/05/98 17,500 17,329,113
5.61% 03/06/98 10,000 9,900,178
5.61% 03/09/98 19,500 19,296,404
5.59% 03/10/98 10,500 10,389,132
5.63% 03/10/98 16,500 16,324,654
5.40% 03/12/98 12,500 12,368,750
5.59% 03/12/98 10,000 9,891,305
5.62% 03/13/98 15,000 14,833,742
5.59% 03/26/98 41,000 40,465,223
5.58% 03/30/98 10,500 10,356,780
5.59% 04/13/98 24,000 23,619,880
5.59% 04/22/98 39,000 38,327,802
5.55% 04/24/98 22,000 21,617,118
5.53% 06/04/98 10,000 9,763,439
5.52% 06/08/98 10,000 9,757,733
5.54% 06/09/98 19,000 18,535,102
5.51% 06/19/98 7,500 7,306,002
------------
TOTAL AGENCY OBLIGATIONS 446,455,267
------------
</TABLE>
See accompanying notes to financial statements.
B-29
<PAGE> 49
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE PAR
OF PORTFOLIO MATURITY (000) VALUE
------------ ---------- -------- ------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER....................................... 70.50%
Agriculture............................................ 9.66%
Archer Daniels Midland (A-1+,P-1)
5.55% 01/12/98 $22,000 $ 21,962,692
5.55% 01/29/98 13,000 12,943,883
5.58% 02/12/98 11,000 10,928,390
5.68% 02/25/98 12,938 12,825,727
5.70% 03/06/98 10,000 9,898,667
Cargill, Inc. (A-1+, P-1)
5.51% 03/12/98 14,000 13,850,006
5.57% 03/17/98 14,500 14,331,740
5.61% 03/20/98 15,000 14,817,675
5.61% 03/23/98 5,000 4,936,887
5.65% 04/02/98 20,000 19,714,361
5.54% 04/17/98 7,000 6,885,814
Golden Peanuts Co. (A-1+,P-1)
5.63% 03/19/98 8,000 7,903,664
------------
150,999,506
------------
Automobiles............................................ 4.82%
Daimler-Benz North America (A-1, P-1)
5.55% 01/13/98 12,000 11,977,800
5.70% 01/20/98 9,500 9,471,421
5.53% 02/02/98 10,000 9,950,844
5.53% 02/20/98 8,000 7,938,556
5.76% 02/20/98 5,866 5,819,072
5.55% 02/23/98 15,000 14,877,437
5.64% 02/26/98 5,500 5,451,747
5.53% 02/27/98 10,000 9,912,442
------------
75,399,319
------------
Banks-Multi-National................................... 1.40%
J.P. Morgan & Co., Inc. (A-1+, P-1)
5.57% 01/30/98 22,000 21,901,287
------------
Beverages.............................................. 1.46%
Coca-Cola Co. (A-1+, P-1)
5.57% 02/17/98 10,000 9,927,281
5.57% 02/18/98 13,000 12,903,453
------------
22,830,734
------------
</TABLE>
See accompanying notes to financial statements.
B-30
<PAGE> 50
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE PAR
OF PORTFOLIO MATURITY (000) VALUE
------------ ----------- -------- -----------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
Chemicals.............................................. 6.05%
Dupont (E.I.) de Nemours & Co. (A-1+, P-1)
5.68% 03/05/98 $11,729 $11,612,414
5.49% 03/18/98 17,000 16,802,970
5.53% 03/25/98 6,500 6,417,127
5.59% 05/14/98 10,000 9,793,480
5.59% 05/28/98 10,000 9,771,742
5.46% 06/02/98 10,000 9,769,467
Monsanto Co. (A-1, P-1)
5.53% 01/07/98 10,000 9,990,783
5.68% 01/26/98 10,000 9,960,556
5.50% 02/04/98 10,500 10,445,458
-----------
94,563,997
-----------
Computer Software...................................... 1.75%
IBM Credit Corp. (A-1, P-1)
5.54% 01/20/98 5,500 5,483,919
5.53% 02/10/98 5,500 5,466,205
5.55% 02/24/98 6,500 6,445,887
5.51% 03/09/98 10,000 9,897,453
-----------
27,293,464
-----------
Consumer Products...................................... 1.85%
Proctor & Gamble Co. (A-1+, P-1)
5.50% 01/23/98 6,600 6,577,817
5.55% 02/25/98 11,500 11,402,490
5.72% 03/10/98 5,600 5,539,495
5.58% 03/31/98 5,500 5,424,127
-----------
28,943,929
-----------
Entertainment.......................................... 1.83%
Walt Disney Company Inc. (A-1, P-1)
5.50% 03/02/98 10,000 9,908,333
5.61% 03/16/98 10,500 10,378,918
5.55% 03/23/98 8,500 8,393,856
-----------
28,681,107
-----------
</TABLE>
See accompanying notes to financial statements.
B-31
<PAGE> 51
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE PAR
OF PORTFOLIO MATURITY (000) VALUE
------------ --------- ------------ ---------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
Finance................................................ 19.25%
American Express Credit Corp. (A-1, P-1)
5.55% 04/30/98 $ 14,500 $ 14,233,985
5.55% 05/20/98 5,500 5,382,140
Ford Motor Credit Co. (A-1, P-1)
6.05% 01/02/98 10,000 9,998,319
5.57% 02/05/98 14,000 13,924,186
5.50% 02/17/98 9,000 8,935,375
5.48% 02/24/98 12,000 11,901,360
5.55% 02/24/98 4,000 3,966,700
5.49% 02/25/98 10,000 9,916,125
5.51% 03/17/98 10,000 9,885,208
5.50% 04/16/98 1,500 1,475,938
General Electric Capital Corp. (A-1+, P-1)
6.08% 01/09/98 19,000 18,974,329
5.54% 01/15/98 1,000 997,846
5.57% 02/06/98 15,000 14,916,450
5.55% 02/12/98 10,500 10,432,013
5.55% 03/11/98 10,000 9,893,625
5.53% 03/16/98 9,500 9,392,011
5.53% 04/03/98 10,000 9,858,678
J.C. Penney Funding Corp. (A-1, P-1)
5.59% 01/05/98 14,500 14,490,994
5.59% 01/27/98 30,000 29,878,883
5.58% 02/18/98 10,000 9,925,600
Met Life Funding Corp. (A-1+, P-1)
5.59% 01/08/98 12,252 12,238,683
5.71% 03/24/98 16,237 16,025,820
Pitney Bowes Credit Corp. (A-1+, P-1)
5.50% 01/06/98 10,000 9,992,361
USAA Capital Corp. (A-1+, P-1)
5.68% 01/22/98 6,500 6,478,463
5.55% 02/03/98 3,000 2,984,737
5.67% 02/04/98 10,000 9,946,450
5.63% 02/13/98 25,000 24,831,882
--------------
300,878,161
--------------
</TABLE>
See accompanying notes to financial statements.
B-32
<PAGE> 52
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE PAR
OF PORTFOLIO MATURITY (000) VALUE
------------ ----------- -------- ------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
Financial Services..................................... 9.48%
Bear Stearns Companies, Inc. (A-1, P-1)
5.58% 01/14/98 $10,000 $ 9,979,850
5.62% 02/06/98 14,000 13,921,320
5.55% 02/11/98 13,000 12,917,829
5.69% 03/03/98 14,000 13,865,021
5.56% 03/04/98 5,000 4,952,122
5.69% 03/20/98 20,000 19,753,433
Merrill Lynch & Co., Inc. (A-1+, P-1)
5.62% 01/08/98 10,000 9,989,072
5.57% 01/28/98 3,500 3,485,379
5.54% 02/19/98 16,000 15,879,351
5.53% 02/27/98 8,500 8,425,575
5.62% 02/27/98 10,000 9,911,017
5.75% 03/13/98 10,500 10,380,927
5.51% 03/26/98 5,000 4,935,717
5.66% 05/15/98 10,000 9,789,322
------------
148,185,935
------------
Food................................................... 3.18%
Campbell Soup Co. (A-1+, P-1)
5.46% 02/26/98 25,000 24,787,667
5.50% 03/04/98 4,600 4,556,428
5.62% 04/09/98 10,500 10,339,361
McCormick and Co., Inc. (A-1, P-1)
5.53% 01/12/98 10,000 9,983,103
------------
49,666,559
------------
Food/Retail............................................ 4.78%
Winn Dixie Stores, Inc. (A-1, P-1)
5.58% 01/13/98 15,000 14,972,100
5.58% 01/27/98 10,000 9,959,700
5.68% 02/03/98 30,000 29,843,800
5.67% 02/10/98 8,000 7,949,600
5.70% 02/10/98 12,000 11,924,000
------------
74,649,200
------------
</TABLE>
See accompanying notes to financial statements.
B-33
<PAGE> 53
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
STATEMENT OF NET ASSETS (CONCLUDED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE PAR
OF PORTFOLIO MATURITY (000) VALUE
------------ ----------- -------- --------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
Pharmaceutical......................................... 2.28%
Schering-Plough Corporation (A-1+, P-1)
5.65% 02/24/98 $10,000 $ 9,915,250
5.72% 03/19/98 6,000 5,926,593
Warner-Lambert Company (A-1+, P-1)
5.50% 02/23/98 20,000 19,838,056
--------------
35,679,899
--------------
Publishing............................................. 2.71%
McGraw-Hill, Inc. (A-1, P-1)
5.57% 01/30/98 10,830 10,781,406
5.67% 03/18/98 12,000 11,856,360
5.67% 03/19/98 20,000 19,757,450
--------------
42,395,216
--------------
TOTAL COMMERCIAL PAPER 1,102,068,313
--------------
VARIABLE RATE OBLIGATIONS.............................. 1.00%
Federal Home Loan Bank
6.00% 03/29/98 3,500 3,499,485
Federal National Mortgage Association
5.51% 03/14/98 5,000 5,000,000
Student Loan Marketing Association
5.61% 01/06/98 5,000 4,999,596
5.64% 01/06/98 2,225 2,222,661
--------------
TOTAL VARIABLE RATE OBLIGATIONS 15,721,742
--------------
TOTAL INVESTMENTS...................................... 100.06% 1,564,245,322
(Amortized Cost $1,564,245,322)*
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS......... (-0.06%) (957,174)
----- --------------
NET ASSETS............................................. 100.00% $1,563,288,148
====== ==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE
(1,563,288,148 / 1,563,302,506) $ 1.00
==============
</TABLE>
- ---------------------
* Also cost for Federal Income Tax purposes.
See accompanying notes to financial statements.
B-34
<PAGE> 54
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest...................................................................... $ 79,769,295
--------------
EXPENSES
Advisory fees................................................................. 5,228,609
Administration fees........................................................... 539,795
Distribution fees............................................................. 2,844,920
Directors' fees............................................................... 43,601
Custodian fees................................................................ 156,688
Transfer agent fees........................................................... 1,397,967
Legal fees.................................................................... 65,584
Audit fees.................................................................... 19,328
SEC registration fees......................................................... 96,971
Blue sky registration fees.................................................... 66,410
Insurance expense............................................................. 16,992
Printing and postage fees..................................................... 204,747
Miscellaneous fees............................................................ $ 10,238
--------------
TOTAL EXPENSES............................................................ 10,691,850
Waiver of advisory fees....................................................... $ (211,230)
--------------
NET EXPENSES.............................................................. 10,480,620
--------------
NET INVESTMENT INCOME......................................................... 69,288,675
NET REALIZED LOSS ON INVESTMENTS.............................................. (18)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................... $ 69,288,657
==============
</TABLE>
See accompanying notes to financial statements.
B-35
<PAGE> 55
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Increase in Net Assets:
Operations:
Net investment income...................................... $ 69,288,675 54,422,671
Net realized loss on investments........................... (18) $ (139)
----------------- ---------------
Net increase in net assets resulting from operations....... 69,288,657 54,422,532
----------------- ---------------
Dividends to shareholders from:
Net investment income ($.0485 and $.0468 per share,
respectively)........................................ (69,288,675) (54,422,671)
----------------- ---------------
Total dividends to shareholders.............................. (69,288,675) (54,422,671)
----------------- ---------------
Capital stock transactions:
Proceeds from sale of capital shares....................... 6,757,471,254 5,268,446,578
Value of shares issued in reinvestment of dividends........ 68,375,264 51,941,658
Cost of shares repurchased................................. (6,496,879,767) (5,095,436,397)
----------------- ---------------
Increase in net assets derived from capital stock
transactions......................................... 328,966,751 224,951,839
----------------- ---------------
Total increase in assets..................................... 328,966,733 224,951,700
----------------- ---------------
Net Assets:
Beginning of year.......................................... 1,234,321,415 1,009,369,715
----------------- ---------------
End of year................................................ $ 1,563,288,148 $ 1,234,321,415
================= ===============
</TABLE>
See accompanying notes to financial statements.
B-36
<PAGE> 56
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
FINANCIAL HIGHLIGHTS
(for a share outstanding through each year)
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ---------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ...................... .0485 .0468 .0515 .0343 .0247
Net Realized Gain on Investments ........... -- -- -- -- --
----------- ----------- ---------- --------- ---------
Total From Investment Operations ....... .0485 .0468 .0515 .0343 .0247
----------- ----------- ---------- --------- ---------
LESS DISTRIBUTIONS:
Dividend to Shareholders from Net Investment
Income ................................. (.0485) (.0468) (.0515) (.0343) (.0247)
Dividend to Shareholders from Net Realized
Gains .................................. -- -- -- -- --
----------- ----------- ---------- --------- ---------
Total Distributions .................... (.0485) (.0468) (.0515) (.0343) (.0247)
----------- ----------- ---------- --------- ---------
Net Asset Value, End of Year .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== ========== ========= =========
TOTAL RETURN .................................. 4.96% 4.78% 5.28% 3.48% 2.50%
RATIO / SUPPLEMENT DATA:
Net Assets, End of Year (in thousands) ..... $ 1,563,288 $ 1,234,321 $1,009,370 $ 677,177 $719,337
Ratio of Expenses to Average Daily Net
Assets ........................... .74%(a) .77%(a) .80%(a) .80%(a) .81%(a)
Ratio of Net Investment Income to Average
Daily Net Assets ................. 4.87%(a) 4.68%(a) 5.15%(a) 3.39%(a) 2.47%(a)
</TABLE>
(a) During the year a portion of the Advisory and/or Distribution fees were
voluntarily reduced. If such voluntary fee reductions had not occurred, the
Ratio of Expenses to Average Daily Net Assets would have been .75%, .78%,
.81%, .83%, and .84% respectively, and the Ratio of Net Investment Income to
Average Daily Net Assets would have been 4.85%, 4.67%, 5.14%, 3.36%, and
2.44% respectively.
See accompanying notes to financial statements.
B-37
<PAGE> 57
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Bradford Funds, Inc. (the "Company"), an open-end, diversified
management investment company, was incorporated in Maryland on October 26, 1988.
The Company is authorized to issue 5.0 billion shares of multiple portfolios.
The Company is currently offering shares of one portfolio, The Bradford Money
Fund (the "Fund"). The only transaction occurring in the Fund between the date
of incorporation and the commencement of operations was the sale and issuance of
100,000 shares of capital stock for $100,000 to Bradford Capital Management,
Ltd. ("Bradford Capital Management"), the Fund's investment adviser, on January
10, 1989. The investment objective of the Fund is to provide as high a level of
current interest income as is consistent with maintaining liquidity and
stability of principal. It seeks to achieve this objective by investing in high
quality, U.S. dollar-dominated instruments, such as short-term U.S. Government
securities, bank certificates of deposit, commercial paper and repurchase
agreements. The ability of issuers of debt securities held by the Fund to meet
their obligations may be affected by economic developments in a specific
industry or region.
A) SECURITY VALUATION--Portfolio securities are valued under the
amortized cost method, which approximates current market value. Under this
method, securities are valued at cost when purchased and thereafter a constant
proportionate amortization of any discount or premium is recorded until maturity
of the security. The Fund seeks to maintain net asset value per share at $1.00.
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME--Security transactions
are accounted for on the trade date. The cost of investments sold is determined
by use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on the accrual basis.
C) DISTRIBUTIONS TO SHAREHOLDERS--Dividends from net investment income
are declared daily and paid monthly. Net realized capital gains, if any, will be
distributed at least annually.
D) FEDERAL INCOME TAXES--The Fund intends to qualify for and elect the
tax treatment applicable to regulated investment companies under the Internal
Revenue Code and make the requisite distributions to its shareholders which will
be sufficient to relieve it from Federal income and Federal excise taxes.
Therefore, no provision has been recorded for Federal income or Federal excise
taxes.
E) REPURCHASE AGREEMENTS--Money market instruments may be purchased
from financial institutions, such as banks and non-bank dealers, subject to the
seller's agreement to repurchase them at an agreed upon date and price.
Collateral for repurchase agreements may have longer maturities than the maximum
permissible remaining maturity of portfolio investments. The seller will be
required on a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by the Fund
may be delayed or limited. The agreements are conditioned upon the collateral
being deposited under the Federal Reserve book-entry system or with the Fund's
custodian or a third party sub-custodian.
NOTE 2--INVESTMENT ADVISORY, ADMINISTRATION, DISTRIBUTION AND TRANSFER AGENCY
AGREEMENTS
The Fund has entered into an investment advisory agreement with
Bradford Capital Management. J.C.B. Financial Services, Inc. acts as the general
partner to the adviser and J.C. Bradford & Co. L.L.C., a Tennessee limited
liability company ("Bradford"), is the adviser's limited partner. The general
partner is a wholly owned subsidiary of Bradford & Co., Incorporated. The Fund
has also entered into an Administration and Accounting Services Agreement with
Reich & Tang Asset Management, L.P. and distribution and transfer agency
agreements with Bradford.
B-38
<PAGE> 58
THE BRADFORED FUNDS, INC.
THE BRADFORD MONEY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 2--INVESTMENT ADVISORY, ADMINISTRATION, DISTRIBUTION AND TRANSFER AGENCY
AGREEMENTS (CONTINUED)
For the advisory services provided and expenses assumed by it, Bradford
Capital Management is entitled to receive from the Fund a fee, computed daily
and payable monthly, at an annual rate of .40% of the first $500 million of the
Fund's daily net assets and .35% of the daily net assets of the Fund in excess
of $500 million. Bradford Capital Management may, in its discretion from time to
time, waive voluntarily all or any portion of its advisory fee or reimburse the
Fund for a portion of the expenses of its operations. Bradford Capital
Management has agreed to waive indefinitely a portion of its advisory fee such
that it is receiving .30% of the Fund's average daily net assets in excess of $1
billion. For the year ended December 31, 1997, such waiver amounted to $211,230.
Advisory fees, before such waiver amounted to $5,228,609 for the year ended
December 31, 1997.
For the administration services provided, Reich & Tang Asset
Management, L.P. is entitled to receive from the Fund a fee, computed daily and
payable monthly, at an annual rate of .10% of the first $200 million of daily
net assets; .07% of the next $200 million of daily net assets; .045% of the next
$200 million of daily net assets; .025% of the next $100 million of daily net
assets; and .01% of the daily net assets in excess $700 million. Such fees
amounted to $201,543 for the period from August 18, 1997 to December 31, 1997.
For the period January 1, 1997 through August 17, 1997, PFPC Inc. provided
administration services to the Fund and for such services received fees in the
amount of $338,252.
The Fund has adopted a Plan of Distribution and pursuant thereto has
entered into an agreement under which the distributor, Bradford, is entitled to
receive from the Fund reimbursement of its distribution costs at an annual rate
of up to .20% of daily net assets. Bradford may, in its discretion from time to
time, waive voluntarily all or any portion of its distribution fees. Such fees
amounted to $2,844,920 for the year ended December 31, 1997.
For the transfer agency services provided, Bradford is entitled to
receive a fee, computed and paid monthly, at an annual rate of $11.50 per active
account. Such fees amounted to $1,397,967 for the year ended December 31, 1997.
B-39
<PAGE> 59
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 3--CAPITAL STOCK
Transactions in capital stock of the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------ ------------------
<S> <C> <C>
Shares sold..................................................... 6,757,471,254 5,268,446,578
Shares issued in connection with reinvestment of dividends
from net investment income................................... 68,375,264 51,941,658
Shares redeemed................................................. (6,496,879,767) (5,095,436,397)
------------------ ------------------
Net increase.................................................... 328,966,751 224,951,839
================== ==================
</TABLE>
NOTE 4--NET ASSETS
Net assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Capital stock, at par........................................... $ 1,563,302 $ 1,234,336
Paid-in capital in excess of par................................ 1,561,739,204 1,233,101,418
Net accumulated realized capital loss........................... (14,358) (14,339)
----------------- ----------------
$ 1,563,288,148 $ 1,234,321,415
================= ================
</TABLE>
B-40
<PAGE> 60
INDEPENDENT AUDITORS' REPORT
SHAREHOLDERS AND BOARD OF DIRECTORS
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
We have audited the accompanying statement of net assets of The
Bradford Funds, Inc., The Bradford Money Fund as of December 31, 1997 and the
related statements of operations for the year then ended and of changes in net
assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of The Bradford
Funds, Inc., The Bradford Money Fund as of December 31, 1997, the results of its
operations, changes in its net assets and the financial highlights for the
respective stated years in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
January 16, 1998
B-41
<PAGE> 61
APPENDIX
COMMERCIAL PAPER RATINGS
Standard & Poor's Corporation. Commercial paper ratings are graded into
four categories, ranging from "A" for the highest quality obligations to "D" for
the lowest. Issues assigned the A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
designation 1, 2, and 3 to indicate the relative degree of safety. The "A-1"
designation indicates that the degree of safety regarding timely payment is very
strong. Those issues determined to possess overwhelming safety characteristics
will be denoted with a plus sign designation.
Moody's Investors Service, Inc. Moody's commercial paper ratings are
opinions of the ability of the issuers to repay punctually promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation that such obligations are exempt from registration under
the Securities Act of 1933, nor does it represent that any specific note is a
valid obligation of a rated issuer or issued in conformity with any applicable
law. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime-1 Superior capacity for repayment of short-term promissory
obligations.
Prime-2 Strong capacity for repayment of short-term promissory
obligations.
Prime-3 Acceptable capacity for repayment of short-term promissory
obligations.
Duff and Phelps, Inc. Duff & Phelps' commercial paper ratings are
consistent with the short-term rating criteria utilized by money market
participants. The ratings apply to obligations with maturities (when issued) of
under one year.
Duff & Phelps refines the traditional "1" category. As a consequence,
Duff & Phelps has incorporated gradations of "1+" (one plus) and "1-" (one
minus), to, respectively, indicate the "highest" certainty of timely payment or
simply "high" certainty of timely payment. The Duff 2 category has not been
similarly refined but could be at some later date.
Duff 1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
A-1
<PAGE> 62
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing internal
funds needs may enlarge total financing requirements, access
to capital markets is good. Risk factors are small.
Duff 3 Satisfactory liquidity and other protection factors qualify
issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
All Duff & Phelps' short-term ratings (Duff 1, Duff 2 and Duff 3) are considered
investment grade. No ratings are issued for companies whose commercial paper is
not deemed to be of investment grade.
Fitch IBCA Information Services, Inc. Fitch IBCA Information Services, Inc.
short term ratings, as described by the company, are:
F1+: Commercial paper assigned this rating is regarded as having
the strongest capacity for timely payment of financial
commitments; an added "+" denotes any exceptionally strong
credit feature.
F1: Commercial paper assigned this rating is regarded as having a
capacity for timely payment only slightly less than the
highest rating, i.e., F1+.
F2: Commercial paper assigned this rating is regarded as having a
satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as the
two higher ratings.
A-2
<PAGE> 63
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in the Prospectus:
Financial Highlights for the period February 8, 1989 through
December 31, 1989 and for the years ended December 31, 1990,
1991, 1992, 1993, 1994, 1995, 1996 and
1997.
Included in Part B:
Statement of Net Assets as of December 31, 1997.
Statement of Operations for the year ended December 31, 1997.
Statements of Changes in Net Assets for the years ended
December 31, 1997 and 1996.
Financial Highlights for the years ended December 31, 1997,
1996, 1995, 1994 and 1993.
Notes to Financial Statements, December 31, 1997.
Independent Auditors' Report dated January 16, 1998.
All required financial statements are included in Part B. All other
financial statements and schedules are inapplicable.
(b) Exhibits
(1) Articles of Incorporation of the Registrant are
incorporated by reference to Exhibit (1) of Post-
Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A (No. 33-25137)
filed on April 24, 1996.
(1.1) Amendment to Articles of Incorporation dated February
9, 1989, is incorporated by reference to Exhibit
(1.1) of Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (No.
33-25137) filed on April 24, 1996.
(1.2) Articles Supplementary to Articles of Incorporation
approved July 19, 1989, are incorporated by
C-1
<PAGE> 64
reference to Exhibit (1.2) of Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) filed on
April 24, 1996.
(1.3) Articles Supplementary to Articles of Incorporation
approved April 25, 1991, are incorporated by
reference to Exhibit (1.3) of Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) filed on April
24, 1996.
(1.4) Articles Supplementary to Articles of Incorporation
approved August 3, 1995, are incorporated by
reference to Exhibit (1.4) of Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) filed on April
24, 1996.
(1.5) Articles Supplementary to Articles of Incorporation
approved February 14, 1997, are incorporated by
reference to Exhibit (1.5) of Post-Effective
Amendment No. 10 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) filed on April
29, 1997.
(2) Bylaws of the Registrant are incorporated by
reference to Exhibit (2) of Post-Effective Amendment
No. 9 to Registrant's Registration Statement on Form
N-1A (No. 33-25137) filed on April 24, 1996.
(2.1) Amendment dated December 14, 1988 to Article III,
Section 6 of the Bylaws is incorporated by reference
to Exhibit (2.1) of Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (No.
33-25137) filed on April 24, 1996.
(2.2) Amendment dated January 31, 1989, to Article II,
Section 2 of the Bylaws is incorporated by reference
to Exhibit (2.2) of Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (No.
33-25137) filed on April 24, 1996.
(2.3) Amendment dated July 19, 1989, to Article I, Section
2 of the Bylaws is incorporated by reference to
Exhibit (2.3) of Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (No.
33-25137) filed on April 24, 1996.
C-2
<PAGE> 65
(2.4) Amendment dated July 18, 1997, to Article I, Section
2 of the Bylaws.
(3) Not Applicable
(4) Not Applicable
(5) Form of Investment Advisory Agreement between the
Registrant on behalf of the Fund and the Adviser is
incorporated by reference to Exhibit (5) of
Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A (No. 33-25137)
filed on April 24, 1996.
(6) Form of Distribution Agreement between the Registrant
on behalf of the Fund and Bradford is incorporated by
reference to Exhibit (6) of Post-Effective Amendment
No. 9 to Registrant's Registration Statement on Form
N-1A (No. 33-25137)
filed on April 24, 1996.
(7) Not Applicable
(8) Form of Custodian Agreement between the Registrant on
behalf of the Fund and the Custodian dated as of
August 15, 1997.
(9)(a) Form of Transfer Agency Agreement between the
Registrant on behalf of the Fund and Bradford is
incorporated by reference to Exhibit (9)(a) of
Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A (No. 33-25137)
filed on April 24, 1996.
(a)-1 Fee Letter dated as of February 1, 1993, relating to
the Transfer Agency Agreement between the Registrant
on behalf of the Fund and Bradford is incorporated by
reference to Exhibit (9)(a)-1 of Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) filed on April
24, 1996.
(b) Form of Administrative Services Agreement between the
Registrant on behalf of the Fund and Reich & Tang
dated as of August 15, 1997.
(c) Form of Bradford Capital Management Account
Agreements and Account Summary Descriptions are
incorporated by reference to Exhibit (9)(c) of
Post-Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A (No. 33-25137)
filed on April 29, 1997.
C-3
<PAGE> 66
*(10) Opinion of Counsel.
(11) Consent of Deloitte & Touche LLP
(12) Not Applicable
(13) Form of Initial Capital Agreement between Bradford
Capital Management, Ltd. and the Registrant on behalf
of the Fund is incorporated by reference to Exhibit
(13) of Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (No.
33-25137) filed on April 24, 1996.
(14)(a) IRA Adoption Agreement is incorporated by reference
to Exhibit (14)(a) of Post-Effective Amendment No. 9
to Registrant's Registration Statement on Form N-1A
(No. 33-25137) filed on April 24, 1996. Disclosure
Statement Amendments and Disclosure Statement
relating thereto.
(b) Adoption Agreements, Summary Plan Description and
Summary Plan Description General Information Sheets
are incorporated by reference to Exhibit (14)(b) of
Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A (No. 33-25137)
filed on April 24, 1996. J.C. Bradford Prototype
Qualified Retirement Plans and Trusts (Model Plans).
(c) J.C. Bradford & Co. Prototype Simplified Employee
Pension Plan, Adoption Agreement and Participant
Salary Deferral Agreement are incorporated by
reference to Exhibit (14)(c) of Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) filed on April
24, 1996.
(d) J.C. Bradford & Co. Simplified Standardized Adoption
Agreements and General Information Sheets are
incorporated by reference to Exhibit (14)(d) of
Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A (No. 33-25137)
filed on April 24, 1996.
(e) J.C. Bradford & Co. Flexible Nonstandardized Safe
Harbor 401(k) Profit Sharing Plan Adoption Agreement,
Flexible Standardized 401(k) Profit Sharing Plan
Adoption Agreement and Prototype Plan Document for
Qualified Retirement Plans (401(k) Profit Sharing)
are incorporated by reference to Exhibit (14)(e) of
Post-Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A (No. 33-25137)
filed on April 29, 1997.
(f) Simple IRA Adoption Agreement, Disclosure Statement,
Disclosure Statement Amendments and Custodial
Agreement.
(g) Account Application, Custodial Account Agreement and
Account Transfer Form for 403(b) Choice Account.
- ---------------
* Filed with Registrant's Notice filed pursuant to Rule 24f-2 on
February 26, 1997.
C-4
<PAGE> 67
(15) Form of Rule 12b-1 Plan of Registrant on behalf of
the Fund is incorporated by reference to Exhibit (15)
of Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A (No. 33-25137)
filed on April 24, 1996.
(16) Schedule for Computation of Performance Quotations
are incorporated by reference to Exhibit (16) of
Post-Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A (No. 33-25137)
filed on April 29, 1997.
(17) Financial Data Schedule.
(18) None.
(19) (a) Consent of Baker & Hostetler LLP.
(b) Powers of Attorney for Allan L. Erb, Douglas
C. Altenbern, William Carter, Richard W.
Hanselman, Michael R. Shea, Edward J. Roach,
William T. Spitz and Randall R. Harness are
incorporated by reference to Exhibit (19)(b)
of Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form
N-1A (No. 33-25137) filed on April 24,
1996.
Item 25. Persons Controlled by or Under Common Control
with Registrant
None.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
(1) (2)
Number of Record Holders
Title of Class as of March 31, 1998*
-------------- -----------------------
<S> <C>
Common Stock,
par value $.001
per share 136,387
</TABLE>
- ----------------------
* Shares are registered in the name of J.C. Bradford & Co. LLC
for the sub-accounts of these holders.
C-5
<PAGE> 68
Item 27. Indemnification
Article VIII of the Registrant's Articles of Incorporation provides for
indemnification of any director or officer of Registrant to the fullest extent
permitted by law, including the advance of expenses under the procedures and to
the full extent permitted by law. This provision does not authorize
indemnification of any director or officer against any liability to Registrant
or its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. Registrant will advance
indemnification expenses only in accordance with the requirements imposed by the
Securities and Exchange Commission as set forth in Investment Company Act
Releases 7,221 and 11,330.
Insofar as the indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Mutual fund and director and officer liability policies may be
purchased jointly by the Registrant, Bradford Capital Management, Ltd. and
Bradford to insure such persons and their respective partners, directors,
officers and employees, subject to the policies' coverage limits and exclusions
and varying deductibles, against loss resulting from claims by reason of any
act, error, omission, misstatement, misleading statement, neglect or breach of
duty.
Item 28. Business and Other Connections of Investment
Adviser
Information on the business of the Adviser is described in the section
of the Prospectus, filed as part of this Registration Statement, entitled
"MANAGEMENT."
C-6
<PAGE> 69
Set forth below is a list of the general partner and all officers of
Bradford Capital Management, Ltd. and, with respect to each such person, the
name and business address of all companies (if any) with which such person has
been connected at any time since January 1, 1996, as well as the capacity in
which such person was connected:
<TABLE>
<CAPTION>
Name and Name and Principal
Position with Business Address of Connection with
Investment Adviser Other Company Other Company
- ------------------ -------------------- ---------------
<S> <C> <C>
Allan L. Erb J. C. Bradford & Co. Voting Member
President LLC
330 Commerce Street
Nashville, TN 37201
Michael R. Shea J. C. Bradford & Co. Voting Member
Vice President LLC
330 Commerce Street
Nashville, TN 37201
Judy K. Abroms J. C. Bradford & Co. Equity Member
Vice President LLC
330 Commerce Street
Nashville, TN 37201
R. Patrick Shepherd J. C. Bradford & Co. Voting Member and
Vice President LLC Secretary
330 Commerce Street
Nashville, TN 37201
JCB Financial Secretary
Services, Inc.
330 Commerce Street
Nashville, TN 37201
Randall R. Harness J. C. Bradford & Co. Voting Member and
Secretary/Treasurer LLC Assistant Secretary
330 Commerce Street
Nashville, TN 37201
JCB Financial Treasurer
Services, Inc.
330 Commerce Street
Nashville, TN 37201
J. C. Bradford & Secretary/Treasurer
Co. Inc.
330 Commerce Street
Nashville, TN 37201
</TABLE>
C-7
<PAGE> 70
<TABLE>
<S> <C> <C>
Robert P. DeBastiani J. C. Bradford & Co. Equity Member
Vice President LLC
330 Commerce Street
Nashville, TN 37201
JCB Financial Bradford & Co., Subsidiary
Services, Inc. Incorporated
General Partner 330 Commerce Street
Nashville, TN 37201
</TABLE>
Item 29. Principal Underwriters
(a) J. C. Bradford & Co. LLC does not act as principal under- writer,
distributor or investment adviser of any investment company other than the
Registrant.
(b) The name, positions and offices with J. C. Bradford & Co. LLC, and
positions and offices with the Registrant, of each voting member and officer of
J. C. Bradford & Co. LLC, 330 Commerce Street, Nashville, Tennessee 37201, are
as follows:
<TABLE>
<CAPTION>
Positions and
Positions and Offices Offices with
Name with Underwriter Registrant
- --------------------------- ----------------------- ------------------
<S> <C> <C>
J. C. Bradford, Jr. Senior Partner, Chief None
Manager
W. Lucas Simons, Jr. Managing Partner None
C. Taxon Malott Voting Member None
Victor A. Ptak Voting Member None
M. Alton Ross, Jr. Voting Member None
J. Ronald Scott Voting Member None
F. Mitchell Johnson Voting Member None
Park B. Smith Voting Member None
James M. Avent, Jr. Voting Member None
R. R. Harness Chief Financial Partner Treasurer
and Assistant Secretary
Michael R. Shea Voting Member Vice President and
Director
R. Patrick Sheperd Voting Member and Vice President
Secretary
John Felber Voting Member None
James S. Frazer, III Voting Member None
Douglas O. Kitchen Voting Member None
Louis B. Todd, Jr. Voting Member None
Marc Garrett Voting Member None
Eric L. Broder Voting Member None
Frank F. Venable, Jr. Voting Member None
Barry B. Polston Voting Member None
Allan L. Erb Voting Member President and
Director
Jeffrey E. Powell Voting Member None
</TABLE>
C-8
<PAGE> 71
Item 30. Location of Accounts and Records
The Articles of Incorporation, By-Laws and minute books of the
Registrant are in the physical possession of Baker & Hostetler LLP, 65 East
State Street, Suite 2100, Columbus, Ohio 43215. All other accounts, books and
other documents required to be maintained under Section 31(a) of the Investment
Company Act of 1940 and the rules and regulations promulgated thereunder are in
the physical possession of Bradford Capital Management, Ltd., 330 Commerce
Street, Nashville, Tennessee 37201 (records relating to investment advisory
functions), J. C. Bradford & Co. LLC, 330 Commerce Street, Nashville, Tennessee
37201 (records relating to transfer agency and dividend disbursing functions),
or Reich & Tang Asset Management, L.P., 600 Fifth Avenue, New York, New York
10020 (all other records).
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
C-9
<PAGE> 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Nashville and State of Tennessee on the 23rd day of April, 1998.
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
By /s/ Allan L. Erb
---------------------------------
Allan L. Erb
President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Allan L. Erb Principal Executive April 23, 1998
- ---------------------------- Officer and Director
Allan L. Erb
/s/ Randall R. Harness Principal Financial April 23, 1998
- ---------------------------- and Accounting Officer
Randall R. Harness
/s/*Douglas C. Altenbern Director April 23, 1998
- ----------------------------
Douglas C. Altenbern
/s/*William Carter Director April 23, 1998
- ----------------------------
William Carter
/s/*Richard W. Hanselman Director April 23, 1998
- ----------------------------
Richard W. Hanselman
/s/ *Edward J. Roach Director April 23, 1998
- ----------------------------
Edward J. Roach
/s/*Michael R. Shea Director April 23, 1998
- ----------------------------
Michael R. Shea
/s/*William T. Spitz Director April 23, 1998
- ----------------------------
William T. Spitz
*By /s/ Allan L. Erb April 23, 1998
- ----------------------------
Allan L. Erb
Attorney-in-Fact
</TABLE>
C-10
<PAGE> 73
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
(1) Articles of Incorporation of the Registrant
were filed as Exhibit (1) to Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
24, 1996.
(1.1) Amendment to Articles of Incorporation dated
February 9, 1989, was filed as Exhibit (1.1)
to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-
1A (No. 33-25137) on April 24, 1996.
(1.2) Articles Supplementary to Articles of
Incorporation approved July 19, 1989, were
filed as Exhibit (1.2) to Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
24, 1996.
(1.3) Articles Supplementary to Articles of
Incorporation approved April 25, 1991, were
filed as Exhibit (1.3) to Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
24, 1996.
(1.4) Articles Supplementary to Articles of
Incorporation approved August 3, 1995, were
filed as Exhibit (1.4) to Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
24, 1996.
(1.5) Articles Supplementary to Articles of
Incorporation approved February 14, 1997, were
filed as Exhibit (1.5) to Post-Effective
Amendment No. 10 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
29, 1997.
(2) Bylaws of the Registrant were filed as Exhibit
(2) to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-
1A (No. 33-25137) on April 24, 1996.
</TABLE>
C-11
<PAGE> 74
<TABLE>
<S> <C>
(2.1) Amendment dated December 14, 1988, to Article
III, Section 6 of the Bylaws was filed as
Exhibit (2.1) to Post-Effective Amendment No.
9 to Registrant's Registration Statement on
Form N-1A (No. 33-25137) on April 24, 1996.
(2.2) Amendment dated January 31, 1989, to Article
II, Section 2 of the Bylaws was filed as
Exhibit (2.2) to Post-Effective Amendment No.
9 to Registrant's Registration Statement on
Form N-1A (No. 33-25137) on April 24, 1996.
(2.3) Amendment dated July 19, 1989, to Article I,
Section 2 of the Bylaws was filed as Exhibit
(2.3) to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-
1A (No. 33-25137) on April 24, 1996.
(2.4) Amendment dated July 18, 1997, to Article I,
Section 2 of the Bylaws.
(5) Form of Investment Advisory Agreement between
the Registrant on behalf of the Fund and the
Adviser was filed as Exhibit (5) to Post-
Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A (No. 33-
25137) on April 24, 1996.
(6) Form of Distribution Agreement between the
Registrant on behalf of the Fund and Bradford
was filed as Exhibit (6) to Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
24, 1996.
(8) Form of Custodian Agreement between the
Registrant on behalf of the Fund and the
Custodian dated as of August 15, 1997.
(9)(a) Form of Transfer Agency Agreement between the
Registrant on behalf of the Fund and Bradford
was filed as Exhibit (9)(a) to Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
24, 1996.
(a)-1 Fee Letter dated as of February 22, 1993,
relating to the Transfer Agency Agreement
between the Registrant on behalf of the Fund
and Bradford was filed as Exhibit (9)(a)-1 to
Post-Effective Amendment No. 9 to Registrant's
</TABLE>
C-12
<PAGE> 75
<TABLE>
<S> <C>
Registration Statement on Form N-1A (No. 33-
25137) on April 24, 1996.
(b) Form of Administrative Services Agreement between the
Registrant on behalf of the Fund and Reich & Tang dated as of
August 15, 1997.
(c) Form of Bradford Capital Management Account
Agreements and Account Summary Descriptions
were filed as Exhibit (9)(c) to Post-Effective
Amendment No. 10 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
29, 1997.
(11) Consent of Deloitte & Touche LLP
(13) Form of Initial Capital Agreement between
Bradford Capital Management, Ltd. and the
Registrant on behalf of the Fund was filed as
Exhibit (13) to Post-Effective Amendment No. 9
to Registrant's Registration Statement on Form
N-1A (No. 33-25137) on April 24, 1996.
(14)(a) IRA Adoption Agreement was filed as
Exhibit (14)(a) to Post-Effective Amendment
No. 9 to Registrant's Registration Statement
on Form N-1A (No. 33-25137) on April 24, 1996.
Disclosure Statement Amendments and Disclosure
Statement relating thereto.
(b) Adoption Agreements, Summary Plan Description and
Summary Plan Description and General Information Sheets
were filed as Exhibit (14)(b) to Post-Effective Amendment
No. 9 to Registrant's Registration Statement on Form
N-1A (No. 33-25137) on April 24, 1996. J.C. Bradford Prototype
Qualified Retirement Plans and Trusts (Model Plans).
(c) J.C. Bradford & Co. Prototype Simplified
Employee Pension Plan, Adoption Agreement and
Participant Salary Deferral Agreement were
filed as Exhibit (14)(c) to Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
24, 1996.
(d) J.C. Bradford & Co. Simplified Standardized Adoption
Agreements and General Information Sheets were filed as
Exhibit (14)(d) to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (No. 33-
25137) on April 24, 1996.
</TABLE>
C-13
<PAGE> 76
<TABLE>
<S> <C>
(e) J.C. Bradford & Co. Flexible Nonstandardized
Safe Harbor 401(k) Profit Sharing Plan
Adoption Agreement, Flexible Standardized
401(k) Profit Sharing Plan Adoption Agreement
and Prototype Plan Document for Qualified
Retirement Plans (401(k) Profit Sharing) were
filed as Exhibit (14)(e) to Post-Effective
Amendment No. 10 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
29, 1997.
(f) Simple IRA Adoption Agreement, Disclosure Statement,
Disclosure Statement Amendments and Custodial Agreement.
(g) Account Application, Custodial Account Agreement and Account
Transfer Form for 403(b) Choice Account.
(15) Form of Rule 12b-1 Plan of Registrant on
behalf of the Fund was filed as Exhibit (15)
to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-
1A (No. 33-25137) on April 24, 1996.
(16) Schedule for Computation of Performance
Quotations was filed as Exhibit (16) to Post-
Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A (No. 33-
25137) on April 29, 1997.
(17) Financial Data Schedule.
(18) None.
(19) (a) Consent of Baker & Hostetler LLP.
(b) Power of Attorney for Allan L. Erb, Douglas C.
Altenbern, William Carter, Richard W.
Hanselman, Michael R. Shea, Edward J. Roach,
William T. Spitz and Randall R. Harness were
filed as Exhibit (19)(b) to Post-Effective
Amendment No. 9 to Registrant's Registration
Statement on Form N-1A (No. 33-25137) on April
24, 1996.
</TABLE>
C-14
<PAGE> 77
As filed with the Securities and Exchange Commission April 29, 1998
1933 Act Registration No. 33-25137
1940 Act File No. 811-5682
EXHIBITS TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Post-Effective Amendment No. 11 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 13
The Bradford Funds, Inc.
The Bradford Money Fund
(Exact Name of Registrant as Specified in Charter)
600 Fifth Avenue
New York, New York 10020
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(888) 226-5504
C-15
<PAGE> 1
EXHIBIT (2.4)
<PAGE> 2
AMENDMENT TO THE BY-LAWS
OF THE BRADFORD FUNDS, INC.
ARTICLE I, SECTION 2
RESOLVED, That Article I, Section 2 of the By-Laws of the Company be,
and it hereby is, amended in its entirety to read as follows:
"Section 2. Principal Executive Office. The principal executive office
of the Corporation shall be in the City of New York, New York."
Adopted July 18, 1997
<PAGE> 1
EXHIBIT 8
CUSTODY AGREEMENT
THIS AGREEMENT made effective the 15th day of August, 1997, by and
between INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the
laws of the state of Missouri, having its trust office located at l27 West 10th
Street, Kansas City, Missouri 64105 ("Custodian"), and THE BRADFORD FUNDS, INC.,
a Maryland corporation, having its principal office and place of business at 600
5th Avenue, New York, New York 10020 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of The Bradford Money Fund; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints
Custodian as custodian of the securities and monies at any time owned
by the Fund.
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to
Custodian:
1. That it is a corporation or trust (as specified
above) duly organized and existing and in good
standing under the laws of the state of its
incorporation, and that it is registered under the
Investment Company Act of 1940 (the "1940 Act"); and
2. That it has the requisite power and authority under
applicable law, its articles of incorporation and its
bylaws to enter into this Agreement; that it has
taken all requisite action necessary to appoint
Custodian as custodian for the Fund; that this
Agreement has been duly executed and delivered by
Fund; and that this Agreement constitutes a legal,
valid and binding obligation of Fund, enforceable in
accordance with its terms.
B. Custodian hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and
existing and in good standing under the laws of the
State of Missouri; and
2. That it has the requisite power and authority under
applicable law, its charter and its bylaws to enter
into and perform this Agreement; that this Agreement
has been duly executed and delivered by Custodian;
and that this Agreement
<PAGE> 2
constitutes a legal, valid and binding obligation of
Custodian, enforceable in accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets. Except as permitted by the 1940 Act, Fund
will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as
practicable, and from time to time thereafter, all portfolio
securities acquired by it and monies then owned by it or from
time to time coming into its possession during the time this
Agreement shall continue in effect which Fund intends to be
held in the custody of Custodian. Custodian shall have no
responsibility or liability whatsoever for or on account of
securities or monies not so delivered.
B. Delivery of Accounts and Records. Fund shall turn over or
cause to be turned over to Custodian all of the Fund's
relevant accounts and records previously maintained. Custodian
shall be entitled to rely conclusively on the completeness and
correctness of the accounts and records turned over to it, and
Fund shall indemnify and hold Custodian harmless of and from
any and all expenses, damages and losses whatsoever arising
out of or in connection with any error, omission, inaccuracy
or other deficiency of such accounts and records or in the
failure of Fund to provide, or to provide in a timely manner,
any accounts, records or information needed by the Custodian
to perform its functions hereunder.
C. Delivery of Assets to Third Parties. Custodian will receive
delivery of and keep safely the assets of Fund delivered to it
from time to time segregated in a separate account, and if
Fund is comprised of more than one portfolio of investment
securities (each a "Portfolio") Custodian shall keep the
assets of each Portfolio segregated in a separate account.
Custodian will not deliver, assign, pledge or hypothecate any
such assets to any person except as permitted by the
provisions of this Agreement or any agreement executed by it
according to the terms of Section 3.S of this Agreement. Upon
delivery of any such assets to a subcustodian pursuant to
Section 3.S of this Agreement, Custodian will create and
maintain records identifying those assets which have been
delivered to the subcustodian as belonging to the Fund, by
Portfolio if applicable. The Custodian is responsible for the
safekeeping of the securities and monies of Fund only until
they have been transmitted to and received by other persons as
permitted under the terms of this Agreement, except for
securities and monies transmitted to subcustodians appointed
under Section 3.S. of this Agreement, for which Custodian
remains responsible to the extent provided in Section 3.S
hereof. Custodian may participate directly or indirectly
through a subcustodian in the Depository Trust Company (DTC),
Treasury/Federal Reserve Book Entry System (Fed System),
Participant Trust Company (PTC) or other depository approved
by the Fund (as such entities are defined at 17 CFR Section
270.17f-4(b)) (each a "Depository" and collectively, the
"Depositories").
2
<PAGE> 3
D. Registration of Securities. The Custodian shall at all times
hold registered securities of the Fund in the name of the
Custodian, the Fund, or a nominee of either of them, unless
specifically directed by instructions to hold such registered
securities in so- called "street name," provided that, in any
event, all such securities and other assets shall be held in
an account of the Custodian containing only assets of the
Fund, or only assets held by the Custodian as a fiduciary or
custodian for customers, and provided further, that the
records of the Custodian at all time shall indicate the Fund
or other customer for which such securities and other assets
are held in such account and the respective interests therein.
If, however, the Fund directs the Custodian to maintain
securities in "street name", notwithstanding anything
contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect
income due the Fund on such securities and to notify the Fund
of relevant corporate actions including, without limitation,
pendency of calls, maturities, tender or exchange offers. All
securities, and the ownership thereof by Fund, which are held
by Custodian hereunder, however, shall at all times be
identifiable on the records of the Custodian. The Fund agrees
to hold Custodian and its nominee harmless for any liability
as a shareholder of record of securities held in custody.
E. Exchange of Securities. Upon receipt of instructions as
defined herein in Section 4.A, Custodian will exchange, or
cause to be exchanged, portfolio securities held by it for the
account of Fund for other securities or cash issued or paid in
connection with any reorganization, recapitalization, merger,
consolidation, split-up of shares, change of par value,
conversion or otherwise, and will deposit any such securities
in accordance with the terms of any reorganization or
protective plan. Without instructions, Custodian is authorized
to exchange securities held by it in temporary form for
securities in definitive form, to effect an exchange of shares
when the par value of the stock is changed, and, upon
receiving payment therefor, to surrender bonds or other
securities held by it at maturity or when advised of earlier
call for redemption, except that Custodian shall receive
instructions prior to surrendering any convertible security.
F. Purchases of Investments of the Fund. Fund will, on each
business day on which a purchase of securities shall be made
by it, deliver to Custodian instructions which shall specify
with respect to each such purchase:
1. If applicable, the name of the Portfolio making such
purchase;
2. The name of the issuer and description of the
security;
3. The number of shares and the principal amount
purchased, and accrued interest, if any;
4. The trade date;
5. The settlement date;
3
<PAGE> 4
6. The purchase price per unit and the brokerage
commission, taxes and other expenses payable in
connection with the purchase;
7. The total amount payable upon such purchase;
8. The name of the person from whom or the broker or
dealer through whom the purchase was made; and
9. Whether the security is to be received in
certificated form or via a specified Depository.
In accordance with such instructions, Custodian will pay for
out of monies held for the account of Fund, but only insofar
as such monies are available for such purpose, and receive the
portfolio securities so purchased by or for the account of
Fund, except that Custodian may in its sole discretion advance
funds to the Fund which may result in an overdraft because the
monies held by the Custodian on behalf of the Fund are
insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, such payment
shall be made by the Custodian only upon receipt of
securities: (a) by the Custodian; (b) by a clearing
corporation of a national exchange of which the Custodian is a
member; or (c) by a Depository. Notwithstanding the foregoing,
(i) in the case of a repurchase agreement, the Custodian may
release funds to a Depository prior to the receipt of advice
from the Depository that the securities underlying such
repurchase agreement have been transferred by book-entry into
the account maintained with such Depository by the Custodian,
on behalf of its customers, provided that the Custodian's
instructions to the Depository require that the Depository
make payment of such funds only upon transfer by book-entry of
the securities underlying the repurchase agreement in such
account; (ii) in the case of time deposits, call account
deposits, currency deposits and other deposits, foreign
exchange transactions, futures contracts or options, the
Custodian may make payment therefor before receipt of an
advice or confirmation evidencing said deposit or entry into
such transaction; and (iii) in the case of the purchase of
securities, the settlement of which occurs outside of the
United States of America, the Custodian may make, or cause a
subcustodian appointed pursuant to Section 3.S.2 of this
Agreement to make, payment therefor in accordance with
generally accepted local custom and market practice.
G. Sales and Deliveries of Investments of the Fund - Other than
Options and Futures Fund will, on each business day on which a
sale of investment securities (other than options and futures)
of Fund has been made, deliver to Custodian instructions
specifying with respect to each such sale:
1. If applicable, the name of the Portfolio making such
sale;
2. The name of the issuer and description of the
securities;
3. The number of shares and principal amount sold, and
accrued interest, if any;
4
<PAGE> 5
4. The date on which the securities sold were purchased
or other information identifying the securities sold
and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission,
taxes or other expenses payable in connection with
such sale;
8. The total amount to be received by Fund upon such
sale; and
9. The name and address of the broker or dealer through
whom or person to whom the sale was made.
In accordance with such instructions, Custodian will deliver
or cause to be delivered the securities thus designated as
sold for the account of Fund to the broker or other person
specified in the instructions relating to such sale. Except as
otherwise instructed by Fund, such delivery shall be made upon
receipt of payment therefor: (a) in such form as is
satisfactory to the Custodian; (b) credit to the account of
the Custodian with a clearing corporation of a national
securities exchange of which the Custodian is a member; or (c)
credit to the account of the Custodian, on behalf of its
customers, with a Depository. Notwithstanding the foregoing:
(i) in the case of securities held in physical form, such
securities shall be delivered in accordance with "street
delivery custom" to a broker or its clearing agent; or (ii) in
the case of the sale of securities, the settlement of which
occurs outside of the United States of America, the Custodian
may make, or cause a subcustodian appointed pursuant to
Section 3.S.2 of this Agreement to make, payment therefor in
accordance with generally accepted local custom and market
practice.
H. Purchases or Sales of Options and Futures. Fund will, on each
business day on which a purchase or sale of the following
options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to
each such purchase or sale:
1. If applicable, the name of the Portfolio making such
purchase or sale;
2. In the case of security options:
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening,
exercising, expiring or closing transaction;
5
<PAGE> 6
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer
through whom the sale or purchase was made.
3. In the case of options on indices:
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening,
exercising, expiring or closing transaction;
h. Whether the transaction involves a put or
call;
i. Whether the option is written or purchased;
and
j. The name and address of the broker or dealer
through whom the sale or purchase was made,
or other applicable settlement instructions.
4. In the case of security index futures contracts:
a. The last trading date specified in the
contract and, when available, the closing
level, thereof;
b. The index level on the date the contract is
entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in
addition to instructions, and if not already
in the possession of Custodian, Fund shall
deliver a substantially complete and
executed custodial safekeeping account and
procedural agreement which shall be
incorporated by reference into this Custody
Agreement); and
f. The name and address of the futures
commission merchant through whom the sale or
purchase was made, or other applicable
settlement instructions.
5. In the case of options on index future contracts:
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or
call;
h. Whether the option is written or purchased;
and
6
<PAGE> 7
i. The market on which the option is traded.
I. Securities Pledged or Loaned. If specifically allowed for in
the prospectus of Fund, and subject to such additional terms
and conditions as Custodian may require:
1. Upon receipt of instructions, Custodian will release
or cause to be released securities held in custody to
the pledgee designated in such instructions by way of
pledge or hypothecation to secure any loan incurred
by Fund; provided, however, that the securities shall
be released only upon payment to Custodian of the
monies borrowed, except that in cases where
additional collateral is required to secure a
borrowing already made, further securities may be
released or caused to be released for that purpose
upon receipt of instructions. Upon receipt of
instructions, Custodian will pay, but only from funds
available for such purpose, any such loan upon
redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note
or notes evidencing such loan.
2. Upon receipt of instructions, Custodian will release
securities held in custody to the borrower designated
in such instructions; provided, however, that the
securities will be released only upon deposit with
Custodian of full cash collateral as specified in
such instructions, and that Fund will retain the
right to any dividends, interest or distribution on
such loaned securities. Upon receipt of instructions
and the loaned securities, Custodian will release the
cash collateral to the borrower.
J. Routine Matters. Custodian will, in general, attend to all
routine and mechanical matters in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings
with securities or other property of Fund except as may be
otherwise provided in this Agreement or directed from time to
time by the Fund in writing.
K. Deposit Accounts. Custodian will open and maintain one or more
special purpose deposit accounts in the name of Custodian
("Accounts"), subject only to draft or order by Custodian upon
receipt of instructions. All monies received by Custodian from
or for the account of Fund shall be deposited in said
Accounts. Barring events not in the control of the Custodian
such as strikes, lockouts or labor disputes, riots, war or
equipment or transmission failure or damage, fire, flood,
earthquake or other natural disaster, action or inaction of
governmental authority or other causes beyond its control, at
9:00 a.m., Kansas City time, on the second business day after
deposit of any check into an Account, Custodian agrees to make
Fed Funds available to the Fund in the amount of the check.
Deposits made by Federal Reserve wire will be available to the
Fund immediately and ACH wires will be available to the Fund
on the next business day. Income earned on the portfolio
securities will be credited to the Fund based on the schedule
attached as Exhibit A. The Custodian will be entitled to
reverse any credited amounts where credits have been made and
monies are not finally collected. If monies are collected
after such reversal, the Custodian will credit
7
<PAGE> 8
the Fund in that amount. Custodian may open and maintain
Accounts in its own banking department, or in such other banks
or trust companies as may be designated by it or by Fund in
writing, all such Accounts, however, to be in the name of
Custodian and subject only to its draft or order. Funds
received and held for the account of different Portfolios
shall be maintained in separate Accounts established for each
Portfolio.
L. Income and other Payments to Fund. Custodian will:
1. Collect, claim and receive and deposit for the
account of Fund all income and other payments which
become due and payable on or after the effective date
of this Agreement with respect to the securities
deposited under this Agreement, and credit the
account of Fund in accordance with the schedule
attached hereto as Exhibit A. If, for any reason, the
Fund is credited with income that is not subsequently
collected, Custodian may reverse that credited
amount.
2. Execute ownership and other certificates and
affidavits for all federal, state and local tax
purposes in connection with the collection of bond
and note coupons; and
3. Take such other action as may be necessary or proper
in connection with:
a. the collection, receipt and deposit of such
income and other payments, including but not
limited to the presentation for payment of:
1. all coupons and other income items
requiring presentation; and
2. all other securities which may
mature or be called, redeemed,
retired or otherwise become payable
and regarding which the Custodian
has actual knowledge, or should
reasonably be expected to have
knowledge; and
b. the endorsement for collection, in the name
of Fund, of all checks, drafts or other
negotiable instruments.
Custodian, however, will not be required to institute suit or
take other extraordinary action to enforce collection except
upon receipt of instructions and upon being indemnified to its
satisfaction against the costs and expenses of such suit or
other actions. Custodian will receive, claim and collect all
stock dividends, rights and other similar items and will deal
with the same pursuant to instructions. Unless prior
instructions have been received to the contrary, Custodian
will, without further instructions, sell any rights held for
the account of Fund on the last trade date prior to the date
of expiration of such rights.
8
<PAGE> 9
M. Payment of Dividends and other Distributions. On the
declaration of any dividend or other distribution on the
shares of capital stock of Fund ("Fund Shares") by the Board
of Directors of Fund, Fund shall deliver to Custodian
instructions with respect thereto. On the date specified in
such instructions for the payment of such dividend or other
distribution, Custodian will pay out of the monies held for
the account of Fund, insofar as the same shall be available
for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to
pay the amount per share payable in cash on Fund Shares issued
and outstanding on the record date established by such
resolution.
N. Shares of Fund Purchased by Fund. Whenever any Fund Shares are
repurchased or redeemed by Fund, Fund or its agent shall
advise Custodian of the aggregate dollar amount to be paid for
such shares and shall confirm such advice in writing. Upon
receipt of such advice, Custodian shall charge such aggregate
dollar amount to the account of Fund and either deposit the
same in the account maintained for the purpose of paying for
the repurchase or redemption of Fund Shares or deliver the
same in accordance with such advice. Custodian shall not have
any duty or responsibility to determine that Fund Shares have
been removed from the proper shareholder account or accounts
or that the proper number of Fund Shares have been canceled
and removed from the shareholder records.
O. Shares of Fund Purchased from Fund. Whenever Fund Shares are
purchased from Fund, Fund will deposit or cause to be
deposited with Custodian the amount received for such shares.
Custodian shall not have any duty or responsibility to
determine that Fund Shares purchased from Fund have been added
to the proper shareholder account or accounts or that the
proper number of such shares have been added to the
shareholder records.
P. Proxies and Notices. Custodian will promptly deliver or mail
or have delivered or mailed to Fund all proxies properly
signed, all notices of meetings, all proxy statements and
other notices, requests or announcements affecting or relating
to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its
nominee to execute and deliver or mail or have delivered or
mailed such proxies or other authorizations as may be
required. Except as provided by this Agreement or pursuant to
instructions hereafter received by Custodian, neither it nor
its nominee will exercise any power inherent in any such
securities, including any power to vote the same, or execute
any proxy, power of attorney, or other similar instrument
voting any of such securities, or give any consent, approval
or waiver with respect thereto, or take any other similar
action.
Q. Disbursements. Custodian will pay or cause to be paid, insofar
as funds are available for the purpose, bills, statements and
other obligations of Fund (including but not limited to
obligations in connection with the conversion, exchange or
surrender of securities owned by Fund, interest charges,
dividend disbursements, taxes, management fees, custodian
fees, legal fees, auditors' fees, transfer agents' fees,
9
<PAGE> 10
brokerage commissions, compensation to personnel, and other
operating expenses of Fund) pursuant to instructions of Fund
setting forth the name of the person to whom payment is to be
made, the amount of the payment, and the purpose of the
payment.
R. Daily Statement of Accounts. Custodian will, within a
reasonable time, render to Fund a detailed statement of the
amounts received or paid and of securities received or
delivered for the account of Fund during each business day.
Custodian will, from time to time, upon request by Fund,
render a detailed statement of the securities and monies held
for Fund under this Agreement, and Custodian will maintain
such books and records as are necessary to enable it to do so.
Custodian will permit such persons as are authorized by Fund,
including Fund's independent public accountants, reasonable
access to such records or will provide reasonable confirmation
of the contents of such records, and if demanded, Custodian
will permit federal and state regulatory agencies to examine
the securities, books and records. Upon the written
instructions of Fund or as demanded by federal and state
regulatory agencies, Custodian will instruct any subcustodian
to permit such persons as are authorized by Fund, including
Fund's independent public accountants, reasonable access to
such records or to provide reasonable confirmation of the
contents of such records, and to permit such agencies to
examine the books, records and securities held by such
subcustodian which relate to Fund.
S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this
Agreement, all or any of the monies or securities of
Fund may be held in Custodian's own custody or in the
custody of one or more other banks or trust companies
acting as subcustodians as may be selected by
Custodian. Any such subcustodian selected by the
Custodian must have the qualifications required for a
custodian under the 1940 Act, as amended. Custodian
shall be responsible to the Fund for any loss, damage
or expense suffered or incurred by the Fund resulting
from the actions or omissions of any subcustodians
selected and appointed by Custodian (except
subcustodians appointed at the request of Fund and as
provided in Subsection 2 below) to the same extent
Custodian would be responsible to the Fund under
Section 5. of this Agreement if it committed the act
or omission itself. Upon request of the Fund,
Custodian shall be willing to contract with other
subcustodians reasonably acceptable to the Custodian
for purposes of (i) effecting third-party repurchase
transactions with banks, brokers, dealers, or other
entities through the use of a common custodian or
subcustodian, or (ii) providing depository and
clearing agency services with respect to certain
variable rate demand note securities, or (iii) for
other reasonable purposes specified by Fund;
provided, however, that the Custodian shall be
responsible to the Fund for any loss, damage or
expense suffered or incurred by the Fund resulting
from the actions or omissions of any such
subcustodian only to the same extent such
10
<PAGE> 11
subcustodian is responsible to the Custodian. The
Fund shall be entitled to review the Custodian's
contracts with any such subcustodians appointed at
the request of Fund. Custodian shall be responsible
to the Fund for any loss, damage or expense suffered
or incurred by the Fund resulting from the actions or
omissions of any Depository only to the same extent
such Depository is responsible to Custodian.
2. Notwithstanding any other provisions of this
Agreement, Fund's foreign securities (as defined in
Rule 17f-5(c)(1) under the 1940 Act) and Fund's cash
or cash equivalents, in amounts deemed by the Fund to
be reasonably necessary to effect Fund's foreign
securities transactions, may be held in the custody
of one or more banks or trust companies acting as
subcustodians, and thereafter, pursuant to a written
contract or contracts as approved by Fund's Board of
Directors, may be transferred to accounts maintained
by any such subcustodians with eligible foreign
custodians, as defined in Rule 17f-5(c)(2). Custodian
shall be responsible to the Fund for any loss, damage
or expense suffered or incurred by the Fund resulting
from the actions or omissions of any foreign
subcustodians or a domestic subcustodian contracting
with such foreign subcustodians only to the same
extent such domestic subcustodian is responsible to
the Custodian.
T. Accounts and Records Property of Fund. Custodian acknowledges
that all of the accounts and records maintained by Custodian
pursuant to this Agreement are the property of Fund, and will
be made available to Fund for inspection or reproduction
within a reasonable period of time, upon demand. Custodian
will assist Fund's independent auditors, or upon approval of
Fund, or upon demand, any regulatory body, in any requested
review of Fund's accounts and records but shall be reimbursed
by Fund for all expenses and employee time invested in any
such review outside of routine and normal periodic reviews.
Upon receipt from Fund of the necessary information or
instructions, Custodian will supply information from the books
and records it maintains for Fund that Fund needs for tax
returns, questionnaires, periodic reports to shareholders and
such other reports and information requests as Fund and
Custodian shall agree upon from time to time.
U. Adoption of Procedures. Custodian and Fund may from time to
time adopt procedures as they agree upon, and Custodian may
conclusively assume that no procedure approved or directed by
Fund or its accountants or other advisors conflicts with or
violates any requirements of its prospectus, articles of
incorporation, bylaws, any applicable law, rule or regulation,
or any order, decree or agreement by which Fund may be bound.
Fund will be responsible to notify Custodian of any changes in
statutes, regulations, rules, requirements or policies which
might necessitate changes in Custodian's responsibilities or
procedures.
11
<PAGE> 12
V. Advances. In the event Custodian or any subcustodian shall, in
its sole discretion, advance cash or securities for any
purpose (including but not limited to securities settlements,
purchase or sale of foreign exchange or foreign exchange
contracts and assumed settlement) for the benefit of any
Portfolio, the advance shall be payable by the Fund to
Custodian upon demand. Any such cash advance shall be subject
to an overdraft charge at the rate set forth in the
then-current Fee Schedule from the date advanced until the
date repaid. Fund hereby grants Custodian and such
subcustodian a lien on and security interest in all property
at any time held for the account of the applicable Portfolio,
including without limitation all assets acquired with the
amount advanced. Should the Fund fail to promptly repay the
advance, the Custodian and such subcustodian shall be entitled
to utilize available cash and to dispose of such Portfolio's
assets pursuant to applicable law to the extent necessary to
obtain reimbursement of the amount advanced and any related
overdraft charges.
W. Exercise of Rights; Tender Offers . Upon receipt of
instructions, the Custodian shall: (a) deliver warrants, puts,
calls, rights or similar securities to the issuer or trustee
thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new securities,
cash or other assets, if any, are to be delivered to the
Custodian; and (b) deposit securities upon invitations for
tenders thereof, provided that the consideration for such
securities is to be paid or delivered to the Custodian or the
tendered securities are to be returned to the Custodian.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means written
(including telecopied or telexed) or oral instructions which
Custodian reasonably believes were given by a designated
representative of Fund. Fund shall deliver to Custodian, prior
to delivery of any assets to Custodian and thereafter from
time to time as changes therein are necessary, written
instructions naming one or more designated representatives to
give instructions in the name and on behalf of Fund, which
instructions may be received and accepted by Custodian as
conclusive evidence of the authority of any designated
representative to act for Fund and may be considered to be in
full force and effect (and Custodian will be fully protected
in acting in reliance thereon) until receipt by Custodian of
notice to the contrary. Unless such written instructions
delegating authority to any person to give instructions
specifically limit such authority to specific matters or
require that the approval of anyone else will first have been
obtained, Custodian will be under no obligation to inquire
into the right of such person, acting alone, to give any
instructions whatsoever which Custodian may receive from such
person. If Fund fails to provide Custodian any such
instructions naming designated representatives, any
instructions received by Custodian from a person reasonably
believed to be an appropriate representative of Fund shall
constitute valid and proper instructions hereunder.
12
<PAGE> 13
B. No later than the next business day immediately following each
oral instruction, Fund will send Custodian written
confirmation of such oral instruction. At Custodian's sole
discretion, Custodian may record on tape, or otherwise, any
oral instruction whether given in person or via telephone,
each such recording identifying the parties, the date and the
time of the beginning and ending of such oral instruction.
5. LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall at all times use reasonable care and due
diligence and act in good faith in performing its duties under
this Agreement. Custodian shall not be responsible for, and
the Fund shall indemnify and hold Custodian harmless from and
against, any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liability which may be asserted
against Custodian, incurred by Custodian or for which
Custodian may be held to be liable, arising out of or
attributable to:
1. All actions taken by Custodian pursuant to this
Agreement or any instructions provided to it
hereunder, provided that Custodian has acted in good
faith and with due diligence and reasonable care; and
2. The Fund's refusal or failure to comply with the
terms of this Agreement (including without limitation
the Fund's failure to pay or reimburse Custodian
under this indemnification provision), the Fund's
negligence or willful misconduct, or the failure of
any representation or warranty of the Fund hereunder
to be and remain true and correct in all respects at
all times.
B. Custodian may request and obtain at the expense of Fund the
advice and opinion of counsel for Fund or of its own counsel
with respect to questions or matters of law, and it shall be
without liability to Fund for any action taken or omitted by
it in good faith, in conformity with such advice or opinion.
If Custodian reasonably believes that it could not prudently
act according to the instructions of the Fund or the Fund's
accountants or counsel, it may in its discretion, with notice
to the Fund, not act according to such instructions.
C. Custodian may rely upon the advice and statements of Fund,
Fund's accountants and officers or other authorized
individuals, and other persons believed by it in good faith to
be expert in matters upon which they are consulted, and
Custodian shall not be liable for any actions taken, in good
faith, upon such advice and statements.
D. If Fund requests Custodian in any capacity to take any action
which involves the payment of money by Custodian, or which
might make it or its nominee liable for payment of monies or
in any other way, Custodian shall be indemnified and held
harmless by Fund against any liability on account of such
action; provided, however, that nothing herein shall obligate
Custodian to take any such action except in its sole
discretion.
13
<PAGE> 14
E. Custodian shall be protected in acting as custodian hereunder
upon any instructions, advice, notice, request, consent,
certificate or other instrument or paper appearing to it to be
genuine and to have been properly executed and shall be
entitled to receive upon request as conclusive proof of any
fact or matter required to be ascertained from Fund hereunder
a certificate signed by an officer or designated
representative of Fund.
F. Custodian shall be under no duty or obligation to inquire
into, and shall not be liable for:
1. The validity of the issue of any securities purchased
by or for Fund, the legality of the purchase of any
securities or foreign currency positions or evidence
of ownership required by Fund to be received by
Custodian, or the propriety of the decision to
purchase or amount paid therefor;
2. The legality of the sale of any securities or foreign
currency positions by or for Fund, or the propriety
of the amount for which the same are sold;
3. The legality of the issue or sale of any Fund Shares,
or the sufficiency of the amount to be received
therefor;
4. The legality of the repurchase or redemption of any
Fund Shares, or the propriety of the amount to be
paid therefor; or
5. The legality of the declaration of any dividend by
Fund, or the legality of the issue of any Fund Shares
in payment of any stock dividend.
G. Custodian shall not be liable for, or considered to be
Custodian of, any money represented by any check, draft, wire
transfer, clearinghouse funds, uncollected funds, or
instrument for the payment of money to be received by it on
behalf of Fund until Custodian actually receives such money;
provided, however, that it shall advise Fund promptly if it
fails to receive any such money in the ordinary course of
business and shall cooperate with Fund toward the end that
such money shall be received.
H. Except as provided in Section 3.S, Custodian shall not be
responsible for loss occasioned by the acts, neglects,
defaults or insolvency of any broker, bank, trust company, or
any other person with whom Custodian may deal.
I. Custodian shall not be responsible or liable for the failure
or delay in performance of its obligations under this
Agreement, or those of any entity for which it is responsible
hereunder, arising out of or caused, directly or indirectly,
by circumstances beyond the affected entity's reasonable
control, including, without limitation: any interruption, loss
or malfunction of any utility, transportation, computer
(hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a
delay in mails; governmental or exchange
14
<PAGE> 15
action, statute, ordinance, rulings, regulations or direction;
war, strike, riot, emergency, civil disturbance, terrorism,
vandalism, explosions, labor disputes, freezes, floods, fires,
tornados, acts of God or public enemy, revolutions, or
insurrection.
J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO
THIS AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT
LIMITATION TO THE OTHER PARTY, FOR CONSEQUENTIAL, SPECIAL OR
PUNITIVE DAMAGES FOR ANY ACT OR FAILURE TO ACT UNDER ANY
PROVISION OF THIS AGREEMENT EVEN IF ADVISED OF THIS
POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder, Fund will
pay to Custodian such compensation as shall be set forth in a separate
fee schedule to be agreed to by Fund and Custodian from time to time. A
copy of the initial fee schedule is attached hereto and incorporated
herein by reference. Custodian shall also be entitled to receive, and
Fund agrees to pay to Custodian, on demand, reimbursement for (i)
Custodian's cash disbursements and reasonable out-of-pocket costs and
expenses incurred by Custodian in connection with the performance of
services hereunder and (ii) the amount of any loss, damage, liability,
advance, overdraft or expense for which it shall be entitled to
reimbursement from Fund. Custodian will be entitled to reimbursement by
the Fund for the losses, damages, liabilities, advances, overdrafts and
expenses of subcustodians only to the extent that (i) Custodian would
have been entitled to reimbursement hereunder if it had incurred the
same itself directly, and (ii) Custodian is obligated to reimburse the
subcustodian therefor. In connection with any fees or other amounts due
to Custodian as described above, Custodian shall submit its request for
payment in writing to Reich & Tang Asset Management L.P. as the Fund's
administrator (the "Administrator"). If within 30 days after such
request is submitted, Custodian shall not have received such fees or
other amounts as are due to it hereunder from the Administrator and the
Administrator has not contested in good faith such fees or other
amounts, then Custodian shall submit its request for payment in writing
directly to the Fund. If within 30 days after such request is
submitted, Custodian has not received such fees or other amounts as are
due to it hereunder and the Fund has not contested in good faith such
fees or other amounts, then Custodian may charge such fees and amounts
due, including reasonable attorneys fees incurred in connection with
the collection of fees, against monies held by it for the account of
Fund.
7. TERM AND TERMINATION. The initial term of this Agreement shall be for a
period of one (1) year. Thereafter, either party to this Agreement may
terminate the same by notice in writing, delivered or mailed, postage
prepaid, to the other party hereto and received not less than ninety
(90) days prior to the date upon which such termination will take
effect. Upon termination of this Agreement, Fund will pay Custodian its
fees and compensation due hereunder and its reimbursable disbursements,
costs and expenses paid or incurred to such date and Fund shall
designate a successor custodian by notice in writing to Custodian by
the termination date. In the event no written order designating a
successor custodian has been delivered to Custodian on or before the
date when such termination becomes effective, then Custodian may, at
its option, deliver the securities, funds and properties of Fund to a
bank
15
<PAGE> 16
or trust company at the selection of Custodian, and meeting the
qualifications for custodian set forth in the 1940 Act and having not
less than Two Million Dollars ($2,000,000) aggregate capital, surplus
and undivided profits, as shown by its last published report, or apply
to a court of competent jurisdiction for the appointment of a successor
custodian or other proper relief, or take any other lawful action under
the circumstances; provided, however, that Fund shall reimburse
Custodian for its costs and expenses, including reasonable attorney's
fees, incurred in connection therewith. Custodian will, upon
termination of this Agreement and payment of all sums due to Custodian
from Fund hereunder or otherwise, deliver to the successor custodian so
specified or appointed, or as specified by the court, at Custodian's
office, all securities then held by Custodian hereunder, duly endorsed
and in form for transfer, and all funds and other properties of Fund
deposited with or held by Custodian hereunder, and Custodian will
co-operate in effecting changes in book-entries at all Depositories.
Upon delivery to a successor custodian or as specified by the court,
Custodian will have no further obligations or liabilities under this
Agreement. Thereafter such successor will be the successor custodian
under this Agreement and will be entitled to reasonable compensation
for its services. In the event that securities, funds and other
properties remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to appoint a successor
custodian, the Custodian shall be entitled to compensation as provided
in the then-current fee schedule hereunder for its services during such
period as the Custodian retains possession of such securities, funds
and other properties, and the provisions of this Agreement relating to
the duties and obligations of the Custodian shall remain in full force
and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed
to Fund at Reich & Tang, 600 Fifth Ave., New York City, New York 10020,
c/o B.N. Finn, or at such other address as Fund may have designated to
Custodian in writing, will be deemed to have been properly given to
Fund hereunder; and notices, requests, instructions and other writings
addressed to Custodian at its offices at 127 West 10th Street, Kansas
City, Missouri 64105, Attention: Custody Department, or to such other
address as it may have designated to Fund in writing, will be deemed to
have been properly given to Custodian hereunder.
9. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:
A. Each Portfolio shall be regarded for all purposes hereunder as
a separate party apart from each other Portfolio. Unless the
context otherwise requires, with respect to every transaction
covered by this Agreement, every reference herein to the Fund
shall be deemed to relate solely to the particular Portfolio
to which such transaction relates. Under no circumstances
shall the rights, obligations or remedies with respect to a
particular Portfolio constitute a right, obligation or remedy
applicable to any other Portfolio. The use of this single
document to memorialize the separate agreement of each
Portfolio is understood to be for clerical convenience only
and shall not constitute any basis for joining the Portfolios
for any reason.
16
<PAGE> 17
B. Additional Portfolios may be added to this Agreement, provided
that Custodian consents to such addition. Rates or charges for
each additional Portfolio shall be as agreed upon by Custodian
and Fund in writing.
10. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights
and liabilities of the parties hereto shall be governed by,
the laws of the State of Missouri, without reference to the
choice of laws principles thereof.
B. All terms and provisions of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted
assigns.
C. The representations and warranties and the indemnifications
extended hereunder are intended to and shall continue after
and survive the expiration, termination or cancellation of
this Agreement.
D. No provisions of the Agreement may be amended or modified in
any manner except by a written agreement properly authorized
and executed by each party hereto.
E. The failure of either party to insist upon the performance of
any terms or conditions of this Agreement or to enforce any
rights resulting from any breach of any of the terms or
conditions of this Agreement, including the payment of
damages, shall not be construed as a continuing or permanent
waiver of any such terms, conditions, rights or privileges,
but the same shall continue and remain in full force and
effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder
shall be effective unless contained in a written instrument
signed by the party sought to be charged.
F. The captions in the Agreement are included for convenience of
reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
G. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
H. If any part, term or provision of this Agreement is determined
by the courts or any regulatory authority to be illegal, in
conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not be
affected, and the rights and obligations of the parties shall
be construed and enforced as if the Agreement did not contain
the particular part, term or provision held to be illegal or
invalid.
17
<PAGE> 18
I. This Agreement may not be assigned by either party hereto
without the prior written consent of the other party.
J. Neither the execution nor performance of this Agreement shall
be deemed to create a partnership or joint venture by and
between Custodian and Fund.
K. Except as specifically provided herein, this Agreement does
not in any way affect any other agreements entered into among
the parties hereto and any actions taken or omitted by either
party hereunder shall not affect any rights or obligations of
the other party hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST THE BRADFORD FUNDS, INC.
COMPANY
By: /s/ Allen A. Strain By: /s/ Judy Abroms
-------------------------------- --------------------------------
Title: Executive Vice President Title: Vice President
----------------------------- -----------------------------
18
<PAGE> 19
EXHIBIT A
INVESTORS FIDUCIARY TRUST COMPANY
AVAILABILITY SCHEDULE BY TRANSACTION TYPE
<TABLE>
<CAPTION>
===============================================================================================================================
TRANSACTION DTC PHYSICAL FED
----------- --- -------- ---
- -------------------------------------------------------------------------------------------------------------------------------
TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE
- ---- ----------- ---------- ----------- ---------- ----------- ----------
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Calls Puts As Received C or F* As Received C or F*
- -------------------------------------------------------------------------------------------------------------------------------
Maturities As Received C or F* Mat. Date C or F* Mat. Date F
- -------------------------------------------------------------------------------------------------------------------------------
Tender Reorgs. As Received C As Received C N/A
- -------------------------------------------------------------------------------------------------------------------------------
Dividends Paydate C Paydate C N/A
- -------------------------------------------------------------------------------------------------------------------------------
Floating Rate Int. Paydate C Paydate C N/A
- -------------------------------------------------------------------------------------------------------------------------------
Floating Rate Int. N/A As Rate Received C N/A
(No Rate)
- -------------------------------------------------------------------------------------------------------------------------------
Mtg. Backed P&I Paydate C Paydate + 1 Bus. C Paydate F
Day
- -------------------------------------------------------------------------------------------------------------------------------
Fixed Rate Int. Paydate C Paydate C Paydate F
- -------------------------------------------------------------------------------------------------------------------------------
Euroclear N/A C Paydate C
===============================================================================================================================
</TABLE>
Legend
C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
Availability based on how received.
19
<PAGE> 20
EXHIBIT B -- FUNDS TRANSFER OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: Custodian ("IFTC") is authorized to promptly debit
Fund's ("Client's") account(s) upon the receipt of a payment order in
compliance with any of the Security Procedures chosen by the Client, from those
offered on the attached selection form (and any updated selection forms
hereafter executed by the Client), for funds transfers and in the amount of
money that IFTC has been instructed to transfer. IFTC is hereby instructed to
accept funds transfer instructions only via the delivery methods and Security
Procedures indicated on the attached selection form (and any updated executed
by the Client). The Client agrees that the Security Procedures are reasonable
and adequate for its wire transfer transactions and agrees to be bound by any
payment orders, amendments and cancellations, whether or not authorized, issued
in its name and accepted by IFTC after being confirmed by any of the selected
Security Procedures. The Client also agrees to be bound by any other valid and
authorized payment order accepted by IFTC. IFTC shall execute payment orders in
compliance with the selected Security Procedures and with the
Client's/Investment Manager's instructions on the execution date provided that
such payment order is received by the customary deadline for processing such a
request, unless the payment order specifies a later time. IFTC will use
reasonable efforts to execute on the execution date payment orders received
after the customary deadline, but if it is unable to execute any such payment
order on the execution date, such payment order will be deemed to have been
received on the next business day.
2. SECURITY PROCEDURES: The Client acknowledges that the selected Security
Procedures were selected by the Client from Security Procedures offered by
IFTC. The Client shall restrict access to confidential information relating to
the Security Procedures to authorized persons as communicated in writing to
IFTC. The Client must notify IFTC immediately if it has reason to believe
unauthorized persons may have obtained access to such information or of any
change in the Client's authorized personnel. IFTC shall verify the authenticity
of all instructions according to the selected Security Procedures.
3. ACCOUNT NUMBERS: IFTC shall process all payment orders on the basis of the
account number contained in the payment order. In the event of a discrepancy
between any name indicated on the payment order and the account number, the
account number shall take precedence and govern. Financial institutions that
receive payment orders initiated by IFTC at the instruction of the Client may
also process payment orders on the basis of account numbers, regardless of any
name included in the payment order. IFTC will also rely on any financial
institution identification numbers included in any payment order, regardless of
any financial institution name included in the payment order.
4. REJECTION: IFTC reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance
in the account to be charged at the time of IFTC's receipt of such payment
order; (b) if initiating such payment order would cause IFTC, in IFTC's sole
judgment, to exceed any applicable volume, aggregate dollar, network, time,
credit or similar limits upon wire transfer; or (c) if IFTC, in good faith, is
unable to satisfy itself that the transaction has been properly authorized.
<PAGE> 21
5. CANCELLATION OR AMENDMENT: IFTC shall use reasonable efforts to act on all
authorized requests to cancel or amend payment orders received in compliance
with the selected Security Procedures provided that such requests are received
in sufficient time to afford IFTC a reasonable opportunity to act prior to
executing the payment order. However, IFTC assumes no liability if the request
for amendment or cancellation cannot be satisfied by IFTC's reasonable efforts.
6. ERRORS: IFTC shall assume no responsibility for failure to detect any
erroneous payment order provided that IFTC complies with the payment order
instructions as received and IFTC complies with the selected Security
Procedures. The Security Procedures are established for the purpose of
authenticating payment orders only and not for the detection of errors in
payment orders.
7. INTEREST AND LIABILITY LIMITS: IFTC shall assume no responsibility for lost
interest with respect to the refundable amount of any unauthorized payment
order, unless IFTC is notified of the unauthorized payment order within thirty
(30) days of notification by IFTC of the acceptance of such payment order. In
no event (including but not limited to failure to execute a payment order)
shall IFTC be liable for special, indirect or consequential damages, even if
advised of the possibility of such damages.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS: When
the Client initiates or receives ACH credit and debit entries pursuant to
these Guidelines and the rules of the National Automated Clearing House
Association and the Mid-America Payment Exchange or other similar body, IFTC or
its agent will act as an Originating Depository Financial Institution and/or
Receiving Depository Financial Institution, as the case may be, with respect to
such entries. Credits given with respect to an ACH credit entry are
provisional until final settlement for such entry is received from the Federal
Reserve Bank. If such final settlement is not received, the Client agrees to
promptly refund the amount credited to the Client in connection with such
entry, and the party making payment to the Client via such entry shall not be
deemed to have paid the amount of the entry.
9. CONFIRMATIONS: Confirmation of IFTC's execution of payment orders shall
ordinarily be provided within 24 hours. Notice may be delivered through IFTC's
account statements, advices, information systems, or by facsimile or callback.
The Client must report any objections to the execution of a payment order
within 30 days.
10. MISCELLANEOUS: IFTC may use the Federal Reserve System Fedwire to execute
payment orders, and any payment order carried in whole or in part through
Fedwire will be subject to applicable Federal Reserve Board rules and
regulations. IFTC and the Client agree to cooperate to attempt to recover any
funds erroneously paid to wrong parties, regardless of any fault of IFTC or the
Client, but the party responsible for the erroneous payment shall bear all costs
and expenses incurred in trying to effect such recover. These Guidelines may
not be amended except by written agreement signed by the parties.
<PAGE> 22
SECURITY PROCEDURES SELECTION FORM
Please select one or more of the funds transfer security procedures indicated
below.
[ ] SWIFT SWIFT (Society for Worldwide Interbank Financial
Telecommunication) is a cooperative society owned and operated by member
financial institutions that provides telecommunication services for its
membership. Participation is limited to securities brokers and dealers,
clearing and depository institutions, recognized exchanges for securities,
and investment management institutions. SWIFT provides a number of
security features through encryption and authentication to protect against
unauthorized access, loss or wrong delivery of messages, transmission
errors, loss of confidentiality and fraudulent changes to messages.
Selection of this security procedure would be most appropriate for
existing SWIFT members.
[ ] REMOTE BATCH TRANSMISSION Wire transfer instructions are delivered via
Computer-to-Computer (CPU-CPU) data communications between the Client
and/or its agent and IFTC and/or its agent. Security procedures include
encryption and/or the use of a test key by those individuals authorized as
Automated Batch Verifiers or a callback procedure to those individuals.
Clients selecting this option should have an existing facility for
completing CPU-CPU transmissions. This delivery mechanism is typically
used for high-volume business such as shareholder redemptions and dividend
payments.
[X] TELEPHONE CONFIRMATION (CALL BACK) This procedure requires Clients to
designate individuals as authorized initiators and authorized verifiers.
IFTC will verify that the instruction contains the signature of an
authorized person and prior to execution of the payment order, will
contact someone other than the originator at the Client's location to
authenticate the instruction. Non-repetitive wire transfers with the
original signatures of 2 authorized persons are acceptable and do not
require a call back. Selection of this alternative is appropriate for
Clients who do not have the capability to use other security procedures.
[ ] TEST KEY Test Key confirmation will be used to verify all
non-repetitive funds transfer instructions received via facsimile or
phone. IFTC will provide test keys if this option is chosen. IFTC will
verify that the instruction contains the signature of an authorized person
and prior to execution of the payment order, will authenticate the test
key provided with the corresponding test key at IFTC. Non-repetitive wire
transfers with the original signatures of 2 authorized persons are
acceptable and do not require a test key. Selection of this alternative is
appropriate for Clients who do not have the capability to use other
security procedures.
[X] REPETITIVE WIRES For situations where funds are transferred periodically
from an existing authorized account to the same payee (destination bank
and account number) and only the date and currency amount are variable, a
repetitive wire may be implemented. Repetitive wires will be subject to a
$10 million limit. If the payment order exceeds the $10 million limit, the
instruction will be confirmed by telephone or test key prior to execution.
Repetitive wire instructions must be reconfirmed annually. Clients may
establish Repetitive Wires by following the agreed upon security
procedures for Non-Repetitive Wire Transfers as described by Telephone
Confirmation (Call Back) or Test Key. This alternative is recommended
whenever funds are frequently transferred between the same two accounts.
<PAGE> 23
[X] STANDING INSTRUCTIONS Funds are transferred by IFTC to a counter party
on the Client's established list of authorized counter parties. Only
the date and the dollar amount are variable. Clients may establish
Standby Instructions by following the agreed upon security procedures
for Non-Repetitive Wire Transfers as described by Telephone
Confirmation (Call Back) or Test Key. This option is used for
transactions that include but are not limited to Foreign Exchange
Contracts, Time Deposits and Tri-Party Repurchase Agreements.
[ ] AUTOMATED CLEARING HOUSE (ACH) IFTC or its agent receives an automated
transmission from a Client for the initiation of payment (credit) or
collection (debit) transactions through the ACH network. The
transactions contained on each transmission or tape must be
authenticated by the Client. The transmission is sent from the Client's
or its agent's system to IFTC's or its agent's system with encryption.
KEY CONTACT INFORMATION
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT
- ---------------------------------- ----------------------------------
Name Name
- ---------------------------------- ----------------------------------
Address Address
- ---------------------------------- ----------------------------------
City/State/Zip Code City/State/Zip Code
- ---------------------------------- ----------------------------------
Telephone Number Telephone Number
- ----------------------------------
Facsimile Number
- ----------------------------------
SWIFT Number
THE BRADFORD FUNDS, INC.
By: /s/ Judy Abroms
-------------------------------
Title: Vice President
----------------------------
Date: August 15, 1997
-----------------------------
<PAGE> 24
INVESTORS FIDUCIARY TRUST COMPANY
REICH & TANG FUNDS
FEE SCHEDULE
I. INVESTMENT ACCOUNTING & CUSTODY
A. Asset Based Fee (Based on the aggregate assets of all funds in the
Reich & Tang complex included under the terms of this agreement. An
allocable portion of the asset based fee is to be apportioned to the
Fund in accordance with the methodology agreed to between the Fund and
Reich & Tang Asset Management L.P.).
2.55/100 of 1% (2.55 basis points) on the first $5 billion in assets
1/100 of 1% (1 basis point) on all assets over $5 billion
(Note: Investment accounting assets will be used to determine all
charges.)
B. Transaction Fee, per transaction
Physical Delivery - $19.00
Fed Book Entry - $9.00
Fed Book Entry - Repo's - $7.00
DTC - $7.00
PTC - $12.00
GNMA Paydown - $10.00
Euroclear/CEDEL/First Chicago Clearing - $32.00
Emerging Markets - $90 - $120
C. Sweep Account Deposits
$5.00 per deposit
D. Foreign Custody Fees
16/100 of 1% (16 basis points) on all assets held in foreign securities
6/100 of 1% (6 basis points) on all assets held in
Euroclear/CEDEL/First Chicago Clearing (Excluding Daily Dollar
International which will be charged 2 basis points)
40/100 of 1% (40 basis points) on all assets held in emerging markets
(Excluding Mexico which is 22 basis points)
June 26, 1997 Page 1 of 3
<PAGE> 25
Reich & Tang Funds
Fee Schedule (continued)
E. Federal Funds Wire
See Cash Management Services Fee Schedule
F. Balance Credits
IFTC will offset fees with balance credits calculated at 75%
of the bank credit rate (see below) applied to average custody
collected cash balances for the month. Balance credits will be
applied on a fund by fund basis and can be used to offset
custody and portfolio accounting fees. Any credits in excess
of fees will be carried forward from month to month through
the end of the calendar year. For calculation purposes, IFTC
uses an actual/actual basis.
Note: The bank credit rate is the equivalent to the lesser of:
- The average 91-day Treasury Bill discount rate for the
month
or
- The average Federal Funds rate for the month less
50 basis points.
G. Overdraft Charges
Overdrafts will be calculated at the Fed Fund rate (as
published in the Wall Street Journal) and charged on a daily
basis.
H. Multi-Class Fees
There will be a $350 per month base fee for each additional
class that is added to each fund.
June 26, 1997 Page 2 of 3
<PAGE> 26
II. NOTES TO THE ABOVE FEE SCHEDULE
A. Asset based fees will be billed monthly at 1/12th of the
annual stated rate based on monthly average net assets, except
for the foreign securities premium which will be billed on
month-end market value at 1/12th of the annual stated rate.
B. The above schedule does not include out-of-pocket expenses
that would be incurred by IFTC on the client's behalf.
Examples of out-of-pocket expenses include but are not limited
to forms, postage, magnetic tapes, printing, proxy processing,
microfilm, microfiche, back-up recovery, pricing services,
overnight mailing services, FDIC insurance, foreign
registration and script fees, etc. IFTC bills out-of-pocket
expenses separately from service fees.
C. The fees stated above are exclusive of terminal equipment
required in the client's location(s) and communication line
costs.
D. Any fees or out-of-pocket expenses not paid within 30 days of
the date of the original invoice will be charged a late
payment fee of 1% per month until payment of the fees are
received by IFTC.
E. The above fee schedule is applicable for selections made and
communicated within 90 days of the date of this proposal. The
fees are guaranteed for a one year period commencing on the
effective date of the service agreement between IFTC and the
client. All changes to the fee schedule will be communicated
in writing at least 60 days not prior to their effective date.
F. The Foreign Custody Fee will be charged on all securities
that are held by a sub-custodian or depository outside of the
United States.
June 26, 1997 Page 3 of 3
<PAGE> 27
INVESTORS FIDUCIARY TRUST COMPANY
REICH & TANG FUNDS
CASH MANAGEMENT SERVICES FEE SCHEDULE
JUNE 26, 1997
<TABLE>
<CAPTION>
ITEM CHARGE
---------------------------------------------------
<S> <C>
Account Maintenance $50.00 per account/month (Capped at 7,500 per year)
Checks Cleared $0.15 per check
Deposits $0.35 per transaction
Deposited Items*
Pre-encoded
First 20,000 $0.035 per item/month
Next 20,000 $0.03 per item/month
Unencoded $0.075 per item
Internal Transfers $0.35 per transfer
Microfilming Checks $0.01 per check
Return Items $0.95 per item
Check Copies $2.50 per check
NSCC Settlement $200.00 per month
ACH Item Fee $0.07 per item
ACH File Fee $10.00 per file
Wires In/Out $4.50 per wire
Wires-Remote Input $2.00 per wire
Stop Payments $5.00 per check
Signature Verification $0.25 per check
Returning Checks to Shareholders** $0.04 per check
</TABLE>
Page 1
<PAGE> 28
FDIC Insurance *** 23 basis points on cash balances
Overdraft Charges Prime rate per Wall Street Journal
Moneynet System Charges Line charges approx. $1,700 per month
(The Moneynet System line charges are
assessed once, on a complex-wide basis.
Reich & Tang Asset Management L.P. will
allocate a portion of the charge to the
funds in the complex in a manner agreed to
between the funds and Reich & Tang Asset
Management L.P.)
IFTC will offset fees with balance credits calculated at 75% of the bank credit
rate (see below) applied to average collected cash balances for the month.
Balance credits will be applied on a fund by fund basis and can be used to
offset fees. Any credits in excess of fees will be carried forward from month
to month through the end of the calendar year. For calculation purposes, IFTC
uses an actual/actual basis.
Note: The bank credit rate is the equivalent to the lesser of:
- The average 91-day Treasury Bill discount rate for the month OR
- The average Federal Funds rate for the month less 50 basis points.
* Additional per item fees will normally be imposed for clearing through
the Federal Reserve System or a direct send to a commercial bank, and
for transportation.
** Plus Postage
*** Fluctuates based on assessment from FDIC.
Page 1
<PAGE> 1
EXHIBIT (9)(b)
ADMINISTRATIVE SERVICES AGREEMENT
THE BRADFORD FUNDS, INC.
(the "Fund")
THE BRADFORD MONEY FUND
(the "Portfolio")
August 15, 1997
Reich & Tang Asset Management L.P.
600 Fifth Avenue
New York, New York 10020
Gentlemen:
We herewith confirm our agreement with you as follows:
1. We engage in the business of investing and reinvesting our assets in
securities of the type, and in accordance with the limitations, specified
in our Articles of Incorporation, By-Laws and Registration Statement filed
with the Securities and Exchange Commission under the Investment Company
Act of 1940 (the "1940 Act") and the Securities Act of 1933, including the
Prospectus forming a part thereof (the "Registration Statement"), all as
from time to time in effect, and in such manner and to such extent as may
from time to time be authorized by our Board of Directors. We enclose
copies of the documents listed above and will furnish you such amendments
thereto as may be made from time to time.
2. (a) We hereby employ you as our administrator (the "Administrator")
to provide all management and administrative services reasonably necessary
for our operation under applicable provisions of federal and state law,
other than those services which are to be provided by the adviser (the
"Adviser") pursuant to the Investment Advisory Agreement. The services to
be provided by you shall include but not be limited to those enumerated on
Exhibit A hereto. The personnel providing these services may be your
employees or employees of your affiliates or of other organizations. The
execution of your duties hereunder is subject to the general control of our
Board of Directors and to the supervision of the Adviser. You shall also
make periodic reports to the Fund's Board of Directors and the Adviser on
the performance of your obligations under this Agreement, in the form and
content as we may reasonable request.
(b) It is understood that you will from time to time employ,
subcontract with or otherwise associate yourself with, entirely at your
expense, such persons as you believe to be particularly fitted to assist
you in the execution of your duties hereunder.
3. We will expect of you, and you will give us the benefit of, your
best judgment and efforts in rendering these services to us, and we agree
as an inducement to your undertaking these services that you will not be
liable hereunder
<PAGE> 2
for any mistake of judgment or for any other cause beyond your control,
provided that nothing herein shall protect you against any liability to us
or to our security holders by reason of willful misfeasance, bad faith or
negligence in the performance of your duties hereunder, or by reason of
your reckless disregard of your obligations and duties hereunder. It is
understood that while the Adviser has been employed to supervise and
monitor your performance in accordance with this Agreement, such employment
is not an assumption by the Adviser of your duties hereunder or of any
liability you may incur by reason of your performance hereunder.
4. In consideration of the foregoing we will pay you a fee equal to
.10 of 1% per annum of the average daily net assets of the Portfolio up to
$200 million plus .07 of 1% per annum of the average daily net assets of
the Portfolio in excess of $200 million up to $400 million plus .045 of 1%
per annum of the average daily net assets in excess of $400 million up to
$600 million plus .025 of 1% in excess of $600 million up to $700 million
plus .01 of 1% of average daily net assets in excess of $700 million. Your
fee will be accrued by us daily, and will be payable on the last day of
each calendar month for services performed hereunder during that month or
on such other schedule as you may agree in writing. You may waive your
right to any fee to which you are entitled hereunder, provided such waiver
is delivered to us in writing.
We have entered into a custody agreement directly with
Investors Fiduciary Trust Company (the "Custody Agreement"). The fee
schedule included with the Custody Agreement includes an asset based fee
for Investment Accounting & Custody services which are assessed on a
complex wide basis among all of the mutual funds sponsored or administered
by you. All of the other costs included on such fee schedule represent
individual transaction charges assessable directly to the account of the
Fund. You agree to allocate a portion of the aforementioned asset based
charge to us as follows:
1/3 of the asset based fee will be allocated to Custody services,
while the remaining 2/3 is attributable to Investment Accounting
services. The charge for custody services will be allocated to the
Portfolio in the proportion of the Portfolio's average net asset value
relative to the total average net asset value of all of the funds in
the complex. Our allocable portion of Investment Accounting services
expense will be borne by you, as such services are covered under the
provisions of this Agreement. All other charges assessable under the
fee schedule will be assessed directly to us to the extent that the
Portfolio has executed custody and/or cash management related
transactions.
In addition, you agree to pay promptly and in accordance with
the terms of the Custody Agreement any overdraft or FDIC charges billed to
us by Investors Fiduciary Trust Company pursuant to the terms of the Cash
Management Services Fee Schedule of the Custody Agreement. Notwithstanding
your agreement to pay such charges, you will not be held liable for charges
under these provisions resulting from the failure of the Fund or its
transfer agent to properly transfer funds into such cash management
account.
5. This Agreement will become effective on the date hereof and shall
continue in effect until December 31, 1998 and thereafter for successive
twelve-month periods (computed from each January 1), provided that such
continuation is specifically approved at least annually by our Board of
Directors and by a majority
<PAGE> 3
of those of our directors who are neither party to this Agreement nor,
other than by their service as directors of the corporation, interested
persons, as defined in the 1940 Act, of any such person who is party to
this Agreement. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of a majority of our outstanding voting
securities, as defined in the 1940 Act, or by a vote of a majority of our
entire Board of Directors, on sixty days' written notice to you, or by you
on sixty days' written notice to us.
6. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale,
hypothecation or pledge by you. The terms "transfer", "assignment" and
"sale" as used in this paragraph shall have the meanings ascribed thereto
by governing law and in applicable rules or regulations of the Securities
and Exchange Commission.
7. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right,
or the right of any of your officers, directors, partners or employees who
may also be a director, officer or employee of ours, or of a person
affiliated with us, as defined in the Act, to engage in any other business
or to devote time and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other corporation, firm, individual or
association.
8. This Agreement shall be construed in accordance with the laws of
the State of New York and the applicable provisions of the Investment
Company Act of 1940, as amended.
9. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed to have been given if delivered or sent by
registered or certified mail, return receipt requested, (1) to the
Administrator at 600 Fifth Avenue, New York, New York 10020, Attention:
Bernadette N. Finn or (2) to the Adviser, c/o J.C. Bradford & Co. LLC, 330
Commerce Street, Nashville, Tennessee 37201, Attention: Judy Abroms.
10. The books and records pertaining to the Fund which are in the
possession of the Administrator shall be the property of the Fund. Such
books and records shall be prepared and maintained as required by the 1940
Act and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access to such
books and records at all times during the Administrator's normal business
hours. Upon the reasonable request of the Fund, copies of any such books
and records shall be provided by the Administrator to the Fund or the
Fund's authorized representative at the Fund's expense.
11. You agree on behalf of yourself and your employees to treat
confidentially all records and other information relative to the Fund and
its prior, present or potential Shareholders and relative to the Adviser
and its prior, present or potential customers, except when, after prior
notification to and approval in writing by the Fund which approval shall
not be unreasonably withheld and may not be withheld where you may be
exposed to civil or criminal contempt proceedings for failure to comply,
you are requested to divulge such information by duly constituted
authorities, or when so requested by the Fund.
<PAGE> 4
If the foregoing is in accordance with your understanding, will you kindly
so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
THE BRADFORD FUNDS, INC.
THE BRADFORD MONEY FUND
By: /s/ Judy Abrams
---------------------------------------
ACCEPTED:
REICH & TANG ASSET MANAGEMENT L.P.
By: REICH & TANG ASSET MANAGEMENT INC., General Partner
By: /s/ Richard DeSanctis
---------------------------------------
Vice President & Treasurer
<PAGE> 5
EXHIBIT A
SERVICES OF ADMINISTRATOR/ACCOUNTING
ACCOUNTING FUNCTIONS:
Journalize the Portfolio's daily investment, capital share and income and
expense activities
Verify investment buy/sell trade tickets when received from the Advisor and
transmit trades to the Portfolio's custodian for proper settlement
Maintain individual ledgers for investment securities
Maintain historical tax lots for each security
Reconcile cash, investment balances and securities positions of the Fund and the
Portfolio with the custodian on a monthly basis, and provide the Advisor
with the beginning daily cash balance available for investment purposes
Reconcile trades with the custodian on a daily basis
Update the cash availability throughout the day as required by the Advisor
Post to and prepare the Statement of Assets and Liabilities and the Statement of
Operations for the Portfolio
Calculate various contractual expenses
Calculate daily expense accruals based upon pre-authorized budgets developed by
Fund management and Administrator and notify Fund management of any
proposed adjustments
Control and process all disbursements, including all expenses of the Portfolio,
from the Portfolio and authorize such disbursements upon instructions of an
Authorized Person
Calculate capital gains and losses
Calculate the amount of dividend distribution for the Portfolio
Calculate the net income for the Fund and the Portfolio
Obtain security prices daily from an independent pricing service approved by the
Fund
Calculate the market value of the Portfolio's investments
Transmit a copy of the Portfolio valuation to the Advisor
Compute the daily net asset value of the Portfolio
Compute the Portfolio yield, total return, expense ratios, portfolio turnover
rate and portfolio average dollar-weighted maturity
Input Fund Information nightly into NASDAQ
Calculate daily the deviation, if any, between marked-to-market and amortized
cost of the Portfolio's shares
<PAGE> 6
RECORDKEEPING AND REGULATORY FUNCTIONS:
Prepare monthly schedules for the Portfolio which will include the following
items:
Aging of Interest Payments Past Due
Summary of Capital Share Activity
Summary of Purchases, Sales & Maturities
Summary of Monthly Dividends
Summary of Gains & Losses
Calculations of Average Net Assets
Monthly Expense Summary
Internal Audit of Fund's books at month end
Prepare quarterly broker security transactions summaries
Prepare monthly security transaction listings
Supply various Portfolio statistical data as requested on an ongoing basis
Prepare for execution and file the Fund's and the Portfolio's Federal, state
and excise tax returns
Prepare and file the Portfolio's Semi-Annual Reports with the SEC on Form
N-SAR
Prepare and file with the SEC the Portfolio's annual and semi-annual reports
Assist with the preparation of registration statements on Form N-1A and other
filings relating to the registration of shares
Monitor the Fund's status as a regulated investment company under Sub-
chapter M of the Internal Revenue Code
Maintain the Fund's fidelity bond as required by the 1940 Act
Determine the amount of annual ordinary income and capital gain
distributions to Shareholders which is necessary to avoid Federal excise
tax
Prepare and file Form 24f-2 notices
Make all of the filings and take all appropriate actions necessary to maintain
and renew state registration of the Shares
Monitor the Fund's compliance with the amounts and the conditions of each
state's registration of the Shares
Keep the following records with respect to the Fund and the Portfolio:
All books and records with respect to the books of account
Records of securities transactions
Assist in year end audit with the Fund's Independent Auditors.
Prepare year end tax letters to shareholders
Prepare reports for the Board of Directors' Meetings including reports for
contract renewal and audit committee meetings.
<PAGE> 1
EXHIBIT (11)
<PAGE> 2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 11 to Registration
Statement No. 33-25137 of The Bradford Funds, Inc., The Bradford Money Fund of
our report dated January 16, 1998, appearing in the Statement of Additional
Information, which is a part of such Registration Statement, and to the
references to us under the headings "Financial Highlights" in the Prospectus and
"Miscellaneous" in the Statement of Additional Information, which are a part of
such Registration Statement.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
April 28, 1998
<PAGE> 1
EXHIBIT 14(a)
===============================================================================
IRA
RETIREMENT ACCUMULATOR
A
SELF DIRECTED
INDIVIDUAL RETIREMENT ACCOUNT
PLEASE READ THIS DISCLOSURE STATEMENT AND RETAIN IN YOUR FILES.
J.C.BRADFORD&CO.
MEMBERS NEW YORK STOCK EXCHANGE, INC. - MEMBER S.I.P.C.
===============================================================================
<PAGE> 2
J.C. BRADFORD & CO.
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT AMENDMENTS
IN AUGUST 1997, THE TAXPAYER RELIEF ACT OF 1997 (TRA-97) WAS ENACTED AND MADE
NUMEROUS CHANGES TO INDIVIDUAL RETIREMENT ACCOUNTS. AS REQUIRED BY THE INTERNAL
REVENUE SERVICE, J.C. BRADFORD & CO. HAS AMENDED ITS IRA DISCLOSURE STATEMENT TO
INCLUDE THE CHANGES BROUGHT ABOUT BY THIS LAW.
MAXIMUM CONTRIBUTION MODIFIED - The total amount you may contribute to an IRA
for any taxable year cannot exceed the lesser of $2,000 or 100 percent of your
compensation. If you also maintain a Roth IRA, the maximum contribution to your
Traditional IRAs (i.e. IRAs subject to Internal Revenue Code (IRC) Sections
408(a) and 408(b)) is reduced by any contributions you make to your Roth IRA.
Your total annual contribution to all Traditional IRAs and Roth IRAs cannot
exceed the lesser of $2,000 or 100 percent of your compensation.
PERMISSIBLE IRA INVESTMENTS EXPANDED - You may not invest the assets of your IRA
in collectibles (within the meaning of the Internal Revenue Code (IRC) Section
408(m)). A collectible is defined as any work of art, rug or antique, metal or
gem, stamp or coin, alcoholic beverage, or any other tangible personal property
specified by the Internal Revenue Service. However, specially minted United
States gold and silver bullion coins and certain state-issued coins are
permissible investments. Beginning January 1, 1998, platinum coins and certain
gold, silver, platinum or palladium bullion (as described in IRC Section
408(m)(3)) are also permitted as IRA investments.
IRA DEDUCTIBILITY CHANGES - If you have not yet reached the year in which you
attain age 70 1/2 and have earned income from services rendered, you may make an
IRA contribution of the lesser of 100 percent of compensation or $2,000.
However, the amount of the contribution for which you may take a tax deduction
will depend upon whether you (or, in some cases, your spouse) are an active
participant in an employer-maintained retirement plan. If you are not an active
participant, your IRA contribution will be totally deductible. If you are an
active participant, the deductibility of your contribution will depend on your
modified adjusted gross income (MAGI) for the tax year for which the
contribution was made. MAGI is determined on your tax return using your adjusted
gross income but disregarding any deductible IRA contribution.
DEFINITION OF ACTIVE PARTICIPANT - Generally, you will be an active participant
if you are covered by one or more of the following employer-maintained
retirement plans:
1. a qualified pension, profit sharing, 401(k), or stock bonus plan;
2. a qualified annuity plan of an employer;
3. a simplified employee pension (SEP) plan;
4. a retirement plan established by the Federal government, a State, or a
political subdivision (except certain unfunded deferred compensation
plans under IRC Section 457);
5. a tax sheltered annuity for employees of certain tax-exempt
organization or public schools;
6. a plan meeting the requirements of IRC Section 501(c)(18);
7. a qualified plan for self-employed individuals (H.R. 10 or Keogh Plan);
and
8. a SIMPLE IRA plan or a SIMPLE 401(k) plan.
If you do not know whether your employer maintains one of these plans or whether
you are an active participant in it, check with your employer and your tax
advisor. Also, the Form W-2 (Wage and Tax Statement) that you receive at the end
of the year from your employer will indicate whether you are an active
participant.
If you are an active participant and are single, the deductible amount of your
contribution is determined as follows: (1) take the Phase-out Maximum for the
applicable year (specified below) and subtract your MAGI, (2) multiply the
difference by .2. For example, if your 1998 MAGI is $35,000, your maximum
deductible contribution is $1,000 (the 1998 Phase-out Maximum of $40,000 minus
your MAGI of $35,000, multiplied by .2). You must round the resulting number to
the next highest $10 if the number is not a multiple of 10.
If you are an active participant, are married and you file a joint tax return,
the deductible amount of your contributions is determined as follows: (1) take
the Phase-out Maximum for the applicable year (specified below) and subtract
your MAGI, (2) multiply the difference by .2. (Multiply the difference between
the Phase-out Maximum and your MAGI by .1 beginning in 2007.) For example, if
your MAGI in 1998 is $55,000, your maximum deductible contribution is $1,000:
[($60,000 minus $55,000) multiplied by .2]. You must round the resulting number
to the next highest $10 if the number is not a multiple of 10.
<TABLE>
<CAPTION>
JOINT FILERS SINGLE TAXPAYERS
TAX YEAR PHASE-OUT MAXIMUM PHASE-OUT MAXIMUM
<S> <C> <C>
1997 $ 50,000 $35,000
1998 $ 60,000 $40,000
1999 $ 61,000 $41,000
2000 $ 62,000 $42,000
2001 $ 63,000 $43,000
2002 $ 64,000 $44,000
2003 $ 70,000 $50,000
2004 $ 75,000 $55,000
2005 $ 80,000 $60,000
2006 $ 85,000 $60,000
2007 $100,000 $60,000
</TABLE>
<PAGE> 3
If you are married filing jointly and are not an active participant in an
employer-maintained retirement plan, but are married to someone who is an
active participant, your maximum deductible contribution is determined by
taking $160,000 minus your MAGI and multiplying the result by .2 (subject to
the maximum combined annual contribution limit for Traditional and Roth IRAs
of the lesser of $2,000 or 100% of earned income).
TRADITIONAL IRA TO ROTH IRA ROLLOVERS - If your adjusted gross income is not
more than $100,000, you are eligible to roll over (or convert) all or any
portion of your existing Traditional IRA(s) into your Roth IRA(s). The amount
of the rollover from your Traditional IRA to your Roth IRA shall be treated
as a distribution for income tax purposes and is includible in your gross
income (except for any nondeductible contributions). Although the rollover
amount is generally included in income, the 10 percent early distribution
penalty shall not apply to rollovers or conversions from a Traditional IRA to
a Roth IRA, regardless of whether you qualify for any exceptions to the 10%
penalty.
If you roll over assets from your Traditional IRA to your Roth IRA prior to
January 1, 1999, you may spread the amount of the distributions which must be
included in your gross income ratably over a four year period beginning with
the year in which the payment or distribution is made.
NEW EXCEPTIONS TO 10 PERCENT EARLY DISTRIBUTION PENALTY - If you are under
age 59 1/2 and receive an IRA distribution, an additional tax of 10 percent
will apply, unless made on account of death, disability, a qualifying
rollover, a direct transfer, the timely withdrawal of an excess contribution;
or if the distribution is part of a series of substantially equal period
payments (at least annual payments) made over your life expectancy or the
joint life expectancy of you and your beneficiary. Payments made to pay
medical expenses which exceed 7.5 percent of your adjusted gross income and
distributions to pay for health insurance by an individual who has separated
from employment and who has received unemployment compensation under a
federal or state program for at least 12 weeks are also exempt from the 10
percent tax. Beginning January 1, 1998, payments to cover certain qualified
education expenses and distributions for first-home purchases (up to a
life-time maximum of $10,000) are exempt from the 10 percent tax. This
additional tax will apply only to the portion of a distribution which is
includible in your income.
REPEAL OF EXCESS DISTRIBUTION PENALTY - Prior to 1997, you would have been
taxed an additional 15 percent on any amount received and included in income
during a calendar year from qualified retirement plans, tax-sheltered
annuities and IRAs which exceeded $112,500 (indexed each year for the cost of
living). Certain exceptions applied. If you received an excess distribution
as described above, your tax advisor could determine if these exceptions
applied to you. This tax is referred to as an excess distribution penalty.
However, this tax is repealed effective for all payouts received after
December 31, 1996, as a result of the Taxpayer Relief Act of 1997.
REPEAL OF EXCESS RETIREMENT ACCUMULATION PENALTY - In the past, your estate
would have paid additional federal estate tax if you died with an excess
retirement accumulation. An excess retirement accumulation existed if, at the
time of your death, the value of all of your interests in qualified plans,
tax-sheltered annuities and IRAs exceeded the present value of an annuity
with annual payments of $112,500 (indexed each year for the cost of living),
payable over your life expectancy immediately before your death. This tax was
referred to as an excess retirement accumulation tax penalty. However, this
tax is repealed for estates of decedents dying after December 31, 1996, as a
result of the Taxpayer Relief Act of 1997.
IN AUGUST 1996, TWO LAWS WERE ENACTED THAT AFFECTED IRA RULES: THE SMALL
BUSINESS JOB PROTECTION ACT (PUBLIC LAW 104-188) AND HEALTH INSURANCE
PORTABILITY AND ACCOUNTABILITY ACT OF 1996 (PUBLIC LAW 104-191). AS REQUIRED BY
THE INTERNAL REVENUE SERVICE, J. C. BRADFORD & CO. HAS AMENDED ITS IRA
DISCLOSURE STATEMENT TO INCLUDE THE CHANGES BROUGHT ABOUT BY THESE LAWS.
INCREASED SPOUSAL IRA CONTRIBUTION LIMITS - If you are married, you may make
payments to an IRA established for the benefit of your spouse. Your spouse must
not have attained age 70 1/2 in that year, or any prior year, even if you are
age 70 1/2 or older. You must file a joint tax return for the year which the
contribution is made.
The amount you may contribute to your IRA and your spouse's IRA is the lesser of
$4,000 or 100% of your combined compensation. However, you may not contribute
more that $2,000 to any one IRA.
CHANGES TO IRA DEDUCTIBILITY - If you have not yet reached the year in which you
attain age 70 1/2 and have earned income from services rendered, you may make an
IRA contribution of the lesser of 100% of compensation or $2,000. However, the
amount of the contribution for which you may take a tax deduction will depend
upon whether you (or your spouse) are an active participant in an
employer-maintained retirement plan. If you (and your spouse) are not an active
participant, your IRA contribution will be totally
<PAGE> 4
deductible. If you (or your spouse) are an active participant, the deductibility
of your contribution will depend on your adjusted gross income (AGI) for the tax
year for which the contribution was made. AGI is determined on your tax return
(disregarding any deductible IRA contribution).
Definition of Active Participant - Generally, you will be an active participant
if you are covered by one or more of the following employer-maintained
retirement plans:
1. a qualified pension, profit sharing, 401(k) or stock bonus plan;
2. a qualified annuity plan of an employer;
3. a simplified employee pension (SEP) plan;
4. a retirement plan established by the Federal government, a State, or a
political subdivision (except certain unfunded deferred compensation
plans under IRC Section 457);
5. a tax sheltered annuity for employees of certain tax-exempt
organizations or public schools;
6. a qualified plan for self-employed individuals (H.R. 10 or Keogh Plan);
and
7. a SIMPLE Retirement Account (SRA) or a SIMPLE 401(k) Plan.
If you do not know whether your employer maintains one of these plans or whether
you are an active participant in it, check with your employer and your tax
advisor. Also, the Form W-2 (Wage and Tax Statement) that you receive at the end
of the year from your employer will indicate whether you are an active
participant.
If you are single, your threshold AGI level is $25,000. The threshold level if
you are married and file a joint tax return is $40,000, and if you are married
but file a separate tax return, the threshold level is $0. If your AGI is less
than $10,000 above your threshold level, you will still be able to make a
deductible contribution but it may be limited in amount (but never less than
$200).
The deductible amount of your contribution is determined by taking your
threshold AGI level plus $10,000 (e.g. $50,000 if you are married and filing
jointly, $35,000 if you are single) and subtracting from it your AGI (determined
prior to taking your itemized deductions). Multiply the resulting number by .2
to give you your personal deduction limit. You must round up the resulting
number to the next highest $10 if the number is not a multiple of 10.
TEMPORARY SUSPENSION OF EXCESS DISTRIBUTION PENALTY FOR 1997, 1998 AND 1999 -
You will be taxed an additional 15% on any amount received and included in
income during a calendar year from qualified retirement plans, tax-sheltered
annuities and IRAs which exceed $112,500 (indexed each year for the cost of
living). Certain exceptions may apply. If you receive an excess distribution as
described above, you should see your tax advisor to determine if these
exceptions apply to you. This tax is referred to as an excess distribution
penalty. However, this penalty is suspended for payments received during 1997,
1998 and 1999 as a result of the Small Business Job Protection Act of 1996.
ADDITIONAL EARLY DISTRIBUTION PENALTY EXCEPTIONS - Beginning January 1997,
payments made to pay medical expenses which exceed 7.5% of your adjusted gross
income and distributions to pay insurance by an individual who has separated
from employment and who has received unemployment compensation under federal or
state program for at least 12 weeks are exempt from the 10% tax which generally
applies to distributions taken before you reach age 59 1/2.
ADDITIONAL ROLLOVER OPTION - Beginning January 1, 1997, certain employers will
be permitted to establish SIMPLE Retirement Plans. These plans are funded
through SIMPLE Retirement Accounts (SRAs). You may roll funds from an SRA to
your regular IRA provided two years have passed since you first participated in
your employer's SIMPLE salary reduction arrangement.
<PAGE> 5
J. C. BRADFORD & CO.
INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT
The following disclosure statement is provided to you in accordance with the
Internal Revenue Code. It should be reviewed along with the Custodial Account
Adoption Agreement, Custodial Account Agreement and Explanation of Fees. The
information provided below reflects the provisions of the Internal Revenue Code
as are effective January 1, 1997.
(A) RIGHT OF DEPOSITOR TO REVOKE WITHIN SEVEN DAYS
Within seven (7) days after the date Depositor signs the Custodial Account
Adoption Agreement, thereby acknowledging receipt of the Disclosure Statement,
the Depositor shall have the right to revoke the Adoption Agreement. Such
notification of revocation shall be in writing (specifically stating the
Depositor's intention to revoke). Oral revocation is not permitted. The written
notification of revocation shall be mailed or hand delivered to the Retirement
Services Department, J. C. Bradford & Co., 330 Commerce Street, Nashville,
Tennessee, 37201 on or before the end of the seven-day period. In the event the
written notification is mailed, it shall be deemed mailed on the date of the
postmark, or if sent by certified or registered mail, it shall be deemed to be
mailed as of the date of certification or registration. If mailed, the written
notice of revocation shall be mailed in the United States in an envelope, or
other appropriate wrapper, and it shall be mailed by first class mail with the
postage prepaid and properly addressed. Notification mailed or delivered after
the seven-day period will be considered null and void, and will not cause an
effective revocation. The phone number of the Retirement Services Department of
J. C. Bradford & Co. is (615) 748-9434. The Custodian shall execute any
investment directions of the Depositor during the seven (7) day revocation
period.
(B) INTERNAL REVENUE CODE REQUIREMENTS WITH RESPECT TO YOUR CUSTODIAL
ACCOUNT
The Internal Revenue Code of 1986 (hereinafter referred to as the "Code")
defines an Individual Retirement Account as a trust or custodial account
(hereinafter referred to as the "Account") maintained for the exclusive benefit
of the Depositor or his beneficiaries pursuant to a written instrument, which
contains the following provisions:
(1) Except in the case of rollover contributions (described
below), contributions must be in cash and no contribution will
be accepted in excess of $2,000 (or such limit as may be
prescribed by law).
(2) The Custodian must be a bank or other organization, such as J.
C. Bradford & Co., which has been qualified by the Internal
Revenue Service to serve as trustee or custodian.
(3) No portion of the funds in the account may be invested in life
insurance contracts or collectibles.
(4) The interest of a Depositor in his account is nonforfeitable.
(5) The assets of the account will not be commingled with other
property except in a common trust fund or common investment
fund (within the meaning of Section 408(a)(5) of the Code).
(6) Distributions may begin when the Depositor reaches age 59 1/2
; however, distributions must begin on or before the first day
of April following the calendar year in which the Depositor
attains age 70 1/2 ("required beginning date"). A Depositor
who becomes disabled may elect to receive distributions
without regard to age. Upon reaching the required beginning
date, distribution must be made in a single sum payment, or in
equal or substantially equal monthly, quarterly or annual
payments over a specified period that may not be longer than
the Depositor's life expectancy or in equal or substantially
equal monthly, quarterly or annual payments over a specified
period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his designated
beneficiary. Life expectancy
1
<PAGE> 6
is calculated based upon Treasury regulation tables. Even if
payments based on life expectancy have begun, the Depositor
may give written notice to the Custodian to receive a
distribution of the balance of the account. However, the
Depositor must give written notice to the Custodian not more
than 30 days and not less than 7 days prior to the date a
minimum distribution is required.
(7) If the Depositor dies on or after his required beginning date
and distribution of his interest has begun, then the remaining
portion of such interest will continue to be distributed under
the method being used prior to the Depositor's death. If the
Depositor dies before distribution of his interest commences,
then the entire account will be distributed at the election of
the beneficiary or beneficiaries in accordance with one of the
following:
(a) The entire account will be paid by December 31 of the
year in which the fifth anniversary of the
Depositor's death occurs.
(b) If the Depositor's account is payable to a designated
beneficiary who is an individual, the account will be
distributed in equal or substantially equal payments
over the life or life expectancy of the designated
beneficiary or beneficiaries. If the spouse of the
Depositor is not the beneficiary, payment must begin
by the December 31 of the year following the
Depositor's death. If the spouse is the beneficiary,
then payments shall begin prior to the date on which
the deceased Depositor would have attained age 70
1/2. The beneficiary (including the spouse) may at
any time elect to receive greater payments.
The election of either (a) or (b) must be made by the
December 31 following the year of the Depositor's
death. If the beneficiary or beneficiaries do not
elect either (a) or (b), then distribution will be
made in accordance with (b) if the beneficiary is the
spouse of the Depositor, or (a) if the beneficiary or
beneficiaries are or include anyone other than the
spouse.
(8) If the spouse of the Depositor is the designated beneficiary,
and if the entire account is paid in a single sum, the spouse
can rollover all or part of the payment to the spouse's IRA
provided the rollover is made within 60 days of receipt of
payment. In such a case the surviving spouse would not have to
begin receiving distributions from the IRA until Age 70 1/2 .
However, distributions prior to 59 1/2 would generally be
subject to the 10% premature distribution penalty.
(9) If the spouse of the Depositor is the designated beneficiary,
then the spouse may elect to maintain the account as her own
account. The surviving spouse shall be deemed to have elected
to maintain the account as her own if the spouse fails to
elect either (a) or (b) above or the spouse makes additional
contributions to the account. If the spouse dies prior to
receiving distributions from the Depositor's IRA,
distributions must be made under the rules applicable as if
the spouse were the Depositor.
(10) If the designated beneficiary is a trust for the Depositor's
surviving spouse and a qualified terminal interest property
marital deduction for federal estate tax purposes is allowable
with respect to the distributions from the custodial account
payable to such trust, then the distributions required above
will be increased, if necessary, to assure that all of the
annual income of the account is distributed at least annually
to the trust. Furthermore, all administrative charges and
expenses of the account shall be charged to principal and
shall not reduce the annual income of the account. The trustee
of the trust shall have the right to request immediate payment
of any part or all of the custodial account in order to
satisfy any request by the surviving spouse to convert
unproductive property into productive property or in order to
make withdrawals in excess of the minimum required
distributions. The provisions of this subparagraph are subject
to the applicable minimum distribution requirements. The
Depositor shall be responsible for completing an appropriate
Beneficiary designation to carry out the provisions of this
subparagraph (10).
2
<PAGE> 7
(11) If the Depositor dies before his account balance has been
distributed to him, and the beneficiary is other than the
surviving spouse, no additional cash contributions or rollover
contributions may be accepted by the Custodian. Further, the
IRA may not be rolled over to another IRA or qualified plan.
(C) INCOME TAX CONSEQUENCES OF ESTABLISHING AN ACCOUNT
(1) LIMITATIONS AND RESTRICTIONS ON TAX DEDUCTION
(a) A Depositor can contribute for each tax year the
lesser of 100% of compensation or $2,000. The
Depositor's income tax deduction may be reduced or
eliminated as provided below.
(b) If neither the Depositor, nor his spouse, is an
active participant in an employer sponsored
retirement plan, the Depositor may make a
contribution of up to the lesser of $2,000 (or $2,250
in the case of a spousal IRA) or 100% of compensation
and take a deduction for the entire amount
contributed. If the Depositor is an active
participant but has an adjusted gross income (AGI)
below a certain level, the Depositor may make a
deductible contribution. If, however, the Depositor
or his spouse is an active participant and their
combined AGI is above the specified level, the amount
of the deductible contribution the Depositor may make
to an IRA is phased down and eventually eliminated.
(c) The Depositor is an "active participant" for a year
if the Depositor is covered by a retirement plan. The
Depositor is covered by a "retirement plan" for a
year if the Depositor's employer or union has a
retirement plan under which money is added to the
Depositor's account or the Depositor is eligible to
earn retirement credits. For example, if the
Depositor is covered under a profit-sharing plan,
certain government plans, a salary reduction
arrangement (such as a tax sheltered annuity
arrangement or a 401(k) plan), a simplified employee
pension plan (SEP) or a plan which promises the
Depositor a retirement benefit which is based upon
the number of years of service the Depositor has with
the employer, the Depositor is likely to be an active
participant. The Depositor's Form W-2 for the year
should indicate the Depositor's participation status.
The Depositor is an active participant for a year
even if the Depositor is not yet vested in the
Depositor's retirement benefit. Also, if the
Depositor makes required contributions or voluntary
employee contributions to a retirement plan, the
Depositor is an active participant. In certain plans
the Depositor may be an active participant even if
the Depositor was only with the employer for part of
the year.
The Depositor is not considered an active participant
if the Depositor is covered in a plan only because of
the Depositor's service as 1) an Armed Forces
Reservist, for less than 90 days of active service,
or 2) a volunteer firefighter covered for
firefighting service by a government plan (in general
those persons whose accrued retirement benefits at
the beginning of the year will not exceed $1,800 per
year at retirement). Of course, if the Depositor is
covered in any other plan, these exceptions do not
apply.
If the Depositor is married but files a separate tax
return and lives apart from his spouse, his spouses'
active participation does not affect the Depositor's
ability to make deductible contributions. If the
Depositor is married but files a separate tax return
and does not live apart from his spouse, then the
deductible contributions are phased out between
spouse, $0 and $10,000 if either is an active
participant.
(d) If the Depositor is an active participant, the
Depositor must look at his Adjusted Gross Income for
the year (if the Depositor and his spouse file a
joint tax return the Depositor uses their
3
<PAGE> 8
combined AGI) to determine whether the Depositor can
make a deductible IRA contribution. The Depositor's
tax return will show the Depositor how to calculate
his AGI for this purpose. If the Depositor is at or
below a certain AGI level, called the Threshold
Level, the Depositor is treated as if the Depositor
was not an active participant and can make a
deductible contribution under the same rules as a
person who is not an active participant.
If the Depositor is single, the Depositor's threshold
AGI level is $25,000. The threshold level if the
Depositor is married and files a joint tax return is
$40,000, and if the Depositor is married but files a
separate tax return and is not living apart, the
threshold level is $0.
If the Depositor's AGI is less than $10,000 above the
Depositor's threshold level, the Depositor will still
be able to make a deductible contribution but it will
be limited in amount. The amount by which the
Depositor's AGI exceeds the Depositor's Threshold
Level (AGI-Threshold Level) is called the Depositor's
Excess AGI. The Maximum Allowable Deduction is $2,000
(or $2,250 for a Spousal IRA). The Depositor can
calculate it as follows:
10,000 - Excess AGI X Maximum Allowable Deduction = Deduction
------------------- Limit
10,000
The Depositor must round up the result to the next
highest $10 level (the next highest number which ends
in zero). For example, if the result is $1,525, the
Depositor must round it up to $1,530. If the final
result is below $200 but above zero, the Depositor's
Deduction Limit is $200. The Depositor's Deduction
Limit cannot, in any event, exceed 100% of the
Depositor's compensation.
(e) The Depositor may contribute to a Spousal IRA even if
his spouse has earned some compensation during the
year. Provided his spouse does not make a
contribution to an IRA, the Depositor may set up a
Spousal IRA consisting of an account for his spouse
as well as an account for the Depositor. The maximum
deductible amount for the spousal IRA is the lesser
of $2,250 or 100% of compensation.
(f) Even if the Depositor is above the threshold level
and thus may not make a deductible contribution of
$2,000 ($2,250 for a spousal IRA), the Depositor may
still contribute up to the lesser of 100% of
compensation or $2,000 to an IRA ($2,250 for a
spousal IRA). The amount of the Depositor's
contribution which is not deductible will be a
nondeductible contribution to the IRA. The Depositor
may also choose to make a contribution nondeductible
even if the Depositor could have deducted part or all
of the contribution. Interest or other earnings on
the Depositor's IRA contribution, whether from
deductible or nondeductible contributions, will not
be taxed until taken out of the Depositor's IRA and
distributed to the Depositor.
If the Depositor makes a nondeductible contribution
to an IRA the Depositor must report the amount of the
nondeductible contribution to the IRS as a part of
the Depositor's tax return for the year.
The Depositor may make a $2,000 contribution at any
time during the year, if the Depositor's compensation
for the year will be at least $2,000, without having
to know how much will be deductible. When the
Depositor fills out his tax return the Depositor may
then figure out how much is deductible.
The Depositor may withdraw an IRA contribution made
for a year any time before April 15 of the following
year. If the Depositor does so, the Depositor must
also withdraw the earnings
4
<PAGE> 9
attributable to that portion and report the earnings
as income for the year for which the contribution was
made. If some portion of the Depositor's contribution
is not deductible, the Depositor may decide either to
withdraw the nondeductible amount, or to leave it in
the IRA and designate that portion as a nondeductible
contribution on the Depositor's tax return.
(g) Compensation means wages, salaries, or professional
fees, and other amounts received for personal
services actually rendered. Compensation includes
income earned by a self-employed individual from his
trade or business in which his personal services are
a material income-producing factor. Compensation also
includes any amount includable in the Depositor's
gross income as alimony under Section 71 of the Code
with respect to a divorce or separation instrument
described in Section 71(b)(2)(A) of the Code.
(h) No deduction is allowed for an individual for a
contribution during the taxable year in which he
attains age 70 1/2. If the Depositor attains age 70
1/2 prior to the non-working spouse, a deductible
contribution may be made for the spouse, but the
Depositor, may not make a deductible contribution for
himself.
(i) A deduction may be obtained for the previous taxable
year if the Depositor makes his contribution no later
than the time for filing his Federal income tax
return without extensions for such taxable year (i.e.
April 15 for a calendar year taxpayer).
(j) The deductions referred to above may be taken even if
the Depositor elects to take the standard deduction.
(2) TAXATION UPON DISTRIBUTION
(a) The full amount of any distribution from an IRA
(including a lump sum distribution) will be taxed as
ordinary income to the recipient, except as provided
below.
(b) Because nondeductible IRA contributions are made
using income which has already been taxed (that is,
they are not deductible contributions), the portion
of the IRA distributions consisting of nondeductible
contributions will not be taxed again when received
by the Depositor. If the Depositor makes any
nondeductible IRA contributions, each distribution
from the Depositor's IRAs will consist of a
nontaxable portion (return of nondeductible
contributions) and a taxable portion (return of
deductible contributions, if any, and account
earnings).
Thus, the Depositor may not take a distribution which
is entirely tax-free. The following formula is used
to determine the nontaxable portion of the
Depositor's distributions for a taxable year:
Remaining
Nondeductible
Contributions X Total = Nontaxable
-------------------- Distributions distributions
Year-end total IRA (for the year)
account balances
To figure the year-end total IRA account balance the
Depositor treats all of his IRAs as a single IRA.
This includes all regular IRAs, as well as Simplified
Employer Pension (SEP) IRAs, and Rollover IRAs. The
Depositor also adds back the distributions taken
during the year.
5
<PAGE> 10
(c) A distribution from an IRA may be a tax-free transfer
if:
(i) The entire amount received is transferred
within 60 days of receipt to another IRA.
Tax-free rollovers from one IRA to another
IRA may occur only once each year or
(ii) The entire amount received is totally
attributable to an amount previously
received by the IRA as a rollover
contribution from a qualified employee
benefit plan and the entire amount received
is transferred within 60 days of receipt to
a qualified amount received from the IRA and
deposited in the qualified employee benefit
plan may be attributable to sources other
than an amount previously received from a
qualified employee benefit plan. Further
restrictions apply to this type of rollover.
You should consult your own tax advisor in
this regard.
(iii) The amount received represents the entire
interest in the IRA, the entire amount
received is attributable to a previous
rollover to the IRA from a tax-sheltered
annuity (qualified under Code Section
403(b)), and the entire amount received is
paid into another such tax-sheltered annuity
contract within 60 days of receipt. Further
restrictions apply to this type of rollover.
You should consult your own tax advisor in
this regard.
(3) ROLLOVER CONTRIBUTIONS TO AN IRA
(a) A rollover contribution is a tax-free transfer of
funds from one retirement savings program to another.
No deduction is allowed for a rollover contribution.
In order to maintain its tax-free character, a
rollover from an employer's qualified plan to an IRA
must satisfy the following requirements.
(i) The funds so contributed to an IRA must have
been distributed to the employee from the
qualified plan and may not include any
distribution which is one of a series of
substantially equal periodic payments (not
less frequently than annually) made for the
life (or life expectancy) of the employee or
the joint lives (or joint life expectancies)
of the employee and the employee's
designated beneficiary, or for a specified
period of ten years or more. Further, the
funds must not be a minimum required
distribution under Section 401(a)(9) of the
Code.
(ii) The maximum amount that may be rolled over
is the value of the property distributed
from the qualified plan and earnings
therefrom included in the distribution less
any employee contributions (other than
qualified deductible voluntary
contributions).
(iii) If only a portion of such a distribution is
rolled over, the remaining portion (other
than employee contributions which are not
qualified deductible voluntary
contributions) will be taxed as ordinary
income.
(iv) With respect to a noncash distribution, the
rollover contribution must consist of all or
any portion of the property distributed from
the qualified plan, or the proceeds from the
sale of such property.
(v) If part or all of the distribution consists
of property other than money, the taxpayer
may designate on a timely filed tax return
the portion of the money or other property
treated as a distribution of employee
contributions, otherwise the law requires
the proration on a ratable basis. Such a
designation may have important tax
consequences with respect to taxation of any
portion of the distribution that is not
rolled over. There is no dollar limit to the
amount of a rollover contribution.
6
<PAGE> 11
(vi) The funds must be transferred to the IRA
within 60 days after the date of the
Depositor's receipt.
(vii) Unless the Depositor otherwise directs the
Custodian in writing, each rollover will be
held by the Custodian in a separate account
and the Custodian will not accept other
contributions to the account.
(viii) It is the Depositor's sole responsibility to
determine whether or not any rollover is
proper pursuant to requirements of the
Internal Revenue Code, state law and the
IRA.
(b) A rollover from one IRA to another IRA must satisfy
the following requirements:
(i) The entire amount received must be paid into
an IRA within sixty days after the amount is
received.
(ii) Withdrawal of assets from an IRA for the
purpose of a rollover to an IRA may occur
only once within any one-year period. The
one-year rule does not apply to direct
transfers between IRA custodians or
trustees.
(iii) The rollover contribution must include the
entire interest which the Depositor received
from the IRA and must be in the form of the
identical property received from the IRA.
(4) ESTATE AND GIFT TAXES
(a) Upon the death of the Depositor, the value of the
account is part of the Depositor's gross estate for
Federal estate tax purposes and may incur Federal
estate taxes. Depending upon the applicable state
law, the account may or may not be subject to state
inheritance or estate taxes.
(b) The account may be made payable to a trust that
qualifies for the qualified terminal interest
property marital deduction.
(c) Amounts withdrawn from the account and given as a
gift are subject to Federal (and possibly state) gift
tax laws and may incur gift taxes. However, a
Depositor's revocable election to have a distribution
payable to a beneficiary upon the death of the
Depositor will not be treated as a gift subject to
gift tax.
Because of the complexity of the rules relating to
income taxes, estate and gift taxes, rollover
contributions and the tax implications, you should
consult your tax advisor before taking any action.
(D) ADDITIONAL LIMITATIONS AND PROHIBITIONS
(1) A Depositor, his spouse and his beneficiary are
prohibited from engaging in a prohibited transaction
described in Section 4975(c) of the Code with respect
to his account. If such a transaction is engaged in,
the account will lose its tax-exempt status and the
fair market value of the account will be subject to
income tax in the taxable year in which the
prohibited transaction occurs (this is considered a
premature distribution under subsection 4 below).
Generally, prohibited transactions include the direct
or indirect (a) sale or exchange, or leasing, of any
property; (b) lending of money or other extension of
credit; (c) furnishing of
7
<PAGE> 12
goods, services or facilities between the Depositor
or a beneficiary or other disqualified person and the
IRA; (d) transfer to, or use by or for the benefit of
the Depositor or a beneficiary or other disqualified
person, of the income or assets of the IRA; (e)
dealing by the Depositor, beneficiary or other
disqualified person with the assets of the IRA in his
or her own interest or own account; or (f) receipt by
any disqualified person who is a fiduciary from a
party dealing with the IRA of any consideration in
connection with any transaction involving the income
or assets of the IRA.
(2) The acquisition in the account of any collectible
will be treated for purposes of Sections 402 and 408
of the Code as a distribution from the account in an
amount equal to the cost to the account of the
collectible and will be taxable as such. This is
considered a premature distribution under subsection
(4) below. The term "collectible" means any work of
art, rug, antique, metal, gem, stamp, coin, alcoholic
beverage, or other tangible personal property
specified as such by the Secretary of the Treasury
for the purposes of Section 408(m) of the Code.
However, certain designated gold or silver coins and
certain coins issued by States of the United States
are permitted investments.
(3) If a Depositor uses all or any portion of his account
as security for a loan, then the portion of the
account so used is treated as having been distributed
to such individual and the benefitted individual must
include such distribution in his gross income for the
year in which he so uses the account. This is
considered a premature distribution under subsection
(4) below.
(4) A ten percent (10%) penalty tax is imposed on
distributions made before the Depositor attains age
59 1/2 , unless such distribution is made on account
of (a) death, (b) disability, (c) the distribution is
part of a series of substantially equal periodic
payments (not less frequently than annually) made for
the life (or life expectancy) of the Depositor or the
joint lives (or joint life expectancies) of the
Depositor and his designated beneficiary, or (d) a
qualified rollover contribution made with such
distribution.
(5) After a Depositor attains age 70 1/2, if the required
distributions do not equal or exceed certain
minimums, a non-deductible excise tax of fifty
percent (50%) will be imposed upon the difference
between the amount required to be distributed and the
amount actually distributed.
(6) Any contributions made to your IRA which exceed the
permissible limits set forth above are considered
excess contributions. Such contributions are subject
to an excise tax of six percent (6%) per year for
every year the excess contributions are not corrected
either by withdrawal of the excess from the IRA or by
foregoing IRA contributions up to the permissible
limits.
(a) If the excess contributions (plus income thereon) is withdrawn
on or before the due date (including extensions) for filing
the Depositor's income tax return for the year in which he
made the excess contribution, the 6% excise tax is not
imposed. Even if the excess contribution is not withdrawn in
time to prevent imposition of the 6% penalty for such year,
the 6% penalty may be avoided for a subsequent year by
withdrawal of the excess contribution at a later date. Also,
under certain circumstances a prior excess contribution may be
corrected by foregoing a contribution in a later year.
Except in the limited circumstances described below, the
withdrawal of an excess contribution before the individual
attains age 59 1/2, or in a case of death or disability, will
be considered a premature distribution which is subject to the
ten percent (10%) penalty tax.
8
<PAGE> 13
(b) An excess contribution that exceeds $2,250 must be withdrawn
no later than the due date for filing the Depositor's income
tax return for the year in which he made the excess
contribution to avoid such penalties. Any income included in
such a distribution will be taxable income in the year in
which the excess contribution is made. Where an IRA
contribution for a year (other than a rollover contribution)
does not exceed $2,250, the excess amount may be withdrawn any
time at a later date without including it in gross income and
paying the premature withdrawal penalty, if applicable, if no
deduction has been allowed for the excess amount. If an excess
rollover contribution occurs because you reasonably relied
upon erroneous information supplied by your employer, the part
of the excess attributable to such erroneous information may
be subsequently withdrawn without including it in gross income
or paying the premature withdrawal penalty.
(7) The Depositor (and Spouse in the case of a Spousal
IRA) must file Form 5329 (Return for Individual
Retirement Arrangements Taxes) with the Internal
Revenue Service only if he owes a penalty tax for an
excess contribution, a premature distribution, an
underdistribution or an excess distribution.
(8) The Custodial Account Agreement is on a form approved
by the Internal Revenue Service for use in
establishing custodial accounts.
(9) Further information pertaining to the laws and
regulations governing Individual Retirement Accounts
may be obtained from any district office of the
Internal Revenue Service.
(10) If the Depositor is a resident of a community
property state and the Depositor desires to name a
beneficiary other than the Depositor's spouse, then
the Depositor is solely responsible for securing the
spouse's consent and the Custodian shall not be
liable to the spouse, any beneficiary or entity in
regard to such consent. The Depositor should consult
an attorney in regard to any such spousal consents.
(E) INVESTMENTS
(1) The Depositor is responsible for directing the Custodian with
respect to the investment of all contributions and earnings
therefrom. The Custodian has no discretion or duty, in the
absence of the Depositor's direction or as mandated in the
Custodial Account Agreement, to invest any funds. Further, the
Depositor assumes all investment risks with regard to such
investments. Non-brokered certificates of deposit,
non-brokered notes (mortgages), closely held securities (in
which J. C. Bradford & Co. does not participate in the
subscription offer), and real estate (collectively referred to
as "Special Assets") are not permitted investments in the
account unless the Custodian has agreed to permit such
investments in the account. The Depositor shall provide
valuations of any Special Assets. If the Depositor fails to
provide such valuations then the Custodian may employ
appraisers to make such valuations. Any appraiser fees shall
be charged against the IRA account and the Depositor will be
liable for any deficiency.
The Depositor may only direct the investment of the assets of
the account into investments obtainable through J. C. Bradford
& Co. Assets of the account may not be invested in
"Collectibles" as defined in Section 408(m) of the Code (see
paragraph D(2) above).
(2) The Depositor may delegate to any person or institution (other
than the Custodian) the Depositor's power to direct investment
of the account as long as the Custodian is given advance
written notice in which the Depositor names and appoints the
delegate, a signed copy of the written agreement between the
Depositor and his delegate and any additional information and
documents the Custodian may
9
<PAGE> 14
require. Any direction given by the delegate is conclusively
presumed to be the Depositor's direction until the Custodian
receives written notice of revocation of the delegate's
authority.
(3) The Custodian upon receipt of the Depositor's investment
direction shall execute the direction as soon as practical,
and shall send a written confirmation to the Depositor
acknowledging the completion of the Depositor's transaction.
(4) Dividends and earnings from the assets of the account will be
retained in the account. Until such time as the Depositor has
directed the Custodian with respect to his account, the
Custodian shall invest the amounts so received in interest
bearing accounts (at then current interest rates) maintained
by the Custodian.
(5) The Depositor shall have the power to make a continuing
investment direction with respect to the dividends and
earnings received by the account from the assets of the
account. A continuing investment direction can be made either
orally or in writing to the Custodian.
(6) Such amounts received shall be reinvested as directed in the
Depositor's continuing investment direction; provided that
such amount equals or exceeds the minimum investment
requirements then in effect for the designated investment.
(7) The Custodian may retain cash in the account without investing
the same.
(8) As soon as practical after the Custodian receives notification
of the death of a Depositor, all subsequent earnings on his
account shall be reinvested in the money market fund
designated by the Depositor prior to his death for the purpose
of investment of income. All other assets in his account shall
remain as invested until distributed in full to the
Beneficiary of the Depositor or until the Beneficiary
otherwise designates.
(F) FEES AND FINANCIAL MATTERS
(1) A fee schedule setting forth the annual maintenance and
transfer fee and any other fees is outlined in the Explanation
of Fees. Such fee schedule may be amended from time to time by
the Custodian. Annual maintenance fees and any other fees will
be charged to the IRA account each June for that calendar year
or upon termination of the IRA if the fee has not been charged
for such year. This applies to regular, spousal and rollover
IRAs and each participant's account under a SEP. Fees will not
be prorated.
A Depositor may pay the maintenance fee within the times
specified by the Custodian. If the Depositor fails to pay the
maintenance fee within such times, then Custodian will
liquidate sufficient assets within the IRA to satisfy the fees
and cannot be held accountable or liable for choosing a
specific asset or assets to liquidate.
Payments received after June 1 cannot be used to reimburse the
IRA account but will apply as a credit against the next year's
annual maintenance fee after satisfying any current
outstanding fee balance. If sufficient assets cannot be
liquidated, the IRA account will be closed out and remaining
assets transferred to an individual brokerage account at J. C.
Bradford & Co. The Depositor is personally liable for full
payment to the Custodian for all fee deficiencies including
any debit balances. By entering into the Adoption Agreement,
Depositor and his beneficiary or beneficiaries agree to hold
Custodian harmless from any taxes, interest, penalties or
other claims, liabilities or damages resulting from or arising
out of
10
<PAGE> 15
such asset liquidation and/or account termination. Further,
Depositor and his beneficiary or beneficiaries release
Custodian from all damage claims resulting from or arising out
of such asset liquidation and account termination. J. C.
Bradford & Co. cannot be held responsible for any taxes,
interest and penalties that may be assessed on such
distributions.
(2) Normal J. C. Bradford & Co. brokerage fees, and buying and
selling expenses will be charged for each transaction
involving an investment.
(3) The Custodian will charge the IRA for any special reports or
returns required to be filed with the Internal Revenue Service
such as Form 990T.
(4) The Custodian may at any time liquidate sufficient assets in
the IRA to satisfy any obligations of the IRA and the
Depositor and his beneficiary or beneficiaries agree to hold
Custodian harmless from any taxes, interest, penalties or
other claims, liabilities or damages resulting from or arising
out of such asset liquidation and/or account termination.
Further, Depositor and his beneficiary or beneficiaries
release Custodian from all damage claims resulting from or
arising out of such asset liquidation.
(5) Any taxes of any kind which may be imposed with respect to the
account and any administrative expenses, including but not
limited to custodial and brokerage fees, shall be paid by the
Depositor. If not paid by the Depositor, such amounts shall be
paid from the account and will constitute a lien against such
account until paid.
(6) The earnings of each separate account will be allocated to
such account.
(7) Growth in value of this account is neither guaranteed nor
capable of projection.
(8) The Custodian will charge a one-time fee for handling Special
Assets. Additionally, the Custodian may charge for any
valuation of Special Assets.
(9) The Custodian may charge the account for review (including
legal fees incurred) of any separation and divorce orders,
decrees or agreements.
(G) SIMPLIFIED EMPLOYEE PENSION PLANS (SEP)
(1) A SEP is a new retirement income arrangement under which your
employer may contribute any amount each year up to the lesser
of $30,000 or 15% of your compensation to your own Individual
Retirement Account. All amounts contributed to your IRA by
your employer belong to you, even after you separate from
service with that employer.
(2) Whether or not your employer makes a contribution to a SEP is
entirely within your employer's discretion. If a contribution
is made under the SEP, it must be allocated to all the
eligible employees according to the SEP agreement. Some SEPs
allow you to defer a portion of your compensation into your
SEP-IRA.
(3) Each employee who is 21 years old or older and has performed
service for the employer in at least three of the immediately
preceding five calendar years are eligible to participate in
the SEP. In certain situations employees covered under a
collective bargaining agreement and certain nonresident aliens
may be excluded.
(4) You are entitled to contribute to your own IRA even though
your employer makes a contribution to your IRA under a SEP.
However, your deduction may be limited.
(5) A contribution by you or by your employer in excess of the
annual deduction limitations may be withdrawn without penalty
on, or prior to, the due date for filing your tax return
(normally April
11
<PAGE> 16
15). Excess contributions left in your SEP-IRA account beyond
that time are subject to a 6% excise tax. Withdrawals of those
contributions at a later time may be taxed as premature
withdrawals.
(6) It is permissible for you to withdraw funds from your SEP-IRA
and roll such funds over to another IRA in accordance with the
rollover rules discussed above with respect to rollovers from
one IRA to another IRA. Such rollover may not be made more
frequently than once each year without penalty.
(7) You may withdraw the employer's contribution from your SEP-IRA
in the same manner and subject to the same rules as any other
withdrawal from an IRA as described in Paragraphs (C) and (D)
above. Generally, any amount withdrawn is includable in your
income and a withdrawal before attainment of 59 1/2 years of
age may be subject to a 10% penalty tax.
(8) You do not have to file any additional form with the Internal
Revenue Service because you participate in a SEP.
IRA AS AN INVESTMENT CONDUIT - "ROLLOVERS"
PERMISSIBLE TAX-FREE TRANSFERS
1. From a qualified corporate plan to an IRA.
2. From a qualified corporate plan to another through an IRA.
3. From a Keogh Plan (HR-10) to an IRA.
4. From a tax sheltered annuity to an IRA.
5. From a tax sheltered annuity to another through an IRA.
6. From a qualified bond purchase plan to an IRA.
7. Distributions received by a spouse due to participant's death.
GENERAL CONDITIONS
1. Must be received by the IRA within 60 days after distribution is
received.
2. Only one tax-free rollover per year. However there are no restrictions
on the number of transfers between custodians or trustees.
3. Must not include certain periodic payment distributions or certain
minimum required distributions under Code Section 401(a)(9).
4. Must not include employee's post tax contributions therefrom.
5. If the rollover includes property such as company stock and the
property has been sold the proceeds may still be rolled over. If the
rollover is for the entire amount allowable, the gain or loss on the
sale of the property is not recognized.
6. Transfers to a (new) qualified Plan can include only assets received
from the (old) qualified Plan; therefore, a rollover to an IRA should
be made to a separate account and should not include contributions made
by an eligible person for his retirement to his IRA.
LIMITS ON AMOUNT OF ROLLOVER TRANSFERS
1. No dollar limit.
12
<PAGE> 17
2. All or any portion of the distribution minus post tax employee
contributions and any required minimum distribution for such year.
Note: Any amount not rolled over does not qualify for capital gains
provision and/or special ten year averaging provision.
3. No endowment or life insurance contracts.
REGULAR IRA
ELIGIBILITY
1. Every individual, whether or not covered by a retirement plan, who has
compensation is eligible.
2. No deduction is allowed for an individual during the taxable year in
which he or she attains 701/2.
MAXIMUM DEDUCTIBLE CONTRIBUTION
1. 100% of compensation not to exceed $2,000 per year or such limits as
may be prescribed by law. However, reduction or elimination may occur
if you or your spouse are active participants in a qualified retirement
plan.
2. If your spouse does not work, you may establish an individual account
for you and your spouse and may annually contribute the lesser $2,250
or 100% of compensation. However, reduction or elimination may occur if
you are an active participant in a qualified retirement plan.
3. Contribution need not be equally divided between both accounts, but not
more than $2,000 to one account.
4. If both spouses have earned income, both may contribute but to separate
IRAs.
TIME FOR ESTABLISHING IRA AND MAKING CONTRIBUTIONS
1. No later than the due date for filing tax returns (normally April 15).
ADDITIONAL INFORMATION FOR ALL IRAS
PERMISSIBLE INVESTMENTS
1. As examples, stocks, mutual funds, corporate and government bonds, plus
savings media approved by the Trustee.
2. Not limited to the example above but cannot purchase collectibles.
Further, Special Assets are not permitted investments in the individual
retirement account unless permitted by the Custodian.
3. Custodian will hold assets in an account with your Broker.
4. Investments not generating confirms must be accompanied by written
instructions.
DISTRIBUTIONS
1. Permitted after 59 1/2 years or in the event of permanent disability or
death or if distributions paid in substantially equal periodic payments
(not less frequently than annually) over life expectancy.
13
<PAGE> 18
2. If any individual receives a distribution prior to one of these events,
there is a non-deductible penalty tax of 10%.
3. Distributions must start not later than April 1 of the year following
the calendar year in which the Participant attains 701/2 years of age.
4. If the distribution selected does not equal or surpass IRS minimums, a
non-deductible excise tax of 50% will be imposed upon the difference
between the amount required and the amount distributed.
5. The taxability at distribution is as normal income received. Ten Year
and Five Year Averaging are not permissible. The tax status during the
accumulation period is exempt.
SEP (SIMPLIFIED EMPLOYEE PENSION)
ELIGIBILITY
1. Any employee who is at least 21 years old and has performed "service"
in at least 3 of the last 5 calendar years.
2. The employer may establish less restrictive eligibility requirements.
CONTRIBUTIONS
1. You are not required to make any contributions in a given year.
2. If contributions are made, they must be made to all eligible employees,
whether or not they are still employed at the time.
3. Some SEP Plans have permitted disparity which varies the percentage of
contribution among participants. Some SEP Plans may permit a
participant to defer compensation into their SEP-IRA.
4. Contributions for any one employee may not be more than the lesser of
$30,000 or 15% of that employee's total compensation for the calendar
year.
HOW TO REPORT CONTRIBUTIONS
1. The employer deducts the amount it contributes to the SEP-IRA on the
employer tax return.
2. Employers who have established a SEP-IRA and have provided each
participant with a copy of Form 5305-SEP (or 5305A-SEP) are not
required to file the annual information returns, Form 5500, 5500-C,
5500-K or 5500-R.
DISTRIBUTIONS
All distribution regulations and restrictions pertaining to IRAs apply under a
SEP. (Summarized above)
EXPLANATION OF FEES
Annual Maintenance Fee for each IRA - $35 (not prorated)
The Custodian will charge a one-time $100 fee for receiving, maintaining,
administering, safekeeping and selling non-brokered certificates of deposit,
non-brokered notes (mortgages), closely held securities (in which J. C. Bradford
& Co.
14
<PAGE> 19
does not participate in the subscription offer), and real estate. Additionally,
the Custodian may charge for appraisals of such Special Assets.
The Custodian will charge a $100 fee for filing IRS Form 990T.
Transfer Fee - $50 plus that year's maintenance fee.
This fee is charged when IRA assets are transferred to another financial
institution. The fee must be paid prior to transfer by the Depositor or the
successor custodian or trustee. This fee schedule may be amended at any time by
the Custodian (J. C. Bradford & Co.).
The Custodian may charge the account for review (including any legal fees
incurred) of any separation and divorce orders, decrees or agreements.
Annual maintenance fees and any other fees will be charged to the IRA account
each June for that calendar year or upon termination of the IRA if the fee has
not been charged for such year. This applies to regular, spousal, and rollover
IRAs and each participant's account under a SEP. Fees will not be prorated.
A Depositor may pay the maintenance fee within the times specified by the
Custodian. If the Depositor fails to pay the maintenance fee within such times,
then Custodian will liquidate sufficient assets within the IRA to satisfy the
fees and cannot be held accountable or liable for choosing a specific asset or
assets to liquidate.
Payments received after June 1 cannot be used to reimburse the IRA account but
will apply as a credit against the next year's annual maintenance fee after
satisfying any current outstanding fee balance. If sufficient assets cannot be
liquidated, the IRA account will be closed out and remaining assets transferred
to an individual brokerage account at J. C. Bradford & Co. The Depositor is
personally liable for full payment to the Custodian for all fee deficiencies
including any debit balances.
By entering into the Adoption Agreement, Depositor and his beneficiary or
beneficiaries agree to hold Custodian harmless from any taxes, interest,
penalties or other claims, liabilities or damages resulting from or arising out
of such asset liquidation and/or account termination. Further, Depositor and his
beneficiary or beneficiaries release Custodian from all damage claims resulting
from or arising out of such asset liquidation and account termination. J. C.
Bradford & Co. cannot be held responsible for any taxes, interest and penalties
that may be assessed on such distributions.
CUSTODIAL ACCOUNT AGREEMENT
THIS AGREEMENT entered into by and between each individual who executes
an Adoption Agreement incorporating this Agreement (hereinafter referred to as
"Depositor") and J. C. BRADFORD & CO., (hereinafter referred to as "Custodian"),
having its principal place of business at 330 Commerce Street, Nashville,
Tennessee 37201.
WITNESSETH:
WHEREAS, the Depositor desires to provide for his retirement and for the support
of his Beneficiaries upon his death; and
WHEREAS, to accomplish this purpose, the Depositor desires to establish an
individual retirement account (hereinafter referred to as "the account") as
described in Section 408(a) of the Internal Revenue Code of 1986, as amended, or
any successor statute; and
WHEREAS, the Custodian has provided the Depositor with the disclosure statement
required under the Income Tax Regulation under Section 408(i) of the Code;
NOW, THEREFORE, the Depositor (or the spouse of the Depositor) has transferred,
assigned, and conveyed to the Custodian the property described in the Adoption
Agreement, and it is agreed by and between the Depositor and the Custodian the
following:
15
<PAGE> 20
ARTICLE I
CONTRIBUTIONS.
(1) The Custodian may accept additional contributions in cash from or on
behalf of the Depositor for a taxable year of the Depositor except as
limited by paragraph (2) of this Article.
(2) Except in the case of an eligible rollover contribution as that term is
described in Section 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the
Code or an employer contribution made in accordance with the terms of a
simplified employee pension as defined in Section 408(k) of the Code,
the Custodian will only accept cash and will not accept contributions
on behalf of the Depositor in excess of $2,000 for any taxable year.
The Depositor may roll over property in kind to the custodial account
that is acceptable to the Custodian. No contribution will be accepted
under a SIMPLE plan established by any employer pursuant to Section
408(p) of the Code. No transfer or rollover of funds attributable to
contributions made by a particular employer under its SIMPLE plan will
be accepted from a SIMPLE IRA, that is, an IRA used in conjunction with
a SIMPLE plan, prior to the expiration of the two (2) year period
beginning on the date the individual first participated in that
employer's SIMPLE plan.
ARTICLE II
NONFORFEITURE.
The Depositor's interest in the balance in the custodial account shall
at all times be nonforfeitable.
ARTICLE III
INVESTMENT IN GENERAL.
(1) No part of the custodial funds shall 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) of the Code).
(2) No part of the custodial funds may be invested in collectibles (within
the meaning of Section 408(m) of the Code).
(3) This custodial account is created, administered and held for the
exclusive benefit of the Depositor and his Beneficiaries.
ARTICLE IV
DISTRIBUTION.
(1) Notwithstanding any provision of this Agreement to the contrary, the
distribution of a Depositor's interest in the custodial account shall
be made in accordance with the minimum distribution requirements of
Section 408(a)(6) or Section 408(b)(3) of the Code and the Income Tax
Regulations thereunder, including the incidental death benefit
provisions of Section 1.401(a)(9)-2 of the proposed Income Tax
Regulations, all of which are herein incorporated by reference.
(2) The Depositor's entire interest in the custodial account must be
distributed, or begin to be distributed, by the Depositor's "required
beginning date," which is the April 1 following the calendar year in
which the Depositor attains age 70 1/2. For such succeeding year, a
distribution must be made on or before December 31. By the required
beginning date the Depositor shall elect, in a manner and at such time
as may be acceptable to the Custodian, to have the balance in the
custodial account distributed in one of the following forms:
(a) a single lump sum payment;
16
<PAGE> 21
(b) an annuity contract providing equal or substantially equal
monthly, quarterly, or annual payments over the life of the
Depositor;
(c) an annuity contract providing equal or substantially equal
monthly, quarterly or annual payments over the joint and last
survivor lives of the Depositor and his designated
Beneficiary;
(d) equal or substantially equal monthly, quarterly or annual
payments over a specified period that may not be longer than
the Depositor's life expectancy; or
(e) equal or substantially equal monthly, quarterly or annual
payments over a specified period that may not be longer than
the joint life and last survivor expectancy of the Depositor
and his designated Beneficiary.
Even if distributions have begun to be made under option (d) or (e),
the Depositor may receive a distribution of the balance in the
custodial account at any time by giving written notice to the
Custodian. The Depositor shall be solely responsible for making the
necessary election and commencing distribution by the required
beginning date.
The amount to be distributed each year, beginning with the first
calendar year for which distributions are required and then for each
succeeding calendar year, shall not be less than the quotient obtained
by dividing the Depositor's benefit by the lesser of (i) the applicable
life expectancy, or (ii) if the Depositor's spouse is not the
designated beneficiary, the applicable divisor determined from the
table set forth in Q&A-4 or Q&A-5, as applicable, of Section
1.401(a)(9)-2 of the proposed Income Tax Regulations.
Distributions after the death of the Depositor shall be distributed
using the applicable life expectancy as the relevant divisor without
regard to Section 1.401(a)(9)-2 of the proposed Income Tax Regulations.
(3) If the Depositor dies before his entire interest is distributed to him,
the entire remaining interest in the custodial account will be
distributed as follows:
(a) If the Depositor dies on or after distributions have begun
under paragraph (2) of this Article, the entire remaining
interest must be distributed at least as rapidly as provided
under paragraph (2) of this Article.
(b) If the Depositor dies before distributions have begun under
paragraph (2) of this Article, the entire remaining interest
must be distributed as elected by the Depositor or, if the
Depositor has not so elected, as elected by the Beneficiary or
Beneficiaries, as follows:
(i) by December 31st of the year containing the fifth
anniversary of the Depositor's death; or
(ii) in equal or substantially equal monthly, quarterly or
annual payments over the life or life expectancy of
the designated Beneficiary or Beneficiaries starting
by December 31st of the year following the year of
the Depositor's death. If, however, the Beneficiary
is the Depositor's surviving spouse and subject to
paragraph (e) of this Article, then this distribution
is not required to begin before December 31st of the
year in which the Depositor would have attained age
70 1/2.
(c) Subject to paragraph (e) of this Article, in the event of the
death of the Depositor the surviving spouse Beneficiary may
elect to treat the account as the spouse's own individual
retirement account in accordance with 1.408-8 of the Proposed
Income Tax Regulations.
17
<PAGE> 22
(d) Distributions under paragraph (2) of this Article are
considered to have begun if the distributions are made on
account of the Depositor reaching his required beginning date.
If the Depositor receives distributions prior to the required
beginning date and the Depositor dies, distributions will not
be considered to have begun.
(e) Notwithstanding the foregoing provisions, if the Beneficiary
is a trust for the surviving spouse, and if a qualified
terminal interest property marital deduction for federal
estate tax purposes is allowable with respect to the
distributions from the custodial account payable to such
trust, then the distributions under this paragraph (3) shall
be increased, if necessary, to assure that all of the annual
income of the custodial account is distributed at least
annually to the trust. Furthermore, if the Beneficiary is such
a trust, all administrative charges and expenses of the
custodial account shall be charged to principal and shall not
reduce the annual income of the custodial account. The trustee
of the trust shall have the right to request immediate payment
of any part or all of the custodial account in order to
satisfy any request by the surviving spouse to convert
unproductive property into productive property or in order to
make withdrawals in excess of the minimum required
distributions. The provisions of this subparagraph (e) are
subject to the applicable minimum distribution requirements.
The Depositor shall be responsible for completing an
appropriate Beneficiary designation to carry out the
provisions of this subparagraph (e).
(4) Life expectancy is computed by use of the expected return multiples in
Table V and VI of Section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the Depositor prior to the commencement of
distributions under paragraph (2) of this Article or, if applicable, by
the surviving spouse where the Depositor dies before distributions have
commenced, life expectancies of a Depositor or spouse Beneficiary shall
be recalculated annually for purposes of distributions under paragraph
(2) and paragraph (3) of this Article. An election not to recalculate
shall be irrevocable and shall apply to all subsequent years. The life
expectancy of a nonspouse Beneficiary shall not be recalculated.
Instead, life expectancy will be calculated using the attained age of
such Beneficiary during the calendar year in which the individual
attains age 70 1/2, and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life expectancy
was first calculated.
(5) An individual may satisfy the minimum distribution requirements under
Sections 408(a)(6) and 408(b)(3) of the Code by receiving a
distribution from one Individual Retirement Account or Individual
Retirement Annuity ("IRA") that is equal to the amount required to
satisfy the minimum distribution requirements for two or more IRAs. For
this purpose, the Depositor of two or more IRAs may use the
"alternative method" described in Internal Revenue Service Notice
88-38, 1988-1 C.B. 524, to satisfy the minimum distribution
requirements described above.
ARTICLE V
DEPOSITOR'S DECLARATION
Except in the case of the Depositor's death, disability (as defined in Section
72(m) of the Code) or attainment of age 59 1/2, before distributing an amount
from the account, the Custodian may require from the Depositor a declaration of
the Depositor's intention as to the disposition of the amount distributed.
18
<PAGE> 23
ARTICLE VI
REPORTS
(1) The Depositor agrees to provide information to the Custodian
at such time and in such manner and containing such
information as may be necessary for the Custodian to prepare
any reports required pursuant to Section 408(i) of the Code
and the Income Tax Regulations thereunder.
(2) The Custodian agrees to submit reports to the Internal Revenue
Service and the Depositor at such time and in such manner and
containing such information as is prescribed by the Internal
Revenue Service.
(3) The Custodian shall furnish the Depositor annual calendar
year-end reports concerning the status of the custodial
account as required by 1.408-5 of the Income Tax Regulations.
ARTICLE VII
PREEMPTION
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence shall be controlling.
Furthermore, any such additional Article shall be wholly invalid, if it is
inconsistent, in whole or in part, with Section 408(a) of the Code and the
Income Tax Regulations thereunder.
ARTICLE VIII
AMENDMENTS IN GENERAL
This Agreement shall be amended, from time to time, in order to comply with the
provisions of the Code and Income Tax Regulations thereunder. Furthermore, other
amendments may be made to this Agreement by the Custodian as provided herein.
ARTICLE IX
ACCOUNTING
(1) All contributions made by the Depositor or the spouse of the
Depositor and all investments made with such contributions and
the earnings thereon shall be credited to an account
maintained for the Depositor or the spouse of the Depositor by
the Custodian. The Custodian shall keep accurate and detailed
records of all contributions, receipts, investments,
distributions, disbursements, and all other transactions. Any
contribution or investment in the custodial account shall be
held without distinction between income and principal.
(2) After the close of each calendar year the Custodian shall
render to the Depositor a written report of the Depositor's
account as of each December 31. Such report shall be made
available to the Depositor within the time and in a form
prescribed by the Internal Revenue Service. The Custodian
shall also render such reports as are regularly issued by J.
C. Bradford & Co. to its customers (which may consist of
copies of account statements regularly issued by J. C.
Bradford & Co.).
(3) In the absence of the filing in writing with the Custodian by
the Depositor of exceptions or objections to the annual report
within sixty days after the mailing of such report, the
Depositor shall be deemed to have approved such report and the
Custodian shall be released, relieved and discharged from all
liability to anyone (including the Beneficiary) with respect
to all matters set forth in such report as though such account
had been settled by the decree of a court of competent
19
<PAGE> 24
jurisdiction. No person other than a Depositor may require an
accounting or bring any action against the Custodian with
respect to the account.
(4) The Custodian shall have the right at any time to apply to a
court of competent jurisdiction for judicial settlement of its
accounts or for determination of any questions of construction
which may arise or for instructions. The only necessary party
defendant to such action shall be the Depositor but the
Custodian may, if it so elects, bring in as a party defendant
any other person or persons. The cost of any such accounting,
including, but not limited to, attorney's fees and court
costs, shall be charged to the account as an administration
expense under Article XV.
ARTICLE X
INVESTMENT POWERS
(1) The Depositor shall have the full responsibility for directing
the investment of all accounts credited limited to investments
approved by J. C. Bradford & Co. from time to time for
investments in IRA accounts. Further, non-brokered
certificates of deposit, non-brokered notes (mortgages),
closely held securities (in which J. C. Bradford & Co. does
not participate in the subscription offer), and real estate
(hereinafter collectively referred to as "Special Assets") are
not permitted investments in the individual retirement account
unless the Custodian has agreed to permit such investments in
the account. The Depositor shall provide Custodian with an
annual written valuation of all Special Assets valued as of
each December 31 and upon such other times as the Custodian
may require. If the Depositor fails to provide such valuations
the Custodian may employ such appraisers as needed to make the
valuation and charge the account for such appraisal. If
Special Assets are received into the account, the Custodian
will charge additional fees for receiving, maintaining,
administering, safekeeping and selling such assets.
(2) The Depositor's investment directions may be given to the
Custodian either orally or in writing. The Depositor may
delegate to an investment manager the Depositor's power to
direct investment of the account; providing that the Custodian
must be given a written notice in which the Depositor names
and appoints the delegate, a signed copy of the written
agreement between the Depositor and his delegate and any
additional information and documents that the Custodian may
then require. Any direction given by such delegate shall
conclusively be presumed to be the direction of the Depositor
until the Custodian receives written notice of revocation of
such delegation.
(3) The Custodian upon receipt of the Depositor's investment
direction shall execute the direction as soon as practical,
and shall send a written confirmation to the Depositor
acknowledging the completion of the Depositor's transaction.
(4) The Custodian shall have no right or responsibility (except as
provided below) to make any investments or dispose of any
investment held in the account, unless pursuant to the
Depositor's direction. The Custodian shall have no
responsibility to inquire into or question any such directions
of the Depositor, to review the investments held in the
account, or to give advice to the Depositor with respect to
the retention or disposition of any assets in the account.
(5) Dividends and earnings from the assets of the account will be
retained in the account. Until such time as the Depositor has
directed the Custodian with respect to his account, the
Custodian shall invest the amounts so received in interest
bearing accounts (at then current interest rates) maintained
by the Custodian.
(6) Notwithstanding anything herein contained to the contrary, the
Depositor may direct the investment of dividends and earnings
from the assets of the account pursuant to paragraph (2) of
this Article.
(7) The Custodian may retain cash in the account without investing
the same.
(8) As soon as practical after the Custodian shall have received
notification of the death of a Depositor, all subsequent
earnings in his account shall be reinvested in the money
market fund designated by the Depositor prior to his death for
the purpose of investment of income in accordance with
20
<PAGE> 25
paragraph (6) of this Article. All other assets in his account
shall remain as invested until distributed in full to the
Beneficiary of the Depositor or until the Beneficiary
otherwise designates.
ARTICLE XI
RESPONSIBILITY OF THE CUSTODIAN
(1) The Custodian shall have no responsibilities or duties except
for those specifically set forth in this Agreement. The
Custodian shall have the power to hold any investment in
bearer form or in the name of the Custodian or in the name of
any nominee without qualification or description.
(2) The Custodian shall have the power, pursuant to the
Depositor's directions, to write covered listed call options
against existing positions or to close such option contracts,
to exercise conversion privileges, or rights to subscribe for
additional securities and to make payments therefor.
(3) The Custodian shall have the power, pursuant to the
Depositor's directions, to invest and reinvest the assets of
the account.
(4) Pursuant to the directions of the Depositor, the Custodian
shall have the power to consent or to participate in
dissolutions, reorganizations, consolidations, mergers, sales,
leases, mortgages, transfers or other changes affecting
investments held by the Custodian. In the absence of such
directions the Custodian shall take no action.
(5) The Custodian shall have no duty or responsibility to
diversify the assets of the account or to insure that the
investment of such assets is authorized by the laws of any
jurisdiction for purposes of trust investment.
(6) The Custodian shall not vote any shares of investments held in
the account except in accordance with the written instructions
of a Depositor.
(7) Neither the Custodian nor any agent of the Custodian shall
have any power, authority or discretion to enter into a mutual
agreement, arrangement or understanding on behalf of the
Custodian or the agent, in which the Custodian or such agent
agrees to render to the Depositor, advice which will serve as
a primary basis for investment with respect to the assets of
the account and which investment advice is individualized to
the particular needs of the account.
ARTICLE XII
DESIGNATION OF BENEFICIARY
(1) Subject to applicable state law, the Depositor from time to
time, may designate any Beneficiary or Beneficiaries
(concurrently, contingently or successively) to whom the
assets in the account are to be paid upon the Depositor's
death. In certain community property states, the Custodian may
require spousal consent to a non-spouse Beneficiary. Such
designation shall be in writing and shall continue in effect
until revoked by the Depositor during his lifetime by a
subsequent designation in writing. The Depositor is solely
responsible for securing the spouse's consent and the
Custodian shall not be liable to the spouse, any Beneficiary
or any entity in regard to such consent or any payments
related thereto.
(2) If no such designation is in effect at the time of the
Depositor's death or if the designated beneficiary of the
Depositor shall not survive the Depositor, the Beneficiary
shall be the spouse of the Depositor, or if there is no spouse
living at the time of the Depositor's death, the Beneficiary
shall be the estate of the Depositor.
(3) After all custodian fees have been paid, the Beneficiary shall
be entitled to the Depositor's entire interest in the event of
the Depositor's death prior to the complete distribution of
the entire interest.
21
<PAGE> 26
ARTICLE XIII
PAYMENT OF BENEFITS
(1) The Depositor shall notify the Custodian in writing signed by
the Depositor of the time he wishes to receive his benefits
and the form of the benefit in accordance with Article IV. The
Custodian shall not be liable, for the proper application of
any part of the account if the distributions are made in
accordance with the written directions of the Depositor.
(2) If the distribution is to be made in cash or kind the
Depositor shall direct the Custodian as to what investments
are to be sold or distributed in order to comply with the
direction. If the Depositor fails to so direct, the Custodian
shall, to the extent necessary to comply with the direction to
distribute, either sell investments for cash or distribute the
assets of the account in the sole discretion of the Custodian
and without liability to the Custodian.
(3) If the Depositor dies before his entire interest in the
custodial account is distributed to him, or if the
distribution has been commenced to his surviving spouse and
such surviving spouse dies before the entire interest is
distributed to such spouse, the balance of his account shall
be distributed to the Beneficiary in accordance with paragraph
(3) of Article IV at the time and in the manner as directed by
the Beneficiary entitled thereto.
(4) If the Custodian is unable to make a distribution to a
Depositor or a Beneficiary within a reasonable time after such
payment is due because the Custodian cannot ascertain the
whereabouts of the Depositor or the Beneficiary by mailing to
the last known address of such individual, the Custodian shall
take no action (other than paying Custodian's fees from the
account) until such time as disbursement is possible or such
funds escheat to a governmental agency by operation of law.
(5) If the Depositor provides the Custodian written notice and
evidence satisfactory to the Custodian that the Depositor is
disabled within the meaning of Section 72(m)(7) of the Code,
the Depositor may elect to receive his interest in his account
in accordance with any of the settlement options set forth in
Article IV of this Agreement. The Custodian shall not be
liable for any penalties or tax assessed because distributions
under this paragraph fail to qualify as payments attributable
to disability.
ARTICLE XIV
ROLLOVER CONTRIBUTIONS
(1) The Custodian may receive from any individual a rollover
contribution as described in Section 402(c); 403(a)(4);
403(b)(8) and 408(d)(3) of the Code, to be invested and
distributed, pursuant to this agreement. Unless the Depositor
otherwise directs the Custodian in writing, each rollover
contribution received shall be held by the Custodian in a
separate account and all earnings therefrom shall be credited
to such account. The Custodian shall not accept other
contributions to such an account unless the Depositor
otherwise requests in writing. The Custodian shall have no
obligation to ascertain whether or not such rollover is proper
pursuant to the Code or the provisions of any other plan.
(2) The Custodian may receive rollover contributions consisting of
property which is obtainable through J. C. Bradford & Co. The
Custodian may also receive as a rollover contribution such
other property which is approved by the Custodian's Trust
Division.
22
<PAGE> 27
ARTICLE XV
COMPENSATION
(1) The Depositor shall be charged by the Custodian for its
services under this Agreement in accordance with the fee
schedule of the Custodian in effect from time to time. The
Depositor hereby covenants and agrees to pay the same.
(2) The Depositor shall pay to the Custodian any taxes paid by the
Custodian which may be imposed upon the account or the income
thereof which the Custodian is required to pay, as well as all
expenses of administration of the account including fees for
legal services. The Depositor shall pay to the Custodian fees
charged by the Custodian (including, but not limited to, legal
fees incurred by the Custodian) for review of any divorce
decrees, divorce agreements and/or court orders involving the
custodial account and reserves the right to reject any such
decrees, agreements or orders if such documents are not
specific or correct.
(3) The Depositor's account will be charged for all brokerage
fees, other selling and buying expenses, and mutual fund
management fees which are allocable to the account.
(4) In the event a Depositor (or his Beneficiary) fails to
promptly pay the taxes, expenses, liabilities, or the
Custodian's fees or compensation allocable to the account,
after a demand for such payment has been made by the Custodian
of the Depositor (or his Beneficiary, as the case may be) such
liability shall be charged against the account. In this
connection, the Custodian shall to the extent necessary to pay
the liabilities, liquidate the assets of the account without
liability to the Custodian.
(5) If the account is insufficient to satisfy such liabilities
(including if the account cannot be liquidated) or in the
event a deficit should occur in the account for any reason,
the Custodian will charge the Depositor for such amounts as
are unsatisfied and may terminate the account as provided in
Article XVIII. All monies and property carried by the
Custodian at any time in any account of the Depositor (held
either jointly, individually or otherwise) other than a
Regulated Commodity account, or which may at any time be in
the Custodian's possession or under its control for any
purpose shall be collateral subject to a general lien and
security interest for the discharge of all liabilities arising
under this Agreement and of all deficits arising in the
account, however and whenever arising. Should the Depositor
fail to make any payment or satisfy any liability arising
under this agreement or any deficit arising in the account,
the Custodian is hereby authorized to sell any property in the
account of the Depositor with the Custodian, or buy in any
property which any such account may be short, or otherwise
effect settlement for the purpose of satisfying any such
liability or deficit which may arise. Any such sale, purchase
or settlement may be made at the Custodian's discretion and at
its prevailing commission rates on any exchange or market
where such business is then transacted or at public auction or
private sale without notice to the Depositor and without
advertisement, tender or demand of any kind on the Depositor,
such notice, advertisement, tender or demand being hereby
expressly waived by the Depositor.
(6) The Custodian may at any time liquidate sufficient assets in
the IRA to satisfy any obligations of the IRA and the
Depositor and his Beneficiary or Beneficiaries agree to hold
Custodian harmless from any taxes, interest, penalties or
other claims, liabilities or damages resulting from or arising
out of such asset liquidation and/or account termination.
Further, Depositor and his Beneficiary or Beneficiaries
release Custodian from all damage claims resulting from or
arising out of such asset liquidation.
23
<PAGE> 28
ARTICLE XVI
AMENDMENT
(1) This Custodial Account Agreement is intended to be and to
continue as a qualified individual retirement custodial
account within the meaning of Section 408 of the Code. The
Depositor irrevocably delegates to the Custodian the power to
amend this document in writing from time to time without the
consent of the Depositor if such amendment is necessary to
comply with pro visions of the Code and related regulations,
or to comply with regulatory or statutory revision or to
maintain compliance with Federal and State laws. The Depositor
irrevocably delegates to the Custodian power to amend this
Agreement in writing from time to time without the consent of
the Depositor for any other amendments upon thirty (30) days
prior written notice to the Depositor setting forth such
amendment. Any amendment to the Agreement may be retroactively
effective unless otherwise required by law.
(2) Notwithstanding anything herein contained to the contrary, the
Depositor may change his investment directions (in accordance
with Article X), his Beneficiary designation (in accordance
with Article XII), or the time or form for payment of benefits
(in accordance with Articles IV and XIII).
(3) Neither the Depositor nor the Custodian shall have the power
to amend the Custodial Account Agreement in such manner as
would cause or permit any part of the benefits in the account
to be diverted to purposes other than for the exclusive
benefit of the Depositor or his Beneficiaries unless such
amendment is necessary to conform the Custodial Account
Agreement to or satisfy the conditions of any law,
governmental regulation or ruling or to meet the requirements
of the Code or any amendment thereof. Further, neither the
Depositor nor the Custodian shall have the power to amend the
Custodial Account Agreement in such manner as would cause the
account to fail to qualify as an individual retirement account
under Section 408 of the Code.
ARTICLE XVII
TERMINATION AND TRANSFER
(1) A Depositor may terminate this Custodial Account Agreement at
any time by delivery of written notice of such termination to
the Custodian. Upon such termination, the Custodian shall
continue to hold the assets and distribute them in accordance
with the previous instructions of the Depositor and the
provisions of this Agreement unless the Custodian receives
other instructions from the Depositor (such as those involving
a rollover) which the Custodian may follow, without liability
and without any duty to ascertain whether such payout is
proper under the provisions of the Code or of any other plan.
If such other instructions involve a payout of the Depositor's
benefits, the pro- cedures set forth in Article XIII hereof
shall be applicable.
(2) Upon request of a Depositor in writing to the Custodian, the
Custodian shall transfer all benefits of the Depositor to the
Depositor, to a qualified employee retirement plan or to
another individual retirement account established by the
Depositor. The Custodian is authorized, however, to reserve
such sum of money or investments as it may deem advisable for
payment of all its fees, compensation, costs and expenses, or
for any other liabilities constituting a charge against the
assets of the account or against the Custodian with any
balance of such reserve remaining after the payment of all
such items to be paid over to the successor trustee or
custodian. If investments are retained for the aforesaid
reasons, they shall be disposed of in accordance with Article
XIII. Upon any such transfer, the Custodian's accounting
procedures set forth in Article IX hereof shall be applicable.
The Depositor assumes all responsibility and liability for
determining whether a transfer of benefits from this Agreement
is permitted by the Code or state law.
24
<PAGE> 29
(3) This Custodial Account Agreement will be terminated in the
case of complete distribution of the assets of the Depositor's
Account.
(4) The death of the Depositor shall not cause a termination of
this Custodial Account Agreement.
ARTICLE XVIII
RESIGNATION OR REMOVAL OF CUSTODIAN
(1) The Custodian may resign at any time upon thirty (30) days'
notice in writing to the Depositor and may be removed by the
Depositor at any time upon thirty (30) days' notice in writing
to the Custodian. Upon such resignation or removal, the
Depositor shall appoint a qualified successor custodian or
trustee. Upon receipt by the Custodian of written acceptance
of such appointment by the successor custodian or trustee, the
Custodian shall transfer and pay over to such successor the
assets of the accounts or account and all records pertaining
thereto. The Custodian is authorized, however, to reserve such
sum of money or investments as it may deem advisable for
payment of all its fees, compensation, costs and expenses, or
for payment of any other liabilities constituting a charge
against the assets of the accounts or account or against the
Custodian with any balance of such reserve remaining after the
payment of all such items to be paid over to the successor
custodian or trustee. If investments are retained for the
aforesaid reasons, they shall be disposed of in accordance
with Article XIII.
(2) It shall be a condition of the removal of the Custodian by the
Depositor that the Depositor shall have appointed a qualified
successor custodian or trustee. In the event of the
resignation of the Custodian and failure to appoint a
qualified successor, the Custodian may designate a successor
custodian(s) or trustee(s). Such designation or designations
may be made in the alternative specifying the order in which
the custodians or trustees names are to serve. Unless and
until a custodian or trustee named shall commence to act
hereunder, the designation of such custodian or trustee may be
revoked by the custodian or trustee then acting in the same
manner as the designation of such custodian or trustee was
made.
(3) In the event the Depositor fails to pay the Custodian's fees
or compensation, the account cannot be liquidated in order to
pay such fees or compensation, and the Depositor fails to
appoint a successor custodian or trustee within thirty (30)
days after written notice is mailed by Custodian, then
Custodian may terminate its custodial relationship and this
individual retirement account and transfer the assets in the
account to a regular brokerage account at J. C. Bradford & Co.
In such event Custodian shall not be liable for taxes,
penalties, interest or other damages resulting therefrom.
(4) The Custodian shall substitute another trustee or custodian if
the Custodian receives notice from the Commissioner of
Internal Revenue that such substitution is required because it
has failed to comply with the requirements of Section
1.401-(12)(n) of the Income Tax Regulations.
(5) In the event a successor custodian or trustee is appointed the
Custodian shall have the power to sell all the property in the
account in order to convert such property into a form which
the successor custodian or trustee may receive.
ARTICLE XIX
MISCELLANEOUS
(1) Unless specifically authorized in this agreement, the
Custodian shall not, with respect to the account, exercise any
discretionary authority or discretionary control respecting
the management or disposition of its assets, or any
discretionary authority or responsibility in its
administration.
(2) The Custodian shall not be liable for any tax attributable to
the contribution or receipt of any excess contribution. The
Custodian shall have no duty to determine whether
contributions in any year exceed the maximum deductible for
contributions to an account for federal or state income tax
purposes.
25
<PAGE> 30
(3) The Custodian is not liable to the Depositor, his spouse, or
other Beneficiaries for any loss, income tax liability or any
other detriment to an account held by the Custodian pursuant
to this Agreement caused by a transaction engaged in by the
Depositor, his spouse, or other Beneficiary that is prohibited
by Section 4975 of the Code.
(4) The Custodian shall be fully protected in acting upon any
instrument, certificate, power of attorney, appointment of
investment manager or paper believed by it to be genuine and
the Custodian shall be under no duty to make any investigation
or inquiry as to any statement contained in any such writing
or other legality of such writing, but may accept the same as
conclusive evidence of the truth and accuracy of the
statements therein contained. The Custodian may rely upon, and
act in accordance with, a power of attorney given by the
Depositor to any person or persons or institution. The
Depositor shall at all times duly indemnify and save harmless
the Custodian from any liability which may arise hereunder
except liability arising from the negligence or willful
misconduct of the Custodian.
(5) The Custodian shall not be liable for any losses which may
result from its failure to act in the absence of directions
from the Depositor, when such directions are prescribed by
this Agreement.
(6) The Custodian shall not be liable for any act or omission made
with respect to the Custodial Account Agreement except for its
intentional misconduct or negligence.
(7) The Depositor may transfer part or all of his interest in his
custodial account to the former spouse of the Depositor, or an
individual retirement account established by such spouse,
pursuant to a divorce decree or under a written instrument
incident to a divorce.
(8) Unless otherwise required by law, the terms and conditions of
this Custodial Account Agreement shall be applicable without
regard to the community property laws of any state.
(9) The terms and provisions of this Custodial Account Agreement
shall be construed according to the principles, and in the
priority, as follows: first, in accordance with the meaning
under, and which will bring the Agreement into conformity
with, the Internal Revenue Code of 1986, as amended, and the
Employee Retirement Income Security Act of 1974, as amended;
and secondly, in accord- ance with the laws of the State of
Tennessee. If any provisions of this Agreement shall be
construed as if such provision had never been included, then
this Agreement shall be deemed to contain the provision
necessary to comply with such laws. Wherever applicable, the
masculine pronoun as used herein shall include the feminine,
and the singular the plural.
(10) The Depositor herein agrees that he shall look solely to the
assets of his account for the payment of any benefits to which
he is entitled.
(11) The Depositor shall notify the Custodian of any change in the
Depositor's address.
(12) If the custodial account acquires collectibles within the
meaning of Section 408(m) of the Code after December 31, 1981,
the investment in collectibles will be treated as a taxable
distribution in an amount equal to the cost of such
collectible and taxable as such.
(13) If this custodial account is established by an employer for
the exclusive benefit of its employees or their beneficiaries,
then separate records will be maintained for the interest of
each individual; provided, however, that the employer shall
secure Internal Revenue Service approval of the custodial
account pursuant to Section 408(c) of the Code.
(14) This Agreement shall not be deemed to create a trust between
the Custodian and the Depositor and his spouse or other
Beneficiaries.
(15) The Depositor certifies that:
(a) all contributions made to the custodial account are
within the limits specified by applicable law;
(b) all contributions made by or on behalf of the
Depositor have been made on a timely basis; and
(c) Depositor satisfied the eligibility requirements
specified in the law to make such contributions.
26
<PAGE> 31
The Custodian may rely upon all such certifications of the
Depositor, and shall not be liable for any mistake of fact or
judgment with respect to any contribution into the custodial
account.
(16) It is the Depositor's (or Beneficiary's in the event of the
Depositor's death) responsibility and obligation to give
written notice to the Custodian of the amount of each minimum
distribution required in order to avoid the minimum
distribution excise tax penalty under federal and state laws
or to satisfy any qualified terminal interest property marital
deduction distribution require- ments. Such notice shall be
delivered to the Custodian not more than thirty (30) days nor
less than seven (7) days prior to each required minimum
distribution date. The Custodian shall have no duty,
obligation or responsibility to notify the Depositor or any
Beneficiary of any obligation hereunder or to determine the
amount of any minimum distribution and the Custodian shall not
be liable for any penalties, taxes or interest of any kind
related thereto.
(17) If a custodial account is established for a minor, the
guardian, custodian or other legal representative of the minor
shall agree in writing to guarantee full payment of all
compensation or fees payable to the Custodian herein. No
investment direction shall be accepted by the Custodian from
the minor and shall only be accepted from the guardian,
custodian or other legal representative of the minor.
ARTICLE XX
RIGHTS OF REVOCATION
(1) This Custodian Account Agreement may be revoked by the
Depositor or rejected by the Custodian within seven (7)
calendar days after the date upon which the Adoption Agreement
is signed by the Depositor, in which event this Agreement
shall be void from its inception, and all property contributed
and all fees paid by the Depositor to the Custodian shall be
returned to the Depositor. Notwithstanding the preceding
sentence, the Custodian shall execute any investment
directions of the Depositor during the seven (7) calendar days
immediately following the date upon which the Depositor signed
the Custodian Account Adoption Agreement.
ARTICLE XXI
DEFINITIONS
The following words and phrases, when used herein, shall have the following
respective meanings (unless their context clearly indicates otherwise):
(1) Depositor: The individual who is eligible to establish an
Individual Retirement Custodial Account and who establishes an
individual retirement custodial account under this Agreement
by executing the IRA Adoption Agreement.
(2) Beneficiary: A person, trustee, or entity (including but not
limited to the Depositor's (or spouse's) estate, dependent (or
dependents), designated in writing by the Depositor (or
surviving spouse) to receive benefits payable under this
Agreement, subsequent to the death of the Depositor (or
surviving spouse).
(3) Custodian: J. C. Bradford & Co., its successors and assigns.
(4) Code: The Internal Revenue Code of 1986, as amended. Reference
to a section of the Code shall include that section and any
comparable section or sections of any future legislation that
amends, supplements or supersedes said section.
(5) Compensation: Wages, salaries, professional fees, or other
amounts derived from or received for personal service actually
rendered (including, but not limited to commissions paid
salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums,
tips, and bonuses) and includes earned income, as defined in
Section 401(c)(2) of the Code (reduced by the deduction the
self-employed individual takes for contributions made to a
self-employed retirement plan). For purposes of this
definition, Section 401(c)(2) shall be applied as if the term
trade or
27
<PAGE> 32
business for purposes of Section 1402 included service
described in Subsection (c)(6). Compensation does not include
amounts derived from or received as earnings or profits from
property (including, but not limited to, interest and
dividends) or amounts not includible in gross income.
Compensation also does not include any amount received as a
pension or annuity or as deferred compensation. The term
"compensation" shall include any amount includible in the
individual's gross income under Section 71 of the Code with
respect to a divorce or separation instrument described in
subparagraph (A) of Section 71(b)(2) of the Code.
28
<PAGE> 33
ROTH IRA DISCLOSURE STATEMENT
RIGHT OF DEPOSITOR TO REVOKE WITHIN SEVEN DAYS
You have the right to revoke your Roth IRA within seven days after the date you
sign the Roth Adoption Agreement. If you decide to revoke, the full amount of
your Roth IRA contribution - without adjustment for sales commissions,
administrative expenses, or market fluctuations - will be returned to you. You
may revoke your Roth IRA by mailing or delivering a written notice to the
Retirement Services Department of J.C. Bradford & Co., 330 Commerce Street,
Nashville, TN 37201. Your notice will be deemed mailed as of the date of the
postmark. If you have any questions regarding the revocation of your account,
contact the Retirement Services Department at 615-748-9434.
CONTRIBUTIONS
Contributions (other than rollovers and conversions, as defined in the
ROLLOVERS/CONVERSIONS section below) must be made in cash. The total amount you
may contribute to your Roth IRA in any calendar year cannot exceed 100% of your
earned income or $2,000, whichever is less. The total annual contribution to all
IRAs (Traditional and Roth) cannot exceed 100% of your earned income, limited to
the $2,000 maximum.
Your ability to contribute to a Roth IRA is restricted by your Adjusted Gross
Income (AGI)*, as outlined below:
- Individuals with AGI below $95,000 can make a full
$2,000 contribution
- Individuals with AGI between $95,000 and $110,000 can
make a partial contribution calculated as follows:
$110,000 - AGI X $2,000
--------------
$15,000
- Individuals with AGI above $110,000 are not eligible
to contribute
- Couples with AGI below $150,000 can make a full
$2,000 contribution
- Couples with AGI between $150,000 and $160,000 can
make a partial contribution calculated as follows:
$160,000 - AGI X $2,000
--------------
$10,000
- Couples with AGI above $160,000 are not eligible to
contribute
* AGI is any income, such as salary, dividends, capital gains,
and rental income, less certain items you can subtract, such
as 401(k) contributions, deductible IRAs, etc. For this
purpose, AGI does not include amounts converted from a
Traditional IRA to a Roth IRA.
Your Roth IRA contributions are not limited by your participation in an employer
sponsored retirement plan. In addition, you may continue to fund your Roth IRA
AFTER you turn 70 1/2 years of age if you have earned income and your AGI is
below the maximum thresholds discussed above.
SPOUSAL CONTRIBUTIONS - If you are married and file a joint return you may make
a contribution to your spouse's Roth IRA. Contributions to your Roth IRA and
your spouse's Roth IRA cannot exceed 100% of your earned income or $4,000,
limited to $2,000 per individual account. Spousal contributions are subject to
the AGI limitations mentioned above.
NONFORFEITABILITY - All contributions, including earnings, in your Roth IRA are
nonforfeitable.
CARRYBACKS - Contributions made by your tax filing deadline are deemed to have
been made on the last day of the previous calendar year, if designated as such.
EXCESS CONTRIBUTIONS - An excess is any amount that exceeds 100% of your earned
income or $2,000, whichever is less, subject to the AGI limitations mentioned
above. A 6% excise tax applies to any excess contributions made to your Roth
IRA. This tax is cumulative and applies each year the excess remains in your
account. Excess contribution amounts do not include transfers and rollovers.
ELIGIBLE CUSTODIANS
Your Roth IRA must be custodied by a bank, savings and loan association, credit
union, or a person approved by the Secretary of the Treasury.
INVESTMENT RESTRICTIONS
Roth IRA assets may not be commingled with other property except in a common
trust fund or common investment fund.
Your Roth IRA may not be invested in any life insurance contracts or
collectibles. [Refer to the Internal Revenue Service's definitions of
collectibles in Internal Revenue Section (IRC) 408(m)]. Certain specially minted
US gold and silver bullion coins and state-issued coins are permissible. Also,
platinum coins and some gold, silver, platinum and palladium bullion is also
permitted.
BENEFICIARIES
If you have designated your spouse as the sole beneficiary of your Roth IRA,
upon your death, he or she may elect to roll the assets into his/her own Roth
IRA to avoid future Required Minimum Distributions. If the beneficiary is
someone other than your spouse, the following options are available:
1. The amount remaining in your account must be distributed by
December 31st of the year following the fifth anniversary of
your death.
2. The account assets must be distributed in annual installments
based on the life expectancy of your eldest beneficiary.
Your nonspouse beneficiary(ies) must elect one of the options above by
December 31st of the year following your death. If no choice is made,
option 1 will be deemed to have been selected.
EXCESS ACCUMULATION PENALTIES - A nonspouse beneficiary is required to take
certain minimum distributions after your death. If such distributions are not
satisfied by the required deadline, a penalty of 50% is imposed on the amount
that should have been distributed.
<PAGE> 34
INCOME TAX TREATMENT FOR ROTH IRAS
Deductions are not allowed for Roth IRA contributions, including transfers and
rollovers. Earnings from the investments in your Roth IRA are not subject to
federal taxation while they accumulate in your account or when distributed to
you, provided you make "qualified distributions", as defined below. Please
consult your tax advisor about possible STATE income tax on your distributions.
QUALIFIED DISTRIBUTIONS - These are not included in your gross income. A
"qualified" distribution consists of assets which have been in the Roth IRA for
five years and are distributed due to:
- attainment of age 59 1/2
- death or disability
- purchase of a new home (subject to lifetime limit of $10,000)
In a Contributory Roth IRA, the five-year period begins with the first year for
which you make a contribution. For a Conversion Roth IRA, the five-year period
begins with the year in which the conversion is made.
NONQUALIFIED DISTRIBUTIONS - Distributions from your Roth IRA that do not meet
the requirements listed above are deemed to be "nonqualified" and will be
includible in your gross income the year in which they are taken. However,
distributions are considered to come first from principal (the amount of your
contributions), which is not subject to taxation. Therefore, your nonqualified
distributions will not be taxed until they exceed the amount of your original
contributions. Special rules may apply to distributions from Conversion Roth
IRAs.
EARLY DISTRIBUTION PENALTIES - If you are under age 59 1/2 and receive a
nonqualified distribution as defined above, an additional 10% penalty tax will
apply to the amount included in your gross income. Exceptions to this penalty,
other than those mentioned in the QUALIFIED DISTRIBUTIONS section above, are:
- Substantially equal periodic payments
- Medical expenses which exceed 7.5% of your AGI
- Health insurance premiums, if you are unemployed for more than
12 weeks and receive unemployment compensation
- Higher education expenses
REQUIRED MINIMUM DISTRIBUTIONS - Your Roth IRA is not subject to Required
Minimum Distributions (RMDs).
SPECIAL TAX TREATMENT - Capital gains treatment and five and ten-year forward
averaging are not available on Roth IRA distributions.
ROLLOVERS/CONVERSIONS
A rollover is a tax free movement of assets into your Roth IRA from any of your
other Roth or Traditional IRAs. The rules regarding Roth IRA rollovers are
summarized below. Rollover rules vary and are complex - please seek the advice
of a competent tax advisor if you have any questions.
1. ROTH TO ROTH - Assets distributed from your Roth IRA may be rolled to
another Roth IRA per the rules set forth in IRC section 408(d)(3). You
must roll your Roth IRA assets to another valid Roth IRA within sixty
days of receiving the distribution. You may only initiate one rollover
from each Roth IRA every twelve months, and you cannot roll the same
assets more than once per twelve month period. You may not roll Roth
IRA assets to other types of IRAs.
2. TRADITIONAL TO ROTH - If you have more than $100,000 in earned income
or are married and do not file a joint return, you are not eligible to
convert your Traditional IRA into a Roth IRA.
If you are eligible for a Roth IRA Conversion, you must establish a
separate Roth IRA account. The only contributions allowed in a
conversion account are amounts converted from Traditional IRAs in one
tax year. The amount you convert from a Traditional IRA to your Roth
IRA will be reported as taxable income for that year; however, the 10%
early distribution penalty will not apply.
If you convert a Traditional IRA to a Roth IRA before January 1, 1999,
you may pro-rate your taxable distribution amount over a four-year
period.
You must designate to J.C. Bradford & Co., in writing, your intention to treat
your contribution as a rollover. This election is irrevocable.
You may not roll proceeds from an employer sponsored, qualified retirement plan
directly into your Roth IRA (or Conversion Roth) account.
MISCELLANEOUS
The agreement used to establish your Roth IRA has been approved by the Internal
Revenue Service. IRS approval applies only to the Roth IRA form and is not to be
considered an endorsement of the Roth IRA itself or of the investments offered.
If you would like to obtain more information on Roth IRAs, you may request such
information from your District Office of the Internal Revenue Service.
Specifically, you may want to review IRS Publication 590, Individual Retirement
Arrangements (IRAs).
You are responsible for filing all necessary tax and penalty forms with the
Internal Revenue Service that apply to your Roth IRA. IRS Form 5329 is the form
to use when remitting penalties and/or excise taxes.
<PAGE> 1
EXHIBIT (14)(b)
QUALIFIED RETIREMENT PLAN AND TRUST
DEFINED CONTRIBUTION
BASIC PLAN
DOCUMENT 03
(MONEY PURCHASE PENSION/PROFIT SHARING)
<PAGE> 2
QUALIFIED RETIREMENT PLAN AND TRUST
DEFINED CONTRIBUTION BASIC PLAN DOCUMENT 03
SECTION ONE DEFINITIONS
The following words and phrases when used in the Plan with
initial capital letters shall, for the purpose of this Plan,
have the meanings set forth below unless the context
indicates that other meanings are intended:
1.01 ADOPTION AGREEMENT
Means the document executed by the Employer through which it
adopts the Plan and Trust and thereby agrees to be bound by
all terms and conditions of the Plan and Trust.
1.02 BASIC PLAN DOCUMENT
Means this prototype Plan and Trust document.
1.03 BREAK IN ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an
Eligibility Computation Period during which an Employee fails
to complete more than 500 Hours of Service (or such lesser
number of Hours of Service specified in the Adoption
Agreement for this purpose).
1.04 BREAK IN VESTING SERVICE
Means a Plan Year during which an Employee fails to complete
more than 500 Hours of Service (or such lesser number of
Hours of Set-vice specified in the Adoption Agreement for
this purpose).
1.05 CODE
Means the Internal Revenue Code of 1986 as amended from
time-to-time.
1.06 COMPENSATION
For Plan Years beginning on or after January 1, 1989, the
following definition of Compensation shall apply:
Compensation will mean Compensation as that term is defined
in Section 3.05(E)(2) of the Plan. For any Self-Employed
Individual covered under the Plan, Compensation will mean
Earned Income. Compensation shall include only that
Compensation which is actually paid to the Participant during
the applicable period. Except as provided elsewhere in this
Plan, the applicable period shall be the Plan Year unless the
Employer has selected another period in the Adoption
Agreement.
Unless otherwise indicated in the Adoption Agreement,
Compensation shall include any amount which is contributed by
the Employer pursuant to a salary reduction agreement and
which is not includible in the gross income of the Employee
under Sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
For years beginning after December 31, 1988, the annual
Compensation of each Participant taken into account under the
Plan for any year shall not exceed $200,000. This limitation
shall be adjusted by the Secretary at the same time and in
the same manner as under Section 415(d) of the Code, except
that the dollar increase in effect on January I of any
calendar year is effective for years beginning in such
calendar year and the first adjustment to the $200,000
limitation is effected on January 1, 1990. If a Plan
determines Compensation on a period of time that contains
fewer than 12 calendar months, then the annual Compensation
limit is an amount equal to the annual Compensation limit for
the calendar year in which the compensation period begins
multiplied by the ratio obtained by dividing the number of
full months in the period by 12.
In determining the Compensation of a Participant for purposes
of this limitation, the rules of Section 414(q)(6) of the
Code shall apply, except in applying such rules, the term
"family" shall include only the spouse of the Participant and
any lineal descendants of the Participant who have not
attained age 19 before the close of the year.
If, as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the integration
level if this Plan provides for permitted disparity), the
limitation shall be prorated among the affected individuals
in proportion to each such individual's Compensation as
determined under this Section prior to the application of
this limitation.
If Compensation for any prior Plan Year is taken into account
in determining an Employee's contributions or benefits for
the current year, the Compensation for such prior year is
subject to the applicable annual Compensation limit in effect
for that prior year. For this purpose for years beginning
before January 1, 1990, the applicable annual Compensation
limit is $200,000.
Unless otherwise indicated in the Adoption Agreement, where
an Employee enters the Plan (and thus becomes a Participant)
on an Entry Date other than the first Entry Date in a Plan
Year, his Compensation will include any such earnings paid to
him during the whole of such Plan Year.
Where this Plan is being adopted as an amendment and
restatement to bring a Prior Plan into compliance with the
Tax Reform Act of 1986, such Prior Plan's definition of
Compensation shall apply for Plan Years beginning before
January 1, 1989.
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to
the contrary, for Plan Years beginning on or after January 1,
1994, the annual Compensation of each Employee taken into
account under the Plan shall not exceed the OBRA '93 annual
Compensation limit. The OBRA '93 annual Compensation limit is
$150,000, as adjusted by the Commissioner for increases in
the cost of living in accordance with Section 401 (a)(17)(B)
of the Internal Revenue Code. The cost-of-living adjustment
in effect for a calendar year applies to any period, not
exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the
OBRA '93 annual Compensation limit will be multiplied by a
2
<PAGE> 3
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 the OBRA '93 annual
Compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning
before the first day of the first Plan Year beginning on or
after January 1, 1994, the OBRA '93 annual Compensation limit
is $150,000.
1.07 CUSTODIAN
Means an entity specified in the Adoption Agreement as
Custodian or any duly appointed successor as provided in
Section 5.09.
1.08 DISABILITY
Means the inability to engage in any substantial, gainful
activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than 12 months. The permanence and degree
of such impairment shall be supported by medical evidence.
1.09 EARNED INCOME
Means the net earnings from self-employment in the trade or
business with respect to which the Plan is established, for
which personal services of the individual are a material
income-producing factor. Net earnings will be determined
without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced
by contributions by the Employer to a qualified plan to the
extent deductible under Section 404 of the Code.
Net earnings shall be determined with regard to the deduction
allowed to the Employer by Section 164(f) of the Code for
taxable years beginning after December 31, 1989.
1.10 EFFECTIVE DATE
Means the date the Plan becomes effective as indicated in the
Adoption Agreement. However, where a separate date is stated
in the Plan as of which a particular Plan provision becomes
effective, such date will control with respect to that
provision.
1.11 ELIGIBILITY COMPUTATION PERIOD
An Employee's initial Eligibility Computation Period shall be
the 12 consecutive month period commencing with the date such
Employee first performs an Hour of Service (employment
commencement date). His subsequent Eligibility Computation
Periods shall be the 12 consecutive month periods commencing
on the anniversaries of his employment commencement date;
provided, however, if pursuant to the Adoption Agreement, an
Employee is required to complete one or less Years of
Eligibility Service to become a Participant, then his
subsequent Eligibility Computation Periods shall be the Plan
Years commencing with the Plan Year beginning during his
initial Eligibility Computation Period.
1.12 EMPLOYEE
Means any person employed by an Employer maintaining the Plan
or of any other employer required to be aggregated with such
Employer under Sections 414(b), (c), (m) or (o) or the Code.
The term Employee shall also include any Leased Employee
deemed to be an Employee of any Employer described in the
previous paragraph as provided in Section 414(n) or (o) of
the Code.
1.13 EMPLOYER
Means any corporation, partnership, sole-proprietorship or
other entity named in the Adoption Agreement and any
successor who by merger, consolidation, purchase or otherwise
assumes the obligations of the Plan. A partnership is
considered to be the Employer of each of the partners and a
sole-proprietorship is considered to be the Employer of a
sole proprietor.
1.14 EMPLOYER CONTRIBUTION
Means the amount contributed by the Employer each year as
determined under this Plan.
1.15 ENTRY DATES
Means the first day of the Plan Year and the first day of the
seventh month of the Plan Year, unless the Employer has
specified more frequent dates in the Adoption Agreement.
1.16 ERISA
Means the Employee Retirement Income Security Act of 1974 as
amended from time-to-time.
1.17 FORFEITURE
Means that portion of a Participant's Individual Account as
derived from Employer Contributions which he or she is not
entitled to receive (i.e., the nonvested portion).
1.18 FUND
Means the Plan assets held by the Trustee or Custodian for
the Participants' exclusive benefit.
1.19 HIGHLY COMPENSATED EMPLOYEE
The term Highly Compensated Employee includes highly
compensated active employees and highly compensated former
employees. A highly compensated active employee includes any
Employee who performs service for the Employer during the
determination year and who,
3
<PAGE> 4
during the look-back year: (a) received Compensation from the
Employer in excess of $75,000 (as adjusted pursuant to
Section 415(d) of the Code); (b) received Compensation from
the Employer in excess of $50,000 (as adjusted pursuant to
Section 415(d) of the Code) and was a member of the top-paid
group for such year: or (c) was an officer of the Employer
and received Compensation during such year that is greater
than 50% of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated
Employee also includes: (a) Employees who are both described
in the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the Employee is
one of the 100 Employees who received the most Compensation
from the Employer during the determination year; and (b)
Employees who are 5% owners at any time during the look-back
year or determination year.
If no officer has satisfied the Compensation requirement of
(c) above during either a determination year or look-back
year, the highest paid officer for such year shall be treated
as a Highly Compensated Employee. For this purpose, the
determination year shall be the Plan Year. The look-back year
shall be the 12 month period immediately preceding the
determination year.
A highly compensated former employee includes any Employee
who separated from service (or was deemed to have separated)
prior to the determination year, performs no service for the
Employer during the determination year, and was a highly
compensated active employee for either the separation year or
any determination year ending on or after the Employee's 55th
birthday.
If an Employee is, during a determination year or look-back
year, a family member of either a 5% owner who is an active
or former Employee or a Highly Compensated Employee who is
one of the 10 most Highly Compensated Employees ranked on the
basis of Compensation paid by the Employer during such year,
then the family member and the 5% owner or top 10 Highly
Compensated Employee shall be aggregated. In such case, the
family member and 5% owner or top 10 Highly Compensated
Employee shall be treated as a single Employee receiving
Compensation and Plan contributions or benefits equal to the
sum of such Compensation and contributions or benefits of the
family member and 5% owner or top 10 Highly Compensated
Employee. For purposes of this Section, family member
includes the spouse, lineal ascendants and descendants of the
Employee or former Employee and the spouses of such lineal
ascendants and descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of
Employees in the top-paid group, the top 100 Employees, the
number of Employees treated as officers and the Compensation
that is considered, will be made in accordance with Section
414(q) of the Code and the regulations thereunder.
1.20 HOURS OF SERVICE - Means
A. Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer.
These hours will be credited to the Employee for the
computation period in which the duties are performed; and
B. Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time
during which no duties are performed (irrespective of
whether the employment relationship has terminated) due
to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of
absence. No more than 501 Hours of Service will be
credited under this paragraph for any single continuous
period (whether or not such period occurs in a single
computation period). Hours under this paragraph shall be
calculated and credited pursuant to Section 2530.200b-2
of the Department of Labor Regulations which is
incorporated herein by this reference; and
C. Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the
Employer. The same Hours of Service will not be credited
both under paragraph (A) or paragraph (B), as the case
may be, and under this paragraph (C). These hours will be
credited to the Employee for the computation period or
periods to which the award or agreement pertains rather
than the computation period in which the award,
agreement, or payment is made.
D. Solely for purposes of determining whether a Break in
Eligibility Service or a Break in Vesting Service has
occurred in a computation period (the computation period
for purposes of determining whether a Break in Vesting
Service has occurred is the Plan Year), an individual who
is absent from work for maternity or paternity reasons
shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for
such absence, or in any case in which such hours cannot
be determined, 8 Hours of Service per day of such
absence. For purposes of this paragraph, an absence from
work for maternity or paternity reasons means an absence
(1) by reason of the pregnancy of the individual, (2) by
reason of a birth of a child of the individual, (3) by
reason of the placement of a child with the individual in
connection with the adoption of such child by such
individual, or (4) for purposes of caring for such child
for a period beginning immediately following such birth
or placement. The Hours of Service credited under this
paragraph shall be credited (1) in the Eligibility
Computation Period or Plan Year in which the absence
begins if the crediting is necessary to prevent a Break
in Eligibility Service or a Break in Vesting Service in
the applicable period, or (2) in all other cases, in the
following Eligibility Computation Period or Plan Year.
E. Hours of Service will be credited for employment with
other members of an affiliated service group (under
Section 414(m) of the Code), a controlled group of
corporations (under Section 414(b) of the Code), or a
group of trades or businesses under common control (under
Section 414(c) of the Code) of which the adopting
Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to Section 414(o)
of the Code and the regulations thereunder.
Hours of Service will also be credited for any individual
considered an Employee for purposes of this Plan under
Code Sections 414(n) or 414(o) and the regulations
thereunder.
F. Where the Employer maintains the plan of a predecessor
employer, service for such predecessor employer shall be
treated as service for the Employer.
G. The above method for determining Hours of Service may be
altered as specified in the Adoption Agreement.
4
<PAGE> 5
1.21 INDIVIDUAL ACCOUNT
Means the account established and maintained under this Plan
for each Participant in accordance with Section 4.0
1.22 INVESTMENT FUND
Means a subdivision of the Fund established pursuant to
Section 5.05.
1.23 KEY EMPLOYEE
Means any person who is determined to be a Key Employee under
Section 10.08.
1.24 LEASED EMPLOYEE
Means any person (other than an Employee of the recipient)
who pursuant to an agreement between the recipient and any
other person ("leasing organization") has performed services
for the recipient (or for the recipient and related persons
determined in accordance with Section 414(n)(6) of the Code)
on a substantially full time basis for a period of at least
one year, and such services are of a type historically
performed by Employees in the business field of the recipient
Employer. Contributions or benefits provided a Leased
Employee by the leasing organization which are attributable
to services performed for the recipient Employer shall be
treated as provided by the recipient Employer.
A Leased Employee shall not be considered an Employee of the
recipient if: (1) such employee is covered by a money
purchase pension plan providing: (a) a nonintegrated employer
contribution rate of at least 10% of compensation, as defined
in Section 415(c)(3) of the Code, but including amounts
contributed pursuant to a salary reduction agreement which
are excludable from the employee's gross income under Section
125, Section 402(a)(8), Section 402(h) or Section 403(b) of
the Code, (b) immediate participation, and (c) full and
immediate vesting; and (2) Leased Employees do not constitute
more than 20% of the recipient's nonhighly compensated work
force.
1.25 NORMAL RETIREMENT AGE
Means the age specified in the Adoption Agreement. However,
if the Employer enforces a mandatory retirement age which is
less than the Normal Retirement Age, such mandatory age is
deemed to be the Normal Retirement Age. If no age is
specified in the Adoption Agreement, the Normal Retirement
Age shall be age 59 1/2.
1.26 OWNER-EMPLOYEE
Means an individual who is a sole proprietor, or who is a
partner owning more than 10% of either the capital or profits
interest of the partnership.
1.27 PARTICIPANT
Means any Employee or former Employee of the Employer who has
met the Plan's eligibility requirements, has entered the Plan
and who is or may become eligible to receive a benefit of any
type from this Plan or whose Beneficiary may be eligible to
receive any such benefit.
1.28 PLAN
Means the prototype defined contribution plan adopted by the
Employer. The Plan consists of this Basic Plan Document plus
the corresponding Adoption Agreement as completed and signed
by the Employer.
1.29 PLAN ADMINISTRATOR
Means the person or persons determined to be the Plan
Administrator in accordance with Section 8.01.
1.30 PLAN YEAR
Means the 12 consecutive month period which coincides with
the Employer's tax year or such other 12 consecutive month
period as is designated in the Adoption Agreement.
1.31 PRIOR PLAN
Means a plan which was amended or replaced by adoption of
this Plan document as indicated in the Adoption Agreement.
1.32 PROTOTYPE SPONSOR
Means the entity specified in the Adoption Agreement. Such
entity must meet the definition of a sponsoring organization
set forth in Section 3.07 of Revenue Procedure 89-9.
1.33 SELF-EMPLOYED INDIVIDUAL
Means an individual who has Earned Income for the taxable
year from the trade or business for which the Plan is
established; also, an individual who would have had Earned
Income but for the fact that the trade or business had no net
profits for the taxable year.
1.34 SEPARATE FUND
Means a subdivision of the Fund held in the name of a
particular Participant representing certain assets held for
that Participant. The assets which comprise a Participant's
Separate Fund are those assets earmarked for him and those
assets subject to the Participant's individual direction
pursuant to Section 5.14.
1.35 TAXABLE WAGE BASE
Means, with respect to any taxable year, the maximum amount
of earnings which may be considered wages for such year under
Section 312(a)(1) of the Code.
1.36 TERMINATION OF EMPLOYMENT
A Termination of Employment of an Employee of an Employer
shall occur whenever his status as an Employee of such
Employer ceases for any reason other than his death. An
Employee who does not return to work for the Employer on or
before the expiration of an authorized leave of absence from
such Employer shall be deemed to have incurred a Termination
of Employment when such leave ends.
5
<PAGE> 6
1.37 TOP-HEAVY PLAN
This Plan is a Top-Heavy Plan for any Plan Year if it is
determined to be such pursuant to Section 10.08.
1.38 TRUSTEE
Means an individual, individuals or corporation specified in
the Adoption Agreement as Trustee or any duly appointed
successor as provided in Section 5.09. Trustee shall mean
Custodian in the event the financial organization named as
Trustee does not have full trust powers.
1.39 VALUATION DATE
Means the last day of the Plan Year and each other date
designated by the Plan Administrator which is selected in a
uniform and nondiscriminatory manner when the assets of the
Fund are valued at their then fair market value.
1.40 VESTED
Means nonforfeitable, that is, a claim which is unconditional
and legally enforceable against the Plan obtained by a
Participant or his Beneficiary to that part of an immediate
or deferred benefit under the Plan which arises from a
Participant's Years of Vesting Service.
1.41 YEAR OF ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an
Eligibility Computation period during which an Employee
completes at least 1,000 Hours of Service (or such lesser
number of Hours of Service specified in the Adoption
Agreement for this purpose).
1.42 YEAR OF VESTING SERVICE
Means a Plan Year during which an Employee completes at least
1,000 Hours of Service (or such lesser number of Hours of
Service specified in the Adoption Agreement for this
purpose).
In the case of a Participant who has 5 or more consecutive
Breaks in Vesting Service, all Years of Vesting Service after
such Breaks in Vesting Service will be disregarded for the
purpose of determining the Vested portion of his Individual
Account derived from Employer Contributions that accrued
before such breaks. Such Participant's prebreak service will
count in vesting the postbreak Individual Account derived
from Employer Contributions only if either:
(A) such Participant had any Vested right to any portion of
his Individual Account derived from Employer
Contributions at the time of his Termination of
Employment; or
(B) upon returning to service, the number of consecutive
Breaks in Vesting Service is less than his number of
Years of Vesting Service before such breaks.
Separate subaccounts will be maintained for the Participant's
prebreak and postbreak portions of his Individual Account
derived from Employer Contributions. Both subaccounts will
share in the gains and losses of the Fund.
Years of Vesting Service shall not include any period of time
excluded from Years of Vesting Service in the Adoption
Agreement.
In the event the Plan Year is changed to a new 12-month
period, Employees shall receive credit for Years of Vesting
Service, in accordance with the preceding provisions of this
definition, for each of the Plan Years (the old and new Plan
Years) which overlap as a result of such change.
SECTION TWO ELIGIBILITY AND PARTICIPATION
2.01 ELIGIBILITY TO PARTICIPATE
Each Employee of the Employer, except those Employees who
belong to a class of Employees which is excluded from
participation as indicated in the Adoption Agreement, shall
be eligible to participate in this Plan upon the satisfaction
of the age and Years of Eligibility Service requirements
specified in the Adoption Agreement.
2.02 PLAN ENTRY
A. If this Plan is a replacement of a Prior Plan by
amendment or restatement, each Employee of the Employer
who was a Participant in said Prior Plan before the
Effective Date shall continue to be a Participant in this
Plan.
B. An Employee will become a Participant in the Plan as of
the Effective Date if he has met the eligibility
requirements of Section 2.01 as of such date. After the
Effective Date, each Employee shall become a Participant
on the first Entry Date following the date the Employee
satisfies the eligibility requirements of Section 2.01.
C. The Plan Administrator shall notify each Employee who
becomes eligible to be a Participant under this Plan and
shall furnish him with the application form, enrollment
forms or other documents which are required of
Participants. The eligible Employee shall execute such
forms or documents and make available such information as
may be required in the administration of the Plan.
2.03 TRANSFER TO OR FROM INELIGIBLE CLASS
If an Employee who had been a Participant becomes ineligible
to participate because he is no longer a member of an
eligible class of Employees, but has not incurred a Break in
Eligibility Service, such Employee shall participate
immediately upon his return to an eligible class of
Employees. If such Employee incurs a Break in Eligibility
Service, his eligibility to participate shall be determined
by Section 2.04.
6
<PAGE> 7
An Employee who is not a member of the eligible class of
Employees will become a Participant immediately upon becoming
a member of the eligible class provided such Employee has
satisfied the age and Years of Eligibility Service
requirements. If such Employee has not satisfied the age and
Years of Eligibility Service requirements as of the date he
becomes a member of the eligible class, he shall become a
Participant on the first Entry Date following the date he
satisfies said requirements.
2.04 RETURN AS A PARTICIPANT AFTER BREAK IN ELIGIBILITY SERVICE
A. EMPLOYEE NOT PARTICIPANT BEFORE BREAK - If an Employee
incurs a Break in Eligibility Service before satisfying
the Plan's eligibility requirements, such Employee's
Years of Eligibility Service before such Break in
Eligibility Service will not be taken into account.
B. NONVESTED PARTICIPANTS - In the case of a Participant who
does not have a Vested interest in his Individual Account
derived from Employer Contributions, Years of Eligibility
Service before a period of consecutive Breaks in
Eligibility Service will not be taken into account for
eligibility purposes if the number of consecutive Breaks
in Eligibility Service in such period equals or exceeds
the greater of 5 or the aggregate number of Years of
Eligibility Service before such break. Such aggregate
number of Years of Eligibility Service will not include
any Years of Eligibility Service disregarded under the
preceding sentence by reason of prior breaks.
If a Participant's Years of Eligibility Service are
disregarded pursuant to the preceding paragraph, such
Participant will be treated as a new Employee for
eligibility purposes. If a Participant's Years of
Eligibility Service may not be disregarded pursuant to
the preceding paragraph, such Participant shall continue
to participate in the Plan, or, if terminated, shall
participate immediately upon reemployment.
C. VESTED PARTICIPANTS - A Participant who has sustained a
Break in Eligibility Service and who had a Vested
interest in all or a portion of his Individual Account
derived from Employer Contributions shall continue to
participate in the Plan, or, if terminated, shall
participate immediately upon reemployment.
2.05 DETERMINATIONS UNDER THIS SECTION
The Plan Administrator shall determine the eligibility of
each Employee to be a Participant. This determination shall
be conclusive and binding upon all persons except as
otherwise provided herein or by law.
2.06 TERMS OF EMPLOYMENT
Neither the fact of the establishment of the Plan nor the
fact that a common law Employee has become a Participant
shall give to that common law Employee any right to continued
employment; nor shall either fact limit the right of the
Employer to discharge or to deal otherwise with a common law
Employee without regard to the effect such treatment may have
upon the Employee's rights under the Plan.
SECTION THREE CONTRIBUTIONS
3.01 EMPLOYER CONTRIBUTIONS
A. OBLIGATION TO CONTRIBUTE - The Employer shall make
contributions to the Plan in accordance with the
contribution formula specified in the Adoption Agreement.
If this Plan is a profit sharing plan, the Employer
shall, in its sole discretion, make contributions without
regard to current or accumulated earnings or profits.
B. ALLOCATION FORMULA AND THE RIGHT TO SHARE IN THE EMPLOYER
PROFIT SHARING CONTRIBUTION -
1. General - The Employer Contribution for a Plan Year
will be allocated or contributed to the Individual
Accounts of qualifying Participants in accordance
with the allocation or contribution formula specified
in the Adoption Agreement. The Employer Contribution
for any Plan Year will be allocated to each
Participant's Individual Account as of the last day
of that Plan Year.
Any Employer Contribution for a Plan Year must
satisfy Section 401(a)(4) and the regulations
thereunder for such Plan Year.
2. Qualifying Participants - A Participant is a
qualifying Participant and is entitled to share in
the Employer Contribution for any Plan Year if (1) he
was a Participant on at least one day during the Plan
Year, (2) if this Plan is a nonstandardized plan, he
completes a Year of Vesting Service during the Plan
Year and (3) where the Employer has selected the
"last day requirement" in the Adoption Agreement, he
is an Employee of the Employer on the last day of
Plan Year (except that this last requirement (3)
shall not apply if the Participant has died during
the Plan Year or incurred a Termination of Employment
during the Plan Year after having reached his Normal
Retirement Age or having incurred a Disability).
Notwithstanding anything in this paragraph to the
contrary, a Participant will not be a qualifying
Participant for a Plan Year if he incurs a
Termination of Employment during such Plan Year with
not more than 500 Hours of Service if he is not an
Employee on the last day of the Plan Year. The
determination of whether a Participant is entitled to
share in the Employer Contribution shall be made as
of the last day of each Plan Year.
3. Special Rules for Integrated Plans - If the Employer
has selected the integrated contribution or
allocation formula in the Adoption Agreement, then
the maximum disparity rate shall be determined in
accordance with the following table.
7
<PAGE> 8
MAXIMUM DISPARITY RATE
<TABLE>
<CAPTION>
Top-Heavy Nontop-Heavy
Integration Level Money Purchase Profit Sharing Profit Sharing
- ----------------- -------------- -------------- --------------
<S> <C> <C> <C>
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not more than X* 5.7% 2.7% 5.7%
More than X* of TWB but not more 4.3% 1.3% 4.3%
than 80% of TWB
More than 80% of TWB but not more 5.4% 2.4% 5.4%
than TWB
</TABLE>
*X means the greater of $10,000 or 20% of TWB.
C. ALLOCATION OF FORFEITURES - Forfeitures for a Plan
Year which arise as a result of the application of
Section 6.01(D) shall be allocated as follows:
1. Profit Sharing Plan - If this is a profit sharing
plan, Forfeitures shall be allocated in the manner
provided in Section 3.01(B) (for Employer
Contributions) to the Individual Accounts of
Participants who are entitled to share in the
Employer Contribution for such Plan Year.
2. Money Purchase Pension and Target Benefit Plan - If
this Plan is a money purchase plan or a target
benefit plan, forfeitures shall be applied towards
the reduction of Employer Contributions to the Plan.
However, if the Employer has indicated in the
Adoption Agreement that Forfeitures shall be
allocated to the Individual Accounts of Participants,
then Forfeitures shall be allocated in the manner
provided in Section 3.01(B) (for Employer
Contributions) to the Individual Accounts of
Participants who are entitled to share in the
Employer Contributions for such Plan Year.
D. TIMING OF EMPLOYER CONTRIBUTION - The Employer
Contribution for each Plan Year shall be delivered to the
Trustee (or Custodian, if applicable) not later than the
due date for filing the Employees income tax return for
its fiscal year in which the Plan Year ends, including
extensions thereof.
E. MINIMUM ALLOCATION FOR TOP-HEAVY PLANS - The contribution
and allocation provisions of this Section 3.01(E) shall
apply for any Plan Year with respect to which this Plan
is a Top-Heavy Plan.
1. Except as otherwise provided in (3) and (4) below,
the Employer Contributions and Forfeitures allocated
on behalf of any Participant who is not a Key
Employee shall not be less than the lesser of 3% of
such Participant's Compensation or (in the case where
the Employer has no defined benefit plan which
designates this Plan to satisfy Section 401 of the
Code) the largest percentage of Employer
Contributions and Forfeitures, as a percentage of the
first $200,000 (increased by any cost of living
adjustment made by the Secretary of Treasury or his
delegate) of the Key Employee's Compensation,
allocated on behalf of any Key Employee for that
year. The minimum allocation is determined without
regard to any Social Security contribution. This
minimum allocation shall be made even though under
other Plan provisions, the Participant would not
otherwise be entitled to receive an allocation, or
would have received a lesser allocation for the year
because of (a) the Participant's failure to complete
1,000 Hours of Service (or any equivalent provided in
the Plan), or (b) the Participant's failure to make
mandatory Employee Contributions to the Plan, or (c)
Compensation less than a stated amount.
2. For purposes of computing the minimum allocation,
Compensation shall mean Compensation as defined in
Section 1.06 of the Plan.
3. The provision in (1) above shall not apply to any
Participant who was not employed by the Employer on
the last day of the Plan Year.
4. The provision in (1) above shall not apply to any
Participant to the extent the Participant is covered
under any other plan or plans of the Employer and the
Employer has provided in the adoption agreement that
the minimum allocation or benefit requirement
applicable to Top-Heavy Plans will be met in the
other plan or plans.
5. The minimum allocation required under this Section
3.01(E) and Section 3.01(F)(1) (to the extent
required to be nonforfeitable under Code Section
416(b)) may not be forfeited under Code Section
411(a)(3)(B) or 411(a)(3)(D).
F. SPECIAL REQUIREMENTS FOR PAIRED PLANS - The Employer
maintains paired plans if the Employer has adopted both a
standardized profit sharing plan and a standardized money
purchase pension plan using this Basic Plan Document.
1. Minimum Allocation - The mandatory minimum allocation
provision of Section 3.01(E) shall not apply to any
Participant if the Employer maintains paired plans.
Rather, for each Plan Year, the Employer will provide
a minimum contribution equal to 3% of Compensation
for each non-Key Employee who is entitled to a
minimum contribution. Such minimum contribution will
only be made to one of the Plans. If an Employee is a
Participant in only one of the Plans, the minimum
contribution shall be made to that Plan. If the
Employee is a Participant in both Plans, the minimum
contribution shall be made to the money purchase
plan.
2. Only One Plan Can Be Integrated - If the Employer
maintains paired plans, only one of the Plans may
provide for the disparity in contributions which is
permitted under Section 401(l) of the Code. In the
event that both Adoption Agreements provide for such
integration, only the money purchase pension plan
shall be deemed to be integrated.
G. RETURN OF THE EMPLOYER CONTRIBUTION TO THE EMPLOYER UNDER
SPECIAL CIRCUMSTANCES - Any contribution made by the
Employer because of a mistake of fact must be returned to
the Employer within one year of the contribution.
8
<PAGE> 9
In the event that the Commissioner of Internal Revenue
determines that the Plan is not initially qualified under
the Code, any contributions made incident to that initial
qualification by the Employer must be returned to the
Employer within one year after the date the initial
qualification is denied, but only if the application for
qualification is made by the time prescribed by law for
filing the Employer's return for the taxable year in
which the Plan is adopted, or such later date as the
Secretary of the Treasury may prescribe.
In the event that a contribution made by the Employer
under this Plan is conditioned on deductibility and is
not deductible under Code Section 404, the contribution,
to the extent of the amount disallowed, must be returned
to the Employer within one year after the deduction is
disallowed.
H. OMISSION OF PARTICIPANT
1. If the Plan is a money purchase plan or a target
benefit plan and, if in any Plan Year, any Employee
who should be included as a Participant is
erroneously omitted and discovery of such omission is
not made until after a contribution by the Employer
for the year has been made and allocated, the
Employer shall make a subsequent contribution with
respect to the omitted Employee in the amount which
the Employer would have contributed with respect to
that Employee had he not been omitted.
2. If the Plan is a profit sharing plan, and if in any
Plan Year, any Employee who should be included as a
Participant is erroneously omitted and discovery of
such omission is not made until after the Employer
Contribution has been made and allocated, then the
Plan Administrator must re-do the allocation (if a
correction can be made) and inform the Employee.
Alternatively, the Employer may choose to contribute
for the omitted Employee the amount which the
Employer would have contributed for him.
3.02 EMPLOYEE CONTRIBUTIONS
This Plan will not accept nondeductible employee
contributions and matching contributions for Plan Years
beginning after the Plan Year in which this Plan is adopted
by the Employer. Employee contributions for Plan Years.
beginning after December 31, 1986. together with any matching
contributions as defined in Section 401(m) of the Code, will
be limited so as to meet the nondiscrimination test of
Section 401(m) of the Code.
A separate account will be maintained by the Plan
Administrator for the nondeductible employee contributions
of each Participant.
A Participant may, upon a written request submitted to the
Plan Administrator withdraw the lesser of the portion of his
Individual Account attributable to his nondeductible employee
contributions or the amount he contributed as nondeductible
employee contributions.
Employee contributions and earnings thereon will be
nonforfeitable at all times. No Forfeiture will occur solely
as a result of an Employee's withdrawal of employee
contributions.
The Plan Administrator will not accept deductible employee
contributions which are made for a taxable year beginning
after December 31, 1986. Contributions made prior to that
date will be maintained in a separate account which will be
nonforfeitable at all times. The account will share in the
gains and losses of the Fund in the same manner as described
in Section 4.03 of the Plan. No part of the deductible
employee contribution account will be used to purchase life
insurance. Subject to Section 6.05, joint and survivor
annuity requirements (if applicable), the Participant may
withdraw any part of the deductible employee contribution
account by making a written application to the Plan
Administrator.
3.03 ROLLOVER CONTRIBUTIONS
If the Plan Administrator so permits in a uniform and
nondiscriminatory manner, an Employee may contribute a
rollover contribution to the Plan; provided that such
Employee submits a written certification, satisfactory to the
Trustee (or Custodian), that the contribution qualifies as a
rollover contribution.
A separate account shall be maintained by the Plan
Administrator for each Employee's rollover contributions
which will be nonforfeitable at all times. Such account will
share in the income and gains and losses of the Fund in the
manner described in Section 4.03 and shall be subject to the
Plan's provisions governing distributions.
For purposes of this Section 3.03, "rollover contribution"
means a contribution described in Sections 402(a)(5),
403(a)(4) or 408(d)(3) of the Code or in any other provision
which may be added to the Code which may authorize rollovers
to the Plan.
3.04 TRANSFER CONTRIBUTIONS
If the Plan Administrator so permits in a uniform and
nondiscriminatory manner, the Trustee (or Custodian, if
applicable) may receive any amounts transferred to it from
the trustee or custodian of another plan qualified under Code
Section 401(a).
A separate account shall be maintained by the Plan
Administrator for each Employee's transfer contributions
which will be nonforfeitable at all times. Such account will
share in the income and gains and losses of the Fund in the
manner described in Section 4.03 and shall be subject to the
Plan's provisions governing distributions. 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).
9
<PAGE> 10
3.05 LIMITATION ON ALLOCATIONS
A. If the Participant does not participate in, and has never
participated in another qualified plan maintained by the
Employer or a welfare benefit fund, as defined in Section
419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in Section
415(l)(2) of the Code, maintained by the Employer, which
provides an annual addition as defined in Section
3.05(E)(1), the following rules shall apply:
1. The amount of annual additions which may be credited
to the Participant's Individual Account for any
limitation year will not exceed the lesser of the
maximum permissible amount or any other limitation
contained in this Plan. If the Employer Contribution
that would otherwise be contributed or allocated to
the Participant's Individual Account would cause the
annual additions for the limitation year to exceed
the maximum permissible amount, the amount
contributed or allocated will be reduced so that the
annual additions for the limitation year will equal
the maximum permissible amount.
2. Prior to determining the Participant's actual
compensation for the limitation year, the Employer
may determine the maximum permissible amount for a
Participant on the basis of a reasonable estimation
of the Participant's Compensation for the limitation
year, uniformly determined for all participants
similarly situated.
3. As soon as is administratively feasible after the end
of the limitation year, the maximum permissible
amount for the limitation year will be determined on
the basis of the Participant's actual compensation
for the limitation year.
4. If pursuant to Section 3.05(A)(3) or as a result of
the allocation of Forfeitures there is an excess
amount, the excess will be disposed of as follows:
a. Any nondeductible voluntary employee
contributions, to the extent they would reduce
the excess amount. will be returned to the
Participant;
b. If after the application of paragraph (a) an
excess amount still exists, and the Participant
is covered by the Plan at the end of the
limitation year, the excess amount in the
Participant's Individual Account will be used to
reduce Employer Contributions (including any
allocation of Forfeitures) for such Participant
in the next limitation year, and each succeeding
limitation year if necessary.
c. If after the application of paragraph (a) an
excess amount still exists, and the Participant
is not covered by the Plan at the end of a
limitation year, the excess amount will be held
unallocated in a suspense account. The suspense
account will be applied to reduce future Employer
Contributions (including allocation of any
Forfeitures) for all remaining Participants in
the next limitation year, and each succeeding
limitation year if necessary;
d. If a suspense account is in existence at any time
during a limitation year pursuant to this
Section, it will not participate in the
allocation of the Fund's investment gains and
losses. If a suspense account is in existence at
any time during a particular limitation year, all
amounts in the suspense account must be allocated
and reallocated to Participants' Individual
Accounts before any Employer Contributions or any
Employee contributions may be made to the Plan
for that limitation year. Excess amounts may not
be distributed to Participants or former
Participants.
B. If, in addition to this Plan, the Participant is covered
under another qualified master or prototype defined
contribution plan maintained by the Employer, a welfare
benefit fund, as defined in Section 419(e) of the Code
maintained by the Employer, or an individual medical
account, as defined in Section 415(l)(2) of the Code,
maintained by the Employer, which provides an annual
addition as defined in Section 3.05(E)(1), during any
limitation year, the following rules apply:
1. The annual additions which may be credited to a
Participant's Individual Account under this Plan for
any such limitation year will not exceed the maximum
permissible amount reduced by the annual additions
credited to a Participant's Individual Account under
the other plans and welfare benefit funds for the
same limitation year. If the annual additions with
respect to the Participant under other defined
contribution plans and welfare benefit funds
maintained by the employer are less than the maximum
permissible amount and the Employer Contribution that
would otherwise be contributed or allocated to the
Participant's Individual Account under this Plan
would cause the annual additions for the limitation
year to exceed this limitation, the amount
contributed or allocated will be reduced so that the
annual additions under all such plans and funds for
the limitation year will equal the maximum
permissible amount. If the annual additions with
respect to the Participant under such other defined
contribution plans and welfare benefit funds in the
aggregate are equal to or greater than the maximum
permissible amount, no amount will be contributed or
allocated to the Participant's Individual Account
under this Plan for the limitation year.
2. Prior to determining the Participant's actual
compensation for the limitation year, the Employer
may determine the maximum permissible amount for a
Participant in the manner described in Section
3.05(A)(2).
3. As soon as is administratively feasible after the end
of the limitation year, the maximum permissible
amount for the limitation year will be determined on
the basis of the Participant's actual compensation
for the limitation year.
4. If, pursuant to Section 3.05(B)(3) or as a result of
the allocation of Forfeitures a Participant's annual
additions under this Plan and such other plans would
result in an excess amount for a limitation year, the
excess amount will be deemed to consist of the annual
additions last allocated, except that annual
additions attributable to a welfare benefit fund or
individual medical account will be deemed to have
been allocated first regardless of the actual
allocation date.
5. If an excess amount was allocated to a Participant on
an allocation date of this Plan which coincides with
an allocation date of another plan, the excess amount
attributed to this Plan will be the product of,
10
<PAGE> 11
a. the total excess amount allocated as of such
date, times
b. the ratio of (i) the annual additions allocated
to the Participant for the limitation year as of
such date under this Plan to (ii) the total
annual additions allocated to the Participant for
the limitation year as of such date under this
and all the other qualified master or prototype
defined contribution plans.
6. Any excess amount attributed to this Plan will be
disposed in the manner described in Section
3.05(A)(4).
C. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer
which is not a master or prototype plan, annual additions
which may be credited to the Participant's Individual
Account under this Plan for any limitation year will be
limited in accordance with Sections 3.05(B)(1) through
3.05(B)(6) as though the other plan were a master or
prototype plan unless the Employer provides other
limitations in the Section of the Adoption Agreement
titled "Limitation on Allocation - More Than One Plan."
D. If the Employer maintains, or at any time maintained, a
qualified defined benefit plan covering any Participant
in this Plan, the sum of the Participant's defined
benefit plan fraction and defined contribution plan
fraction will not exceed 1.0 in any limitation year. The
annual additions which may be credited to the
Participant's Individual Account under this Plan for any
limitation year will be limited in accordance with the
Section of the Adoption Agreement titled "Limitation on
Allocation - More Than One Plan."
E. The following terms shall have the following meanings when
used in this Section 3.05:
1. Annual additions: The sum of the following amounts
credited to a Participant's Individual Account for
the limitation year:
a. Employer Contributions,
b. Employee contributions,
c. Forfeitures, and
d. amounts allocated, after March 31, 1984, to an
individual medical account, as defined in Section
415(l)(2) of the Code, which is part of a pension
or annuity plan maintained by the Employer are
treated as annual additions to a defined
contribution plan. Also amounts derived from
contributions paid or accrued after December 31,
1985, in taxable years ending after such date,
which are attributable to post-retirement medical
benefits, allocated to the separate account of a
key employee, as defined in Section 419A(d)(3) of
the Code. under a welfare benefit fund, as
defined in Section 419(e) of the Code, maintained
by the Employer are treated as annual additions
to a defined contribution plan.
For this purpose, any excess amount applied under
Section 3.05(A)(4) or 3.05(B)(6) in the limitation
year to reduce Employer Contributions will be
considered annual additions for such limitation year.
2. Compensation: As elected by the Employer in the Adoption
Agreement (and if no election is made, Section 3401(a)
wages will be deemed to have been selected), Compensation
shall mean all of a Participant's:
a. Section 3121 wages. Wages as defined in Section
3121(a) of the Code, for purposes of calculating
Social Security taxes, but determined without regard
to the wage base limitation in Section 3121(a)(1),
the special rules in Section 3121(v), any rules that
limit covered employment based on the type or
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 Section 312l(b)(1) through (20)).
b. Section 3401(a) wages. Wages as defined in Section
3401(a) of the Code, for the purposes of income tax
withholding at the source but determined without
regard to any rules that limit the remuneration
included in wages based on the nature or location of
the employment or the services performed (such as the
exception for agricultural labor in Section
3401(a)(2)).
c. 415 safe-harbor compensation. Wages, salaries, and
fees for professional services and other amounts
received (without regard to whether or not an amount
is paid in cash) for personal services actually
rendered in the course of employment with the
Employer maintaining the Plan to the extent that the
amounts are includible in gross income (including,
but not limited to, commissions paid salesmen,
compensation for services on the basis of a
percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits,
reimbursements, and expense allowances), and
excluding the following:
1. Employer contributions to a plan of deferred
compensation which are not includible in the
Employee's gross income for the taxable year in
which contributed, or employer contributions
under a simplified employee pension plan to the
extent such contributions are deductible by the
Employee, or any distributions from a plan of
deferred compensation;
2. Amounts realized from the exercise of a
nonqualified stock option, or when restricted
stock (or property) held by the Employee either
becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
3. Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified
stock option; and
4. Other amounts which received special tax
benefits, or contributions made by the Employer
(whether or not under a salary reduction
agreement) towards the purchase of an annuity
described in Section 403(b) of the Code (whether
or not the amounts are actually excludable from
the gross income of the Employee).
11
<PAGE> 12
For any Self-Employed Individual, Compensation
will mean Earned Income. For limitation years
beginning after December 31, 1991, for purposes
of applying the limitations of this Section 3.05,
compensation for a limitation year is the
compensation actually paid or includible in gross
income during such limitation year.
Notwithstanding the preceding sentence,
compensation for a Participant in a defined
contribution plan who is permanently and totally
disabled (as defined in Section 22(e)(3) of the
Code) is the compensation such Participant would
have received for the limitation year if the
Participant had been paid at the rate of
compensation paid immediately before becoming
permanently and totally disabled; such imputed
compensation for the disabled participant may be
taken into account only if the Participant is not
a Highly Compensated Employee (as defined in
Section 414(q) of the Code) and contributions
made on behalf of such Participant are
nonforfeitable when made.
3. Defined benefit fraction: A fraction, the numerator of
which is the sum of the Participant's projected annual
benefits under all the defined benefit plans (whether or
not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125% of the dollar
limitation determined for the limitation year under
Section 415(b) and (d) of the Code or 140% of the highest
average compensation, including any adjustments under
Section 415(b) of the Code.
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first limitation
year beginning after December 31, 1986, in one or more
defined benefit plans maintained by the employer which
were in existence on May 6, 1986, the denominator of this
fraction will not be less than 125% of the sum of the
annual benefits under such plans which the participant
had accrued as of the close of the last limitation year
beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after May
5, 1986. The preceding sentence applies only if the
defined benefit plans individually and in the aggregate
satisfied the requirements of Section 415 of the Code for
all limitation years beginning before January 1, 1987.
4. Defined contribution dollar limitation: $30,000 or if
greater, one-fourth of the defined benefit dollar
limitation set forth in Section 415(b)(1) of the Code as
in effect for the limitation year.
5. Defined contribution fraction: A fraction, the numerator
of which is the sum of the annual additions to the
Participant's account under all the defined contribution
plans (whether or not terminated) maintained by the
Employer for the current and all prior limitation years
(including the annual additions attributable to the
Participant's nondeductible employee contributions to all
defined benefit plans, whether or not terminated,
maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in
Section 419(e) of the Code, and individual medical
accounts, as defined in Section 415(l)(2) of the Code,
maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate
amounts for the current and all prior limitation years of
service with the Employer (regardless of whether a
defined contribution plan was maintained by the
Employer). The maximum aggregate amount in any limitation
year is the lesser of 125% of the dollar limitation
determined under Section 415(b) and (d) of the Code in
effect under Section 415(c)(1)(A) of the Code or 35% of
the Participant's compensation for such year.
If the Employee was a participant as of the end of the
first day of the first limitation year beginning after
December 31, 1986, in one or more defined contribution
plans maintained by the Employer which were in existence
on May 6, 1986, the numerator of this fraction will be
adjusted if the sum of this fraction and the defined
benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal
to the product of (1) the excess of the sum of the
fractions over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated
using the fractions as they would be computed as of the
end of the last limitation year beginning before January
1, 1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but using
the Section 415 limitation applicable to the first
limitation year beginning on or after January 1, 1987.
The annual addition for any limitation year beginning
before January 1, 1987, shall not be recomputed to treat
all employee contributions as annual additions.
6. Employer: For purposes of this Section 3.05, Employer
shall mean the Employer that adopts this Plan, and all
members of a controlled group of corporations (as defined
in Section 414(b) of the Code as modified by Section
415(h)), all commonly controlled trades or businesses (as
defined in Section 414(c) as modified by Section 415(h))
or affiliated service groups (as defined in Section
414(m)) of which the adopting Employer is a part, and any
other entity required to be aggregated with the Employer
pursuant to regulations under Section 414(o) of the Code.
7. Excess amount: The excess of the Participant's annual
additions for the limitation year over the maximum
permissible amount.
8. Highest average compensation: The average compensation
for the three consecutive years of service with the
Employer that produces the highest average.
9. Limitation year: A calendar year, or the 12-consecutive
month period elected by the Employer in the Section of
the Adoption Agreement titled "Limitation on Allocation -
More Than One Plan." All qualified plans maintained by
the Employer must use the same limitation year. If the
limitation year is amended to a different 12-consecutive
month period, the new limitation year must begin on a
date within the limitation year in which the amendment is
made.
10. Master or prototype plan: A plan the form of which is the
subject of a favorable opinion letter from the Internal
Revenue Service.
11. Maximum permissible amount: The maximum annual addition
that may be contributed or allocated to a Participant's
Individual Account under the Plan for any limitation year
shall not exceed the lesser of:
12
<PAGE> 13
a. the defined contribution dollar limitation, or
b. 25% of the Participant's compensation for the
limitation year.
The compensation limitation referred to in (b) shall not
apply to any contribution for medical benefits (within
the meaning of Section 401(h) or Section 419A(f)(2) of
the Code) which is otherwise treated as an annual
addition under Section 415(l)(1) or 419A(d)(2) of the
Code.
If a short limitation year is created because of an
amendment changing the limitation year to a different
12-consecutive month period, the maximum permissible
amount will not exceed the defined contribution dollar
limitation multiplied by the following fraction:
Number of months in the short limitation year
---------------------------------------------
12
12. Projected annual benefit: The annual retirement benefit
(adjusted to an actuarially equivalent straight life
annuity if such benefit is expressed in a form other than
a straight life annuity or qualified joint and survivor
annuity) to which the Participant would be entitled under
the terms of the Plan assuming:
a. the Participant will continue employment until normal
retirement age under the Plan (or current age, if
later), and
b. the Participant's compensation for the current
limitation year and all other relevant factors used
to determine benefits under the Plan will remain
constant for all future limitation years.
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 INDIVIDUAL ACCOUNTS
A. The Plan Administrator shall establish and maintain an
Individual Account in the name of each Participant to
reflect the total value of his interest in the Fund. Each
Individual Account established hereunder shall consist of
such subaccounts as may be needed for each Participant
including:
1. a subaccount to reflect Employer Contributions and
Forfeitures allocated on behalf of a Participant;
2. a subaccount to reflect a Participant's rollover
contributions;
3. a subaccount to reflect a Participant's transfer
contributions;
4. a subaccount to reflect a Participant's nondeductible
employee contributions; and
5. a subaccount to reflect a Participant's deductible
employee contributions.
Such subaccounts are primarily for accounting purposes,
and do not necessarily require a segregation of the Fund.
B. The Plan Administrator may establish additional accounts
as it may deem necessary for the proper administration of
the Plan, including, but not limited to, a suspense
account for Forfeitures as required pursuant to Section
6.01(D).
4.02 VALUATION OF FUND
The Fund will be valued each Valuation Date at fair market
value.
4.03 VALUATION OF INDIVIDUAL ACCOUNTS
A. Where all or a portion of the assets of a Participant's
Individual Account are invested in a Separate Fund for
the Participant, then the value of that portion of such
Participant's Individual Account at any relevant time
equals the sum of the fair market values of the assets in
such Separate Fund, less any applicable charges or
penalties.
B. The fair market value of the remainder of each Individual
Account is determined in the following manner:
1. First, the portion of the Individual Account invested
in each Investment Fund as of the previous Valuation
Date is determined. Each such portion is reduced by
any withdrawal made from the applicable Investment
Fund to or for the benefit of a Participant or his
Beneficiary, further reduced by any amounts forfeited
by the Participant pursuant to Section 6.01(D) and
further reduced by any transfer to another Investment
Fund since the previous Valuation Date and is
increased by any amount transferred from another
Investment Fund since the previous Valuation Date.
The resulting amounts are the net Individual Account
portions invested in the Investment Funds.
2. Secondly, the net Individual Account portions
invested in each Investment Fund are adjusted upwards
or downwards, pro rata (i.e., ratio of each net
Individual Account portion to the sum of all net
Individual Account portions) so that the sum of all
the net Individual Account portions invested in an
Investment Fund will equal the then fair market value
of the Investment Fund. Notwithstanding the previous
sentence, for the first Plan Year only, the net
Individual Account portions shall be the sum of all
contributions made to each Participant's Individual
Account during the first Plan Year.
3. Thirdly, any contributions to the Plan and
Forfeitures are allocated in accordance with the
appropriate allocation provisions of Section 3. For
purposes of Section 4, contributions made by the
Employer for any Plan Year but after that Plan Year
will be considered to have been made on the last day
of that Plan Year regardless of when paid to the
Trustee (or Custodian, if applicable).
13
<PAGE> 14
Amounts contributed between Valuation Dates will not
be credited with investment gains or losses until the
next following Valuation Date.
4. Finally, the portions of the Individual Account
invested in each Investment Fund (determined in
accordance with (1), (2) and (3) above) are added
together.
4.04 SEGREGATION OF ASSETS
If a Participant elects a mode of distribution other than a
lump sum, the Plan Administrator may place that Participants
account balance into a segregated Investment Fund for the
purpose of maintaining the necessary liquidity to provide
benefit installments on a periodic basis.
4.05 STATEMENT OF INDIVIDUAL ACCOUNTS
No later than 270 days after the close of each Plan Year, the
Plan Administrator shall furnish a statement to each
Participant indicating the Individual Account balances of
such Participant as of the last Valuation Date in such Plan
Year.
4.06 MODIFICATION OF METHOD FOR VALUING INDIVIDUAL ACCOUNTS
If necessary or appropriate, the Plan Administrator may
establish different or additional procedures (which shall be
uniform and nondiscriminatory) for determining the fair
market value of the Individual Accounts.
SECTION FIVE TRUSTEE OR CUSTODIAN
5.01 CREATION OF FUND
By adopting this Plan, the Employer establishes the Fund
which shall consist of the assets of the Plan held by the
Trustee (or Custodian, if applicable) pursuant to this
Section 5. Assets within the Fund may be pooled on behalf of
all Participants, earmarked on behalf of each Participant or
be a combination of pooled and earmarked. To the extent that
assets are earmarked for a particular Participant, they will
be held in a Separate Fund for that Participant.
No part of the corpus or income of the Fund may be used for,
or diverted to, purposes other than for the exclusive benefit
of Participants or their Beneficiaries.
5.02 INVESTMENT AUTHORITY
Except as provided in Section 5.14 (relating to individual
direction of investments by Participants), the Employer, not
the Trustee (or Custodian, if applicable), shall have
exclusive management and control over the investment of the
Fund into any permitted investment. Notwithstanding the
preceding sentence, a Trustee with full trust powers (under
applicable law) may make an agreement with the Employer
whereby the Trustee will manage the investment of all or a
portion of the Fund. Any such agreement shall be in writing
and set forth such matters, as the Trustee deems necessary or
desirable.
5.03 FINANCIAL ORGANIZATION CUSTODIAN OR TRUSTEE WITHOUT FULL
TRUST POWERS
This Section 5.03 applies where a financial organization has
indicated in the Adoption Agreement that it will serve, with
respect to this Plan, as Custodian or as Trustee without full
trust powers (under applicable law). Hereinafter, a financial
organization Trustee without full trust powers (under
applicable law) shall be referred to as a Custodian.
A. PERMISSIBLE INVESTMENTS - The assets of the Plan shall be
invested only in those investments which are available
through the Custodian in the ordinary course of business
which the Custodian may legally hold in a qualified plan
and which the Custodian chooses to make available to
Employers for qualified plan investments.
B. RESPONSIBILITIES OF THE CUSTODIAN - The responsibilities
of the Custodian shall be limited to the following:
1. To receive Plan contributions and to hold, invest and
reinvest the Fund without distinction between
principal and interest; provided, however, that
nothing in this Plan shall require the Custodian to
maintain physical custody of stock certificates (or
other indicia of ownership of any type of asset)
representing assets within the Fund;
2. To maintain accurate records of contributions,
earnings, withdrawals and other information the
Custodian deems relevant with respect to the Plan;
3. To make disbursements from the Fund to Participants
or Beneficiaries upon the proper authorization of
the Plan Administrator; and
4. To furnish to the Plan Administrator a statement
which reflects the value of the investments in the
hands of the Custodian as of the end of each Plan
Year.
C. POWERS OF THE CUSTODIAN - Except as otherwise provided in
this Plan, the Custodian shall have the power to take any
action with respect to the Fund which it deems necessary
or advisable to discharge its responsibilities under this
Plan including, but not limited to, the following powers:
1. To invest all or a portion of the Fund (including
idle cash balances) in time deposits, savings
accounts, money market accounts or similar
investments bearing a reasonable rate of interest in
the Custodian's own savings department or the savings
department of another financial organization;
2. To vote upon any stocks, bonds, or other securities;
to give general or special proxies or powers of
attorney with or without power of substitution; to
exercise any conversion privileges or subscription
rights and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate
in, corporate reorganizations or other changes
affecting corporate securities, and to pay any
assessment or charges in connection therewith; and
generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities or other
property;
14
<PAGE> 15
3. To hold securities or other property of the Fund in
its own name, in the name of its nominee or in bearer
form; and
4. To make, execute, acknowledge, and deliver any and
all documents of transfer and conveyance and any and
all other instruments that may be necessary or
appropriate to carry out the powers herein granted.
5.04 FINANCIAL ORGANIZATION TRUSTEE WITH FULL TRUST POWERS AND
INDIVIDUAL TRUSTEE
This Section 5.04 applies where a financial organization has
indicated in the Adoption Agreement that it will serve as
Trustee with full trust powers. This Section also applies
where one or more individuals are named in the Adoption
Agreement to serve as Trustee(s).
A. PERMISSIBLE INVESTMENTS - The Trustee may invest the
assets of the Plan in property of any character, real or
personal, including, but not limited to the following:
stocks, including shares of open-end investment companies
(mutual funds); bonds; notes; debentures; options;
limited partnership interests; mortgages; real estate or
any interests therein; unit investment trusts; Treasury
Bills, and other U.S. Government obligations; common
trust funds, combined investment trusts, collective trust
funds or commingled funds maintained by a bank or similar
financial organization (whether or not the Trustee
hereunder); savings accounts, time deposits or money
market accounts of a bank or similar financial
organization (whether or not the Trustee hereunder);
annuity contracts; life insurance policies; or in such
other investments as is deemed proper without regard to
investments authorized by statute or rule of law
governing the investment of trust funds but with regard
to ERISA and this Plan.
Notwithstanding the preceding sentence, the Prototype
Sponsor may, as a condition of making the Plan available
to the Employer for adoption, limit the types of property
in which the Trustee (other than a financial organization
Trustee with full trust powers), is permitted to invest.
B. RESPONSIBILITIES OF THE TRUSTEE - The responsibilities of
the Trustee shall be limited to the following:
1. To receive Plan contributions and to hold, invest and
reinvest the Fund without distinction between
physical and interest; provided, however, that
nothing in this Plan shall require the Trustee to
maintain physical custody of stock certificates (or
other indicia of ownership) representing assets
within the Fund;
2. To maintain accurate records of contributions,
earnings, withdrawals and other information the
Trustee deems relevant with respect to the Plan;
3. To make disbursements from the Fund to Participants
or Beneficiaries upon the proper authorization of
the Plan Administrator; and
4. To furnish to the Plan Administrator a statement
which reflects the value of the investments in the
hands of the Trustee as of the end of each Plan Year.
C. POWERS OF THE TRUSTEE - Except as otherwise provided in
this Plan, the Trustee shall have the power to take any
action with respect to the Fund which it deems necessary
or advisable to discharge its responsibilities under this
Plan including, but not limited to, the following powers:
1. To hold any securities or other property of the Fund
in its own name, in the name of its nominee or in
bearer form;
2. To purchase or subscribe for securities issued, or
real property owned, by the Employer or any trade or
business under common control with the Employer but
only if the prudent investment and diversification
requirements of ERISA are satisfied;
3. To sell, exchange, convey, transfer or otherwise
dispose of any securities or other property held by
the Trustee. by private contract or at public
auction. No person dealing with the Trustee shall be
bound to see to the application of the purchase money
or to inquire into the validity, expediency, or
propriety of any such sale or other disposition, with
or without advertisement;
4. To vote upon any stocks, bonds, or other securities;
to give general or special proxies or powers of
attorney with or without power of substitution; to
exercise any conversion privileges or subscription
rights and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate
in, corporate reorganizations or other changes
affecting corporate securities, and to delegate
discretionary powers, and to pay any assessments or
charges in connection therewith; and generally to
exercise any of the powers of an owner with respect
to stocks, bonds, securities or other property;
5. To invest any part or all of the Fund (including idle
cash balances) in certificates of deposit, demand or
time deposits, savings accounts, money market
accounts or similar investments of the Trustee (if
the Trustee is a bank or similar financial
organization), the Prototype Sponsor or any affiliate
of such Trustee or Prototype Sponsor, which bear a
reasonable rate of interest;
6. To provide sweep services without the receipt by the
Trustee of additional compensation or other
consideration (other than reimbursement of direct
expenses properly and actually incurred in the
performance of such services);
7. To hold in the form of cash for distribution or
investment such portion of the Fund as, at any time
and from time-to-time, the Trustee shall deem prudent
and deposit such cash in interest bearing or
noninterest bearing accounts;
15
<PAGE> 16
8. To make, execute, acknowledge, and deliver any and
all documents of transfer and conveyance and any and
all other instruments that may be necessary or
appropriate to carry out the powers herein granted;
9. To settle, compromise, or submit to arbitration any
claims, debts, or damages due or owing to or from the
Plan, to commence or defend suits or legal or
administrative proceedings, and to represent the Plan
in all suits and legal and administrative
proceedings:
10. To employ suitable agents and counsel, to contract
with agents to perform administrative and
recordkeeping duties and to pay their reasonable
expenses, fees and compensation, and such agent or
counsel may or may not be agent or counsel for the
Employer;
11. To cause any part or all of the Fund, without
limitation as to amount, to be commingled with the
funds of other trusts (including trusts for qualified
employee benefit plans) by causing such money to be
invested as a part of any pooled, common, collective
or commingled trust fund heretofore or hereafter
created by any trustee (if the Trustee is a bank), by
the Prototype Sponsor, by any affiliate bank of such
a Trustee or the Prototype Sponsor, or by such a
Trustee, the Prototype Sponsor or such an affiliate
in participation with others; the instrument or
instruments establishing such trust fund or funds, as
amended, being made part of this Plan and trust so
long as any portion of the Fund shall be invested
through the medium thereof.
12. Generally to do all such acts, execute all such
instruments, initiate such proceedings, and exercise
all such rights and privileges with relation to
property constituting the Fund as if the Trustee were
the absolute owner thereof.
5.05 DIVISION OF FUND INTO INVESTMENT FUNDS
The Employer may direct the Trustee (or Custodian, if
applicable) from time-to-time to divide and redivide the Fund
into one or more Investment Funds. Such Investment Funds may
include, but not be limited to, Investment Funds representing
the assets under the control of an investment manager
pursuant to Section 5.12 and Investment Funds representing
investment options available for individual direction by
Participants pursuant to Section 5.14. Upon each division or
redivision, the Employer may specify the part of the Fund to
be allocated to each such Investment Fund and the terms and
conditions, if any, under which the assets in-such Investment
Fund shall be invested.
5.06 COMPENSATION AND EXPENSES
The Trustee (or Custodian, if applicable) shall receive such
reasonable compensation as may be agreed upon by the Trustee
(or Custodian) and the Employer. The Trustee (or Custodian)
shall be entitled to reimbursement by the Employer for all
proper expenses incurred in carrying out his duties under
this Plan, including reasonable legal, accounting and
actuarial expenses. If not paid by the Employer, such
compensation and expenses may be charged against the Fund.
All taxes of any kind that may be levied or assessed under
existing or future laws upon, or in respect of, the Fund or
the income thereof shall be paid from the Fund.
5.07 NOT OBLIGATED TO QUESTION DATA
The Employer shall furnish the Trustee (or Custodian, if
applicable) and Plan Administrator the information which each
party deems necessary for the administration of the Plan
including, but not limited to, changes in a Participant's
status, eligibility, mailing addresses and other such data as
may be required. The Trustee (or Custodian) and Plan
Administrator shall be entitled to act on such information as
is supplied them and shall have no duty or responsibility to
further verify or question such information.
5.08 LIABILITY FOR WITHHOLDING ON DISTRIBUTIONS
The Plan Administrator shall be responsible for withholding
federal income taxes from distributions from the Plan, unless
the Participant (or Beneficiary, where applicable) elects not
to have such taxes withheld. However, the Trustee (or
Custodian) shall act as agent for the Plan Administrator to
withhold such taxes and to make the appropriate distribution
reports, subject to the Plan Administrator's obligation to
furnish all the necessary information to so withhold to the
Trustee (or Custodian).
5.09 RESIGNATION OR REMOVAL OF TRUSTEE (OR CUSTODIAN)
The Trustee (or Custodian, if applicable) may resign at any
time by giving 30 days advance written notice to the
Employer. The resignation shall become effective 30 days
after receipt of such notice unless a shorter period is
agreed upon.
The Employer may remove any Trustee (or Custodian) at any
time by giving written notice to such Trustee (or Custodian)
and such removal shall be effective 30 days after receipt of
such notice unless a shorter period is agreed upon. The
Employer shall have the power to appoint a successor Trustee
(or Custodian).
Upon such resignation or removal, if the resigning or removed
Trustee (or Custodian) is the sole Trustee (or Custodian), he
shall transfer all of the assets of the Fund then held by him
as expeditiously as possible to the successor Trustee (or
Custodian) after paying or reserving such reasonable amount
as he shall deem necessary to provide for the expense in the
settlement of the accounts and the amount of any compensation
due him and any sums chargeable against the Fund for which he
may be liable. If the Funds as reserved are not sufficient
for such purpose, then he shall be entitled to reimbursement
from the successor Trustee (or Custodian) out of the assets
in the successor Trustee's (or Custodian's) hands under this
Plan. If the amount reserved shall be in excess of the amount
actually needed, the former Trustee (or Custodian) shall
return such excess to the successor Trustee (or Custodian).
Upon receipt of such assets, the successor Trustee (or
Custodian) shall thereupon succeed to all of the powers and
responsibilities given to the Trustee (or Custodian) by this
Plan.
16
<PAGE> 17
The resigning or removed Trustee (or Custodian) shall render
an accounting to the Employer and unless objected to by the
Employer within 30 days of its receipt, the accounting shall
be deemed to have been approved and the resigning or removed
Trustee (or Custodian) shall be released and discharged as to
all matters set forth in the accounting. Where a financial
organization is serving as Trustee (or Custodian) and it is
merged with or bought by another organization (or comes under
the control of any federal or state agency), that
organization shall serve as the successor Trustee (or
Custodian) of this Plan, but only if it is the type of
organization that can so serve under applicable law.
Where the Trustee or Custodian is serving as a nonbank
trustee or custodian pursuant to Section 1.401-12(n) of the
Income Tax Regulations, the Employer will appoint a successor
Trustee (or Custodian) upon notification by the Commissioner
of Internal Revenue that such substitution is required
because the Trustee (or Custodian) has failed to comply with
the requirements of Section 1.401-12(n) or is not keeping
such records or making such returns or rendering such
statements as are required by form or regulations.
5.10 DEGREE OF CARE
Limitations of Liability - The Trustee (or Custodian) shall
not be liable for any losses incurred by the Fund by any
lawful direction to invest communicated by the Employer, Plan
Administrator or any Participant or Beneficiary. The Trustee
(or Custodian) shall be under no liability for distributions
made or other action taken or not taken at the written
direction of the Plan Administrator. It is specifically
understood that the Trustee (or Custodian) shall have no duty
or responsibility with respect to the determination of
matters pertaining to the eligibility of any Employee to
become a Participant or remain a Participant hereunder, the
amount of benefit to which a Participant or Beneficiary shall
be entitled to receive hereunder, whether a distribution to
Participant or Beneficiary is appropriate under the terms of
the Plan or the size and type of any policy to be purchased
from any insurer for any Participant hereunder or similar
matters; it being understood that all such responsibilities
under the Plan are vested in the Plan Administrator.
5.11 INDEMNIFICATION OF PROTOTYPE SPONSOR AND TRUSTEE (OR
CUSTODIAN)
Notwithstanding any other provision herein, and except as may
be otherwise provided by ERISA, the Employer shall indemnify
and hold harmless the Trustee (or Custodian, if applicable)
and the Prototype Sponsor, their officers, directors,
employees, agents, their heirs, executors, successors and
assigns, from and against any and all liabilities, damages,
judgments, settlements, losses, costs, charges, or expenses
(including legal expenses) at any time arising out of or
incurred in connection with any action taken by such parties
in the performance of their duties with respect to this Plan,
unless there has been a final adjudication of gross
negligence or willful misconduct in the performance of such
duties.
Further, except as may be otherwise provided by ERISA, the
Employer will indemnify the Trustee (or custodian) and
Prototype Sponsor from any liability, claim or expense
(including legal expense) which the Trustee (or Custodian)
and Prototype Sponsor shall incur by reason of or which
results, in whole or in part, from the Trustees (or
Custodian's) or Prototype Sponsor's reliance on the facts and
other directions and elections the Employer communicates or
fails to communicate.
5.12 INVESTMENT MANAGERS
A. DEFINITION OF INVESTMENT MANAGER - The Employer may
appoint one or more investment managers to make
investment decisions with respect to all or a portion of
the Fund. The investment manager shall be any firm or
individual registered as an investment adviser under the
Investment Advisers Act of 1940, a bank as defined in
said Act or an insurance company qualified under the laws
of more than one state to perform services consisting of
the management, acquisition or disposition of any assets
of the Plan.
B. INVESTMENT MANAGER'S AUTHORITY - A separate Investment
Fund shall be established representing the assets of the
Fund invested at the direction of the investment manager.
The investment manager so appointed shall direct the
Trustee (or Custodian, if applicable with respect to the
investment of such Investment Fund. The investments which
may be acquired at the direction of the investment
manager are those described in Section 5.03(A) (for
Custodians) or Section 5.04(A) (for Trustees).
C. WRITTEN AGREEMENT - The appointment of any investment
manager shall be by written agreement between the
Employer and the investment manager and a copy of such
agreement (and any modification or termination thereof)
must be given to the Trustee (or Custodian).
The agreement shall set forth, among other matters, the
effective date of the investment manager's appointment
and an acknowledgement by the investment manager that it
is a fiduciary of the Plan under ERISA.
D. CONCERNING THE TRUSTEE (OR CUSTODIAN) - Written notice of
each appointment of an investment manager shall be given
to the Trustee (or Custodian) in advance of the effective
date of such appointment. Such notice shall specify which
portion of the Fund will constitute the Investment Fund
subject to the investment manager's direction. The
Trustee (or Custodian) shall comply with the investment
direction given to it by the investment manager and will
not be liable for any loss which may result by reason of
any action (or inaction) it takes at the direction of the
investment manager.
5.13 MATTERS RELATING TO INSURANCE
A. If a life insurance policy is to be purchased for a
Participant, the aggregate premium for certain life
insurance for each Participant must be less than a
certain percentage of the aggregate Employer
Contributions and Forfeitures allocated to a
Participant's Individual Account at any particular time
as follows:
1. Ordinary Life Insurance - For purposes of these
incidental insurance provisions, ordinary life
insurance contracts are contracts with both
nondecreasing death benefits and nonincreasing
premiums. If such contracts are purchased, less than
50% of the aggregate Employer Contributions and
Forfeitures allocated to any Participant's Individual
Account will be used to pay the premiums attributable
to them.
2. Term and Universal Life Insurance - No more than 25%
of the aggregate Employer Contributions and
Forfeitures allocated to any Participant's Individual
Account will be used to pay the premiums on term life
insurance contracts, universal life insurance
contracts, and all other life insurance contracts
which are not ordinary life.
17
<PAGE> 18
3. Combination - The sum of 50% of the ordinary life
insurance premiums and all other life insurance
premiums will not exceed 25% of the aggregate
Employer Contributions and Forfeitures allocated to
any Participant's Individual Account.
B. Any dividends or credits earned on insurance contracts
for a Participant shall be allocated to such
Participant's Individual Account.
C. Subject to Section 6.05, the contracts on a Participant's
life will be converted to cash or an annuity or
distributed to the Participant upon commencement of
benefits.
D. The Trustee (or Custodian, if applicable) shall apply for
and will be the owner of any insurance contract(s)
purchased under the terms of this Plan. The insurance
contract(s) must provide that proceeds will be payable to
the Trustee (or Custodian), however, the Trustee (or
Custodian) shall be required to pay over all proceeds of
the contract(s) to the Participant's designated
Beneficiary in accordance with the distribution
provisions of this Plan. A Participant's spouse will be
the designated Beneficiary of the proceeds in all
circumstances unless a qualified election has been made
in accordance with Section 6.05, Joint and Survivor
Annuity Requirements, if applicable. Under no
circumstances shall the Fund retain any part of the
proceeds. In the event of any conflict between the terms
of this Plan and the terms of any insurance contract
purchased hereunder, the Plan provisions shall control.
E. The Employer may direct the Trustee (or Custodian) to
sell and distribute insurance or annuity contracts to a
Participant (or other party as may be permitted) in
accordance with applicable law or regulations.
5.14 DIRECTION OF INVESTMENTS BY PARTICIPANT
If so indicated in the Adoption Agreement, each Participant
may individually direct the Trustee (or Custodian, if
applicable) regarding the investment of part or all of his
Individual Account. To the extent so directed, the Employer,
Plan Administrator, Trustee (or Custodian) and all other
fiduciaries are relieved of their fiduciary responsibility
under Section 404 of ERISA.
The Plan Administrator shall direct that a Separate Fund be
established in the name of each Participant who directs the
investment of part or all of his Individual Account. Each
Separate Fund shall be charged or credited (as appropriate)
with the earnings, gains, losses or expenses attributable to
such Separate Fund. No fiduciary shall be liable for any loss
which results from a Participant's individual direction. The
assets subject to individual direction shall not be invested
in collectibles as that term is defined in Section 408(m) of
the Code.
The Plan Administrator shall establish such uniform and
nondiscriminatory rules relating to individual direction as
it deems necessary or advisable including, but not limited
to, rules describing (1) which portions of Participant's
Individual Account can be individually directed; (2) the
frequency of investment changes; (3) the forms and procedures
for making investment changes: and (4) the effect of a
Participant's failure to make a valid direction.
Subject to the approval of the Prototype Sponsor, the Plan
Administrator may, in a uniform and nondiscriminatory manner,
limit the available investments for Participants' individual
direction to certain specified investment options (including,
but not limited to, certain mutual funds, investment
contracts, deposit accounts and group trusts). The Plan
Administrator may permit, in a uniform and nondiscriminatory
manner, a Beneficiary of a deceased Participant to
individually direct in accordance with this Section.
SECTION-SIX VESTING AND DISTRIBUTION
6.01 DISTRIBUTION TO PARTICIPANT
A. WHEN DISTRIBUTABLE
1. Entitlement to Distribution - The Vested portion of a
Participant's Individual Account shall be
distributable to the Participant upon the occurrence
of any of the following events:
a. the Participant's Termination of Employment;
b. the Participant's attainment of Normal Retirement
Age;
c. the Participant's Disability; or
d. the termination of the Plan;
2. Written Request: When Distributed - A Participant
entitled to distribution who wishes to receive a
distribution must submit a written request to the
Plan Administrator. Such request shall be made upon a
form provided by the Plan Administrator. Upon a valid
request, the Plan Administrator shall direct the
Trustee (or Custodian, if applicable) to commence
distribution no later than 90 days following the
later of:
a. the close of the Plan Year within which the event
occurs which entitles the Participant to
distribution; or
b. the close of the Plan Year in which the request
is received.
3. Special Rules for Withdrawals During Service - If
this is a profit sharing plan and the Adoption
Agreement so provides, a Participant who is not
otherwise entitled to a distribution under Section
6.01(A)(1) may elect to receive a distribution of all
or part of the Vested portion of his Individual
Account, subject to the requirements of Section 6.05
and further subject to the following limits:
a. Participant for 5 or more years. An Employee who
has been a Participant in the Plan for 5 or more
years may withdraw up to his entire Vested
portion of his Individual Account.
18
<PAGE> 19
b. Participant for less than 5 years. An Employee
who has been a Participant in the Plan for less
than 5 years may withdraw only the amount which
has been in his Vested Individual Account
attributable to Employer Contributions for at
least 2 full Plan Years.
However, if the distribution is on account of
hardship, the Participant may withdraw up to his
entire Vested portion of his Individual Account.
For purposes of the preceding sentence, hardship
is defined as an immediate and heavy financial
need of the Participant where such Participant
lacks other available resources. The following
are the only financial needs considered immediate
and heavy: expenses incurred or necessary for
medical care, described in Section 213(d) of the
Code, of the Employee, the Employee's spouse or
dependents; the purchase (excluding mortgage
payments) of a principal residence for the
Employee; payment of tuition and related
educational fees for the next 12 months of
post-secondary education for the Employee, the
Employee's spouse, children or dependents; or the
need to prevent the eviction of the Employee
from, or a foreclosure on the mortgage of, the
Employee's principal residence.
A distribution will be considered as necessary to
satisfy an immediate and heavy financial need of the
Employee only if:
1) The employee has obtained all distributions,
other than hardship distributions, and all
nontaxable loans under all plans maintained by
the Employer;
2) The distribution is not in excess of the amount
of an immediate and heavy financial need
(including amounts necessary to pay any federal,
state or local income taxes or penalties
reasonably anticipated to result from the
distribution)
4. Commencement of Benefits - Notwithstanding any other
provision, unless the Participant elects otherwise,
distribution of benefits will begin no later than the
60th day after the latest of the close of the Plan
Year in which:
a. the Participant attains Normal Retirement Age;
b. occurs the 10th anniversary of the year in which
the Participant commenced participation in the
Plan; or
c. the Participant incurs a Termination of
Employment.
Notwithstanding the foregoing, the failure of a
Participant and spouse to consent to a
distribution while a benefit is immediately
distributable, within the meaning of Section
6.02(B), shall be deemed to be an election to
defer commencement of payment of any benefit
sufficient to satisfy this Section 6.01(A)(4).
B. DETERMINING THE VESTED PORTION - In determining the
Vested portion of a Participant's Individual Account,
the following rules apply:
1. Employer Contributions and Forfeitures - The Vested
portion of a Participant's Individual Account derived
from Employer Contributions and Forfeitures is
determined by applying the vesting schedule selected
in the Adoption Agreement (or the vesting, schedule
described in Section 6.01(C) if the Plan is a
Top-Heavy Plan).
2. Rollover and Transfer Contributions - A Participant
is fully Vested in his rollover contributions and
transfer contributions.
3. Fully Vested Under Certain Circumstances - A
Participant is fully Vested in his Individual Account
if any of the following occurs:
a. the Participant reaches Normal Retirement Age;
b. the Participant incurs a Disability;
c. the Participant dies;
d. the Plan is terminated or partially terminated;
or
e. there exists a complete discontinuance of
contributions under the Plan (if this Plan is a
profit sharing plan).
4. Participants in a Prior Plan - If a Participant was a
participant in a Prior Plan on the Effective Date,
his Vested percentage shall not be less than it would
have been under such Prior Plan as computed on the
Effective Date.
C. MINIMUM VESTING SCHEDULE FOR TOP-HEAVY PLANS - The
following vesting provisions apply for any Plan Year in
which this Plan is a Top-Heavy Plan.
Notwithstanding the other provisions of this Section 6.01
or the vesting schedule selected in the Adoption
Agreement (unless those provisions or that schedule
provide for more rapid vesting), a Participant's Vested
portion of his Individual Account attributable to
Employer Contributions and Forfeitures shall be
determined in accordance with the following minimum
vesting schedule:
19
<PAGE> 20
<TABLE>
<CAPTION>
YEARS OF VESTING SERVICE VESTED PERCENTAGE
<S> <C>
1 0
2 20
3 40
4 60
5 80
6 100
</TABLE>
This minimum vesting schedule applies to all benefits
within the meaning of Section 411(a)(7) of the Code,
except those attributable to employee contributions
including benefits accrued before the effective date of
Section 416 of the Code and benefits accrued before the
Plan became a Top-Heavy Plan. Further, no decrease in a
Participant's Vested percentage may occur in the event
the Plan's status as a Top-Heavy Plan changes for any
Plan Year. However, this Section 6.01(C) does not apply
to the Individual Account of any Employee who does not
have an Hour of Service after the Plan has initially
become a Top-Heavy Plan and such Employee's Individual
Account attributable to Employer Contributions and
Forfeitures will be determined without regard to this
Section.
If this Plan ceases to be a Top-Heavy Plan, then in
accordance with the above restrictions, the vesting
schedule as selected in the Adoption Agreement will
govern. If the vesting schedule under the Plan shifts in
or out of top-heavy status, such shift is an amendment to
the vesting schedule and the election in Section 9.04
applies.
D. BREAK IN VESTING SERVICE AND FORFEITURES - If a
Participant incurs a Termination of Employment, any
portion of his Individual Account which is not Vested
shall be held in a suspense account. Such suspense
account shall share in any increase or decrease in the
fair market value of the assets of the Fund in accordance
with Section 4 of the Plan. The disposition of such
suspense account shall be as follows:
1. No Breaks in Vesting Service - If a Participant
neither receives nor is deemed to receive a
distribution pursuant to Section 6.01(D)(2) or (3)
and the Participant returns to the service of the
Employer before incurring 5 consecutive Breaks in
Vesting Service, there shall be no Forfeiture and the
amount in such suspense account shall be recredited
to such Participant's Individual Account.
2. Cash-out of Certain Participants - If the value of
the Vested portion of such Participant's Individual
Account derived from Employee and Employer
Contributions does not exceed $3,500, the Participant
shall receive a distribution of the entire Vested
portion of such Individual Account and the portion
which is not Vested shall be treated as a Forfeiture.
For purposes of this Section, if the value of the
Vested portion of a Participant's Individual Account
is zero, the Participant shall be deemed to have
received a distribution of such Vested Individual
Account. A Participant's Vested Individual Account
balance shall not include accumulated deductible
employee contributions within the meaning of Section
72(o)(5)(B) of the Code for Plan Years beginning
prior to January 1, 1989.
3. Participants Who Elect to Receive Distributions - If
such Participant elects to receive a distribution, in
accordance with Section 6.02(B), of the value of the
Vested portion of his Individual Account derived from
Employee and Employer Contributions, the portion
which is not Vested shall be treated as a Forfeiture.
4. Re-employed Participants - If a Participant receives
or is deemed to receive a distribution pursuant to
Section 6.01(D)(2) or (3) above and the Participant
resumes employment covered under this Plan, the
Participants Employer-derived Individual Account
balance will be restored to the amount on the date of
distribution if the Participant repays to the Plan
the full amount of the distribution attributable to
Employer Contributions before the earlier of 5 years
after the first date on which the Participant is
subsequently re-employed by the Employer, or the date
the Participant incurs 5 consecutive Breaks in
Vesting Service following the date of the
distribution.
Amounts forfeited under Section 6.01(D) shall be
allocated in accordance with Section 3.01(C) as of
the last day of the Plan Year during which the
Forfeiture arises. Any restoration of a Participant's
Individual Account pursuant to Section 6.01(D)(4)
shall be made from other Forfeitures, income or gain
to the Fund or contributions made by the Employer.
E. DISTRIBUTION PRIOR TO FULL VESTING - If a distribution is
made to a Participant who was not then fully Vested in
his Individual Account derived from Employer
Contributions and the Participant may increase his Vested
percentage in his Individual Account, then the following
rules shall apply:
1. a separate account will be established for the
Participant's interest in the Plan as of the time of
the distribution, and
2. at any relevant time the Participant's Vested 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) where "P" is the Vested percentage at the
relevant time, "AB" is the separate account balance
at the relevant time; "D" is the amount of the
distribution; and "R" is the ratio of the separate
account balance at the relevant time to the separate
account balance after distribution.
6.02 FORM OF DISTRIBUTION TO A PARTICIPANT
A. VALUE OF INDIVIDUAL ACCOUNT DOES NOT EXCEED $3,500 - If
the value of the Vested portion of a Participant's
Individual Account derived from Employee and Employer
Contributions does not exceed $3,500, distribution from
the Plan shall be made to the Participant in a single
lump sum in lieu of all other forms of distribution from
the Plan.
B. VALUE OF INDIVIDUAL ACCOUNT EXCEEDS $3,500
1. If the value of the Vested portion of a Participant's
Individual Account derived from Employee and Employer
Contributions exceeds (or at the time of any prior
distribution exceeded) $3,500, and the Individual
Account is immediately distributable, the Participant
and the Participant's spouse (or where either the
Participant or the spouse died, the survivor) must
consent to any distribution of such
20
<PAGE> 21
Individual Account. The consent of the Participant
and the Participant's spouse shall be obtained in
writing within the 90-day period ending on the
annuity starting date. The annuity starting date is
the first day of the first period for which an amount
is paid as an annuity or any other form. The Plan
Administrator shall notify the Participant and the
Participant's spouse of the right to defer any
distribution until the Participant's Individual
Account is no longer immediately distributable. Such
notification shall include a general description of
the material features, and an explanation of the
relative values of, the optional forms of benefit
available under the Plan in a manner that would
satisfy the notice requirements of Section 417(a)(3)
of the Code, and shall be provided no less than 30
days and no more than 90 days prior to the annuity
starting date. If a distribution is one to which
Sections 401(a)(11) and 417 of the Internal Revenue
Code do not apply, such distribution may commence
less than 30 days after the notice required under
Section 1.411 (a)-11(c) of the Income Tax Regulations
is given, provided that:
a. the Plan Administrator clearly informs the
Participant that the Participant has a right to a
period of at least 30 days after receiving the
notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a
particular distribution option), and
b. 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 Individual Account is immediately
distributable. Neither the consent of the Participant
nor the Participant's spouse shall be required to the
extent that a distribution is required to satisfy
Section 401(a)(9) or Section 415 of the Code. In
addition, upon termination of this Plan if the Plan
does not offer an annuity option (purchased from a
commercial provider), the Participant's Individual
Account may, without the Participant's consent, be
distributed to the Participant or transferred to
another defined contribution plan (other than an
employee stock ownership plan as defined in Section
4975(e)(7) of the Code) within the same controlled
group.
An Individual Account is immediately distributable if
any part of the Individual Account could be
distributed to the Participant (or surviving spouse)
before the Participant attains or would have attained
(if not deceased) the later of Normal Retirement Age
or age 62.
2. For purposes of determining the applicability of the
foregoing consent requirements to distributions made
before the first day of the first Plan year beginning
after December 31, 1988, the Vested portion of a
Participant's Individual Account shall not include
amounts attributable to accumulated deductible
employee contributions within the meaning of Section
72(o)(5)(B) of the Code.
C. OTHER FORMS OF DISTRIBUTION TO PARTICIPANT - If the value
of the Vested portion of a Participant's Individual
Account exceeds $3,500 and the Participant has properly
waived the joint and survivor annuity, as described in
Section 6.05, the Participant may request in writing that
the Vested portion of his Individual Account be paid to
him in one or more of the following forms of payment: (1)
in a lump sum; (2) in installment payments over a period
not to exceed the life expectancy of the Participant or
the joint and last survivor life expectancy of the
Participant and his designated Beneficiary; or (3)
applied to the purchase of an annuity contract.
Notwithstanding anything in this Section 6.02 to the
contrary, a Participant cannot elect payments in the form
of an annuity if the safe harbor rules of Section 6.05(F)
apply.
6.03 DISTRIBUTIONS UPON THE DEATH OF A PARTICIPANT
A. DESIGNATION OF BENEFICIARY - SPOUSAL CONSENT - Each
Participant may designate, upon a form provided by and
delivered to the Plan Administrator, one or more primary
and contingent Beneficiaries to receive all or a
specified portion of his Individual Account in the event
of his death. A Participant may change or revoke such
Beneficiary designation from time to time by completing
and delivering the proper form to the Plan Administrator.
In the event that a Participant wishes to designate a
primary Beneficiary who is not his spouse, his spouse
must consent in writing to such designation, and the
spouse's consent must acknowledge the effect of such
designation and be witnessed by a notary public.
Notwithstanding this consent requirement, if the
Participant establishes to the satisfaction of the Plan
Administrator that such written consent may not be
obtained because there is no spouse or the spouse cannot
be located, no consent shall be required. Any change of
Beneficiary will require a new spousal consent.
B. PAYMENT TO BENEFICIARY - If a Participant dies before his
entire Individual Account has been paid to him, such
deceased Participant's Individual Account shall be
payable to any surviving Beneficiary designated by the
Participant, or, if no Beneficiary survives the
Participant, to the Participant's estate.
C. WRITTEN REQUEST: WHEN DISTRIBUTED - A Beneficiary of a
deceased Participant entitled to a distribution who
wishes to receive a distribution must submit a written
request to the Plan Administrator. Such request shall be
made upon a form provided by the Plan Administrator. Upon
a valid request, the Plan Administrator shall direct the
Trustee (or Custodian) to commence distribution no later
than 90 days following the later of:
1. the close of the Plan Year within which the
Participant dies; or
2. the close of the Plan Year in which the request is
received.
D. LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN - In the
event that all, or any portion, of the distribution
payable to a Participant or his Beneficiary hereunder
shall, at the expiration of 5 years after it becomes
payable, remain unpaid solely by reason of the inability
of the Plan Administrator, after sending a registered
letter, return receipt requested, to the last known
address, and after further diligent effort, to ascertain
the whereabouts of such Participant or his Beneficiary,
the amount so distributable shall be forfeited and
allocated in accordance with the terms of the Plan.
In the event a Participant or Beneficiary is located
subsequent to his benefit being forfeited, such
benefit shall be restored; provided, however, if all
or a portion of such amount has been lost by reason
of escheat understate law, the Participant or
Beneficiary shall cease to be entitled to the portion
so lost.
21
<PAGE> 22
6.04 FORM OF DISTRIBUTION TO BENEFICIARY
A. VALUE OF INDIVIDUAL ACCOUNT DOES NOT EXCEED $3,500 - If
the value of the Participant's Individual Account derived
from Employee and Employer Contributions does not exceed
$3,500, the Plan Administrator shall direct the Trustee
(or Custodian, if applicable) to make a distribution to
the Beneficiary in a single lump sum in lieu of all other
forms of distribution from the Plan.
B. VALUE OF INDIVIDUAL ACCOUNT EXCEEDS $3,500 - If the value
of a Participant's Individual Account derived from
Employee and Employer Contributions exceeds $3,500 the
preretirement survivor annuity requirements of Section
6.05 shall apply unless waived in accordance with that
Section or unless the safe harbor rules of Section
6.05(F) apply.
C. OTHER FORMS OF DISTRIBUTION TO BENEFICIARY - If the value
of a Participant's Individual Account exceeds $3,500 and
the Participant has properly waived the preretirement
survivor annuity, as described in Section 6.05 (if
applicable), the Beneficiary may, subject to the
requirements of Section 6.06, request in writing that the
Participant's Individual Account be paid to him as
follows: (1) in a lump sum; or (2) in installment
payments over a period not to exceed the life expectancy
of such Beneficiary.
6.05 JOINT AND SURVIVOR ANNUITY REQUIREMENTS
A. The provisions of this Section shall apply to any
Participant who is credited with at least one Hour of
Eligibility Service with the Employer on or after August
23, 1984, and such other participants as provided in
Section 6.05(G).
B. QUALIFIED JOINT AND SURVIVOR ANNUITY - Unless an optional
form of benefit is selected pursuant to a qualified
election within the 90-day period ending on the annuity
starting date, a married Participant's Vested account
balance will be paid in the form of a qualified joint and
survivor annuity and an unmarried Participant's Vested
account balance will be paid in the form of a life
annuity. The Participant may elect to have such annuity
distributed upon attainment of the earliest retirement
age under the Plan.
C. QUALIFIED PRERETIREMENT SURVIVOR ANNUITY - Unless an
optional form of benefit has been selected within the
election period pursuant to a qualified election, if a
Participant dies before the annuity starting date then
the Participant's Vested account balance shall be applied
toward the purchase of an annuity for the life of the
surviving spouse. The surviving spouse may elect to have
such annuity distributed within a reasonable period after
the Participant's death.
D. DEFINITIONS
1. Election Period - The period which begins on the
first day of the Plan Year in which the Participant
attains age 35 and ends on the date of the
Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in
which age 35 is attained, with respect to the account
balance as of the date of separation, the election
period shall begin on the date of separation.
Pre-age 35 waiver - A Participant who will not yet
attain age 35 as of the end of any current Plan Year
may make special qualified election to waive the
qualified preretirement survivor annuity for the
period beginning on the date of such election and
ending on the first day of the Plan Year in which the
Participant will attain age 35. Such election shall
not be valid unless the Participant receives a
written explanation of the qualified preretirement
survivor annuity in such terms as are comparable to
the explanation required under Section 6.05(E)(1).
Qualified preretirement survivor annuity coverage
will be automatically reinstated as of the first day
of the Plan Year in which the Participant attains age
35. Any new waiver on or after such date shall be
subject to the full requirements of this Section
6.05.
2. Earliest Retirement Age - The earliest date on which,
under the Plan, the Participant could elect to
receive retirement benefits.
3. Qualified Election - A waiver of a qualified joint
and survivor annuity or a qualified preretirement
survivor annuity. Any waiver of a qualified joint and
survivor annuity or a qualified preretirement
survivor annuity shall not be effective unless: (a)
the Participant's spouse consents in writing to the
election, (b) the election designates a specific
Beneficiary, including any class of beneficiaries or
any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse
expressly permits designations by the Participant
without any further spousal consent); (c) the
spouse's consent acknowledges the effect of the
election; and (d) the spouse's consent is witnessed
by a plan representative or notary public.
Additionally, a Participant's waiver of the qualified
joint and survivor annuity shall not be effective
unless the election designates a form of benefit
payment which may not be changed without spousal
consent (or the spouse expressly permits designations
by the Participant without any further spousal
consent). If it is established to the satisfaction of
a plan representative that there is no spouse or that
the spouse cannot be located, a waiver will be deemed
a qualified election.
Any consent by a spouse obtained under this provision
(or establishment that the consent of a spouse may
not be obtained) shall be effective only with respect
to such spouse. A consent that permits designations
by the Participant without any requirement of further
consent by such spouse must acknowledge that the
spouse has the right to limit consent to a specific
Beneficiary, and a specific form of benefit where
applicable, and that the spouse voluntarily elects to
relinquish either or both of such rights. A
revocation of a prior waiver may be made by a
Participant without the consent of the spouse at any
time before the commencement of benefits. The number
of revocations shall not be limited. No consent
obtained under this provision shall be valid unless
the Participant has received notice as provided in
Section 6.05(E) below.
4. Qualified Joint and Survivor Annuity - An immediate
annuity for the life of the Participant with a
survivor annuity for the life of the spouse which is
not less than 50% and not more than 100% of the
amount of the annuity which is payable during the
joint lives of the Participant and the spouse and
which is the amount of benefit which can be purchased
with the Participant's vested account balance. The
percentage of the survivor annuity under the Plan
shall be 50% (unless a different percentage is
elected by the Employer in the Adoption Agreement).
22
<PAGE> 23
5. Spouse (surviving spouse) - The spouse or surviving
spouse of the Participant, provided that a former
spouse will be treated as the spouse or surviving
spouse and a current spouse will not be treated as
the spouse or surviving spouse to the extent provided
under a qualified domestic relations order as
described in Section 414(p) of the Code.
6. Annuity Starting Date - The first day of the first
period for which an amount is paid as an annuity or
any other form.
7. Vested Account Balance - The aggregate value of the
Participant's Vested account balances derived from
Employer and Employee contributions (including
rollovers), whether Vested before or upon death,
including the proceeds of insurance contracts, if
any, on the Participant's life. The provisions of
this Section 6.05 shall apply to a Participant who is
Vested in amounts attributable to Employer
Contributions, Employee contributions (or both) at
the time of death or distribution.
E. NOTICE REQUIREMENTS
1. In the case of a qualified joint and survivor
annuity, the Plan Administrator shall no less than 30
days and not more than 90 days prior to the annuity
starting date provide each Participant a written
explanation of: (a) the terms and conditions of a
qualified joint and survivor annuity; (b) the
Participant's right to make and the effect of an
election to waive the qualified joint and survivor
annuity form of benefit; (c) the rights of a
Participant's spouse; and (d) the right to make, and
the effect of, a revocation of a previous election to
waive the qualified joint and survivor annuity.
2. In the case of a qualified preretirement survivor
annuity as described in Section 6.05(C), the Plan
Administrator shall provide each Participant within
the applicable period for such Participant a written
explanation of the qualified preretirement survivor
annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting
the requirements of Section 6.05(E)(1) applicable to
a qualified joint and survivor annuity.
The applicable period for a Participant is whichever
of the following periods ends last: (a) the period
beginning with the first day of the Plan Year in
which the Participant attains age 32 and ending with
the close of the Plan Year preceding the Plan Year in
which the Participant attains age 35; (b) a
reasonable period ending after the individual becomes
a Participant; (c) a reasonable period ending after
Section 6.05(E)(3) ceases to apply to the
Participant; (d) a reasonable period ending after
this Section 6.05 first applies to the Participant.
Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after
separation from service in the case of a Participant
who separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a
reasonable period ending after the enumerated events
described in (b), (c) and (d) is the end of the
two-year period beginning one year prior to the date
the applicable event occurs, and ending one year
after that date. In the case of a Participant who
separates from service before the Plan Year in which
age 35 is attained, notice shall be provided within
the two-year period beginning one year prior to
separation and ending one year after separation. If
such a Participant thereafter returns to employment
with the Employer, the applicable period for such
Participant shall be redetermined.
3. Notwithstanding the other requirements of this
Section 6.05(E), the respective notices prescribed by
this Section 6.05(E), need not be given to a
Participant if (a) the Plan "fully subsidizes" the
costs of a qualified joint and survivor annuity or
qualified preretirement survivor annuity, and (b) the
Plan does not allow the Participant to waive the
qualified joint and survivor annuity or qualified
preretirement survivor annuity and does not allow a
married Participant to designate a nonspouse
beneficiary. For purposes of this Section 6.05(E)(3),
a plan fully subsidizes the costs of a benefit if no
increase in cost, or decrease in benefits to the
Participant may result from the Participant's failure
to elect another benefit.
F. SAFE HARBOR RULES
1. If the Employer so indicates in the Adoption
Agreement, this Section 6.05(F) shall apply to a
Participant in a profit sharing plan, and shall
always apply to any distribution, made on or after
the first day of the first Plan Year beginning after
December 31, 1988, from or under a separate account
attributable solely to accumulated deductible
employee contributions, as defined in Section
72(o)(5)(B) of the Code, and maintained on behalf of
a Participant in a money purchase pension plan,
(including a target benefit plan) if the following
conditions are satisfied:
a. the Participant does not or cannot elect payments
in the form of a life annuity; and
b. on the death of a participant, the Participant's
Vested account balance will be paid to the
Participants surviving spouse, but if there is no
surviving spouse, or if the surviving spouse has
consented in a manner conforming to a qualified
election, then to the Participant's designated
beneficiary. The surviving spouse may elect to
have distribution of the Vested account balance
commence within the 90-day period following the
date of the Participant's death. The account
balance shall be adjusted for gains or losses
occurring after the Participant's death in
accordance with the provisions of the Plan
governing the adjustment of account balances for
other types of distributions. This Section
6.05(F) shall not be operative with respect to a
Participant in a profit sharing plan if the plan
is a direct or indirect transferee of a defined
benefit plan, money purchase plan, a target
benefit plan,
stock bonus, or profit sharing plan which is
subject to the survivor annuity requirements of
Section 401(a)(11) and Section 417 of the code.
If this Section 6.05(F) is operative, then the
provisions of this Section 6.05 other than
Section 6.05(G) shall be inoperative.
23
<PAGE> 24
2. The Participant may waive, the spousal death benefit
described in this Section 6.05(F) at any time
provided that no such waiver shall be effective
unless it satisfies the conditions of Section
6.05(D)(3) (other than the notification requirement
referred to therein) that would apply to the
Participant's waiver of the qualified preretirement
survivor annuity.
3. For purposes of this Section 6.05(F), Vested account
balance shall mean, in the case of a money purchase
pension plan or a target benefit plan, the
Participant's separate account balance attributable
solely to accumulated deductible employee
contributions within the meaning of Section
72(o)(5)(B) of the Code. In the case of a profit
sharing plan, Vested account balance shall have the
same meaning as provided in Section 6.05(D)(7).
G. TRANSITIONAL RULES
1. Any living Participant not receiving benefits on
August 23, 1984, who would otherwise not receive the
benefits prescribed by the previous subsections of
this Section 6.05 must be given the opportunity to
elect to have the prior subsections of this Section
apply if such Participant is credited with at least
one Hour of Service under this Plan or a predecessor
plan in a Plan Year beginning on or after January 1,
1976, and such Participant had at least 10 Years of
Vesting Service when he or she separated from
service.
2. Any living Participant not receiving benefits on
August 23, 1984, who was credited with at least one
Hour of Service under this Plan or a predecessor plan
on or after September 2, 1974, and who is not
otherwise credited with any service in a Plan Year
beginning on or after January 1, 1976, must be given
the opportunity to have his or her benefits paid in
accordance with Section 6.05(G)(4).
3. The respective opportunities to elect (as described
in Section 6.05(G)(1) and (2) above) must be afforded
to the appropriate Participants during the period
commencing on August 23, 1984, and ending on the date
benefits would otherwise commence to said
Participants.
4. Any Participant who has elected pursuant to Section
6.05(G)(2) and any Participant who does not elect
under Section 6.05(G)(1) or who meets the
requirements of Section 6.05(G)(1) except that such
Participant does not have at least 10 Years of
Vesting Service when he or she separates from
service, shall have his or her benefits distributed
in accordance with all of the following requirements
if benefits would have been payable in the form of a
life annuity:
a. Automatic Joint and Survivor Annuity - If
benefits in the form of a life annuity become
payable to a married Participant who:
1. begins to receive payments under the Plan on
or after Normal Retirement Age; or
2. dies on or after Normal Retirement Age while
still working for the Employer; or
3. begins to receive payments on or after the
qualified early retirement age; or
4. separates from service on or after attaining
Normal Retirement Age (or the qualified early
retirement age) and after satisfying the
eligibility requirements for the payment of
benefits under the Plan and thereafter dies
before beginning to receive such benefits;
then such benefits will be received under this
Plan in the form of a qualified joint and
survivor annuity, unless the Participant has
elected otherwise during the election period. The
election period must begin at least 6 months
before the Participant attains qualified early
retirement age and ends not more than 90 days
before the commencement of benefits. Any election
hereunder will be in writing and may be changed
by the Participant at any time.
b. Election of Early Survivor Annuity - A
Participant who is employed after attaining the
qualified early retirement age will be given the
opportunity to elect, during the election period,
to have a survivor annuity payable on death. If
the Participant elects the survivor annuity,
payments under such annuity must not be less than
the payments which would have been made to the
spouse under the qualified joint and survivor
annuity if the Participant had retired on the day
before his or her death. Any election under this
provision will be in writing and may be changed
by the Participant at any time. The election
period begins on the later of (1) the 90th day
before the Participant attains the qualified
early retirement age, or (2) the date on which
participation begins, and ends on the date the
Participant terminates employment.
c. For purposes of Section 6.05(G)(4):
1. Qualified early retirement age is the latest
of:
a. the earliest date, under the Plan, on
which the Participant may elect to
receive retirement benefits,
b. the first day of the 120th month
beginning before the Participant reaches
Normal Retirement Age, or
c. the date the Participant begins
participation.
2. Qualified joint and survivor annuity is an
annuity for the life of the Participant with
a survivor annuity for the life of the spouse
as described in Section 6.05(D)(4) of this
Plan.
24
<PAGE> 25
6.06 DISTRIBUTION REQUIREMENTS
A. GENERAL RULES
1. Subject to Section 6.05 Joint and Survivor Annuity
Requirements, the requirements of this Section shall
apply to any distribution of a Participant's interest
and will take precedence over any inconsistent
provisions of this Plan. Unless otherwise specified,
the provisions of this Section 6.06 apply to calendar
years beginning after December 31, 1984.
2. All distributions required under this Section 6.06
shall be determined and made in accordance with the
Income Tax Regulations under Section 401(a)(9),
including the minimum distribution incidental benefit
requirement of Section 1.401(a)(9)-2 of the
regulations.
B. REQUIRED BEGINNING DATE - The entire interest of a
Participant must be distributed or begin to be
distributed no later than the Participant's required
beginning date.
C. LIMITS ON DISTRIBUTION PERIODS - As of the first
distribution calendar year, distributions, if not made in
a single sum, may only be made over one of the following
periods (or a combination thereof):
1. the life of the Participant,
2. the life of the Participant and a designated
Beneficiary,
3. a period certain not extending beyond the life
expectancy of the Participant, or
4. a period certain not extending beyond the joint and
last survivor expectancy of the Participant and a
designated Beneficiary.
D. DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR - If
the Participant's interest is to be distributed in other
than a single sum, the following minimum distribution
rules shall apply on or after the required beginning
date:
1. Individual Account
a. If a Participant's benefit is to be distributed
over (1) a period not extending beyond the life
expectancy of the Participant or the joint life
and last survivor expectancy of the Participant
and the Participant's designated Beneficiary or
(2) a period not extending beyond the life
expectancy of the designated Beneficiary, the
amount required to be distributed for each
calendar year, beginning with distributions for
the first distribution calendar year, must at
least equal the quotient obtained by dividing the
Participant's benefit by the applicable life
expectancy.
b. 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
50% of the present value of the amount available
for distribution is paid within the life
expectancy of the Participant.
c. For calendar years beginning after December 31,
1988, the amount to be distributed each year,
beginning with distributions for the first
distribution calendar year shall not be less than
the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the
applicable life expectancy or (2) if the
Participant's spouse is not the designated
Beneficiary, the applicable divisor determined
from the table set forth in Q&A-4 of Section
1.401(a)(9)-2 of the Income Tax Regulations.
Distributions after the death of the Participant
shall be distributed using the applicable life
expectancy in Section 6.06(D)(1)(a) above as the
relevant divisor without regard to regulations
1.401(a)(9)-2.
d. The minimum distribution required for the
Participant's first distribution calendar year
must be made on or before the Participant's
required beginning date. The minimum distribution
for other calendar years, including the minimum
distribution for the distribution calendar year
in which the Employee's required beginning date
occurs, must be made on or before December 31 of
that distribution calendar year.
2. Other Forms - If the Participant's benefit is
distributed in the form of an annuity purchased from
an insurance company, distributions thereunder shall
be made in accordance with the requirements of
Section 401(a)(9) of the Code and the regulations
thereunder.
E. DEATH DISTRIBUTION PROVISIONS
1. Distribution Beginning Before Death - If the
Participant dies after distribution of his or her
interest has begun, the remaining portion of such
interest will continue to be distributed at least as
rapidly as under the method of distribution being
used prior to the Participant's death.
2. Distribution Beginning After Death - If the
Participant dies before distribution of his or her
interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of
the calendar year containing the fifth anniversary of
the Participant's death except to the extent that an
election is made to receive distributions in
accordance with (a) or (b) below:
a. if any portion of the Participant's interest is
payable to a designated Beneficiary,
distributions may be made over the life or over a
period certain not greater than the life
expectancy of the designated Beneficiary
commencing on or before December 31 of the
calendar year immediately following the calendar
year in which the Participant died;
25
<PAGE> 26
b. if the designated Beneficiary is the
Participant's surviving spouse, the date
distributions are required to begin in accordance
with (a) above shall not be earlier than the
later of (1) December 31 of the calendar year
immediately following the calendar year in which
the Participant dies or (2) December 31 of the
calendar year in which the Participant would have
attained age 70 1/2.
If the Participant has not made an election
pursuant to this Section 6.06(E)(2) by the time
of his or her death, the Participant's designated
Beneficiary must elect the method of distribution
no later than the earlier of (1) December 31 of
the calendar year in which distributions would be
required to begin under this Section 6.06(E)(2),
or (2) December 31 of the calendar year which
contains the fifth anniversary of the date of
death of the Participant. If the Participant has
no designated Beneficiary, or if the designated
Beneficiary does not elect a method of
distribution. distribution of the Participant's
entire interest must be completed by December 31
of the calendar year containing the fifth
anniversary of the Participant's death.
3. For purposes of Section 6.06(E)(2) above, if the
surviving spouse dies after the Participant, but
before payments to such spouse begin, the provisions
of Section 6.06(E)(2), with the exception of
paragraph (b) therein, shall be applied as if the
surviving spouse were the Participant.
4. For purposes of this Section 6.06(E), any amount paid
to a child of the Participant will be treated as if
it had been paid to the surviving spouse if the
amount becomes payable to the surviving spouse when
the child reaches the age of majority.
5. For purposes of this Section 6.06(E), distribution of
a Participant's interest is considered to begin on
the Participant's required beginning date (or, if
Section 6.06(E)(3) above is applicable, the date
distribution is required to begin to the surviving
spouse pursuant to Section 6.06(E)(2) above). If
distribution in the form of an annuity irrevocably
commences to the Participant before the required
beginning date, the date distribution is considered
to begin is the date distribution actually commences.
F. DEFINITIONS
1. Applicable Life Expectancy - The life expectancy (or
joint and last survivor expectancy) calculated using
the attained age of the Participant (or designated
Beneficiary) as of the Participant's (or designated
Beneficiary's) birthday in the applicable calendar
year reduced by one for each calendar year which has
elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated,
the applicable life expectancy shall be the life
expectancy as so recalculated. The applicable
calendar year shall be the first distribution
calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
2. Designated Beneficiary - The individual who is
designated as the Beneficiary under the Plan in
accordance with Section 401(a)(9) of the Code and the
regulations thereunder.
3. Distribution Calendar Year - A calendar year for
which a minimum distribution is required. For
distributions beginning before the Participant's
death, the first distribution calendar year is the
calendar year immediately preceding the calendar year
which contains the Participant's required beginning
date. For distributions beginning after the
Participant's death, the first distribution calendar
year is the calendar year in which distributions are
required to begin pursuant to Section 6.06(E) above.
4. Life Expectancy - Life expectancy and joint and last
survivor expectancy are computed by use of the
expected return multiples in Tables V and VI of
Section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Participant (or
spouse, in the case of distributions described in
Section 6.06(E)(2)(b) above) by the time
distributions are required to begin, life
expectancies shall be recalculated annually. Such
election shall be irrevocable as to the Participant
(or spouse) and shall apply to all subsequent years.
The life expectancy of a nonspouse Beneficiary may
not be recalculated.
5. Participant's Benefit
a. The account balance as of the last valuation date
in the valuation calendar year (the calendar year
immediately preceding the distribution calendar
year) increased by the amount of any
Contributions or Forfeitures allocated to the
account balance as of dates in the valuation
calendar year after the valuation date and
decreased by distributions made in the valuation
calendar year after the valuation date.
b. Exception for second distribution calendar year.
For purposes of paragraph (a) above, if any
portion of the minimum distribution for the first
distribution calendar year is made in the second
distribution calendar year on or before the
required beginning date, the amount of the
minimum distribution made in the second
distribution calendar year shall be treated as if
it had been made in the immediately preceding
distribution calendar year.
6. Required Beginning Date
a. General Rule - The required beginning date of a
Participant is the first day of April of the
calendar year following the calendar year in
which the Participant attains age 70 1/2.
b. Transitional Rules - The required beginning date
of a Participant who attains age 70 1/2 before
January 1, 1988, shall be determined in
accordance with (1) or (2) below:
(1) Non 5% Owners - The required beginning date
of a Participant who is not a 5% owner is the
first day of April of the calendar year
following the calendar year in which the
later of retirement or attainment of age 70
1/2 occurs.
26
<PAGE> 27
(2) 5% Owners - The required beginning date of a
Participant who is a 5% owner during any year
beginning after December 31, 1979, is the
first day of April following the later of:
(a) the calendar year in which the
Participant attains age 70 1/2, or
(b) the earlier of the calendar year with or
within which ends the Plan Year in which
the Participant becomes a 5% owner, or
the calendar year in which the
Participant retires.
The required beginning date of a
Participant who is not a 5% owner who
attains age 70 1/2 during 1988 and who
has not retired as of January 1, 1989, is
April 1, 1990.
(c) 5% Owner- A Participant is treated as a
5% owner for purposes of this Section
6.06(F)(6) if such Participant is a 5%
owner as defined in Section 416(i) of the
Code (determined in accordance with
Section 416 but without regard to whether
the Plan is top-heavy) at any time during
the Plan Year ending with or within the
calendar year in which such owner attains
age 66 1/2 or any subsequent Plan Year.
(d) Once distributions have begun to a 5%
owner under this Section 6.06(F)(6) they
must continue to be distributed, even if
the Participant ceases to be a 5% owner
in a subsequent year.
G. TRANSITIONAL RULE
1. Notwithstanding the other requirements of this
Section 6.06 and subject to the requirements of
Section 6.05, Joint and Survivor Annuity
Requirements, distribution on behalf of any Employee,
including a 5% owner, may be made in accordance with
all of the following requirements (regardless of when
such distribution commences):
a. The distribution by the Fund is one which would
not have disqualified such Fund under Section
401(a)(9) of the Code as in effect prior to
amendment by the Deficit Reduction Act of 1984.
b. The distribution is in accordance with a method
of distribution designated by the Employee whose
interest in the Fund is being distributed or, if
the Employee is deceased, by a Beneficiary of
such Employee.
c. Such designation was in writing, was signed by
the Employee or the Beneficiary, and was made
before January 1, 1984.
d. The Employee had accrued a benefit under the Plan
as of December 31, 1983.
e. The method of distribution designated by the
Employee or the Beneficiary specifies the time at
which distribution will commence, the period over
which distributions will be made, and in the case
of any distribution upon the Employee's death,
the Beneficiaries of the Employee listed in order
of priority.
2. A distribution upon death will not be covered by this
transitional rule unless the information in the
designation contains the required information
described above with respect to the distributions to
be made upon the death of the Employee.
3. For any distribution which commences before January
1, 1984, but continues after December 31, 1983, the
Employee, or the Beneficiary, to whom such
distribution is being made, will be presumed to have
designated the method of distribution under which the
distribution is being made if the method of
distribution was specified in writing and the
distribution satisfies the requirements in Sections
6.06(G)(1)(a) and (e).
4. If a designation is revoked, any subsequent
distribution must satisfy the requirements of Section
401(a)(9) of the Code and the regulations thereunder.
If a designation is revoked subsequent to the date
distributions are required to begin, the Plan must
distribute by the end of the calendar year following
the calendar year in which the revocation occurs the
total amount not yet distributed which would have
been required to have been distributed to satisfy
Section 401(a)(9) of the Code and the regulations
thereunder, but for the Section 242(b)(2) election.
For calendar years beginning after December 31, 1988,
such distributions must meet the minimum distribution
incidental benefit requirements in Section
1.401(a)(9)-2 of the Income Tax Regulations. Any
changes in the designation will be considered to be a
revocation of the designation. However, the mere
substitution or addition of another Beneficiary (one
not named in the designation) under the designation
will not be considered to be a revocation of the
designation, so long as such substitution or addition
does not alter the period over which distributions
are to be made under the designation, directly or
indirectly (for example, by altering the relevant
measuring life). In the case in which an amount is
transferred or rolled over from one plan to another
plan, the rules in Q&A J-2 and Q&A J-3 shall apply.
6.07 ANNUITY CONTRACTS
Any annuity contract distributed under the Plan (if permitted
or required by this Section 6) must be nontransferable. The
terms of any annuity contract purchased and distributed by
the Plan to a Participant or spouse shall comply with the
requirements of the Plan.
6.08 LOANS TO PARTICIPANTS
If the Adoption Agreement so indicates, a Participant may
receive a loan from the Fund, subject to the following rules:
A. Loans shall be made available to all Participants on a
reasonably equivalent basis.
B. Loans shall not be made available to Highly Compensated
Employees (as defined in Section 414(q) of the Code) in
an amount greater than the amount made available to other
Employees.
27
<PAGE> 28
C. Loans must be adequately secured and bear a reasonable
interest rate.
D. No Participant loan shall exceed the present value of the
Vested portion of a Participant's Individual Account.
E. A Participant must obtain the consent of his or her
spouse, if any, to the use of the Individual Account as
security for the loan. Spousal consent shall be obtained
no earlier than the beginning of the 90 day period that
ends on the date on which the loan is to be so secured.
The consent must be in writing, must acknowledge the
effect of the loan, and must be witnessed by a plan
representative or notary public. Such consent shall
thereafter be binding with respect to the consenting
spouse or any subsequent spouse with respect to that
loan. A new consent shall be required if the account
balance is used for renegotiation, extension, renewal, or
other revision of the loan.
F. In the event of default, foreclosure on the note and
attachment of security will not occur until a
distributable event occurs in the Plan.
G. No loans will be made to any shareholder-employee or
Owner-Employee. For purposes of this requirement, a
shareholder-employee means an employee or officer of an
electing small business (Subchapter S) corporation who
owns (or is considered as owning within the meaning of
Section 318(a)(1) of the Code), on any day during the
taxable year of such corporation, more than 5% of the
outstanding, stock of the corporation.
If a valid spousal consent has been obtained in accordance
with 6.08(E), then, notwithstanding any other provisions of
this Plan, the portion of the Participant's Vested Individual
Account used as a security interest held by the Plan by
reason of a loan outstanding to the Participant shall be
taken into account for purposes of determining the amount of
the account balance payable at the time of death or
distribution, but only if the reduction is used as repayment
of the loan. If less than 100% of the Participant's Vested
Individual Account (determined without regard to the
preceding sentence) is payable to the surviving spouse, then
the account balance shall be adjusted by first reducing the
Vested Individual Account by the amount of the security used
as repayment of the loan, and then determining the benefit
payable to the surviving spouse.
No loan to any Participant can be made to the extent that
such loan when added to the outstanding balance of all other
loans to the Participant would exceed the lesser of (a)
$50,000 reduced by the excess (if any) of the highest
outstanding balance of loans during the one year period
ending on the day before the loan is made, over the
outstanding balance of loans from the Plan on the date the
loan is made, or (b) 50% of the present value of the
nonforfeitable Individual Account of the Participant or, if
greater, the total Individual Account up to $10,000. For the
purpose of the above limitation, all loans from all plans of
the Employer and other members of a group of employers
described in Sections 414(b), 414(c), and 414(m) of the Code
are aggregated. Furthermore, any loan shall by its terms
require that repayment (principal and interest) be amortized
in level payments, not less frequently than quarterly, over a
period not extending beyond 5 years from the date of the
loan, unless such loan is used to acquire a dwelling unit
which within a reasonable time (determined at the time the
loan is made) will be used as the principal residence of the
Participant. An assignment or pledge of any portion of the
Participant's interest in the Plan and a loan, pledge, or
assignment with respect to any insurance contract purchased
under the Plan, will be treated as a loan under this
paragraph.
The Plan Administrator shall administer the loan program in
accordance with a written document. Such written document
shall include, at a minimum, the following: (i) the identity
of the person or positions authorized to administer the
Participant loan program; (ii) the procedure for applying for
loans; (iii) the basis on which loans will be approved or
denied, (iv) limitations (if any) on the types and amounts of
loans offered; (v) the procedure under the program for
determining a reasonable rate of interest; (vi) the types of
collateral which may secure a Participant loan; and (vii) the
events constituting default and the steps that will be taken
to preserve Plan assets in the event of such default.
6.09 DISTRIBUTION IN KIND
The Plan Administrator may cause any distribution under this
Plan to be made either in a form actually held in the Fund,
or in cash by converting assets other than cash into cash, or
in any combination of the two foregoing ways.
6.10 DIRECT ROLLOVERS OF ELIGIBLE ROLLOVER DISTRIBUTIONS
A. DIRECT ROLLOVER OPTION - This Section applies to
distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under
this Section, a distributee may elect, at the time and in
the manner prescribed by the Plan Administrator, to have
any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the
distributee in a direct rollover.
B. DEFINITIONS
1. Eligible rollover distribution - An eligible rollover
distribution is any distribution of all or any
portion of the balance to the credit of the
distributee, except that an eligible rollover
distribution does not include:
a. any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or
life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the
distributee and the distributee's designated
beneficiary, or for a specified period of ten
years or more;
b. any distribution to the extent such distribution
is required under Section 401(a)(9) of the Code;
and
c. the portion of any distribution that is not
includible in gross income (determined without
regard to the exclusion for net unrealized
appreciation with respect to employer
securities).
2. Eligible retirement plan - An eligible retirement
plan is an individual retirement account described in
Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the 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.
28
<PAGE> 29
3. Distributee - A distributee includes an Employee or
former Employee. In addition, the Employee's or
former Employee's surviving spouse and the Employee's
or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the
Code, are distributees with regard to the interest of
the spouse or former spouse.
4. Direct rollover - A direct rollover is a payment by
the Plan to the eligible retirement plan specified by
the distributee.
SECTION SEVEN CLAIMS PROCEDURE
7.01 FILING A CLAIM FOR PLAN DISTRIBUTIONS
A Participant or Beneficiary who desires to make a claim for
the Vested portion of the Participant's Individual Account
shall file a written request with the Plan Administrator on a
form to be furnished to him by the Plan Administrator for
such purpose. The request shall set forth the basis of the
claim. The Plan Administrator is authorized to conduct such
examinations as may be necessary to facilitate the payment of
any benefits to which the Participant or Beneficiary may be
entitled under the terms of the Plan.
7.02 DENIAL OF CLAIM
Whenever a claim for a Plan distribution by any Participant
or Beneficiary has been wholly or partially denied, the Plan
Administrator must furnish such Participant or Beneficiary
written notice of the denial within 60 days of the date the
original claim was filed. This notice shall set forth the
specific reasons for the denial, specific reference to
pertinent Plan provisions on which the denial is based, a
description of any additional information or material needed
to perfect the claim, an explanation of why such additional
information or material is necessary and an explanation of
the procedures for appeal.
7.03 REMEDIES AVAILABLE
The Participant or Beneficiary shall have 60 days from
receipt of the denial notice in which to make written
application for review by the Plan Administrator. The
Participant or Beneficiary may request that the review be in
the nature of a hearing. The Participant or Beneficiary shall
have the right to representation, to review pertinent
documents and to submit comments in writing. The Plan
Administrator shall issue a decision on such review within 60
days after receipt of an application for review as provided
for in Section 7.02. Upon a decision unfavorable to the
Participant or Beneficiary, such Participant or Beneficiary
shall be entitled to bring such actions in law or equity as
may be necessary or appropriate to protect or clarify his
right to benefits under this Plan.
SECTION EIGHT PLAN ADMINISTRATOR
8.01 EMPLOYER IS PLAN ADMINISTRATOR
A. The Employer shall be the Plan Administrator unless the
managing body of the Employer designates a person or
persons other than the Employer as the Plan Administrator
and so notifies the Prototype Sponsor and the Trustee (or
Custodian, if applicable). The Employer shall also be the
Plan Administrator if the person or persons so designated
cease to be the Plan Administrator.
B. If the managing body of the Employer designates a person
or persons other than the Employer as Plan Administrator,
such person or persons shall serve at the pleasure of the
Employer and shall serve pursuant to such procedures as
such managing body may provide. Each such person shall be
bonded as may be required by law.
8.02 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR
A. The Plan Administrator may, by appointment, allocate the
duties of the Plan Administrator among several
individuals or entities. Such appointments shall not be
effective until the party designated accepts such
appointment in writing.
B. The Plan Administrator shall have the authority to
control and manage the operation and administration of
the Plan. The Plan Administrator shall administer the
Plan for the exclusive benefit of the Participants and
their Beneficiaries in accordance with the specific terms
of the Plan.
C. The Plan Administrator shall be charged with the duties
of the general administration of the Plan, including, but
not limited to, the following:
1. To determine all questions of interpretation or
policy in a manner consistent with the Plan's
documents and the Plan Administrator's construction
or determination in good faith shall be conclusive
and binding on all persons except as otherwise
provided herein or by law. Any interpretation or
construction shall be done in a nondiscriminatory
manner and shall be consistent with the intent that
the Plan shall continue to be deemed a qualified plan
under the terms of Section 401(a) of the Code, as
amended from time-to-time, and shall comply with the
terms of ERISA, as amended from time-to-time;
2. To determine all questions relating to the
eligibility of Employees to become or remain
Participants hereunder;
3. To compute the amounts necessary or desirable to be
contributed to the Plan;
4. To compute the amount and kind of benefits to which a
Participant or Beneficiary shall be entitled under
the Plan and to direct the Trustee (or Custodian, if
applicable) with respect to all disbursements under
the Plan, and, when requested by the Trustee (or
Custodian), to furnish the Trustee (or Custodian)
with instructions, in writing, on matters pertaining
to the Plan and the Trustee (or Custodian) may rely
and act thereon;
5. To maintain all records necessary for the
administration of the Plan;
6. To be responsible for preparing and filing such
disclosure and tax forms as may be required from
time-to-time by the Secretary of Labor or the
Secretary of the Treasury; and
29
<PAGE> 30
7. To furnish each Employee, Participant or Beneficiary
such notices, information and reports under such
circumstances as may be required by law.
D. The Plan Administrator shall have all of the powers
necessary or appropriate to accomplish his duties under
the Plan, including, but not limited to, the following:
1. To appoint and retain such persons as may be
necessary to carry out the functions of the Plan
Administrator;
2. To appoint and retain counsel, specialists or other
persons as the Plan Administrator deems necessary or
advisable in the administration of the Plan;
3. To resolve all questions of administration of the
Plan;
4. To establish such uniform and nondiscriminatory rules
which it deems necessary to carry out the terms of
the Plan;
5. To make any adjustments in a uniform and
nondiscriminatory manner which it deems necessary to
correct any arithmetical or accounting errors which
may have been made for any Plan Year; and
6. To correct any defect, supply any omission or
reconcile any inconsistency in such manner and to
such extent as shall be deemed necessary or advisable
to carry out the purpose of the Plan.
8.03 EXPENSES AND COMPENSATION
All reasonable expenses of administration including, but not
limited to, those involved in retaining necessary
professional assistance maybe paid from the assets of the
Fund. Alternatively, the Employer may, in its discretion, pay
such expenses. The Employer shall furnish the Plan
Administrator with such clerical and other assistance as the
Plan Administrator may need in the performance of his duties.
8.04 INFORMATION FROM EMPLOYER
To enable the Plan Administrator to perform his duties, the
Employer shall supply full and timely information to the Plan
Administrator (or his designated agents) on all matters
relating to the Compensation of all Participants, their
regular employment, retirement, death, Disability or
Termination of Employment, and such other pertinent facts as
the Plan Administrator (or his agents) may require. The Plan
Administrator shall advise the Trustee (or Custodian, if
applicable) of such of the foregoing facts as may be
pertinent to the Trustee's (or Custodian's) duties under the
Plan. The Plan Administrator (or his agents) is entitled to
rely on such information as is supplied by the Employer and
shall have no duty or responsibility to verify such
information.
SECTION NINE AMENDMENT AND TERMINATION
9.01 RIGHT OF PROTOTYPE SPONSOR TO AMEND THE PLAN
A. The Employer, by adopting the Plan, expressly delegates
to the Prototype Sponsor the power, but not the duty, to
amend the Plan without any further action or consent of
the Employer as the Prototype Sponsor deems necessary for
the purpose of adjusting the Plan to comply with all laws
and regulations governing pension or profit sharing
plans. Specifically, it is understood that the amendments
may be made unilaterally by the Prototype Sponsor.
However, it shall be understood that the Prototype
Sponsor shall be under no obligation to amend the Plan
documents and the Employer expressly waives any rights or
claims against the Prototype Sponsor for not exercising
this power to amend. For purposes of Prototype Sponsor
amendments, the mass submitter shall be recognized as the
agent of the Prototype Sponsor. If the Prototype Sponsor
does not adopt the amendments made by the mass submitter,
it will no longer be identical to or a minor modifier of
the mass submitter plan.
B. An amendment by the Prototype Sponsor shall be
accomplished by giving written notice to the Employer of
the amendment to be made. The notice shall set forth the
text of such amendment and the date such amendment is to
be effective. Such amendment shall take effect unless
within the 30 day period after such notice is provided,
or within such shorter period as the notice may specify,
the Employer gives the Prototype Sponsor written notice
of refusal to consent to the amendment. Such written
notice of refusal shall have the effect of withdrawing
the Plan as a prototype plan and shall cause the Plan to
be considered an individually designed plan. The right of
the Prototype Sponsor to cause the Plan to be amended
shall terminate should the Plan cease to conform as a
prototype plan as provided in this or any other section.
9.02 RIGHT OF EMPLOYER TO AMEND THE PLAN
The Employer may (1) change the choice of options in the
Adoption Agreement, (2) add overriding language in the
Adoption Agreement when such language is necessary to satisfy
Section 415 or Section 416 of the Code because of the
required aggregation of multiple plans, and (3) add certain
model amendments published by the Internal Revenue Service
which specifically provide that their adoption will not cause
the Plan to be treated as individually designed. An Employer
that amends the Plan for any other reason, including a waiver
of the minimum funding requirement under Section 412(d) of
the Code, will no longer participate in this prototype plan
and will be considered to have an individually designed plan.
An Employer who wishes to amend the Plan to change the
options it has chosen in the Adoption Agreement must complete
and deliver a new Adoption Agreement to the Prototype Sponsor
and Trustee (or Custodian, if applicable). Such amendment
shall become effective upon execution by the Employer and
Trustee (or Custodian).
The Employer further reserves the right to replace the Plan
in its entirety by adopting another retirement plan which the
Employer designates as a replacement plan.
30
<PAGE> 31
9.03 LIMITATION ON POWER TO AMEND
No amendment to the Plan shall be effective to the extent
that it has the effect of decreasing a Participant's accrued
benefit. Notwithstanding the preceding sentence, a
Participant's Individual Account may be reduced to the extent
permitted under Section 412(c)(8) of the Code. For purposes
of this paragraph, a plan amendment which has the effect of
decreasing a Participant's Individual Account or eliminating
an optional form of benefit with respect to benefits
attributable to service before the amendment shall be treated
as reducing an accrued benefit. Furthermore, if the vesting
schedule of a Plan is amended, in the case of an Employee who
is a Participant as of the later of the date such amendment
is adopted or the date it becomes effective, the Vested
percentage (determined as of such date) of such Employee's
Individual Account derived from Employer Contributions will
not be less than the percentage computed under the Plan
without regard to such amendment.
9.04 AMENDMENT OF VESTING SCHEDULE
If the Plan's vesting schedule is amended, or the Plan is
amended in any way that directly or indirectly affects the
computation of the Participant's Vested percentage, or if the
Plan is deemed amended by an automatic change to or from a
top-heavy vesting schedule, each Participant with at least 3
Years of Vesting Service with the Employer may elect, within
the time set forth below, to have the Vested percentage
computed under the Plan without regard to such amendment. For
Participants who do not have at least I Hour of Service in
any Plan Year beginning after December 31, 1988, the
preceding sentence shall be applied by substituting "5 Years
of Vesting Service" for "3 Years of Vesting Service" where
such language appears.
The Period during which the election may be made shall
commence with the date the amendment is adopted or deemed to
be made and shall end the later of:
A. 60 days after the amendment is adopted;
B. 60 days after the amendment becomes effective; or
C. 60 days after the Participant is issued written notice
of the amendment by the Employer or Plan Administrator.
9.05 PERMANENCY
The Employer expects to continue this Plan and make the
necessary contributions thereto indefinitely, but such
continuance and payment is not assumed as a contractual
obligation. Neither the Adoption Agreement nor the Plan nor
any amendment or modification thereof nor the making of
contributions hereunder shall be construed as giving any
Participant or any person whomsoever any legal or equitable
right against the Employer, the Trustee (or Custodian, if
applicable) the Plan Administrator or the Prototype Sponsor
except as specifically provided herein, or as provided by
law.
9.06 METHOD AND PROCEDURE FOR TERMINATION
The Plan may be terminated by the Employer at any time by
appropriate action of its managing body. Such termination
shall be effective on the date specified by the Employer. The
Plan shall terminate if the Employer shall be dissolved,
terminated, or declared bankrupt. Written notice of the
termination and effective date thereof shall be given to the
Trustee (or Custodian), Plan Administrator, Prototype
Sponsor, Participants and Beneficiaries of deceased
Participants, and the required filings (such as the Form 5500
series and others) must be made with the Internal Revenue
Service and any other regulatory body as required by current
laws and regulations. Until all of the assets have been
distributed from the Fund, the Employer must keep the Plan in
compliance with current laws and regulations by (a) making
appropriate amendments to the Plan and (b) taking such other
measures as may be required.
9.07 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER
Notwithstanding the preceding Section 9.06, a successor of
the Employer may continue the Plan and be substituted in the
place of the present Employer. The successor and the present
Employer (or, if deceased, the executor of the estate of a
deceased Self-Employed Individual who was the Employer) must
execute a written instrument authorizing such substitution
and the successor must complete and sign a new Adoption
Agreement.
9.08 FAILURE OF PLAN QUALIFICATION
If the Plan fails to retain its qualified status, the Plan
will no longer be considered to be part of a prototype plan,
and such Employer can no longer participate under this
prototype. In such event, the Plan will be considered an
individually designed plan.
SECTION TEN MISCELLANEOUS
10.01 STATE COMMUNITY PROPERTY LAWS
The terms and conditions of this Plan shall be applicable
without regard to the community property laws of any state.
10.02 HEADINGS
The headings of the Plan have been inserted for convenience
of reference only and are to be ignored in any construction
of the provisions hereof.
10.03 GENDER AND NUMBER
Whenever any words are used herein in the masculine gender
they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and
whenever any words are used herein in the singular form they
shall be construed as though they were also used in the
plural form in all cases where they would so apply.
10.04 PLAN MERGER OR CONSOLIDATION
In the case of any merger or consolidation of the Plan with,
or transfer of assets or liabilities of such Plan to, any
other plan, each Participant shall be entitled to receive
benefits immediately after the merger, consolidation, or
transfer (if the Plan had then terminated) which are equal to
or greater than the benefits he would have been entitled to
receive immediately before the merger, consolidation, or
transfer (if the Plan had then terminated). The Trustee (or
Custodian, if applicable) has the authority to enter into
merger agreements or agreements to directly transfer
31
<PAGE> 32
the assets of this Plan but only if such agreements are made
with trustees or custodians of other retirement plans
described in Section 401(a) of the Code.
10.05 STANDARD OF FIDUCIARY CONDUCT
The Employer, Plan Administrator, Trustee and any other
fiduciary under this Plan shall discharge their duties with
respect to this Plan solely in the interests of Participants
and their Beneficiaries and with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent man acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims. No fiduciary shall cause the
Plan to engage in any transaction known as a "prohibited
transaction" under ERISA.
10.06 GENERAL UNDERTAKING OF ALL PARTIES
All parties to this Plan and all persons claiming any
interest whatsoever hereunder agree to perform any and all
acts and execute any and all documents and papers which may
be necessary or desirable for the carrying out of this Plan
and any of its provisions.
10.07 AGREEMENT BINDS HEIRS, ETC.
This Plan shall be binding upon the heirs, executors,
administrators, successors and assigns, as those terms shall
apply to any and all parties hereto, present and future.
10.08 DETERMINATION OF TOP-HEAVY STATUS
A. For any Plan Year beginning after December 31, 1983, this
Plan is a Top-Heavy Plan if any of the following
conditions exist:
1. If the top-heavy ratio for this Plan exceeds 60% and
this Plan is not part of any required aggregation
group or permissive aggregation group of plans.
2. If this Plan is part of a required aggregation group
of plans but not part of a permissive and the
top-heavy ratio for the group of plans exceeds 60%.
3. If this Plan is a part of a required aggregation
group and part of a permissive aggregation group of
plans and the top-heavy ratio for the permissive
aggregation group exceeds 60%.
For purposes of this Section 10.08, the following terms
shall have the meanings indicated below:
B. KEY EMPLOYEE - Any Employee or former Employee (and the
beneficiaries of such Employee) who at any time during
the determination period was an officer of the Employer
if such individual's annual compensation exceeds 50% of
the dollar limitation under Section 415(b)(1)(A) of the
Code, an owner (or considered an owner under Section 318
of the Code) of one of the 10 largest interests in the
Employer if such individual's compensation exceeds 100%
of the dollar limitation under Section 415(c)(1)(A) of
the Code, a 5% owner of the Employer, or a 1% owner of
the Employer who has an annual compensation of more than
$150,000. Annual compensation means compensation as
defined in Section 415(c)(3) of the Code, but including
amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludible from the
Employee's gross income under Section 125, Section
402(a)(8), Section 402(h) or Section 403(b) of the Code.
The determination period is the Plan Year containing the
determination date and the 4 preceding Plan Years.
The determination of who is a Key Employee will be made
in accordance with Section 416(i)(1) of the Code and the
regulations thereunder.
C. TOP-HEAVY RATIO
1. If the Employer maintains one or more defined
contribution plans (including any simplified employee
pension plan) and the Employer has not maintained any
defined benefit plan which during the 5-year period
ending on the determination date(s) has or has had
accrued benefits, the top-heavy ratio for this Plan
alone or for the required or permissive aggregation
group as appropriate is a fraction, the numerator of
which is the sum of the account balances of all Key
Employees as of the determination date(s) (including
any part of any account balance distributed in the
5-year period ending on the determination date(s)),
and the denominator of which is the sum of all
account balances (including any part of any account
balance distributed in the 5-year period ending on
the determination date(s)), both computed in
accordance with Section 416 of the Code and the
regulations thereunder. Both the numerator and the
denominator of the top-heavy ratio are increased to
reflect any contribution not actually made as of the
determination date, but which is required to be taken
into account on that date under Section 416 of the
Code and the regulations thereunder.
2. If the Employer maintains one or more defined
contribution plans (including any simplified employee
pension plan) and the Employer maintains or has
maintained one or more defined benefit plans which
during the 5-year period ending on the determination
date(s) has or has had any accrued benefits, the
top-heavy ratio for any required or permissive
aggregation group as appropriate is a fraction, the
numerator of which is the sum of account balances
under the aggregated defined contribution plan or
plans for all Key Employees, determined in accordance
with (1) above, and the present value of accrued
benefits under the aggregated defined benefit plan or
plans for all Key Employees as of the determination
date(s), and the denominator of which is the sum of
the account balances under the aggregated defined
contribution plan or plans for all Participants,
determined in accordance with (1) above, and the
present value of accrued benefits under the defined
benefit plan or plans for all Participants as of the
determination date(s), all determined in accordance
with Section 416 of the Code and the regulations
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 5-year
period ending on the determination date.
3. For purposes of (1) and (2) above, the value of
account balances and the present value of accrued
benefits will be determined as of the most recent
valuation date that falls within or ends with the
12-month period ending on the determination date,
except as provided in Section 416 of the Code and the
regulations thereunder for the first and second plan
years of a defined benefit plan. The account
32
<PAGE> 33
balances and accrued benefits of a Participant (a)
who is not a Key Employee but who was a Key Employee
in a Prior Year, or (b) who has not been credited
with at least one Hour of Service with any employer
maintaining the plan at any time during the 5-year
period ending on the determination date will be
disregarded. The calculation of the top heavy ratio,
and the extent to which distributions, rollovers, and
transfers are taken into account will be made in
accordance with Section 416 of the Code and the
regulations thereunder. Deductible employee
contributions will not be taken into account for
purposes of computing the top-heavy ratio. When
aggregating plans the value of account balances and
accrued benefits will be calculated with reference to
the determination dates that fall within the same
calendar year.
The accrued benefit of a Participant other than a Key
Employee shall be determined under (a) the method, if
any, that uniformly applies for accrual purposes
under all defined benefit plans maintained by the
Employer, or (b) if there is no such method, as if
such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional
rule of Section 411(b)(1)(C) of the Code.
4. Permissive aggregation group: The required
aggregation group of plans plus any other plan or
plans of the Employer which, when considered as a
group with the required aggregation group, would
continue to satisfy the requirements of Sections
401(a)(4) and 410 of the Code.
5. Required aggregation group: (a) Each qualified plan
of the Employer in which at least one Key Employee
participates or participated at any time during the
determination period (regardless of whether the Plan
has terminated), and (b) any other qualified plan of
the Employer which enables a plan described in (a) to
meet the requirements of Sections 401(a)(4) or 410 of
the Code.
6. Determination date: For any Plan Year subsequent to
the first Plan Year, the last day of the preceding
Plan Year. For the first Plan Year of the Plan, the
last day of that year.
7. Valuation date: For purposes of calculating the
top-heavy ratio, the valuation date shall be the last
day of each Plan Year.
8. Present value: For purposes of establishing the
"present value" of benefits under a defined benefit
plan to compute the top heavy ratio. any benefit
shall be discounted only for mortality and interest
based on the interest rate and mortality table
specified for this purpose in the defined benefit
plan.
10.09 SPECIAL LIMITATIONS FOR OWNER-EMPLOYEES
If this Plan provides contributions or benefits for one or
more Owner-Employees who control both the business for which
this Plan is established and one or more other trades or
businesses, this Plan and the plan established for other
trades or businesses must, when looked at as a single plan,
satisfy Sections 401(a) and (d) of the Code for the employees
of those trades or businesses.
If the Plan provides contributions or benefits for one or
more Owner-Employees who control one or more other trades or
businesses, the employees of the other trades or businesses
must be included in a plan which satisfies Sections 401(a)
and (d) of the Code and which provides contributions and
benefits not less favorable than provided for Owner-Employees
under this Plan.
If an individual is covered as an Owner-Employee under the
plans of two or more trades or businesses which are not
controlled and the individual controls a trade or business,
then the contributions or benefits of the employees under the
plan of the trade or business which is controlled must be as
favorable as those provided for him under the most favorable
plan of the trade or business which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee,
or two or more Owner-Employees, will be considered to control
a trade or business if the Owner-Employee, or two or more
Owner-Employees, together:
A. own the entire interest in a unincorporated trade or
business, or
B. in the case of a partnership, own more than 50% of either
the capital interest or the profit interest in the
partnership.
For purposes of the preceding sentence, an Owner-Employee, or
two or more Owner-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.
10.10 INALIENABILITY OF BENEFITS
No benefit or interest available hereunder will be subject to
assignment or alienation, either voluntarily or
involuntarily. The preceding sentence shall also apply to the
creation, assignment, or recognition of a right to any
benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined to
be a qualified domestic relations order, as defined in
Section 414(p) of the Code.
Generally, a domestic relations order cannot be a qualified
domestic relations order until January 1, 1985. However, in
the case of a domestic relations order entered before such
date, the Plan Administrator:
(1) shall treat such order as a qualified domestic relations
order if such Plan Administrator is paying benefits
pursuant to such order on such date, and
(2) may treat any other such order entered before such date
as a qualified domestic relations order even if such
order does not meet the requirements of Section 414(p) of
the Code.
33
<PAGE> 34
EXHIBIT 14(b)
QUALIFIED
RETIREMENT
PLAN
BASIC PLAN
DOCUMENT
<PAGE> 35
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION ONE DEFINITIONS
1.01 Adoption Agreement .............................................................................1
1.02 Basic Plan Document ............................................................................1
1.03 Beneficiary.....................................................................................1
1.04 Break In Eligibility Service....................................................................1
1.05 Break In Vesting Service........................................................................1
1.06 Code............................................................................................1
1.07 Compensation....................................................................................1
1.08 Custodian.......................................................................................3
1.09 Disability......................................................................................3
1.10 Early Retirement Age............................................................................3
1.11 Earned Income...................................................................................3
1.12 Effective Date..................................................................................3
1.13 Eligibility Computation Period..................................................................3
1.14 Employee........................................................................................3
1.15 Employer........................................................................................3
1.16 Employer Contribution...........................................................................3
1.17 Employment Commencement Date....................................................................4
1.18 Employer Profit Sharing Contribution............................................................4
1.19 Entry Dates.....................................................................................4
1.20 ERISA...........................................................................................4
1.21 Forfeiture......................................................................................4
1.22 Fund............................................................................................4
1.23 Highly Compensated Employee.....................................................................4
1.24 Hours of Service - Means........................................................................4
1.25 Individual Account..............................................................................5
1.26 Investment Fund.................................................................................5
1.27 Key Employee....................................................................................5
1.28 Leased Employee.................................................................................5
1.29 Nondeductible Employee Contributions............................................................6
1.30 Normal Retirement Age...........................................................................6
1.31 Owner - Employee................................................................................6
1.32 Participant.....................................................................................6
1.33 Plan............................................................................................6
1.34 Plan Administrator..............................................................................6
1.35 Plan Year.......................................................................................6
1.36 Prior Plan......................................................................................6
1.37 Prototype Plan..................................................................................6
1.38 Qualifying Participant..........................................................................6
1.39 Related Employer................................................................................6
1.40 Related Employer Participation Agreement........................................................6
1.41 Self-Employed Individual........................................................................6
1.42 Separate Fund...................................................................................6
1.43 Taxable Wage Base...............................................................................6
1.44 Termination of Employment.......................................................................7
1.45 Top-Heavy Plan..................................................................................7
1.46 Trustee.........................................................................................7
1.47 Valuation Date..................................................................................7
1.48 Vested..........................................................................................7
1.49 Year Of Eligibility Service.....................................................................7
1.50 Year Of Vesting Service.........................................................................7
SECTION TWO ELIGIBILITY AND PARTICIPATION
2.01 Eligibility To Participate......................................................................7
2.02 Plan Entry......................................................................................8
</TABLE>
<PAGE> 36
<TABLE>
<S> <C> <C>
2.03 Transfer To Or From Ineligible Class............................................................8
2.04 Return As A Participant After Break In Eligibility Service......................................8
2.05 Determinations Under This Section...............................................................8
2.06 Terms Of Employment.............................................................................8
2.07 Special Rules Where Elapsed Time Method Is Being Used...........................................8
2.08 Election Not To Participate.....................................................................9
SECTION THREE CONTRIBUTIONS
3.01 Employer Contributions..........................................................................9
3.02 Nondeductible Employee Contributions...........................................................12
3.03 Rollover Contributions.........................................................................12
3.04 Transfer Contributions.........................................................................12
3.05 Limitation On Allocations .....................................................................13
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 Individual Accounts ...........................................................................16
4.02 Valuation Of Fund..............................................................................17
4.03 Valuation Of Individual Accounts...............................................................17
4.04 Modification Of Method For Valuing Individual Accounts.........................................17
4.05 Segregation Of Assets..........................................................................17
4.06 Statement of Individual Accounts...............................................................17
SECTION FIVE TRUSTEE OR CUSTODIAN
5.01 Creation Of Fund...............................................................................18
5.02 Investment Authority...........................................................................18
5.03 Financial Organization Custodian Or Trustee
Without Full Trust Powers......................................................................18
5.04 Financial Organization Trustee With Full Trust Powers
And Individual Trustee.........................................................................19
5.05 Division Of Fund Into Investment Funds.........................................................20
5.06 Compensation And Expenses......................................................................20
5.07 Not Obligated To Question Data.................................................................20
5.08 Liability For Withholding On Distributions.....................................................21
5.09 Resignation Or Removal Of Trustee (Or Custodian)...............................................21
5.10 Degree Of Care - Limitations Of Liability......................................................21
5.11 Indemnification Of Prototype Sponsor And Trustee (Or Custodian)................................21
5.12 Investment Managers............................................................................22
5.13 Matters Relating To Insurance..................................................................22
5.14 Direction Of Investments By Participant........................................................23
SECTION SIX VESTING AND DISTRIBUTION
6.01 Distribution To Participant....................................................................23
6.02 Form Of Distribution To A Participant..........................................................26
6.03 Distributions Upon The Death Of A Participant..................................................27
6.04 Form Of Distribution To Beneficiary............................................................28
6.05 Joint And Survivor Annuity Requirements........................................................28
6.06 Distribution Requirements......................................................................32
6.07 Annuity Contracts..............................................................................35
6.08 Loans To Participants..........................................................................35
6.09 Distribution In Kind...........................................................................36
6.10 Direct Rollovers Of Eligible Rollover Distributions............................................37
6.11 Procedure For Missing Participants Or Beneficiaries............................................37
SECTION SEVEN CLAIMS PROCEDURE
7.01 Filing A Claim For Plan Distributions..........................................................37
7.02 Denial Of Claim................................................................................38
7.03 Remedies Available.............................................................................38
SECTION EIGHT PLAN ADMINISTRATOR
8.01 Employer Is Plan Administrator.................................................................38
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C>
8.02 Powers And Duties Of The Plan Administrator....................................................38
8.03 Expenses And Compensation......................................................................38
8.04 Information From Employer......................................................................38
SECTION NINE AMENDMENT AND TERMINATION
9.01 Right Of Prototype Sponsor To Amend The Plan...................................................39
9.02 Right of Employer To Amend The Plan............................................................39
9.03 Limitation On Power To Amend...................................................................40
9.04 Amendment Of Vesting Schedule..................................................................40
9.05 Permanency.....................................................................................40
9.06 Method And Procedure For Termination...........................................................40
9.07 Continuance Of Plan by Successor Employer......................................................40
9.08 Failure Of Plan Qualification..................................................................41
SECTION TEN MISCELLANEOUS
10.01 State Community Property Laws..................................................................41
10.02 Headings.......................................................................................41
10.03 Gender And Number..............................................................................41
10.04 Plan Merger Or Consolidation...................................................................41
10.05 Standard Of Fiduciary Conduct..................................................................41
10.06 General Undertaking Of All Parties.............................................................41
10.07 Agreement Binds Heirs, Etc.....................................................................41
10.08 Determination Of Top-Heavy Status..............................................................41
10.09 Special Limitations For Owner-Employees........................................................43
10.10 Inalienability Of Benefits.....................................................................43
10.11 Cannot Eliminate Protected Benefits............................................................43
SECTION ELEVEN 401(k) PROVISIONS
11.100 Definitions....................................................................................44
11.101 Actual Deferral Percentage (ADP)...............................................................44
11.102 Aggregate Limit................................................................................44
11.103 Average Contribution Percentage (ACP)..........................................................44
11.104 Contributing Participant.......................................................................44
11.105 Contribution Percentage........................................................................44
11.106 Contribution Percentage Amounts................................................................44
11.107 Elective Deferrals.............................................................................44
11.108 Eligible Participant...........................................................................45
11.109 Excess Aggregate Contributions.................................................................45
11.110 Excess Contributions...........................................................................45
11.111 Excess Elective Deferrals......................................................................45
11.112 Matching Contribution..........................................................................45
11.113 Qualified Nonelective Contributions............................................................45
11.114 Qualified Matching Contributions...............................................................46
11.115 Qualifying Contributing Participant............................................................46
11.200 Contributing Participant.......................................................................46
11.201 Requirements To Enroll As A Contributing Participant...........................................46
11.202 Changing Elective Deferral Amounts.............................................................46
11.203 Ceasing Elective Deferrals.....................................................................46
11.204 Return As A Contributing Participant After Ceasing Elective Deferrals..........................46
11.205 Certain One-Time Irrevocable Elections.........................................................46
11.300 Contributions..................................................................................46
11.301 Contributions By Employer......................................................................47
11.302 Matching Contributions.........................................................................47
11.303 Qualified Nonelective Contributions............................................................47
11.304 Qualified Matching Contributions...............................................................47
11.305 Nondeductible Employee Contributions...........................................................47
11.400 Nondiscrimination Testing......................................................................47
11.401 Actual Deferral Percentage Test (ADP)..........................................................47
11.402 Limits On Nondeductible Employee Contributions
And Matching Contributions.....................................................................48
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C>
11.500 Distribution Provisions........................................................................50
11.501 General Rule...................................................................................50
11.502 Distribution Requirements......................................................................50
11.503 Hardship Distribution..........................................................................50
11.504 Distribution Of Excess Elective Deferrals......................................................51
11.505 Distribution Of Excess Contributions...........................................................51
11.506 Distribution Of Excess Aggregate Contributions.................................................52
11.507 Recharacterization.............................................................................52
11.508 Distribution Of Elective Deferrals If Excess Annual Additions..................................52
11.600 Vesting........................................................................................52
11.601 100% Vesting On Certain Contributions..........................................................53
11.602 Forfeitures And Vesting Of Matching Contributions..............................................53
</TABLE>
<PAGE> 39
QUALIFIED RETIREMENT PLAN AND TRUST
Defined Contribution Basic Plan Document 04
SECTION ONE DEFINITIONS
The following words and phrases when used in the Plan with initial
capital letters shall, for the purpose of this Plan, have the meanings
set forth below unless the context indicates that other meanings are
intended:
1.01 ADOPTION AGREEMENT
Means the document executed by the Employer through which it adopts the
Plan and Trust and thereby agrees to be bound by all terms and
conditions of the Plan and Trust.
1.02 BASIC PLAN DOCUMENT
Means this prototype Plan and Trust document.
1.03 BENEFICIARY
Means the individual or individuals designated pursuant to Section
6.03(A) of the Plan.
1.04 BREAK IN ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an Eligibility
Computation Period during which an Employee fails to complete more than
500 Hours of Service (or such lesser number of Hours of Service
specified in the Adoption Agreement for this purpose).
1.05 BREAK IN VESTING SERVICE
Means a Plan Year (or other vesting computation period described in
Section 1.50) during which an Employee fails to complete more than 500
Hours of Service (or such lesser number of Hours of Service specified
in the Adoption Agreement for this purpose).
1.06 CODE
Means the Internal Revenue Code of 1986 as amended from time-to-time.
1.07 COMPENSATION
A. Basic Definition
For Plan Years beginning on or after January, 1, 1989, the
following definition of Compensation shall apply:
As elected by the Employer in the Adoption Agreement (and if
no election is made, W-2 -wages will be deemed to have been
selected), Compensation shall mean one of the following:
1. W-2 wages. Compensation is defined as information
required to be reported under Sections 6041 and 6051,
and 6052 of the Code (Wages, tips and other
compensation as reported on Form W-2). Compensation
is defined as wages within the meaning of Section
3401(a) of the Code and all other payments of
compensation to an 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) and
6051(a)(3), and 6052 of the Code. Compensation must
be determined without regard to any rules under
Section 3401(a) that limit the remuneration included
in wages based on the nature or location of the
employment or the services performed (such as the
exception for agricultural labor in Section
3401(a)(2)).
2. Section 3401(a) wages. Compensation is defined as
wages within the meaning of Section 3401(a) of the
Code, for the purposes of income tax withholding at
the source but determined without regard to any rules
that limit the remuneration included in wages based
on the nature or location of the employment or the
services performed (such as the exception for
agricultural labor in Section WI(a)(2)).
3. 415 safe-harbor compensation. Compensation is defined
as wages, salaries, and fees for professional
services and other amounts received (without regard
to whether or not an amount is paid in cash) for
personal services actually rendered in the course of
employment with the Employer maintaining the Plan to
the extent that the amounts are includable in gross
income (including, but not Limited to, commissions
paid salesmen, compensation for services on the basis
of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, and
reimbursements or other expense allowances under a
nonaccountable plan (as described in 1.62-2(c)), and
excluding the following:
a. Employer contributions to a plan of deferred
compensation which are not includable in the
Employee's gross income for the taxable year
in which contributed, or employer
contributions under a simplified employee
pension plan to the extent such
contributions are deductible by the
Employee, or any distributions from a plan
of deferred compensation;
<PAGE> 40
2
b. Amounts realized from the exercise of a
nonqualified stock option, or when
restricted stock (or property) held by the
Employee either becomes freely transferable
or is no longer subject to a substantial
risk of forfeiture;
c. Amounts realized from the sale, exchange or
other disposition of stock acquired under a
qualified stock OPTIONS and
d. Other amounts which received special tax
benefits, or contributions made by the
Employer (whether or not under a salary
reduction agreement) towards the purchase of
an annuity contract described in Section
403(b) of the Code (whether or not the
contributions are actually excludable from
the gross income of the Employee).
For any Self-Employed Individual covered under the Plan,
Compensation will mean Earned Income.
B. Determination Period And Other Rules
Compensation shall include only that Compensation
which is actually paid to the Participant during the
determination period. Except as provided elsewhere in
this Plan, the determination period shall be the Plan
Year unless the Employer has selected another period
in the Adoption Agreement. If the Employer makes no
election, the determination period shall be the Plan
Year.
Unless otherwise indicated in the Adoption Agreement,
Compensation shall include any amount which is
contributed by the Employer pursuant to a salary
reduction agreement and which is not includable in
the gross income of the Employee under Sections 125,
402(e)(3), 402(h)(1)(13) or 403(b) of the Code.
Where this Plan is being adopted as an amendment and
restatement to bring a Prior Plan into compliance
with the Tax Reform Act of 1986 such Prior Plan's
definition of Compensation shall apply for Plan Years
beginning before January 1, 1989.
C. Limits On Compensation
For years beginning after December 31, 1988 and
before January 1, 1994, the annual Compensation of
each Participant taken into account for determining
all benefits provided under the Plan for any
determination period shall not exceed $200,000. This
limitation shall be adjusted by the Secretary at the
same time and in the same manner as under Section
415(d) of the Code, except that the dollar increase
in effect on January 1 of any calendar year is
effective for Plan Years beginning in such calendar
year and the first adjustment to the $200,000
limitation is effective on January 1, 1990
For Plan Years beginning on or after January 1, 1994,
the annual Compensation of each Participant taken
into account for determining all benefits provided
under the Plan for any Plan Year shall not exceed
$150,000, as adjusted 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 determination period beginning in
such calendar year.
If the period for determining Compensation used in
calculating an Employee's allocation for a
determination period is a short Plan Year (i.e.,
shorter than 12 months), the annual Compensation
limit is an amount equal to the otherwise applicable
annual Compensation limit multiplied by a fraction,
the numerator of which is the number of months in the
short Plan Year, and the denominator of which is 12.
In determining the Compensation of a Participant for
purposes of this limitation, the rules of Section
414(q)(6) of the Code shall apply, except in applying
such rules, the term "family" shall include only the
spouse of the Participant and any lineal descendants
of the Participant who have not attained age 19
before the close of the year. If, as a result of the
application of such rules the adjusted $200,000
limitation is exceeded, then (except for purposes of
determining the portion of Compensation up to the
integration level, if this Plan provides for
permitted disparity), the limitation shall be
prorated among the affected individuals in proportion
to each such individual's Compensation as determined
under this Section prior to the application of this
limitation.
If Compensation for any prior determination period is
taken into account in determining an Employee's
allocations or benefits for the current determination
period, the Compensation for such prior determination
period is subject to the applicable annual
Compensation limit in effect for that prior period.
For this purpose, in determining allocations in Plan
Years beginning on or after January 1, 1989, the
annual Compensation limit in effect for determination
periods beginning before that date is $200,000. In
addition, in determining allocations in Plan Years
beginning on or after January 1, 19,94, the annual
Compensation limit in effect for determination
periods beginning before that date is $150,000
<PAGE> 41
3
1.08 CUSTODIAN
Means an entity specified in the Adoption Agreement as Custodian or any
duly appointed successor as provided in Section 5.09.
1.09 DISABILITY
Unless the Employer has elected a different definition in the Adoption
Agreement, Disability means the inability to engage in any substantial,
gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less
than 12 months. The permanence and degree of such impairment shall be
supported by medical evidence.
1.10 EARLY RETIREMENT AGE
Means the age specified in the Adoption Agreement. The Plan will not
have an Early Retirement Age if none is specified in the Adoption
Agreement.
1.11 EARNED INCOME
Means the net earnings from self-employment in the trade or business
with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in
gross income and the deductions allocable to such items. Net earnings
are reduced by contributions by the Employer to a qualified plan to the
extent deductible under Section 404 of the Code.
Net earnings shall be determined with regard to the deduction allowed
to the Employer by Section 164(f) of the Code for taxable years
beginning after December 31, 1989.
1.12 EFFECTIVE DATE
Means the date the Plan becomes effective as indicated in the Adoption
Agreement. However, as indicated in the Adoption Agreement, certain
provisions may have specific effective dates. Further, where a separate
date is stated in the Plan as of which a particular Plan provision
becomes effective, such date will control with respect to that
provision.
1.13 ELIGIBILITY COMPUTATION PERIOD
An Employee's initial Eligibility Computation Period shall be the 12
consecutive month period commencing on the Employee's Employment
Commencement Date. The Employee's subsequent Eligibility Computation
Periods shall be the 12 consecutive month periods commencing on the
anniversaries of his or her Employment Commencement Date; provided,
however, if pursuant to the Adoption Agreement, an Employee is required
to complete one or less Years of Eligibility Service to become a
Participant, then his or her subsequent Eligibility Computation Periods
shall be the Plan Years commencing with the Plan Year beginning during
his or her initial Eligibility Computation Period. An Employee does not
complete a Year of Eligibility Service before the end of the 12
consecutive month period regardless of when during such period the
Employee completes the required number of Hours of Service.
1.14 EMPLOYEE
Means any person employed by an Employer maintaining the Plan or of any
other employer required to be aggregated with such Employer under
Sections 414(b), (c), (m) or (o) of the Code.
The term Employee shall also include any Leased Employee deemed to be
an Employee of any Employer described in the previous paragraph as
provided in Section 414(n) or (o) of the Code.
1.15 EMPLOYER
Means any corporation, partnership, sole-proprietorship or other entity
named in the Adoption Agreement and any successor who by merger,
consolidation, purchase or otherwise assumes the obligations of the
Plan. A partnership is considered to be the Employer of each of the
partners and a sole-proprietorship is considered to be the Employer of
a sole proprietor. Where this Plan is being maintained by a union or
other entity that represents its member Employees in the negotiation of
collective bargaining agreements, the term Employer shall mean such
union or other entity.
1.16 EMPLOYER CONTRIBUTION
Means the amount contributed by the Employer each year as determined
under this Plan.
1.17 EMPLOYMENT COMMENCEMENT DATE
An Employee's Employment Commencement date means the date the Employee
first performs an Hour of Service for the Employer.
1.18 EMPLOYER PROFIT SHARING CONTRIBUTION
Means an Employer Contribution made pursuant to the Section of the
Adoption Agreement titled "Employer Profit Sharing Contributions." The
Employer may make Employer Profit Sharing Contributions without regard
to current or accumulated earnings or profits.
1.19 ENTRY DATES
Means the first day of the Plan Year and the first day of the seventh
month of the Plan Year, unless the Employer has specified different
dates in the Adoption Agreement.
<PAGE> 42
4
1.20 ERISA
Means the Employee Retirement Income Security Act of 1974 as amended
from time-to-time.
1.21 FORFEITURE
Means that portion of a Participant's Individual Account derived from
Employer Contributions which he or she is not entitled to receive
(i.e., the nonvested portion).
1.22 FUND
Means the Plan assets held by the Trustee for the Participants'
exclusive benefit.
1.23 HIGHLY COMPENSATED EMPLOYEE
The term Highly Compensated Employee includes highly compensated active
employees and highly compensated former employees.
A highly compensated active employee includes any Employee who performs
service for the Employer during the determination year and who, during
the look-back year. (a) received Compensation from the Employer in
excess of $75,000 (as adjusted pursuant to Section 415(d) of the Code);
(b) received Compensation from the Employer in excess of $50,000 (as
adjusted pursuant to Section 415(d) of the Code) and was a member of
the top-paid group for such year; or (c) was an officer of the Employer
and received Compensation during such year that is greater than 50% of
the dollar limitation in effect under Section 415(b)(1)(A) of the Code.
The term Highly Compensated Employee also includes: (a) Employees who
are both described in the preceding sentence if the term "determination
year" is substituted for the term "look-back year" and the Employee is
one of the 100 Employees who received the most Compensation from the
Employer during the determination year, and (b) Employees who are 5%
owners at any time during the look-back year or determination year.
If no officer has satisfied the Compensation requirement of (c) above
during either a determination year or look-back year, the highest paid
officer for such year shall be treated as a Highly Compensated
Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the 12 month period immediately preceding the
determination year.
A highly compensated former employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
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 an), determination year ending on or
after the Employee's 55th birthday,
If an Employee is, during a determination year or look-back year, a
family member of either a 5% owner who is an active or former Employee
or a Highly Compensated Employee who is one of the 10 most Highly
Compensated Employees ranked on the basis of Compensation paid by the
Employer during such year, then the fan-Lily member and the 5% owner or
top 10 Highly Compensated Employee shall be aggregated. In such case,
the family member and 5% owner or top 10 Highly Compensated Employee
shall be treated as a single Employee receiving Compensation and Plan
contributions or benefits equal to the sum of such Compensation and
contributions or benefits of the family member and 5% owner or top 10
Highly Compensated Employee. For purposes of this Section, family
member includes the spouse, lineal ascendants and descendants of the
Employee or former Employee and the spouses of such lineal ascendants
and descendants.
The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of Employees in the
top-paid group, the top 100 Employees, the number of Employees treated
as officers and the Compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations
thereunder.
1.24 HOURS OF SERVICE - MEANS
A. Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These
hours will be credited to the Employee for the computation
period in which the duties are performed; and
B. Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during
which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence. No more than 501
Hours of Service will be credited under this paragraph for any
single continuous period (whether or not such period occurs in
a single computation period). Hours under this paragraph shall
be calculated and credited pursuant to Section 2530.200b-2 of
the Department of Labor Regulations which is incorporated
herein by this reference; and
C. Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The
same Hours of Service will not be credited both under
paragraph (A) or paragraph (B), as the case may be, and under
this paragraph (C). These hours will be credited to the
Employee for the computation period or periods to which the
award or agreement pertains rather than the computation period
in which the award, agreement, or payment is made.
<PAGE> 43
5
D. Solely for purposes of determining whether a Break in
Eligibility Service or a Break in Vesting Service has occurred
in a computation period (the computation period for purposes
of determining whether a Break in Vesting Service has
occur-red is the Plan Year or other vesting computation period
described in Section 1.50), an individual who, is absent from
work for maternity or paternity reasons shall receive credit
for the Hours of Service which would otherwise have been
credited to such individual but for such absence, or in any
case in which such hours cannot be determined, 8 Hours of
Service per day of such absence. For purposes of this
paragraph, an absence from work for maternity or paternity
reasons means an absence (1) by reason of the pregnancy of the
individual, (2) by reason of a birth of a child of the
individual, (3) by reason of the placement of a child with the
individual in connection with the adoption of such child by
such individual, or (4) for purposes of caring for such child
for a period beginning immediately following such birth or
placement. The Hours of Service credited under this paragraph
shall be credited (1) in the Eligibility Computation Period or
Plan Year or other 91 investing computation period described
in Section 1.50 in which the absence begins if the crediting
is necessary to prevent a Break in Eligibility Service or a
Break in Vesting Service in the applicable period, or (2) in
all other cases, in the following Eligibility Computation
Period or Plan Year or other -vesting computation period
described in Section 1.50.
E. Hours of Service will be credited for employment with other
members of an affiliated service group (under Section 414(m)
of the Code), a controlled group of corporations (under
Section 414(b) of the Code), or a group of trades or
businesses under common control (under Section 414(c) of the
Code) of which the adopting Employer is a member, and any
other entity required to be aggregated with the Employer
pursuant to Section 414(o) of the Code and the regulations t
hereunder.
Hours of Service will also be credited for any individual
considered an Employee for purposes of this Plan under Code
Sections 414(n) or 414(o) and the regulations thereunder.
F. Where the Employer maintains the plan of a predecessor
employer, service for such predecessor employer shall be
treated as service for the Employer.
G. The above method for determining Hours of Service may be
altered as specified in the Adoption Agreement.
1.25 INDIVIDUAL ACCOUNT
Means the account established and maintained under this Plan for each
Participant in accordance with Section 4.01.
1.26 INVESTMENT FUND
Means a subdivision of the Fund established pursuant to Section 5.05.
1.27 KEY EMPLOYEE
Means any person who is determined to be a Key Employee under Section
10.08.
1.28 LEASED EMPLOYEE
Means any person (other than an Employee of the recipient) who pursuant
to an agreement between the recipient and any other person ("leasing
organization") has performed services for the recipient (or for the
recipient and related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full time basis for a period
of at least one year, and such services are of a type historically
performed by Employees in the business field of the recipient Employer
Contributions or benefits provided a Leased Employee by the leasing
organization which are attributable to services performed for the
recipient Employer shall be treated as provided by the recipient
Employer. A Leased Employee shall not be considered an Employee of the
recipient if: (1) such employee is covered by a money purchase pension
plan providing: (a) a nonintegrated employer contribution rate of at
least 10% of compensation, as defined in Section 415(c)(3) of the Code,
but including amounts contributed pursuant to a salary reduction
agreement which are excludable from the employee's gross income under
Section 125, Section 402(e)(3), Section 402(h)(1)(B) or Section 403(b)
of the Code, (b) immediate participation, and (c) full and immediate
vesting; and (2) Leased Employees do not constitute more than 20% of
the recipient's nonhighly compensated work force.
1.29 NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS
Means any contribution made to the Plan by or on behalf of a
Participant that is included in the Participant's gross income in the
year in which made and that is maintained under a separate account to
which earnings and losses are allocated.
1.30 NORMAL RETIREMENT AGE
Means the age specified in the Adoption Agreement. However, if the
Employer enforces a mandatory retirement age which is less than the
Normal Retirement Age, such mandatory age is deemed to be the Normal
Retirement Age. If no age is specified in the Adoption Agreement, the
Normal Retirement Age shall be age 65.
1.31 OWNER - EMPLOYEE
Means an individual who is a sole proprietor, or who is a partner
owning more than 10% of either the capital or profits interest of the
partnership.
1.32 PARTICIPANT
Means any Employee or former Employee of the Employer who has met the
Plan's eligibility requirements, has entered the Plan and who is or may
become eligible to receive a benefit of any type from this Plan or
whose Beneficiary may be eligible to receive any such benefit.
<PAGE> 44
6
1.33 PLAN
Means the prototype defined contribution plan adopted by the Employer.
The Plan consists of this Basic Plan Document plus the corresponding
Adoption Agreement as completed and signed by & Employer.
1.34 PLAN ADMINISTRATOR
Means the person or persons determined to be the Plan Administrator in
accordance with Section 8.01.
1.35 PLAN YEAR
Means the 12 consecutive month period which coincides with the
Employer's fiscal year or such other 12 consecutive month period as is
designated in the Adoption Agreement
1.36 PRIOR PLAN
Means a plan which was amended or replaced by adoption of this Plan
document as indicated in the Adoption Agreement.
1.37 PROTOTYPE SPONSOR
Means the entity specified in the Adoption Agreement that makes this
prototype plan available to employers for adoption.
1.38 QUALIFYING PARTICIPANT
Means a Participant who has satisfied the requirements described in
Section 3.01(B)(2) to be entitled to share in an%7 Employer
Contribution (and Forfeitures, if applicable) for a Plan Year.
1.39 RELATED EMPLOYER
Means an employer that may be required to be aggregated with the
Employer adopting this Plan for certain qualification requirements
under Sections' 414(b), (c), (in) or (o) of the Code (or any other
employer that has ownership in common with the Employer). A Related
Employer may participate in this Plan if so indicated in the Section of
the Adoption Agreement titled "Employer Information" or if such Related
Employer executes a Related Employer Participation Agreement.
1.40 RELATED EMPLOYER PARTICIPATION AGREEMENT
Means the agreement under this prototype Plan that a Related Employer
may execute to participate in this Plan.
1.41 SELF-EMPLOYED INDIVIDUAL
Means an individual who has Famed Income for the taxable year from the
trade or business for which the Plan is established; also, an
individual who would have had Earned Income but for the fact that the
trade or business had no net profits for the taxable year.
1.42 SEPARATE FUND
Means a subdivision of the Fund held in the name of a particular
Participant representing certain assets held for that Participant. The
assets which comprise a Participant's Separate Fund are those assets
earmarked for him or her and those assets subject to the Participant's
individual direction pursuant to Section 5.14.
1.43 TAXABLE WAGE BASE
Means, with respect to any taxable year, the contribution and benefit
base in effect under Section 230 of the Social Security Act at the
beginning of the Plan Year.
1.44 TERMINATION OF EMPLOYMENT
A Termination of Employment of an Employee of an Employer shall occur
whenever his or her status as an Employee of such Employer ceases for
any reason other than death. An Employee who does not return to work
for the Employer on or before the expiration of an authorized leave of
absence from such Employer shall be deemed to have incurred a
Termination of Employment when such leave ends.
1.45 TOP-HEAVY PLAN
This Plan is a Top-Heavy Plan for any Plan Year if it is determined to
be such pursuant to Section 10.08.
1.46 TRUSTEE
Means an individual, individuals or corporation specified in the
Adoption Agreement as Trustee or any duly appointed successor as
provided in Section 5.09. Trustee shall mean Custodian in the event the
financial organization named as Trustee does not have full trust
powers.
1.47 VALUATION DATE
Means the date or dates as specified in the Adoption Agreement. If no
date is specified in the Adoption Agreement, the Valuation Date shall
be the last day of the Plan Year and each other date designated by the
Plan Administrator which is selected in a uniform and nondiscriminatory
manner when the assets of the Fund are valued at their then fair market
value.
1.48 VESTED
Means nonforfeitable, that is, a claim which is unconditional and
legally enforceable against the Plan obtained by a Participant or the
Participant's Beneficiary to that part of an immediate or deferred
benefit under the Plan which arises from a Participant's Years of
Vesting Service.
<PAGE> 45
7
1.49 YEAR OF ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an Eligibility
Computation Period during which an Employee completes at least 1,000
Hours of Service (or such lesser number of Hours of Service specified
in the Adoption Agreement for this purpose). An Employee does not
complete a Year of Eligibility Service before the end of the 12
consecutive month period regardless of when during such period the
Employee completes the required number of Hours of Service.
1.50 YEAR OF VESTING SERVICE
Means a Plan Year during which an Employee completes at least 1,000
Hours of Service (or such lesser number of Hours of Service specified
in the Adoption Agreement for this purpose). Notwithstanding the
preceding sentence, where the Employer so indicates in the Adoption
Agreement, vesting shall be computed by reference to the 12 consecutive
month period beginning with the Employee's Employment Commencement Date
and each successive 12 month period commencing on the anniversaries
thereof.
In the case of a Participant who has 5 or more consecutive Breaks in
Vesting Service, all Years of Vesting Service after such Breaks in
Vesting Service will be disregarded for the purpose of determining the
Vested portion of his or her Individual Account derived from Employer
Contributions that accrued before such breaks. Such Participant's
prebreak service will count in vesting the postbreak Individual Account
derived from Employer Contributions only if either:
(A) such Participant had any Vested right to any portion of his or
her Individual Account derived from Employer Contributions at
the time of his or her Termination of Employment; or
(B) upon returning to service, the number of consecutive Breaks in
Vesting Service is less than his or her number of Years of
Vesting Service before such breaks.
Separate subaccounts will be maintained for the Participant's prebreak
and postbreak portions of his or her Individual Account derived from
Employer Contributions. Both subaccounts will share in the gains and
losses of the Fund.
Years of Vesting Service shall not include any period of time excluded
from Years of Vesting Service in the Adoption Agreement.
In the event the Plan Year is changed to a new 12-month period,
Employees shall receive credit for Years of Vesting Service, in
accordance with the preceding provisions of this definition, for each
of the Plan Years (the old and new Plan Years) which overlap as a
result of such change.
SECTION TWO ELIGIBILITY AND PARTICIPATION
2.01 ELIGIBILITY TO PARTICIPATE
Each Employee of the Employer, except those Employees who belong to a
class of Employees which is excluded from participation as indicated in
the Adoption Agreement, shall be eligible to participate in this Plan
upon the satisfaction of the age and Years of Eligibility Service
requirements specified in the Adoption Agreement.
2.02 PLAN ENTRY
A. If this Plan is a replacement of a Prior Plan by amendment or
restatement, each Employee of the Employer who was a
Participant in said Prior Plan before the Effective Date shall
continue to be a Participant in this Plan.
B. An Employee will become a Participant in the Plan as of the
Effective Date if the Employee has met the eligibility
requirements of Section 2.01 as of such date. After the
Effective Date, each Employee shall become a Participant on
the first Entry Date following the date the Employee satisfies
the eligibility requirements of Section 2.01 unless otherwise
indicated in the Adoption Agreement.
C. The Plan Administrator shall notify each Employee who becomes
eligible to be a Participant under this Plan and shall furnish
the Employee with the application form, enrollment forms or
other documents which are required of Participants. The
eligible Employee shall execute such forms or documents and
make available such information as may be required in the
administration of the Plan.
2.03 TRANSFER TO OR FROM INELIGIBLE CLASS
If an Employee who had been a Participant becomes ineligible to
participate because he or she is no longer a member of an eligible
class of Employees, but has not incurred a Break in Eligibility
Service, such Employee shall participate immediately upon his or her
return to an eligible class of Employees. If such Employee incurs a
Break in Eligibility Service, his or her eligibility to participate
shall be determined by Section 2.04.
An Employee who is not a member of the eligible class of Employees will
become a Participant immediately upon becoming a member of the eligible
class provided such Employee has satisfied the age and Years of
Eligibility Service requirements. If such Employee has not satisfied
the age and Years of Eligibility Service requirements as of the date he
or she becomes a member of the eligible class, such Employee shall
become a Participant on the first Entry Date following the date he or
she satisfies those requirements unless other-wise indicated in the
Adoption Agreement.
<PAGE> 46
8
2.04 RETURN AS A PARTICIPANT AFTER BREAK IN ELIGIBILITY SERVICE
A. Employee Not Participant Before Break - If an Employee incurs
a Break in Eligibility Service before satisfying the Plan's
eligibility requirements, such Employee's Years of Eligibility
Service before such Break in Eligibility Service will not be
taken into account.
B. Nonvested Participants - In the case of a Participant who does
not have a Vested interest in his or her Individual Account
derived from Employer Contributions, Years of Eligibility
Service before a period of consecutive Breaks in Eligibility
Service will not be taken into account for eligibility
purposes if the number of consecutive Breaks in Eligibility
Service in such period equals or exceeds the greater of 5 or
the aggregate number of Years of Eligibility Service before
such break. Such aggregate number of Years of Eligibility
Service will not include any Years of Eligibility Service
disregarded under the preceding sentence by reason of prior
breaks.
If a Participant's Years of Eligibility Service are
disregarded pursuant to the preceding paragraph, such
Participant will be treated as a new Employee for eligibility
purposes- If a Participant's Years of Eligibility Service may
not be disregarded pursuant to the preceding paragraph, such
Participant shall continue to participate in the Plan, or, if
terminated, shall participate immediately upon reemployment.
C. Vested Participants - A Participant who has sustained a Break
in Eligibility Service and who had a Vested interest in all or
a portion of his or her Individual Account derived from
Employer Contributions shall continue to participate in the
Plan, or, if terminated, shall participate immediately upon
reemployment.
2.05 DETERMINATIONS UNDER THIS SECTION
The Plan Administrator shall determine the eligibility of each Employee
to be a Participant. This determination shall be conclusive and binding
upon all persons except as otherwise provided herein or by law.
2.06 TERMS OF EMPLOYMENT
Neither the fact of the establishment of the Plan nor the fact that a
common law Employee has become a Participant shall give to that common
law Employee any right to continued employment; nor shall either fact
limit the right of the Employer to discharge or to deal otherwise with
a common law Employee without regard to the effect such treatment may
have upon the Employee's rights under the Plan.
2.07 SPECIAL RULES WHERE ELAPSED TIME METHOD IS BEING USED
This Section 2.07 shall apply where the Employer has indicated in the
Adoption Agreement that the elapsed time method will be used. When this
Section applies, the definitions of year of service, break in service
and hour of service in this Section will replace the definitions of
Year of Eligibility Service,Year of Vesting Service, Break in
Eligibility Service, Break in Vesting Service and Hours of Service
found in the Definitions Section of the Plan (Section One).
For purposes of determining an Employee's initial or continued
eligibility to participate in the Plan or the Vested interest in the
Participant's Individual Account balance derived from Employer
Contributions, (except for periods of service which may be disregarded
on account of the "nile of parity" described in Sections 1.50 and 2.04)
an Employee will receive credit for the aggregate of all time period(s)
commencing with the Employee's first day of employment or reemployment
and ending on the date a break in service begins. The first day of
employment or reemployment is the first day the Employee performs an
hour of service. An Employee will also receive credit for any period of
severance of less than 12 consecutive months. Fractional periods of a
year will be expressed in terms of days. '
For purposes of this Section, hour of service will mean each hour for
which an Employee is paid or entitled to payment for the performance of
duties for the Employer. Break in service is a period of severance of
at least 12 consecutive months. Period of severance is a continuous
period of time during which the Employee is not employed by the
Employer, Such period begins on the date the Employee retires, quits or
is discharged, or if earlier, the 12 month anniversary of the date on
which the Employee was otherwise first absent from service.
In the case of an individual who is absent from work for maternity or
paternity reasons, the 12 consecutive month period beginning on the
first anniversary of the first date of such absence shall not
constitute a, break in service. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an absence
(1) by reason of the pregnancy of the individual, (2) by reason of the
birth of a child of the individual, (3) by reason of the placement of a
child with the individual in connection with the adoption of such child
by such individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
Each Employee will share in Employer Contributions for the period
beginning on the date the Employee commences participation under the
Plan and ending on the date on which such Employee severs employment
with the Employer or is no longer a member of an eligible class of
Employees.
If the Employer is a member of an affiliated service group (under
Section 414(m) of the Code), a controlled group of corporations under
Section 414(b) of the Code), a group of trades or businesses under
common control (under Section 414(c) of the Code), or any other entity
required to be aggregated with the Employer pursuant to Section 414(o)
of the Code, service will be credited for any employment for any period
of time for any other member of such group. Service will also be
credited for any individual required under Section 414(n) or Section
414(o) to be considered an Employee of any Employer aggregated under
Section 414(b), (c), or (m) of the Code.
<PAGE> 47
9
2.08 ELECTION NOT TO PARTICIPATE
This Section 2.08 will apply if this Plan is a nonstandardized plan and
the Adoption Agreement so provides. If this Section applies, then an
Employee or a Participant may elect not to participate in the Plan for
one or more Plan Years. The Employer may not contribute for an Employee
or Participant for any Plan Year during which such Employee's or
Participant's election not to participate is in effect. Any election
not to participate must be in writing and filed with the Plan
Administrator.
The Plan Administrator shall establish such uniform and
nondiscriminatory rules as it deems necessary or advisable to carry out
the terms of this Section, including, but not limited to, rules
prescribing the timing of the filing of elections not to participate
and the procedures for electing to re-participate in the Plan.
An Employee or Participant continues to earn credit for vesting and
eligibility purposes for each Year of Vesting Service or Year of
Eligibility Service he or she completes and his or her Individual
Account (if any) will share in the gains or losses of the Fund during
the periods he or she elects not to participate.
SECTION THREE CONTRIBUTIONS
3.01 EMPLOYER CONTRIBUTIONS
A. Obligation to Contribute. The Employer shall make
contributions to the Plan in accordance with the contribution
formula specified in the Adoption Agreement. if this Plan is a
profit sharing plan, the Employer shall, in its sole
discretion, make contributions without regard to current or
accumulated earnings or profits.
B. Allocation Formula and the Right to Share in the Employer
Contribution
1. General - The Employer Contribution for any Plan Year
will be allocated or contributed to the Individual
Accounts of Qualifying Participants in accordance
with the allocation or contribution formula specified
in the Adoption Agreement. The Employer Contribution
for any Plan Year will be allocated to each
Participant's Individual Account as of the last day
of that Plan Year.
Any Employer Contribution for a Plan Year must
satisfy Section 401(a)(4) and the regulations
thereunder for such Plan Year.
2. Qualifying Participants - A Participant is a
Qualifying Participant and is entitled to share in
the Employer Contribution for any Plan Year if the
Participant was a Participant on at least one day
during the Plan Year and satisfies any additional
conditions specified in the Adoption Agreement. If
this Plan is a standardized plan, unless the Employer
specifies more favorable conditions in the Adoption
Agreement, a Participant will not be a qualifying
Participant for a Plan Year if he or she incurs a
Termination of Employment during such Plan Year with
not more than 500 Hours of Service if he or she is
not an Employee on the last day of the Plan Year. The
determination of whether a Participant is entitled to
share in the Employer Contribution shall be made as
of the last day of each Plan Year.
3. Special Rules for Integrated Plans - This Plan may
not allocate contributions based on an integrated
formula if the Employer maintains any other plan that
provides for allocation of contributions based on an
integrated formula that benefits any of the same'
Participants. If the Employer has selected the
integrated contribution or allocation formula in the
Adoption Agreement, then the maximum disparity rate
shall be determined in accordance with the following
table.
MAXIMUM DISPARITY RATE
<TABLE>
<CAPTION>
Top-Heavy Nonstandardized and
Integration Level Money Purchase Profit Sharing Non-Top-Heavy Profit Sharing
<S> <C> <C> <C>
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not more
than 20% of TWB 5.7% 2.7% 5.7%
More than 20% of TWB but
not more than 80% of TWB 4.3% 1.3% 4.3%
More than 80% of TWB but
not more than TWB 5.4% 2.4% 5.4%
</TABLE>
<PAGE> 48
10
C. Allocation of Forfeitures - Forfeitures for a Plan Year which
arise as a result of the application of Section 6.01(D) shall
be allocated as follows:
1. Profit Sharing Plan - If thus is a profit sharing
plan, unless the Adoption Agreement indicates
otherwise, Forfeitures shall be allocated in the
manner provided in Section 3.01(B) (for Employer
Contributions) to the Individual Accounts of
Qualifying Participants who are entitled to share in
the Employer Contribution for such Plan Year.
Forfeitures shall be allocated as of the last day of
the Plan Year during which the Forfeiture arose (or
any subsequent Plan Year if indicated in the Adoption
Agreement).
2. Money Purchase Pension and Target Benefit Plan - If
this Plan is a money purchase plan or a target
benefit plan, unless the Adoption Agreement indicates
otherwise, Forfeitures shall be applied towards the
reduction of Employer Contributions to the Plan.
Forfeitures shall be allocated as of the last day of
the Plan Year during which the Forfeiture arose (or
any subsequent Plan Year if indicated in the Adoption
Agreement).
D. Timing of Employer Contribution - The Employer Contribution
for each Plan Year shall be delivered to the Trustee (or
Custodian, if applicable) not later than the due date for
filing the Employer's income tax return for its fiscal year in
which the Plan Year ends, including extensions thereof.
E. Minimum Allocation for Top-Heavy Plans - The contribution and
allocation provisions of this Section 3.010 shall apply for
any Plan Year with respect to which this Plan is a Top-Heavy
Plan.
1. Except as otherwise provided in (3) and (4) below,
the Employer Contributions and Forfeitures allocated
on behalf of any Participant who is not a Key
Employee shall not be less than the lesser of 3% of
such Participant's Compensation or (in the case where
the Employer has no defined benefit plan which
designates this Plan to satisfy Section 401 of the
Code) the largest percentage of Employer
Contributions and Forfeitures, as a percentage of the
first $200,000 ($150,000 for Plan Years beginning
after December 31, 1993), (increased by any cost of
living adjustment made by the Secretary of Treasury
or the Secretary's delegate) of the Key Employee's
Compensation, allocated on behalf of any Key Employee
for that year. The minimum allocation is determined
without regard to any Social Security contribution.
The Employer may, in the Adoption Agreement, limit
the Participants who are entitled to receive the
minimum allocation. This minimum allocation shall be
made even though under other Plan provisions, the
Participant would not otherwise be entitled to
receive an allocation, or would have received a
lesser allocation for the year because of (a) the
Participant's failure to complete 1,000 Hours of
Service (or any equivalent provided in the Plan), or
(b) the Participant's failure to make mandatory
Nondeductible Employee Contributions to the Plan, or
(c) Compensation less than a stated amount.
2. For purposes of computing the minimum allocation,
Compensation shall mean Compensation as defined in
Section 1.07 of the Plan and shall include any
amounts contributed by the Employer pursuant to a
salary reduction agreement and which is not
includible in the gross income of the Employee under
Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) of
the Code even if the Employer has elected to exclude
such contributions in the definition of Compensation
used for other purposes under the Plan.
3. The provision in (1) above shall not apply to any
Participant who was not employed by the Employer on
the last day of the Plan Year.
4. The provision in (1) above shall not apply to any
Participant to the extent the Participant is covered
under any other plan or plans of the Employer and the
Employer has provided in the adoption agreement that
the minimum allocation or benefit requirement
applicable to Top-Heavy Plans will be met in the
other plan or plans.
5. The minimum allocation required under this Section
3.01(E) and Section 3.01(F)(1) (to the extent
required to be nonforfeitable under Code Section
416(b)) may not be forfeited under Code Section
411(a)(3)(B) or 411(a)(3)(D).
F. Special Requirements for Paired Plans -The Employer maintains
paired plans if the Employer has adopted both a standardized
profit sharing plan and a standardized money purchase pension
plan using this Basic Plan Document.
1. Minimum Allocation -When the paired plans are
top-heavy, the top-heavy requirements set forth in
Section 3.01(E)(1) of the Plan shall apply.
a. Same eligibility requirements. In satisfying
the top-heavy minimum allocation
requirements set forth in Section 3.01(E) of
the Plan, if the Employees benefiting under
each of the paired plans are identical, the
top-heavy minimum allocation shall be made
to the money purchase pension plan.
b. Different eligibility requirements. In
satisfying the top-heavy minimum allocation
requirements set forth in Section 3.01(E) of
the Plan, if the Employees benefiting under
each of the paired plans are not identical,
the top-heavy minimum allocation will be
made to both of the paired plans.
<PAGE> 49
11
A Participant is treated as benefiting under
the Plan for any Plan Year during which the
Participant received or is deemed to receive
an allocation in accordance with Section
1.410(b)-3(a)-
2. Only One Plan Can Be Integrated -If the Employer
maintains paired plans, only one of the Plans may
provide for the disparity in contributions which is
permitted under Section 4010) of the Code. In the
event that both Adoption Agreements provide for such
integration, only the money purchase pension plan
shall be deemed to be integrated.
G. Return of the Employer Contribution to the Employer Under
Special Circumstances. Any contribution made by the Employer
because of a mistake of fact must be returned to the Employer
within one year of the contribution.
In the event that the Commissioner of Internal Revenue
determines that the Plan is not initially qualified under the
Code, any contributions made incident to that initial
qualification by the Employer must be returned to the Employer
within one year after the date the initial qualification is
denied, but only if the application for qualification is made
by the time prescribed by law for filing the Employer's return
for the taxable year in which the Plan is adopted, or such
later date as the Secretary of the Treasury may prescribe.
In the event that a contribution made by the Employer under
this Plan is conditioned on deductibility and is not
deductible under Code Section 404, the contribution, to the
extent of the amount disallowed, must be returned to the
Employer within one year after the deduction is disallowed.
H. Omission of Participant
1. If the Plan is a money purchase plan or a
target benefit plan and, if in any Plan
Year, any Employee who should be included as
a Participant is erroneously omitted and
discovery of such omission is not made until
after a contribution by the Employer for the
year has been made and allocated, the
Employer shall make a subsequent
contribution to include earnings thereon,
with respect to the omitted Employee in the
amount which the Employer would have
contributed with respect to that Employee
had he or she not been omitted.
2. If the Plan is a profit sharing plan, and if
in any Plan Year, any Employee who should be
included as a Participant is erroneously
omitted and discovery of such omission is
not made until after the Employer
Contribution has been made and allocated,
then the Plan Administrator must re-do the
allocation (if a correction can be made) and
inform the Employee. Alternatively, the
Employer may choose to contribute for the
omitted Employee the amount to include
earnings thereon, which the Employer would
have contributed for the Employee.
3.02 NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS
This Plan will not accept Nondeductible Employee Contributions and
matching contributions for Plan Years beginning after the Plan Year in
which this Plan is adopted by Employer. Nondeductible Employee
Contributions for Plan Years beginning after December 31, 1986,
together with any matching contributions as defined in Section 401(m)
of the Code, will be limited so as to meet the nondiscrimination test
of Section 401(m) of the Code.
A separate account will be maintained by the Plan Administrator for the
Nondeductible Employee Contributions of each Participant.
A Participant may, upon a written request submitted to the Plan
Administrator withdraw the lesser of the portion of his or her
Individual Account attributable to his or her Nondeductible Employee
Contributions or the amount he or she contributed as Nondeductible
Employee Contributions.
Nondeductible Employee Contributions and earnings thereon will be
nonforfeitable at all times. No Forfeiture will occur solely as a
result of an Employee's withdrawal of Nondeductible Employee
Contributions
The Plan Administrator will not accept deductible employee
contributions which are made for a taxable year beginning after
December 31, 1986. Contributions made prior to that date will be
maintained in a separate account which will be nonforfeitable at all
times. The account will share in the gains and losses of the Fund in
the same mariner as described in Section 4.03 of the Plan. No part of
the deductible employee contribution account will be used to purchase
life insurance. Subject to Section 6.05, joint and survivor annuity
requirements (if applicable), the Participant may withdraw any part of
the deductible employee contribution account by making a written
application to the Plan Administrator.
3.03 ROLLOVER CONTRIBUTIONS
If so indicated in the Adoption Agreement, an Employee may contribute a
rollover contribution to the Plan. The Plan Administrator may require
the Employee to submit a written certification that the contribution
qualifies as a rollover contribution under the applicable provisions of
the Code. If it is later determined that all or part of a rollover
contribution was ineligible to be rolled into the Plan, the Plan
Administrator shall direct that any ineligible amounts, plus earnings
attributable thereto, be distributed from the Plan to the Employee as
soon as administratively feasible.
<PAGE> 50
12
A separate account shall be maintained by the Plan Administrator for
each Employee's rollover contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses
of the Fund in the manner described in Section 4.03 and shall be
subject to the Plan's provisions governing distributions.
The Employer may, in a uniform and nondiscriminatory manner, only allow
Employees who have become Participants in the Plan to make rollover
contributions.
3.04 TRANSFER CONTRIBUTIONS
If so indicated in the Adoption Agreement, the Trustee (or Custodian,
if applicable) may receive any amounts transferred to it from the
trustee or custodian of another plan qualified under Code Section
401(a). If it is later determined that all or part of a transfer
contribution was ineligible to be transferred into the Plan, the Plan
Administrator shall direct that any ineligible amounts, plus earnings
attributable thereto, be distributed from the Plan to the Employee as
soon as administratively feasible.
A separate account shall be maintained by the Plan Administrator for
each Employee's transfer contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses
of the Fund in the manner described in Section 4.03 and shall be
subject to the Plan's provisions governing distributions.
The Employer may, in a uniform and nondiscriminatory manner, only allow
Employees who have become Participants in the Plan to make transfer
contributions.
3.05 LIMITATION ON ALLOCATIONS
A. If the Participant does not participate in, and has never
participated in another qualified plan maintained by the
Employer or a welfare benefit fund, as defined in Section
419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in Section 4150)(2) of
the Code, or a simplified employee pension plan, as defined in
Section 408(k) of the Code, maintained by the Employer, which
provides an annual addition as defined in Section 3.08(E)(1),
the following rules shall apply.
1. The amount of annual additions which may be credited
to the Participant's Individual Account for any
limitation year will not exceed the lesser of the
maximum permissible amount or any other limitation
contained in this Plan. If the Employer Contribution
that would otherwise be contributed or allotted to
the Participant's Individual Account would cause the
annual additions for the limitation year to exceed
the maximum permissible amount, the amount
contributed or allocated will be reduced so that the
annual additions for the limitation year will equal
the maximum permissible amount.
2. Prior to determining the Participant's actual
Compensation for the limitation year, the Employer
may determine the maximum permissible amount for a
Participant on the basis of a reasonable estimation
of the Participant's Compensation for the limitation
year, uniformly determined for all Participants
similarly situated.
3. As soon as is administratively feasible after the end
of the limitation year, the maximum permissible
amount for the limitation year will be determined on
the basis of the Participant's actual Compensation
for the limitation year.
4. If pursuant to Section 3.05(A)(3) or as a result of
the allocation of Forfeitures there is an excess
amount, the excess will be disposed of as follows:
a. Any Nondeductible Employee Contributions, to
the extent they would reduce the excess
amount, will be returned to the Participant.
b. If after the application of paragraph (a) an
excess amount still exists, and the
Participant is covered by the Plan at the
end of the limitation year, the excess
amount in the Participant's Individual
Account will be used to reduce Employer
Contributions (including any allocation of
Forfeitures) for such Participant in the
next limitation year, and each succeeding
limitation year if necessary;
c. If after the application of paragraph (b) an
excess amount still exists, and the
Participant is not covered by the Plan at
the end of a limitation year, the excess
amount will be held unallocated in a
suspense account. The suspense account will
be applied to reduce future Employer
Contributions (including allocation of any
Forfeitures) for all remaining Participants
in the next limitation year, and each
succeeding limitation year if necessary;
d. If a suspense account is in existence at any
time during a limitation year pursuant to
this Section, it will not participate in the
allocation of the Fund's investment gains
and losses. If a suspense account is in
existence at any time during a particular
limitation year, all amounts in the suspense
account must be allocated and reallocated to
Participants' Individual Accounts before any
Employer Contributions or any Nondeductible
Employee Contributions may be made to the
Plan for that limitation year. Excess
amounts may not be distributed to
Participants or former Participants.
<PAGE> 51
13
B. If, in addition to this Plan, the Participant is covered under
another qualified master or prototype defined contribution
plan maintained by the Employer, a welfare benefit fund
maintained by the Employer, an individual medical account
maintained by the Employer, or a simplified employee pension
maintained by the Employer that provides an annual addition as
defined in Section 3.05(E)(1), during any limitation year, the
following rules apply:
1. The annual additions which may be credited to a
Participant's individual Account under this Plan for
any such limitation year will not exceed the maximum
permissible amount reduced by the annual additions
credited to a Participant's Individual Account under
the other qualified master or prototype plans,
welfare benefit funds, individual medical accounts
and simplified employee pensions for the same
limitation year. If the annual additions with respect
to the Participant under other qualified master or
prototype defined contribution plans, welfare benefit
funds, individual medical accounts and simplified
employee pensions maintained by the Employer are less
than the maximum permissible amount and the Employer
contribution that would otherwise be contributed or
allocated to the Participant's Individual Account
under this Plan would cause the annual additions for
the limitation year to exceed this limitation, the
amount contributed 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 qualified
master or prototype defined Contribution plans,
welfare benefit funds, individual medical accounts
and simplified employee pensions in the aggregate are
equal to or greater than the maximum permissible
amount, no amount will be contributed or allocated to
the Participant's Individual Account under this Plan
for the limitation year.
2. Prior to determining the Participant's actual
Compensation for the limitation year, the Employer
may determine the maximum permissible amount for a
Participant in the manner described in Section
3.05(A)(2).
3. As soon as is administratively feasible after the end
of the limitation year, the maximum permissible
amount for the limitation year will be determined on
the basis of the Participant's actual Compensation
for the limitation year.
4. If, pursuant to Section 3-05(B)(3) or as a result of
the allocation of Forfeitures a Participant's annual
additions under this Plan and such other plans would
result in an excess amount for a limitation year, the
excess amount will be deemed to consist of the annual
additions last allocated, except that annual
additions attributable to a simplified employee
pension will be deemed to have been allocated first,
followed by annual additions to a welfare benefit
fund or individual medical account, regardless of the
actual allocation date.
5. If an excess amount was allocated to a Participant on
an allocation date of this Plan which coincides with
an allocation date of another plan, the excess amount
attributed to this Plan will be the product of,
a. the total excess amount allocated as of such
date, times
b. the ratio of W the annual additions
allocated to the Participant for the
limitation year as of such date under this
Plan to (h) the total annual additions
allocated to the Participant for the
limitation year as of such date under this
and all the other qualified prototype
defined contribution plans.
6. Any excess amount attributed to this Plan will be
disposed in the manner described in Section
3.05(A)(4).
C. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a
master or prototype plan, annual additions which may be
credited to the Participant's Individual Account under this
Plan for any limitation year will be limited in accordance
with Sections 3.05(B)(1) through 3.05(B)(6) as though the
other plan were a master or prototype plan unless the Employer
provides other limitations in the Section of the Adoption
Agreement titled "Limitation on Allocation - More Than One
Plan."
D. If the Employer maintains, or at any time maintained, a
qualified defined benefit plan covering any Participant in
this Plan, the sum of the Participant's defined benefit plan
fraction and defined contribution plan fraction will not
exceed 1.0 in any limitation year. The annual additions which
may be credited to the Participant's Individual Account under
this Plan for any limitation year %ill be limited in
accordance with the Section of the Adoption Agreement titled
"limitation on Allocation - More Than One Plan."
E. The following terms shall have the following meanings when
used in this Section 3.05:
1. Annual additions: The sum of the following amounts
credited to a Participant's Individual Account for
the limitation year:
a. Employer Contributions,
b. Nondeductible Employee Contributions,
<PAGE> 52
14
c. Forfeitures,
d. amounts allocated, after March 31, 1984, to
an individual medical account, as defined in
Section 415(1)(2) of the Code, which is part
of a pension or annuity plan maintained by
the Employer are treated as annual additions
to a defined contribution plan. Also amounts
derived from contributions paid or accrued
after December 31, 1985, in taxable years
ending after such date, which are
attributable to post-retirement medical
benefits, allocated to the separate account
of a key employee, as defined in Section
419A(d)(3) of the Code, under a welfare
benefit fund, as defined in Section 419(e)
of the Code, maintained by the Employer are
treated as annual additions to a defined
contribution plan, and
e. allocations under a simplified employee
pension.
For this purpose, any excess amount applied under
Section 3.05(A)(4) or 3-05(B)(6) in the limitation
year to reduce Employer Contributions will be
considered annual additions for such limitation year.
2. Compensation: Means Compensation as defined in
Section 1.07 of the Plan except that Compensation for
purposes of this Section 3.03 shall not include any
amounts contributed by the Employer pursuant to a
salary reduction agreement and which is not
includible in the gross income of the Employee under
Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) of
the Code even if the Employer has elected to include
such contributions in the definition of Compensation
used for other purposes under the Plan. Further, any
other exclusion the Employer has elected (such as the
exclusion of certain types of pay or pay earned
before the Employee enters the Plan) will not apply
for purposes of thus Section.
Notwithstanding the preceding sentence, Compensation
for a Participant in a defined contribution plan who
is permanently and totally disabled (as defined in
Section 22(e)(3) of the Code) is the Compensation
such Participant would have received for the
limitation year if the Participant had been paid at
the rate of Compensation paid immediately before
becoming permanently and totally disabled; such
imputed Compensation for the disabled Participant may
be taken into account only if the Participant is not
a Highly Compensated Employee (as defined in Section
414(q) of the Code) and contributions made on behalf
of such Participant are nonforfeitable when made.
3. Defined benefit fraction: A fraction, the numerator
of which is the sum of the Participant's projected
annual benefits under all the defined benefit plans
(whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser
of 125% of the dollar limitation determined for the
limitation year under Section 415(b) and (d) of the
Code or 140% of the highest average compensation,
including any adjustments under Section 415(b) of the
Code.
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first
limitation year beginning after December 31, 1986, in
one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than
125% of the sum of the annual benefits under such
plans which the Participant had accrued as of the
close of the last limitation year beginning before
January 1, 1987, disregarding any changes in the
terms and conditions of the plan after May 5, 1986.
The preceding sentence applies only if the defined
benefit plans individually and in the aggregate
satisfied the requirements of Section 415 of the Code
for all limitation years beginning before January 1,
1987.
4. Defined contribution dollar limitation: $30,000 or if
greater, one-fourth of the defined benefit dollar
limitation set forth in Section 415(b)(1) of the Code
as in effect for the limitation year.
5. Defined contribution fraction: A fraction, the
numerator of which is the sum of the annual additions
to the Participant's account under all the defined
contribution plans (whether or not terminated)
maintained by the Employer for the current and all
prior limitation years (including the annual
additions attributable to the Participant's
nondeductible employee contributions to all defined
benefit plans, whether or not terminated, maintained
by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined
in Section 419(e) of the Code, individual medical
accounts, and simplified employee pensions,
maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for
the current and all prior limitation years of service
With the Employer (regardless of whether a defined
contribution plan was maintained by the Employer).
The maximum aggregate amount in any limitation year
is the lesser of 125% of the dollar limitation
determined under Section 415(b) and (d) of the Code
in effect under Section 415(c)(1)(A) of the Code or
35% of the Participant's Compensation for such year.
If the Employee was a Participant as of the end of
the first day of the first limitation year beginning
after December 31, 1986, in one or more defined
contribution plans maintained by the Employer which
were in existence on May 6,1986, the numerator of
this fraction Will be adjusted if the sum of this
fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, an amount equal to the product
of (1) the excess of the sum of the fractions over
1.0 times (2) the denominator of this fraction, will
be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of
the last limitation year beginning before January 1,
1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but
using the Section 415 limitation applicable to the
first limitation year beginning on or after January
1, 1987.
The annual addition for any limitation year beginning
before January 1, 1987, shall not be recomputed to
treat all Nondeductible Employee Contributions as
annual additions.
<PAGE> 53
15
6. Employer. For purposes of this Section 3.05, Employer
shall mean the Employer that adopts this Plan, and
all members of a controlled group of corporations (as
defined in Section 414(b) of the Code as modified by
Section 415(h)), all commonly controlled trades or
businesses (as defined in Section 414(c) as modified
by Section 415(h)) or affiliated service groups (as
defined in Section 414(m)) of which the adopting
Employer is a part, and any other entity required to
be aggregated with the Employer pursuant to
regulations under Section 414(o) of the Code.
7. Excess amount: The excess of the Participant's annual
additions for the limitation year over the maximum
permissible amount.
8. Highest average compensation: The average
compensation for the three consecutive years of
service with the Employer that produces the highest
average.
9. Limitation year: A calendar year, or the
12-consecutive month period elected by the Employer
in the Adoption Agreement All qualified plans
maintained by the Employer must use the same
limitation year. If the limitation year is amended to
a different 12-consecutive month period, the new
limitation year must begin on a date within the
limitation year in which the amendment is made.
10. Master or prototype plan: A plan the form of which is
the subject of a favorable opinion letter from the
Internal Revenue Service.
11. Maximum permissible amount: The maximum annual
addition that may be contributed or allocated to a
Participant's Individual Account under the Plan for
any limitation year shall not exceed the lesser of:
a. the defined contribution dollar limitation,
or
The compensation limitation referred to in
(b) shall not apply to any contribution for
medical benefits (within the meaning of
Section 401(h) or Section 419A(f)(2) of the
Code) which is otherwise treated as an
annual addition under Section 4150)(1) or
419A(d)(2) of the Code.
If a short limitation year is created
because of an amendment changing the
limitation year to a different
12-consecutive month period, the maximum
permissible amount will not exceed the
defined contribution dollar limitation
multiplied by the following fraction:
Number of months in the short
limitation year
-----------------------------
12
12. Projected annual benefit: The annual
retirement benefit (adjusted to an
actuarially equivalent straight life annuity
if such benefit is expressed in a form other
than a straight life annuity or qualified
joint and survivor annuity) to which the
Participant would be entitled under the
terms of the Plan assuming:
a. the Participant will continue
employment until Normal Retirement
Age under the Plan (or current age,
if later), and
b. the Participant's Compensation for
the current limitation year and all
other relevant factors used to
determine benefits under the Plan
will remain constant for all future
limitation years.
Straight life annuity means an
annuity payable in equal
installments for the life of the
Participant that terminates upon the
Participant's death.
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 INDIVIDUAL ACCOUNTS
A. The Plan Administrator shall establish and maintain an
Individual Account in the name of each Participant to reflect
the total value of his or her interest in the Fund. Each
Individual Account established hereunder shall consist of such
subaccounts as may be needed for each Participant including:
1. a subaccount to reflect Employer Contributions and
Forfeitures allocated on behalf of a Participant;
2. a subaccount to reflect a Participant's rollover
contributions;
3. a subaccount to reflect a Participant's transfer
contributions;
4. a subaccount to reflect a Participant's Nondeductible
Employee Contributions; and
5. a subaccount to reflect a Participant's deductible
employee contributions.
<PAGE> 54
16
B. The Plan Administrator may establish additional accounts as it
may deem necessary for the proper administration of the Plan,
including, but not limited to, a suspense account for
Forfeitures as required pursuant to Section 6.01(D).
4.02 VALUATION OF FUND
The Fund will be valued each Valuation Date at fair market value.
4.03 VALUATION OF INDIVIDUAL ACCOUNTS
A. Where all or a portion of the assets of a Participant's
Individual Account are invested in a Separate Fund for the
Participant, then the value of that portion of such
Participant's Individual Account at any relevant time equals
the sum of the fair market values of the assets in such
Separate Fund, less any applicable charges or penalties.
B. The fair market value of the remainder of each Individual
Account is determined in the following manner:
1. First, the portion of the Individual Account invested
in each Investment Fund as of the previous Valuation
Date is determined. Each such portion is reduced by
any withdrawal made from the applicable Investment
Fund to or for the benefit of a Participant or the
Participant's Beneficiary, further reduced by any
amounts forfeited by the Participant pursuant to
Section 6.01 (D) and further reduced by any transfer
to another Investment Fund since the previous
Valuation Date and is increased by any amount
transferred from another Investment Fund since the
previous Valuation Date. The resulting amounts are
the net Individual Account portions invested in the
Investment Funds.
2. Secondly, the net Individual Account portions
invested in each Investment Fund are adjusted upwards
or downwards, pro rata (i.e., ratio of each net
Individual Account portion to the sum of all net
Individual Account portions) so that the sum of all
the net Individual Account portions invested in an
Investment Fund will equal the then fair market value
of the Investment Fund. Notwithstanding the previous
sentence, for the first Plan Year only, the net
Individual Account portions shall be the sum of all
contributions made to each Participant's Individual
Account during the first Plan Year.
3. Thirdly, any contributions to the Plan and
Forfeitures are allocated in accordance with the
appropriate allocation provisions of Section 3. For
purposes of Section 4, contributions made by the
Employer for any Plan Year but after that Plan Year
will be considered to have been made on the last day
of that Plan Year regardless of when paid to the
Trustee (or Custodian, if applicable).
Amounts contributed between Valuation Dates will not
be credited with investment gains or losses until the
next following Valuation Date.
4. Finally, the portions of the Individual Account
invested in each Investment Fund (determined in
accordance with (1), (2) and (3) above) are added
together.
4.0.4 MODIFICATION OF METHOD FOR VALUING INDIVIDUAL ACCOUNTS
If necessary or appropriate, the Plan Administrator may establish
different or additional procedures (which shall be uniform and
nondiscriminatory) for determining the fair market value of the
Individual Accounts.
4.05 SEGREGATION OF ASSETS
If a Participant elects a mode of distribution other than a lump sum,
the Plan Administrator may place that Participant's account balance
into a segregated Investment Fund for the purpose of maintaining the
necessary liquidity to provide benefit installments on a periodic
basis.
4.06 STATEMENT OF INDIVIDUAL ACCOUNTS
No later than 270 days after the close of each Plan Year, the Plan
Administrator shall furnish a statement to each Participant indicating
the Individual Account balances of such Participant as of the last
Valuation Date in such Plan Year.
SECTION FIVE TRUSTEE OR CUSTODIAN
5.01 CREATION OF FUND
By adopting this Plan, the Employer establishes the Fund which shall
consist of the assets of the Plan held by the Trustee (or Custodian, if
applicable) pursuant to this Section 5. Assets within the Fund may be
pooled on behalf of all Participants, earmarked on behalf of each
Participant or be a combination of pooled and earmarked. To the extent
that assets are earmarked for a particular Participant, they will be
held in a Separate Fund for that Participant.
<PAGE> 55
17
No part of the corpus or income of the Fund may be used for, or
diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries.
5.02 INVESTMENT AUTHORITY
Except as provided in Section 5.14 (relating to individual direction of
investments by Participants), the Employer, not the Trustee (or
Custodian, if applicable), shall have exclusive management and control
over the investment of the Fund into any permitted investment.
Notwithstanding the preceding sentence, a Trustee may make an agreement
with the Employer whereby the Trustee will manage the investment of all
or a portion of the Fund. Any such agreement shall be in writing and
set forth such matters as the Trustee deems necessary or desirable.
5.03 FINANCIAL ORGANIZATION CUSTODIAN OR TRUSTEE WITHOUT FULL TRUST POWERS
This Section 5.03 applies where a financial organization has indicated
in the Adoption Agreement that it will serve, with respect to this
Plan, as Custodian or as Trustee without full trust powers (under
applicable law). Hereinafter, a financial organization Trustee without
full trust powers (under applicable law) shall be referred to as a
Custodian. The Custodian shall have no discretionary authority with
respect to the management of the Plan or the Fund but will act only as
directed by the entity who has such authority.
A. Permissible Investments - The assets of the Plan shall be
invested only in those investments which are available through
the Custodian in the ordinary course of business which the
Custodian may legally hold in a qualified plan and which the
Custodian chooses to make available to Employers for qualified
plan investments. Notwithstanding the preceding sentence, the
Prototype Sponsor may, as a condition of making the Plan
available to the Employer, limit the types of property in
which the assets of the Plan may be invested.
B. Responsibilities of the Custodian - The responsibilities of
the Custodian shall be limited to the following:
1. To receive Plan contributions and to hold, invest and
reinvest the Fund without distinction between
principal and interest; provided, however, that
nothing in this Plan shall require the Custodian to
maintain physical custody of stock certificates (or
other indicia of ownership of any type of asset)
representing assets within the Fund;
2. To maintain accurate records of contributions,
earnings, withdrawals and other information the
Custodian deems relevant with respect to the Plan;
3. To make disbursements from the Fund to Participants
or Beneficiaries upon the proper authorization of the
Plan Administrator; and
4. To furnish to the Plan Administrator a statement
which reflects the value of the investments in the
hands of the Custodian as of the end of each Plan
Year and as of an other times as the Custodian and
Plan Administrator may agree.
C. Powers of the Custodian - Except as otherwise provided in this
Plan, the Custodian shall have the power to take any action
with respect to the Fund which it deems necessary or advisable
to discharge its responsibilities under this Plan including,
but not limited to, the following powers:
1. To invest all or a portion of the Fund (including
idle cash balances) in time deposits, savings
accounts, money market accounts or similar
investments bearing a reasonable rate of interest in
the Custodian's own savings department or the savings
department of another financial organization;
2. To vote upon any stocks, bonds, or other securities;
to give general or special proxies or powers of
attorney with or without power of substitution; to
exercise any conversion privileges or subscription
rights and to make any payments incidental thereto;
to oppose, or to consent to, or other-wise
participate in, corporate reorganizations or other
changes affecting corporate securities, and to pay
any assessment or charges in connection therewith;
and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities or
other property;
3. To hold securities or other property of the Fund in
its own name, in the name of its nominee or in bearer
form; and
4. To make, execute, acknowledge, and deliver any and
all documents of transfer and conveyance and any and
all other instruments that may be necessary or
appropriate to carry out the powers herein granted.
5.04 FINANCIAL ORGANIZATION TRUSTEE WITH FULL TRUST POWERS AND INDIVIDUAL
TRUSTEE
This Section 5.04 applies where a financial organization has indicated
in the Adoption Agreement that it will serve as Trustee with
full trust powers. This Section also applies where one or more
individuals are named in the Adoption Agreement to serve as Trustee(s).
A. Permissible Investments - The Trustee may invest the assets of
the Plan in property of any character, real or personal,
including, but not limited to the following: stocks, including
shares of open-end investment companies (mutual funds); bonds;
notes; debentures; options; limited partnership interests;
mortgages; real estate or any interests therein; unit
investment trusts; Treasury Bills, and other U.S. Government
obligations; common trust funds, combined investment trusts,
collective trust funds or commingled funds maintained by a
bank or similar financial organization (whether or not the
Trustee hereunder); savings accounts, time deposits or money
market accounts of a bank or similar financial organization
(whether or not the Trustee hereunder); annuity contracts;
life insurance policies; or in such other investments as is
deemed proper without regard to investments authorized by
statute or rule of law governing the investment of trust funds
but with regard to ERISA and this Plan.
<PAGE> 56
18
Notwithstanding the preceding sentence, the Prototype Sponsor
may, as a condition of making the Plan available to the
Employer, limit the types of property in which the assets of
the Plan may be invested.
B. Responsibilities of the Trustee - The responsibilities of the
Trustee shall be limited to the following:
1. To receive Plan contributions and to hold, invest and
reinvest the Fund without distinction between
principal and interest; provided, however, that
nothing in this Plan shall require the Trustee to
maintain physical custody of stock certificates (or
other indicia of ownership) representing assets
within the Fund;
2. To maintain accurate records of contributions,
earnings, withdrawals and other information the
Trustee deems relevant with respect to the Plan;
3. To make disbursements from the Fund to Participants
or Beneficiaries upon the proper authorization of the
Plan Administrator; and
4. To furnish to the Plan Administrator a statement
which reflects the value of the investments in the
hands of the Trustee as of the end of each Plan Year
and as of any other times as the Trustee and Plan
Administrator may agree.
C. Powers of the Trustee - Except as otherwise provided in this
Plan, the Trustee shall have the power to take any action with
respect to the Fund which it deems necessary or advisable to
discharge its responsibilities under this Plan including-, but
not limited to, the following powers:
1. To hold any securities or other property of the Fund
in its own name, in the name of its nominee or in
bearer form;
2. To purchase or subscribe for securities issued, or
real property owned, by the Employer or any trade or
business under common control with the Employer but
only if the prudent investment and diversification
requirements of ERISA are satisfied;
3. To sell, exchange, convey, transfer or otherwise
dispose of any securities or other property held by
the Trustee, by private contract or at public
auction. No person dealing with the Trustee shall be
bound to see to the application of the purchase money
or to inquire into the validity, expediency, or
propriety of any such sale or other disposition, with
or without advertisement;
4. To vote upon any stocks, bonds, or other securities;
to give general or special proxies or powers of
attorney with or without power of substitution; to
exercise any conversion privileges or subscription
rights and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate
in, corporate reorganizations or other changes
affecting corporate securities, and to delegate
discretionary powers, and to pay any assessments or
charges in connection therewith; and generally to
exercise any of the powers of an owner with respect
to stocks, bonds, securities or other property;
5. To invest any part or all of the Fund (including idle
cash balances) in certificates of deposit, demand or
time deposits, savings accounts, money market
accounts or similar investments of the Trustee (if
the Trustee is a bank or similar financial
organization), the Prototype Sponsor or any affiliate
of such Trustee or Prototype Sponsor, which bear a
reasonable rate of interest;
6. To provide sweep services without the receipt by the
Trustee of additional compensation or other
consideration (other than reimbursement of direct
expenses properly and actually incurred in the
performance of such services);
7. To hold in the form of cash for distribution or
investment such portion of the Fund as, at any time
and from time-to-time, the Trustee shall deem prudent
and deposit such cash in interest bearing or
noninterest bearing accounts;
8. To make, execute, acknowledge, and deliver any and
all documents of transfer and conveyance and any and
all other instruments that may be necessary or
appropriate to carry out the powers herein granted;
<PAGE> 57
19
9. To settle, compromise, or submit to arbitration any
claims, debts, or damages due or owing to or from the
Plan, to commence or defend suits or legal or
administrative proceedings, and to represent the Plan
in all suits and legal and administrative
proceedings;
10. To employ suitable agents and counsel, to contract
with agents to perform administrative and
recordkeeping duties and to pay their reasonable
expenses, fees and compensation, and such agent or
counsel may or may not be agent or counsel for &
Employer;
11. To cause any part or all of the Fund, without
limitation as to amount, to be commingled with the
funds of other trusts (including trusts for qualified
employee benefit plans) by causing such money to be
invested as a part of any pooled, common, collective
or commingled trust fund (including any such fund
described in the Adoption Agreement) heretofore or
hereafter created by any Trustee (if the Trustee is a
bank), by the Prototype Sponsor, by any affiliate
bank of such a Trustee or by such a Trustee' or the
Prototype Sponsor, or by such an affiliate in
participation with others, the instrument or
instruments establishing such trust fund or funds, as
amended, being made part of this Plan and trust so
long as any portion of the Fund shall be invested
through the medium thereof; and
12. Generally to do all such acts, execute all such
instruments, initiate such proceedings, and exercise
all such rights and privileges with relation to
property constituting the Fund as if the Trustee were
the absolute owner thereof.
5.05 DIVISION OF FUND INTO INVESTMENT FUNDS
The Employer may direct the Trustee (or Custodian) from time-to-time to
divide and redivide the Fund into one or more Investment Funds-. Such
Investment Funds may include, but not be limited to, Investment Funds
representing the assets under the control of an investment manager
pursuant to Section 5.12 and Investment Funds representing investment
options available for individual direction by Participants pursuant to
Section 5.14. Upon each division or redivision, the Employer may
specify the part of the Fund to be allocated to each such Investment
Fund and the terms and conditions, if any, under which the assets in
such Investment Fund shall be invested.
5.06 COMPENSATION AND EXPENSES
The Trustee (or Custodian, if applicable) shall receive such reasonable
compensation as may be agreed upon by the Trustee (or Custodian) and
the Employer. The Trustee (or Custodian) shall be entitled to
reimbursement by the Employer for all proper expenses incurred in
carrying out his or her duties under this Plan, including reasonable
legal, accounting and actuarial expenses. If not paid by the Employer,
such compensation and expenses may be charged against the Fund.
All taxes of any kind that may be levied or assessed under existing or
future laws upon, or in respect of, the Fund or the income thereof
shall be paid from the Fund.
5.07 NOT OBLIGATED TO QUESTION DATA
The Employer shall furnish the Trustee (or Custodian, if applicable)
and Plan Administrator the information which each part~ deems necessary
for the administration of the Plan including, but not limited to,
changes in a Participant's status, eligibility, mailing addresses and
other such data as may be required. The Trustee (or Custodian) and Plan
Administrator shall be entitled to act on such information as is
supplied them and shall have no duty or responsibility to further
verify or question such information.
5.08 LIABILITY FOR WITHHOLDING ON DISTRIBUTIONS
The Plan Administrator shall be responsible for withholding federal
income taxes from distributions from the Plan, unless the Participant
(or Beneficiary, where applicable) elects not to have such taxes
withheld. The Trustee (or Custodian) or other pavor may act as agent
for the Plan Administrator to withhold such taxes and to make the
appropriate distribution reports, if the , Plan Administrator furnishes
all the information to the Trustee (or Custodian) or other payor it may
need to do withholding and reporting.
5.09 RESIGNATION OR REMOVAL OF TRUSTEE (OR CUSTODIAN)
The Trustee (or Custodian, if applicable) may resign at any time by
giving 30 days advance written not-ice to the Employer. The resignation
shall become effective 30 days after receipt of such notice unless a
shorter period is agreed upon.
The Employer may remove any Trustee (or Custodian) at any time by
giving written notice to such Trustee (or Custodian) and such removal
shall be effective 3,0 days after receipt of such notice unless a
shorter period is agreed upon. The Employer shall have the power to
appoint a successor Trustee (or Custodian).
Upon such resignation or removal, if the resigning or removed Trustee
(or Custodian) is the sole Trustee (or Custodian), he or she shall
transfer all of the assets of the Fund then held by such Trustee (or
Custodian) as expeditiously as possible to the successor Trustee (or
Custodian) after paying or reserving such reasonable amount as he or
she shall deem necessary to provide for the expense in the settlement
of the accounts and the amount of any compensation due him or her and
any sums chargeable against the Fund for which he or she may be liable.
If the Funds as reserved are not sufficient for such purpose, then he
or she shall be entitled to reimbursement from the successor Trustee
(or Custodian) out of the assets in the successor Trustee's (or
Custodian's) hands under this Plan. If the amount reserved shall be in
excess of the amount actually needed, the former Trustee (or Custodian)
shall return such excess to the successor Trustee (or Custodian).
<PAGE> 58
20
Upon receipt of the transferred assets, the successor Trustee (or
Custodian) shall thereupon succeed to all of the powers and
responsibilities given to the Trustee (or Custodian) by this Plan.
The resigning or removed Trustee (or Custodian) shall render an
accounting to the Employer and unless objected to by the Employer
within 30 days of its receipt, the accounting shall be deemed to have
been approved and the resigning or removed Trustee (or Custodian) shall
be released and discharged as to all matters set forth in the
accounting. Where a financial organization is serving as Trustee (or
Custodian) and it is merged with or bought by another organization (or
comes under the control of any federal or state agency), that
organization shall serve as the successor Trustee (or Custodian) of
this Plan, but only if it is the type of organization that can so serve
under applicable law.
Where the Trustee or Custodian is serving as a nonbank trustee or
custodian pursuant to Section 1.401-12(n) of the Income Tax
Regulations, the Employer will appoint a successor Trustee (or
Custodian) upon notification by the Commissioner of Internal Revenue
that such substitution is required because the Trustee (or Custodian)
has failed to comply with the requirements of Section 1.401-12(n) or
is not keeping such records or making such returns or rendering such
statements as are required by forms or regulations.
5.10 DEGREE OF CARE - LIMITATIONS OF LIABILITY
The Trustee (or Custodian) shall not be liable for any losses incurred
by the Fund by any direction to invest communicated by the Employer,
Plan Administrator, investment manager appointed pursuant to Section 12
or any Participant or Beneficiary. The Trustee (or Custodian) shall be
under no liability for distributions made or other action taken or not
taken at the written direction of the Plan Administrator. It is
specifically understood that the Trustee (or Custodian) shall have no
duty or responsibility with respect to the determination of matters
pertaining to the eligibility of any Employee to become a Participant
or remain a Participant hereunder, the amount of benefit to which a
Participant or Beneficiary shall be entitled to receive hereunder,
whether a distribution to Participant or Beneficiary is appropriate
under the terms of the Plan or the size and type of any policy to be
purchased from any insurer for any Participant hereunder or similar
matters; it being understood that all such responsibilities under the
Plan are vested in the Plan Administrator.
5.11 INDEMNIFICATION OF PROTOTYPE SPONSOR AND TRUSTEE (OR CUSTODIAN)
Notwithstanding any other provision herein, and except as may be
otherwise provided by ERISA, the Employer shall indemnify and hold
harmless the Trustee (or Custodian, if applicable) and the Prototype
Sponsor, their officers, directors, employees, agents, their heirs,
executors, successors and assigns, from and against any and all
liabilities, damages, judgments, settlements, losses, costs, charges,
or expenses (including legal expenses) at anytime arising out of or
incurred in connection with any action taken by such parties in the
performance of their duties with respect to this Plan, unless there has
been a final adjudication of gross negligence or willful misconduct in
the performance of such duties.
Further, except as may be otherwise provided by ERISA, the Employer
will indemnify the Trustee (or Custodian) and Prototype Sponsor from
any liability, claim or expense (including legal expense) which the
Trustee (or Custodian) and Prototype Sponsor shall incur by reason of
or which results, in whole or in part, from the Trustee's (or
Custodian's) or Prototype Sponsor's reliance on the facts and other
directions and elections the Employer communicates or fails to
communicate.
5.12 INVESTMENT MANAGERS
A. Definition of Investment Manager - The Employer may appoint
one or more investment managers to make investment decisions
with respect to all or a portion of the Fund. The investment
manager shall be any firm or individual registered as an
investment adviser under the Investment Advisers Act of 1940,
a bank as defined in said Act or an insurance company
qualified under the laws of more than one state to perform
services consisting of the management, acquisition or
disposition of any assets of the Plan.
B. Investment Manager's Authority - A separate Investment Fund
shall be established representing the assets of the Fund
invested at the direction of the investment manager. The
investment manager so appointed shall direct the Trustee (or
Custodian, if applicable) with respect to the investment of
such Investment Fund. The investments which may be acquired at
the direction of the investment manager are those described in
Section 3.03(A) (for Custodians) or Section 5.04(A) (for
Trustees).
C. Written Agreement - The appointment of any investment manager
shall be by written agreement between the Employer and the
investment manager and a copy of such agreement (and any
modification or termination thereof) must be given to the
Trustee (or Custodian).
The agreement shall set forth, among other matters, the
effective date of the investment manager's appointment and an
acknowledgement by the investment manager that it is a
fiduciary of the Plan under ERISA.
D. Concerning the Trustee (or Custodian) - Written notice of each
appointment of an investment manager shall be given to the
Trustee (or Custodian) in advance of the effective date of
such appointment. Such notice shall specify which portion of
the Fund will constitute the Investment Fund subject to the
investment manager's direction. The Trustee (or Custodian)
shall comply, with the investment direction given to it by the
investment manager and will not be liable for any loss which
may result by reason of any action (or inaction) it takes at
the direction of the investment manager.
<PAGE> 59
21
5.13 MATTERS RELATING TO INSURANCE
A. If a life insurance policy is to be purchased for a
Participant, the aggregate premium for certain life insurance
for each Participant must be less than a certain Percentage of
the aggregate Employer Contributions and Forfeitures allocated
to a Participant's Individual Account at any particular time
as follows:
1. Ordinary Life Insurance - For purposes of these
incidental insurance provisions, ordinary life
insurance contracts are contracts with both
nondecreasing death benefits and nonincreasing
premiums. If such contracts are purchased, less than
50% of the aggregate Employer Contributions and
Forfeitures allocated to any Participant's Individual
Account will be used to pay the premiums attributable
to them.
2. Term and Universal Life Insurance - No more than 25%
of the aggregate Employer Contributions and
Forfeitures allocated to any Participant's Individual
Account will be used to pay the premiums on term life
insurance contracts, universal life insurance
contracts, and all other life insurance contracts
which are not ordinary life.
3. Combination - The sum of 30% of the ordinary life
insurance premiums and all other life insurance
premiums will not exceed 25% of the aggregate
Employer Contributions and Forfeitures allocated to
any Participant's Individual Account.
If this Plan is a profit sharing plan, the above
incidental benefits limits do not apply to life
insurance contracts purchased with Employer
Contributions and Forfeitures that have been in the
Participant's Individual Account for at least 2 full
Plan Years, measured from the date such contributions
were allocated.
B. Any dividends or credits earned on insurance contracts for a
Participant shall be allocated to such Participant's
Individual Account.
C. Subject to Section 6.05, the contracts on a Participant's life
will be converted to cash or an annuity or distributed to the
Participant upon commencement of benefits.
D. The Trustee (or Custodian, if applicable) shall apply for and
will be the owner of any insurance contract(s) purchased under
the terms of this Plan. The insurance contract(s) must provide
that proceeds will be payable to the Trustee (or Custodian),
however, the Trustee (or Custodian) shall be required to pay
over all proceeds of the contract(s) to the Participant's
designated Beneficiary in accordance with the distribution
provisions of this Plan. A Participant's spouse will be the
designated Beneficiary of the proceeds in all circumstances
unless a qualified election has been made in accordance with
Section 6.05. Under no circumstances shall the Fund retain any
part of the proceeds- In the event of any conflict between the
terms of this Plan and the terms of any insurance contract
purchased hereunder, the Plan provisions shall control.
E. The Plan Administrator may direct the Trustee (or Custodian)
to sell and distribute insurance or annuity contracts to a
Participant (or other party as may be permitted) in accordance
with applicable law or regulations.
5.14 DIRECTION OF INVESTMENTS BY PARTICIPANT
If so indicated in the Adoption Agreement, each Participant may
individually direct the Trustee (or Custodian, if applicable) regarding
the investment of part or all of his or her Individual Account. To the
extent so directed, the Employer, Plan Administrator, Trustee (or
Custodian) and all other fiduciaries are relieved of their fiduciary
responsibility under Section 404 of ERISA.
The Plan Administrator shall direct that a Separate Fund be established
in the name of each Participant who directs the investment of part or
all of his or her Individual Account- Each Separate Fund shall be
charged or credited (as appropriate) with the earnings, gains, losses
or expenses attributable to such Separate Fund. No fiduciary shall be
liable for any loss which results from a Participant's individual
direction. The assets subject to individual direction shall not be
invested in collectibles as that term is defined in Section 408(m) of
the Code.
The Plan Administrator shall establish such uniform and
nondiscriminaton, rules relating to individual direction as it deems
necessary or advisable including, but not limited to, rules describing
(1) which portions of Participant's Individual Account can be
individually directed; (2) the frequency of investment changes; (3) the
forms and procedures for making investment changes; and (4) the effect
of a Participant's failure to make a valid direction.
The Plan Administrator may, in a uniform and nondiscriminatory manner,
limit the available investments for Participants' individual direction
to certain specified investment options (including, but not limited to,
certain mutual funds, investment contracts, deposit accounts and group
trusts). The Plan Administrator may permit, in a uniform and
nondiscriminatory manner, a Beneficiary of a deceased Participant or
the alternate payee under a qualified domestic relations order (as
defined in Section 414(p) of the Code) to individually direct in
accordance with this Section.
SECTION SIX VESTING AND DISTRIBUTION
6.01 DISTRIBUTION TO PARTICIPANT
A. Distributable Events
<PAGE> 60
22
1. Entitlement to Distribution - The Vested portion of a
Participant's Individual Account shall be
distributable to the Participant upon (1) the
occurrence of any of the distributable events
specified in the Adoption Agreement; (2) the
Participant's Termination of Employment after
attaining Normal Retirement Age; (3) the termination
of the Plan; and (4) the Participant's Termination of
Employment after satisfying any Early Retirement Age
conditions.
If a Participant separates from service before
satisfying the Early Retirement Age requirement, but
has satisfied the service requirement, the
Participant will be entitled to elect an early
retirement benefit upon satisfaction of such age
requirement.
2. Written Request: When Distributed - A Participant
entitled to distribution who wishes to receive a
distribution, must submit a written request to the
Plan Administrator. Such request shall be made upon a
form provided by the Plan Administrator. Upon a valid
request, the Plan Administrator shall direct the
Trustee (or Custodian, if applicable) to commence
distribution no later than the time specified in the
Adoption Agreement for this purpose and, if not
specified
a. the close of the Plan Year within which the
event occurs which entitles the Participant
to distribution; or
b. the close of the Plan Year in which the
request is received.
3. Special Rules for Withdrawals During Service - If
this is a profit sharing plan and the Adoption
Agreement so provides, a Participant may elect to
receive a distribution of ali or part of the Vested
portion of his or her Individual Account, subject to
the requirements of Section 6.05 and further subject
to the following limits:
a. Participant for 5 or more years. An Employee
who has been a Participant in the Plan for 5
or more years may withdraw up to the entire
Vested portion of his or her Individual
Account.
b. Participant for less than 5 years. An
Employee who has been a Participant in the
Plan for less than 5 years may withdraw only
the amount which has been in his or her
Individual Account attributable to Employer
Contributions for at least 2 full Plan
Years, measured from the date such
contributions were allocated. However, if
the distribution is on account of hardship,
the Participant may withdraw up to his or
her entire Vested portion of the
Participant's Individual Account. For this
purpose, hardship shall have the meaning set
forth in Section 6.01(A)(4) of the Code.
4. Special Rules for Hardship Withdrawals -If this is a
profit sharing plan and the Adoption Agreement so
provides, a Participant may elect to receive a
hardship distribution of all or part of the Vested
portion of his or her Individual Account, subject to
the requirements of Section 6.05 and further subject
to the following limits:
a. Participant for 5 or more years. An Employee
who has been a Participant in the Plan for 5
or more years may withdraw up to the entire
Vested portion of his or her Individual
Account.
b. Participant for less than 5 years. An
Employee who has been a Participant in the
Plan for less than 5 years may withdraw only
the amount which has been in his or her
Individual Account attributable to Employer
Contributions for at least 2 full Plan
Years, measured from the date such
contributions were allocated.
For purposes of this Section 6.01(A)(4) and
Section 6.01(A)(3) hardship is defined as an
immediate and heavy financial need of the
Participant where such Participant lacks
other available resources. The following are
the only financial needs considered
immediate and heavy: expenses incurred or
necessary for medical care, described in
Section 213(d) of the Code, of the Employee,
the Employee's spouse or dependents; the
purchase (excluding mortgage payments) of a
principal residence for the Employee;
payment of tuition and related educational
fees for the next 12 months of
post-secondary education for the Employee,
the Employee's spouse, children or
dependents; or the need to prevent the
eviction of the Employee from, or a
foreclosure on the mortgage of, the
Employee's principal residence.
A distribution will be considered as
necessary to satisfy an immediate and heavy
financial need of the Employee only if:
1) The employee has obtained all
distributions, other than hardship
distributions, and all nontaxable
loans under all plans maintained by
the Employer;
2) The distribution is not in excess of
the amount of an immediate and heavy
financial need (including amounts
necessary to pay any federal, state
or local income taxes or penalties
reasonably anticipated to result
from the distribution).
<PAGE> 61
23
5. One-Time In-Service Withdrawal Option - If this is a
profit sharing plan and the Employer has elected the
one-time in-service withdrawal option in the Adoption
Agreement, then Participants will be permitted only
one in-service withdrawal during the course of such
Participants employment with the Employer. The amount
which the Participant can withdraw will be limited to
the lesser of the amount determined under the limits
set forth in Section 6.01(A)(3) or the percentage of
the Participant's Individual Account specified by the
Employer in the Adoption Agreement. Distributions
under this Section will be subject to the
requirements of Section 6.05.
6. Commencement of Benefits - Notwithstanding any other
provision, unless the Participant elects otherwise,
distribution of benefits will begin no later than the
60th day after the latest of the close of the Plan
Year in which:
a. the Participant attains Normal Retirement
Age;
b. occurs the 10th anniversary of the year in
which the Participant commenced
participation in the Plan, or
c. the Participant incurs a Termination of
Employment.
Notwithstanding the foregoing, the failure
of a Participant and spouse to consent to a
distribution while a benefit is immediately
distributable, within the meaning of Section
6.02(B) of the Plan, shall be deemed to be
an election to defer commencement of payment
of any benefit sufficient to satisfy this
Section.
B. Determining the Vested Portion - In determining the
Vested portion of a Participant's Individual Account,
the following rules apply:
1. Employer Contributions and Forfeitures - The
Vested portion of a Participant's Individual
Account derived from Employer Contributions
and Forfeitures is determined by applying
the vesting schedule selected in the
Adoption Agreement (or the vesting schedule
described in Section 6.01(b if the Plan is a
Top-Heavy Plan).
2. Rollover and Transfer Contributions - A
Participant is fully Vested in his or her
rollover contributions and transfer
contributions.
3. Fully Vested Under Certain Circumstances - A
Participant is fully Vested in his or her
Individual Account if any of the following
occurs:
a. the Participant reaches Normal
Retirement Age;
b. the Plan is terminated or partially
terminated; or
c. there exists a complete
discontinuance of contributions
under the Plan.
Further, unless otherwise indicated in the Adoption
Agreement, a Participant is fully Vested if the
Participant dies, incurs a Disability, or satisfies
the conditions for Early Retirement Age (if
applicable).
4. Participants in a Prior Plan - If a Participant was a
participant in a Prior Plan on the Effective Date,
his or her Vested percentage shall not be less than
it would have been under such Prior Plan as computed
on the Effective Date.
C. Minimum Vesting Schedule for Top-Heavy Plans - The following
vesting provisions apply for any Plan Year in which this Plan
is a Top-Heavy Plan.
Notwithstanding the other provisions of this Section 6.01 or
the vesting schedule selected in the Adoption Agreement
(unless those provisions or that schedule provide for more
rapid vesting), a Participant's Vested portion of his or her
Individual Account attributable to Employer Contributions and
Forfeitures shall be deter-mined in accordance with the
vesting schedule elected by the Employer in the Adoption
Agreement (and if no election is made the 6 year graded
schedule will be deemed to have been elected) as described
below:
<TABLE>
<CAPTION>
6 YEAR GRADED 3 YEAR CLIFF
Years of Vesting Service Vested Percentage Years of Vesting Service Vested Percentage
<S> <C> <C> <C>
1 0 1 0
2 20 2 0
3 40 3 100
4 60
5 80
6 100
</TABLE>
<PAGE> 62
24
This minimum vesting schedule applies to all benefits within
the meaning of Section 411(a)(7) of the Code, except those
attributable to Nondeductible Employee Contributions including
benefits accrued before the effective date of Section 416 of
the Code and benefits accrued before the Plan became a
Top-Heavy Plan. Further, no decrease in a Participant's Vested
percentage may occur in the event the Plan's status as a
Top-Heavy Plan changes for any Plan Year. However, this
Section 6.01(C) does not apply to the Individual Account of
any Employee who does not have an Hour of Service after the
Plan has initially become a Top-Heavy Plan and such Employee's
Individual Account attributable to Employer Contributions and
Forfeitures will be determined without regard to this Section.
If this Plan ceases to be a Top-Heavy Plan, then in accordance
with the above restrictions, the vesting schedule as selected
in the Adoption Agreement will govern. If the vesting schedule
under the Plan shifts in or out of top-heavy status, such
shift is an amendment to the vesting schedule and the election
in Section 9.04 applies.
D. Break in Vesting Service and Forfeitures - If a Participant
incurs a Termination of Employment, any portion of his or her
Individual Account which is not Vested shall be held in a
suspense account. Such suspense account shall share in any
increase or decrease in the fair market value of the assets of
the Fund in accordance with Section 4 of the Plan. The
disposition of such suspense account shall be as follows:
1. Breaks in Vesting Service - If a Participant neither
receives nor is deemed to receive a distribution
pursuant to Section 6.01(D)(3) or (4) and the
Participant returns to the service of the Employer
before incurring 5 consecutive Breaks in Vesting
Service, there shall be no Forfeiture and the amount
in such suspense account shall be recredited to such
Participant's Individual Account.
2. Five Consecutive Breaks in Vesting Service - If a
Participant neither receives nor is deemed to receive
a distribution pursuant to Section 6.01(D)(3) or (4)
and the Participant does not return to the service of
the Employer before incurring 5 consecutive Breaks in
Vesting Service, the portion of the Participant's
Individual Account which i~ not Vested shall be
treated as a Forfeiture and allocated in accordance
with Section 3.01(C).
3. Cash-out of Certain Participants - If the value of
the Vested portion of such Participant's Individual
Account derived from Nondeductible Employee
Contributions and Employer Contributions does not
exceed $3,500, the Participant shall receive a
distribution of the entire Vested portion of such
Individual Account and the portion which is not
Vested shall be treated as a Forfeiture and allocated
in accordance with Section 3.01(C). For purposes of
this Section, if the value of the Vested portion of a
Participant's Individual Account is zero, the
Participant shall be deemed to have received a
distribution of such Vested Individual Account. A
Participant's Vested Individual Account balance shall
not include accumulated deductible employee
contributions within the meaning of Section
72(o)(5)(B) of the Code for Plan Years beginning
prior to January 1, 1989.
4. Participants Who Elect to Receive Distributions - If
such Participant elects to receive a distribution, in
accordance with Section 6.02(B), of the value of the
Vested portion of his or her Individual Account
derived from Nondeductible Employee Contributions and
Employer Contributions, the portion which is not
Vested shall be treated as a Forfeiture and allocated
in accordance with Section 3.01(C).
5. Re-employed Participants - If a Participant receives
or is deemed to receive a distribution pursuant to
Section 6.01(D)(3) or (4) above and the Participant
resumes employment covered under this Plan, the
Participant's Employer-derived Individual Account
balance will be restored to the amount on the date of
distribution if the Participant's repays to the Plan
the full amount of the distribution attributable to
Employer Contributions before the earlier of 5 years
after the first date on which the Participant is
subsequently re-employed b~ the Employer, or the date
the Participant incurs; 5 consecutive Breaks in
Vesting Service following the date of the
distribution.
Any restoration of a Participant's Individual Account
pursuant to Section 6.010)(5) shall be made from
other Forfeitures, income or gain to the Fund or
contributions made by the Employer.
E. Distribution Prior to Full Vesting - If a distribution is made
to a Participant who was not then fully Vested in his or her
Individual Account derived from Employer Contributions and the
Participant may increase his or her Vested percentage in his
or her Individual Account, then the following rules shall
apply:
1. a separate account will be established for the
Participant's interest in the Plan as of the time of
the distribution, and
2. at any relevant time the Participant's Vested portion
of the separate account will be equal to an amount
("X") determined by the formula: X=P (AB + (R x N) -
(R x D) where "P" is the Vested percentage at the
relevant time, "AB" is the separate account balance
at the relevant time; "D" is the amount of the
distribution; and "R" is the ratio of the separate
account balance at the relevant time to the separate
account balance after distribution.
<PAGE> 63
25
6.02 FORM OF DISTRIBUTION TO A PARTICIPANT
A. Value of Individual Account Does Not Exceed $3,500 - If the
value of the Vested portion of a Participant's Individual
Account derived from Nondeductible Employee Contributions and
Employer Contributions does not exceed $3,500, distribution
from the Plan shall be made to the Participant in a single
lump sum in lieu of all other forms of distribution from the
Plan as soon as administratively feasible.
B. Value of Individual Account Exceeds $3,500
1. If the value of the Vested portion of a Participant's
Individual Account derived from Nondeductible
Employee Contributions and Employer Contributions
exceeds (or at the time of any prior distribution
exceeded) $3,500, and the Individual Account is
immediately distributable, the Participant and the
Participant's spouse (or where either the Participant
or the spouse died, the survivor) must consent to any
distribution of such Individual Account. The consent
of the Participant and the Participant's spouse shall
be obtained in writing within the 90-day period
ending on the annuity starting date. The annuity
starting date is the first day of the first period
for which an amount is paid as an annuity, or any
other form. The Plan Administrator shall notify the
Participant and the Participant's spouse of the right
to defer any distribution until the Participant's
Individual Account is no longer immediately
distributable. Such notification shall include a
general description of the material features, and an
explanation of the relative values of, the optional
forms of benefit available under the Plan in a manner
that would satisfy the notice requirements of Section
417(a)(3) of the Code, and shall be provided no less
than 30 days and no more than 90 days prior to the
annuity starting date.
If a distribution is one to which Sections 401(a)(11)
and 417 of the Internal Revenue Code do not apply,
such distribution may commence less than 30 days
after the notice required under Section
1.411(a)-11(c) of the Income Tax Regulations is
given, provided that:
a. the Plan Administrator clearly informs the
Participant that the Participant has a right
to a period of at least 30 days after
receiving the notice to consider the
decision of whether or not to elect a
distribution (and, if applicable, a
particular distribution option), and
b. 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
Individual Account is immediately
distributable. Neither the consent of the
Participant nor the Participant's spouse
shall be required to the extent that a
distribution is required to satisfy Section
401(a)(9) or Section 415 of the Code. In
addition, upon termination of this Plan if
the Plan does not offer an annuity option
(purchased from a commercial provider), the
Participant's Individual Account may,
without the Participant's consent, be
distributed to the Participant or
transferred to another defined contribution
plan (other than an employee stock ownership
plan as defined in Section 4975(e)(7) of the
Code) within the same controlled group.
An Individual Account is immediately
distributable if an), part of the Individual
Account could be distributed to the
Participant (or surviving spouse) before the
Participant attains or would have attained
(if not deceased) the later of Normal
Retirement Age or age 62.
2. For purposes of determining the
applicability of the foregoing consent
requirements to distributions made before
the first day of the first Plan Year
beginning after December 31, 1988, the
Vested portion of a Participant's Individual
Account shall not include amounts
attributable to accumulated deductible
employee contributions within the meaning of
Section 72(o)(5)(B) of the Code.
C. Other Forms of Distribution to Participant - If the value of
the Vested portion of a Participant's Individual Account
exceeds $3,500 and the Participant has properly waived the
joint and survivor annuity, as described in Section 6.05, the
Participant may request in writing that the Vested portion of
his or her Individual Account be paid to him or her in one or
more of the following forms of payment: (1) in a lump sum; (2)
in installment payments over a period not to exceed the life
expectancy of the Participant or the joint and last survivor
life expectancy of the Participant and his or her designated
Beneficiary; or (3) applied to the purchase of an annuity
contract.
Notwithstanding anything in this Section 6.02 to the contrary,
a Participant cannot elect payments in the form of an annuity
if the Retirement Equity Act safe harbor rules of Section
6.05(F) apply.
6.03 DISTRIBUTIONS UPON THE DEATH OF A PARTICIPANT
A. Designation of Beneficiary - Spousal Consent - Each
Participant may designate, upon a form provided by and
delivered to the Plan Administrator, one or more primary and
contingent Beneficiaries to receive all or a specified portion
of the Participant's Individual Account in the event of his or
her death. A Participant may change or revoke such Beneficiary
designation from time to time by completing and delivering the
proper form to the Plan Administrator.
<PAGE> 64
26
In the event that a Participant wishes to designate a primary
Beneficiary who is not his or her spouse, his or her spouse
must consent in writing to such designation, and the spouse's
consent must acknowledge the effect of such designation and be
witnessed by a notary public or plan representative.
Notwithstanding this consent requirement, if the Participant
establishes to the satisfaction of the Plan Administrator that
such written consent may not be obtained because there is no
spouse or the spouse cannot be located, no consent shall be
required. Any change of Beneficiary will require a new spousal
consent.
B. Payment to Beneficiary - If a Participant dies before the
Participant's entire Individual Account has been paid to him
or her, such deceased Participant's Individual Account shall
be payable to any surviving Beneficiary designated by the
Participant, or, if no Beneficiary survives the Participant,
to the Participant's estate.
C. Written Request: When Distributed - A Beneficiary of a
deceased Participant entitled to a distribution who wishes to
receive a distribution must submit a written request to the
Plan Administrator. Such request shall be made upon a form
provided by the Plan Administrator. Upon a valid request, the
Plan Administrator shall direct the Trustee (or Custodian) to
commence distribution no later than the time specified in the
Adoption Agreement for this purpose and if not specified in
the Adoption Agreement, then no later than 90 days following
the later of:
1. the close of the Plan Year within which the
Participant dies; or
2. the close of the Plan Year in which the request is
received.
6.04 FORM OF DISTRIBUTION TO BENEFICIARY
A. Value of Individual Account Does Not Exceed $3,500 - If the
value of the Participant's Individual Account derived from
Nondeductible Employee Contributions and Employer
Contributions does not exceed $3,500, the Plan Administrator
shall direct the Trustee (or Custodian, if applicable) to make
a distribution to the Beneficiary in a single lump sum in lieu
of all other forms of distribution from the Plan.
B. Value of Individual Account Exceeds $3,500 - If the value of a
Participant's Individual Account derived from Nondeductible
Employee Contributions and Employer Contributions exceeds
$3,500 the preretirement survivor annuity requirements of
Section 6.05 shall apply unless waived in accordance with that
Section or unless the Retirement Equity Act safe harbor rules
of Section 6.05(F) apply. However, a surviving spouse
Beneficiary may elect any form of payment allowable under the
Plan in lieu of the preretirement survivor annuity Any such
payment to the surviving spouse must meet the requirements of
Section 6.06.
C. Other Forms of Distribution to Beneficiary - If the value of a
Participant's Individual Account exceeds $3,500 and the
Participant has properly waived the preretirement survivor
annuity, as described in Section 6.05 (if applicable) or if
the Beneficiary is the Participant's surviving spouse, the
Beneficiary may, subject to the requirements of Section 6.06,
request in writing that the Participant's Individual Account
be paid as follows: (1) in a lump sum; or (2) in installment
payments over a period not to exceed the life expectancy of
such Beneficiary.
6.05 JOINT AND SURVIVOR ANNUITY REQUIREMENTS
A. The provisions of this Section shall apply to any Participant
who is credited with at least one Hour of Eligibility Service
with the Employer on or after August 23, 1984, and such other
Participants as provided in Section 6.05(G).
B. Qualified Joint and Survivor Annuity - Unless an optional form
of benefit is selected pursuant to a qualified election within
the 90-day period ending on the annuity starting date, a
married Participant's Vested account balance will be paid in
the form of a qualified joint and survivor annuity and an
unmarried Participant's Vested account balance will be paid in
the form of a life annuity. The Participant may elect to have
such annuity distributed upon attainment of the earliest
retirement age under the Plan.
C. Qualified Preretirement Survivor Annuity - Unless an optional
form of benefit has been selected within the election period
pursuant to a qualified election, if a Participant dies before
the annuity starting date then the Participant's Vested
account balance shall be applied toward the purchase of an
annuity for the life of the surviving spouse. The surviving
spouse may elect to have such annuity distributed within a
reasonable period after the Participant's death.
D. Definitions
1. Election Period - The period which begins on the
first day of the Plan Year in which the Participant
attains age 35 and ends on the date of the
Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in
which age 35 is attained, with respect to the account
balance as of the date of separation, the election
period shall begin on the date of separation.
Pre-age 35 waiver - A Participant who will not yet
attain age 35 as of the end of any cur-rent Plan Year
may make special qualified election to waive the
qualified preretirement survivor annuity for the
period beginning on the date of such election and
ending on the first day of the Plan Year in which the
Participant will attain age 35. Such election shall
not be valid unless the Participant receives a
written explanation of the qualified preretirement
survivor annuity in such terms as are comparable to
the explanation required under Section 6.05(E)(1).
Qualified preretirement survivor annuity coverage
will be automatically reinstated as of the first day
of the Plan Year in which the Participant attains age
35. Any new waiver on or after such date shall be
subject to the full requirements of this Section
6.05.
<PAGE> 65
27
2. Earliest Retirement Age - The earliest date on which,
under the Plan, the Participant could elect to
receive retirement benefits.
3. Qualified Election - A waiver of a qualified joint
and survivor annuity or a qualified preretirement
survivor annuity. Any waiver of a qualified joint and
survivor annuity or a qualified preretirement
survivor annuity shall not be effective unless: (a)
the Participant's spouse consents in writing to the
election, (b) the election designates a specific
Beneficiary, including any class of beneficiaries or
any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse
expressly permits designations by the Participant
without any further spousal consent); (c) the
spouse's consent acknowledges the effect of the
election; and (d) the spouse's consent is witnessed
by a plan representative or notary public.
Additionally, a Participant's waiver of the qualified
joint and survivor annuity shall not be effective
unless the election designates a form of benefit
payment which may not be changed without spousal
consent (or the spouse expressly permits designations
by the Participant without any further spousal
consent). If it is established to the satisfaction of
a plan representative that there is no spouse or that
the spouse cannot be located, a waiver will be deemed
a qualified election.
Any consent by a spouse obtained under this provision
(or establishment that the consent of a spouse may
not be obtained) shall be effective only with respect
to such spouse. A consent that permits designations
by the Participant without any requirement of further
consent by such spouse must acknowledge that the
spouse has the right to limit consent to a specific
Beneficiary, and a specific form of benefit where
applicable, and that the spouse voluntarily elects to
relinquish either or both of such rights. A
revocation of a prior waiver may be made by a
Participant without the consent of the spouse at any
time before the commencement of benefits. The number
of revocations shall not be limited. No consent
obtained under this provision shall be valid unless
the Participant has received notice as provided in
Section 6.05(E) below.
4. Qualified Joint and Survivor Annuity - An immediate
annuity for the life of the Participant with a
Survivor annuity for the life of the spouse which is
not less than 50% and not more than 100 %, of the
amount of the annuity which is payable during the
joint lives of the Participant and the spouse and
which is the amount of benefit which can be purchased
with the Participant's vested account balance. The
percentage of the survivor annuity under the Plan
shall be 50% (unless a different percentage is
elected by the Employer in the Adoption Agreement).
5. Spouse (surviving spouse) - The spouse or surviving
spouse of the Participant, provided that a former
spouse will be treated as the spouse or surviving
spouse and a current spouse will not be treated as
the spouse or surviving spouse to the extent provided
under a qualified domestic relations order as
described in Section 414(p) of the Code.
6. Annuity Starting Date - The first day of the first
period for which an amount is paid as an annuity or
any other form.
7. Vested Account Balance - The aggregate value of the
Participant's Vested account balances derived from
Employer and Nondeductible Employee Contributions
(including rollovers), whether Vested before or upon
death, including the proceeds of insurance contracts,
if any, on the Participant's life. The provisions of
this Section 6.05 shall apply to a Participant who is
Vested in amounts attributable to Employer
Contributions, Nondeductible Employee Contributions
(or both) at the time of death or distribution.
E. Notice Requirements
1. In the case of a qualified joint and survivor
annuity, the Plan Administrator shall no less than 30
days and not more than 90 days prior to the annuity
starting date provide each Participant a written
explanation of: (a)the terms and conditions of a
qualified joint and survivor annuity; (b) the
Participant's right to make and the effect of an
election to waive the qualified joint and survivor
annuity form of benefit, (c) the rights of a
Participant's spouse, and (d) the right to make, and
the effect of, a revocation of a previous election to
waive the qualified joint and survivor annuity.
2. In the case of a qualified preretirement annuity as
described in Section 6.05(C), the Plan Administrator
shall provide each Participant within the applicable
period for such Participant a written explanation of
the qualified preretirement survivor annuity in such
terms and in such manner as would be comparable to
the explanation provided for meeting the requirements
of Section 6.05(E)(1) applicable to a qualified joint
and survivor annuity.
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
<PAGE> 66
28
Year preceding the Plan Year in which the Participant
attains age 35; (b) a reasonable period ending after
the individual becomes a Participant; (c) a
reasonable period ending after Section 6 05(E)(3)
ceases to apply to the Participant; and (d) a
reasonable period ending after this Section 6.05
first applies to the Participant. Notwithstanding the
foregoing, notice must be provided within a
reasonable period ending after separation from
service in the case of a Participant who separates
from service before attaining age 35.
For purposes of applying the preceding paragraph, a
reasonable period ending after the enumerated events
described in (b), (c) and (d) is the end of the
two-year period beginning one year prior to the date
the applicable event occurs, a nd ending one year
after that date. In the case of a Participant who
separates from service before the Plan Year in which
age 35 is attained, notice shall be provided within
the two-year period beginning one year prior to
separation and ending one year after separation. If
such a Participant thereafter returns to employment
with the Employer, the applicable period for such
Participant shall be redetermined.
3. Notwithstanding the other requirements of this
Section 6.05(E), the respective notices prescribed by
this Section 6.05(E), need not be given to a
Participant if (a) the Plan "fully subsidizes" the
costs of a qualified joint and survivor annuity or
qualified preretirement survivor annuity, and (b) the
Plan does not allow the Participant to waive the
qualified joint and survivor annuity or qualified
preretirement survivor annuity and does not allow a
married Participant to designate a nonspouse
beneficiary. For purposes of this Section 6.05(E)(
3), a plan fully subsidizes the costs of a benefit if
no increase in cost, or decrease in benefits to the
Participant may result from the Participant's failure
to elect another benefit.
F. Retirement Equity Act Safe Harbor Rules
1. If the Employer so indicates in the Adoption
Agreement, this Section 6.05(F) shall apply to a
Participant in a profit sharing plan, and shall
always apply to any distribution, made on or after
the first day of the first Plan Year beginning after
December 31, 1988, from or under a separate account
attributable solely to accumulated deductible
employee contributions, as defined in Section
72(o)(5)(B) of the Code, and maintained on behalf of
a Participant in a money purchase pension plan,
(including a target benefit plan) if the following
conditions are satisfied:
a. the Participant does not or cannot elect
payments in the form of a life annuity; and
b. on the death of a Participant, the
Participant's Vested account balance will be
paid to the Participant's surviving spouse,
but if there is no surviving spouse, or if
the surviving spouse has consented in a
manner conforming to a qualified election,
then to the Participant's designated
Beneficiary. The surviving spouse may elect
to have distribution of the Vested account
balance commence within the 90-day period
following the date of the Participant's
death. The account balance shall be adjusted
for gains or losses occurring after the
Participant's death in accordance with the
provisions of the Plan governing the
adjustment of account balances for other
types of distributions. This Section 6.05(F)
shall not be operative with respect to a
Participant in a profit sharing plan if the
plan is a direct or indirect transferee of a
defined benefit plan, money purchase plan, a
target benefit plan, stock bonus, or profit
sharing plan which is subject to the
survivor annuity requirements of Section 401
(a)(11) and Section 417 of the code. If this
Section 6.05(F) is operative, then the
provisions of this Section 6.05 other than
Section 6.05(G) shall be inoperative.
2. The Participant may waive the spousal death benefit
described in this Section 6.05(F) at any time
provided that no such waiver shall be effective
unless it satisfies the conditions of Section
6-05(D)(3) (other than the notification requirement
referred to therein) that would apply to the
Participant's waiver of the qualified preretirement
survivor annuity.
3. For purposes of this Section 6.05(F), Vested account
balance shall mean, in the case of a money purchase
pension plan or a target benefit plan, the
Participant's separate account balance attributable
solely to accumulated deductible employee
contributions within the meaning of Section
72(o)(5)(B) of the Code. In the case of a profit
sharing plan, Vested account balance shall hove the
same meaning as provided in Section 6.05(D)(7).
G. TRANSITIONAL RULES
1. Any living Participant not receiving benefits on
August 23, 1984, who would otherwise not receive the
benefits prescribed by the previous subsections of
this Section 6.05 must be given the opportunity to
elect to have the prior subsections of this Section
apply if such Participant is credited with at least
one Hour of Service under this Plan or a predecessor
plan in a Plan Year beginning on or after January 1,
1976, and such Participant had at least 10 Years of
Vesting Service when he or she separated from
service.
2. Any living Participant not receiving benefits on
August 23, 1984, who was credited with at least one
Hour of Service under this Plan or a predecessor plan
on or after September 2, 1974, and who is not
otherwise credited with any service in a Plan Year
beginning on or after January 1, 1976, must be given
the opportunity to have his or her benefits paid in
accordance with Section 6.05(G)(4).
<PAGE> 67
29
3. The respective opportunities to elect (as described
in Section 6.05(G)(1) and (2) above) must be afforded
to the appropriate Participant, during the period
commencing on August 23, 1984, and ending on the date
benefits would otherwise commence to said
Participants.
4. Any Participant who has elected pursuant to Section
6.05(G)(2) and any Participant who does not elect
under Section 6.05(G)(1) or who meets the
requirements of Section 6.05(G)(1) except that such
Participant does not have at least 10 Years of
Vesting Service when he or she separates from
service, shall have his or her benefits
distributed in accordance with all of the following
requirements if benefits would have been payable in
the form of a life annuity:
a. Automatic Joint and Survivor Annuity - If
benefits in the form of a life annuity
become payable to a married Participant who:
(1) begins to receive payments under
the Plan on or after Normal
Retirement Age; or
(2) dies on or after Normal Retirement
Age while still working for the
Employer; or
(3) begins to receive payments on or
after the qualified early
retirement age; or
(4) separates from service on or after
attaining Normal Retirement Age (or
the qualified early retirement age)
and after satisfying the eligibility
requirements for the payment of
benefits under the Plan and
thereafter dies before beginning to
receive such benefits.
then such benefits will be received
under this Plan in the form of a
qualified joint and survivor
annuity, unless the Participant has
elected otherwise during the
election period. The election period
must begin at least 6 months before
the Participant attains qualified
early retirement age and ends not
more than 90 days before the
commencement of benefits. Any
election hereunder will be in
writing and may be changed by the
Participant at any time.
b. Election of Early Survivor Annuity - A
Participant who is employed after attaining
the qualified early retirement age will be
given the opportunity to elect, during the
election period, to have a survivor annuity
payable on death. If the Participant elects
the survivor annuity, payments under such
annuity must not be less than the payments
which would have been made to the spouse
under the qualified joint and survivor
annuity if the Participant had retired on
the day before his or her death. Any
election under this provision will be in
writing and may be changed by the
Participant at any time. The election period
begins on the later of (1) the 90th day
before the Participant attains the qualified
early retirement age, or (2) the date on
which participation begins, and ends on the
date the Participant terminates employment.
c. For purposes of Section 6.05(G)(4):
1. Qualified early retirement age is
the latest of:
a. the earliest date, under
the Plan, on which the
Participant may elect to
receive retirement
benefits,
b. the first day of the 120th
month beginning before the
Participant reaches Normal
Retirement Age, or
c. the date the Participant
begins participation.
2. Qualified joint and survivor annuity
is an annuity for the life of the
Participant with a survivor annuity
for the life of the spouse as
described in Section 6.05(D)(4) of
this Plan.
6.06 DISTRIBUTION REQUIREMENTS
A. General Rules
1. Subject to Section 6.05 joint and Survivor Annuity
Requirements, the requirements of this Section shall
apply to any distribution of a Participant's interest
and will take precedence over any inconsistent
provisions of this Plan. Unless otherwise specified,
the provisions of this Section 6.06 apply to calendar
years beginning after December 31, 1994.
2. All distributions required under this Section 6.06
shall be determined and made in accordance with the
Income Tax Regulations under Section 401(a)(9),
including the minimum distribution incidental benefit
requirement of Section 1.401(a)(9)-2 of the proposed
regulations.
<PAGE> 68
30
B. Required Beginning Date - The entire interest of a Participant
must be distributed or begin to be distributed no later than
the Participant's required beginning date.
C. Limits on Distribution Periods - As of the first distribution
calendar year, distributions, if not made in a single sum, may
only be made over one of the following periods (or a
combination thereof):
1. the life of the Participant,
2. the life of the Participant and a designated
Beneficiary,
3. a period certain not extending beyond the life
expectancy of the Participant, or
4. a period certain not extending beyond the joint and
last survivor expectancy of the Participant and a
designated Beneficiary
D. Determination of Amount to be Distributed Each Year - If the
Participant's interest is to be distributed in other than a
single sum, the following minimum distribution rules shall
apply on or after the required beginning date:
1. Individual Account
a. If a Participant's benefit is to be
distributed over (1) a period not extending
beyond the life expectancy of the
Participant or the joint life and last
survivor expectancy of the Participant and
the Participant's designated Beneficiary or
(2) a period not extending beyond the life
expectancy of the designated Beneficiary,
the amount required to be distributed for
each calendar year, beginning with
distributions for the first distribution
calendar year, must at least equal the
quotient obtained by dividing the
Participant's benefit by the applicable life
expectancy.
b. 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 50% of the present value of the amount
available for distribution is paid within
the life expectancy of the Participant.
c. For calendar years beginning after December
31, 1988, the amount to be distributed each
year, beginning with distributions for the
first distribution calendar year shall not
be less than the quotient obtained by
dividing the Participant's benefit by the
lesser of (1) the applicable life expectancy
or (2) if the Participant's spouse is not
the designated Beneficiary, the applicable
divisor determined from the table set forth
in Q&A-4 of Section 1.401(a)(9)-2 of the
Proposed Income Tax Regulations.
Distributions after the death of the
Participant shall be distributed using the
applicable life expectancy in Section
6.05(D)(1)(a) above as the relevant divisor
without regard to proposed regulations
1.401(a)(9)-2.
d. The minimum distribution required for the
Participant's first distribution calendar
year must be made on or before the
Participant's required beginning date. The
minimum distribution for other calendar
years, including the minimum distribution
for the distribution calendar year in which
the Employee's required beginning date
occurs, must be made on or before December
31 of that distribution calendar year.
2. Other Forms -If the Participant's benefit is
distributed in the form of an annuity Purchased from
an insurance company, distributions thereunder shall
be made in accordance with the requirements of
Section 401(a)(9) of the Code and the regulations
thereunder.
E. DEATH DISTRIBUTION PROVISIONS
1. Distribution Beginning Before Death - If the
Participant dies after distribution of his or her
interest has begun, the remaining portion of such
interest will continue to be distributed at least as
rapidly as under the method of distribution being
used prior to the Participant's death.
2. Distribution Beginning After Death - If the
Participant dies before distribution of his or her
interest begins, distribution of the Participant's
entire interest shall be completed by, December 31 of
the calendar year containing the fifth anniversary of
the Participant's death except to the extent that an
election is made to receive distributions in
accordance with (a) or (b) below:
a. if any portion of the Participant's interest
is payable to a designated Beneficiary,
distributions may be made over the life or
over a period certain not greater than the
life expectancy of the designated
Beneficiary commencing on or before December
31 of the calendar year immediately
following the calendar year in which the
Participant died;
<PAGE> 69
31
b. if the designated Beneficiary is the
Participant's surviving spouse, the date
distributions are required to begin in
accordance with (a) above shall not be
earlier than the later of (1) December 31 of
the calendar year immediately following the
calendar year in which the Participant dies
or (2) December 31 of the calendar year in
which the Participant would have attained
age 70 1/2.
If the Participant has not made an election
pursuant to this Section 6.05(E)(2) by the
time of his or her death, the Participant's
designated Beneficiary must elect the method
of distribution no later than the earlier of
(1) December 31 of the calendar year in
which distributions would be required to
begin under this Section 6.05(E)(2), or (2)
December 31 of the calendar year which
contains the fifth anniversary of the date
of death of the Participant. If the
Participant has no designated Beneficiary or
if the designated Beneficiary does not elect
a method of distribution, distribution of
the Participant's entire interest must be
completed by December 31 of the calendar
year containing the fifth anniversary of the
Participant's death.
3. For purposes of Section 6.06(E)(2) above, if the
surviving spouse dies after the Participant, but
before payments to such spouse begin, the provisions
of Section 6.06(E)(2), with the exception of
paragraph (b) therein, shall be applied as if the
surviving spouse were the Participant.
4. For purposes of this Section 6.06(E), any amount paid
to a child of the Participant will be treated as if
it had been paid to the surviving spouse if the
amount becomes payable to the surviving spouse when
the child reaches the age of majority.
5. For purposes of this Section 6.06(E), distribution of
a Participant's interest is considered to begin on
the Participant's required beginning date (or, if
Section 6.06(E)(3) above is applicable, the date
distribution is required to begin to the surviving
spouse pursuant to Section 6-06(E)(2) above). If
distribution in the form of an annuity irrevocably
commences to the Participant before the required
beginning date, the date distribution is considered
to begin is the date distribution actually commences.
E. DEFINITIONS
1. Applicable Life Expectancy - The life expectancy (or
joint and last survivor expectancy) calculated using
the attained age of the Participant (or designated
Beneficiary') as of the Participant's (or designated
Beneficiary's) birthday in the applicable calendar
year reduced by one for each calendar year which has
elapsed since the date life expectancy was first
calculated. If life expectancy, is being
recalculated, the applicable life expectancy shall be
the life expectancy as so recalculated. The
applicable calendar year shall be the first
distribution calendar year, and if life expectancy is
being recalculated such succeeding calendar year.
2. Designated Beneficiary, - The individual who is
designated as the Beneficiary under the Plan in
accordance with Section 401(a)(9) of the Code and the
regulations thereunder.
3. Distribution Calendar Year - A calendar year for
which a minimum distribution is required. For
distributions beginning before the Participant's
death, the first distribution calendar year is the
calendar year immediately preceding the calendar year
which contains the Participant's required beginning
date. For distributions beginning after the
Participant's death, the first distribution calendar
year is the calendar year in which distributions are
required to begin Pursuant to Section 6.03(E) above.
4. Life Expectancy - Life expectancy and joint and last
survivor expectancy are computed by use of the
expected return multiples in Tables V and VI of
Section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Participant (or
spouse, in the case of distributions described in
Section 6.05(E)(2)(b) above) by the time
distributions are required to begin, life
expectancies shall be recalculated annuity. Such
election shall be irrevocable as to the Participant
(or spouse) and shall apply to all subsequent years.
The life expectancy of a nonspouse Beneficiary may
not be recalculated.
5. Participant's Benefit
a. The account balance as of the last valuation
date in the valuation calendar year (the
calendar year immediately preceding the
distribution calendar year) increased by the
amount of any Contributions or Forfeitures
allocated to the account balance as of dates
in the valuation calendar year after the
valuation date and decreased by
distributions made in the valuation calendar
year after the valuation date.
b. Exception for second distribution calendar
year. For purposes of paragraph (a) above,
if any portion of the minimum distribution
for the first distribution calendar year is
made in the second distribution calendar
year on or before the required beginning
date, the amount of the minimum distribution
made in the second distribution calendar
year shall be treated as if it had been made
in the immediately preceding distribution
calendar year.
<PAGE> 70
32
6. Required Beginning Date
a. General Rule - The required beginning, date
of a Participant is the first day of April
of the calendar year following the calendar
year in which the Participant attains age 70
1/2.
b. Transitional Rules - The required beginning
date of a Participant who attains age 70
1/2 before January 1, 1988, shall be
determined in accordance with (1) or (2)
below:
(1) Non 5% Owners - The required
beginning date of a Participant who
is not a 5% owner is the first day
of April of the calendar year
following the calendar year in which
the later of retirement or
attainment of age 70 1/2 occurs.
(2) 5% Owners - The required beginning
date of a Participant who is a 5%
owner during any year beginning
after December 31, 1979, is the
first day of April following the
later of:
(a) the calendar year in which
the Participant attains
age 70 1/2, or
(b) the earlier of the calendar
year with or within which
ends the Plan Year in which
the Participant becomes a
5% owner, or the calendar
year in which the
Participant retires.
The required beginning date
of a Participant who is not
a 5% owner who attains age
70 1/12 during 1988 and who
has not retired as of
January 1, 1989, is April
1, 1990.
c. Owner - A Participant is treated as
a 5% owner for purposes of this
Section 6-06(F)(6) if such
Participant is a 5% owner as defined
in Section 4160) of the Code
(determined in accordance with
Section 416 but without regard to
whether the Plan is top-heavy) at
any time during the Plan Year ending
with or within the calendar year in
which such owner attains age 66 1/2
or any subsequent Plan Year.
d. Once distributions have begun to a
5% owner under this Section
6.06(F)(6) they must continue to be
distributed, even if the Participant
ceases to be a 5% owner in a
subsequent year.
G. TRANSITIONAL RULE
1. Notwithstanding the other requirements of this
Section 6.06 and subject to the requirements of
Section 6.05, Joint and Survivor Annuity
Requirements, distribution on behalf of any Employee,
including a 5% owner, may be made in accordance with
all of the following requirements (regardless of when
such distribution commences):
a. The distribution by the Fund is one which
would not have qualified such Fund under
Section 401(a)(9) of the Code as in effect
prior to amendment by the Deficit Reduction
Act of 1984.
b. The distribution is in accordance with a
method of distribution designated by the
Employee whose interest in the Fund is being
distributed or, if the Employee is deceased,
by a Beneficiary of such Employee.
c. Such designation was in writing, was signed
by the Employee or the Beneficiary, and was
made before January 1, 1984.
d. The Employee had accrued a benefit under the
Plan as of December 31, 1983.
e. The method of distribution designated by the
Employee or the Beneficiary specifies the
time at which distribution will commence,
the period over which distributions will be
made, and in the case of any distribution
upon the Employee's death, the Beneficiaries
of the Employee listed in order of priority.
2. A distribution upon death will not be covered by this
transitional rule unless the information in the
designation contains the required information
described above with respect to the distributions to
be made upon the death of the Employee.
<PAGE> 71
33
3. For any distribution which commences before January
1, 198-4, but continues after December 31, 1983, the
Employee, or the Beneficiary to whom such
distribution is being made, will be presumed to have
designated the method of distribution under which the
distribution is being made if the method of
distribution was specified in writing and the
distribution satisfies the requirements in Sections
6.06(G)(1)(a) and (e).
4. If a designation is revoked, any subsequent
distribution must satisfy the requirements of Section
401(a)(9) of the Code and the regulations thereunder.
If a designation is revoked subsequent to the date
distributions are required to begin, the Plan must
distribute by the end of the calendar year following
the calendar year in which the revocation occurs the
total amount not yet distributed which would have
been required to have been distributed to satisfy
Section 401(a)(9) of the Code and the regulations
thereunder, but for the Section 242(b)(2) election.
For calendar years beginning after December 31, 1988,
such distributions must meet the minimum distribution
incidental benefit requirements in Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Any changes in the designation will be considered to
be a revocation of the designation. However, the mere
substitution or addition of another Beneficiary (one
not named in the designation) under the designation
will not be considered to be a revocation of the
designation, so long as such substitution or addition
does not alter the period over which distributions
are to be made under the designation, directly or
indirectly (for example, by altering the relevant
measuring life). In the case in which an amount is
transferred or rolled over from one plan to another
plan, the rules in Q&A J-2 and Q&A J-3 shall apply.
6.07 ANNUITY CONTRACTS
Any annuity contract distributed under the Plan (if permitted or
required by this Section 6) must be nontransferable. The terms of any
annuity contract purchased and distributed by the Plan to a Participant
or spouse shall comply with the requirements of the Plan.
6.08 LOANS TO PARTICIPANTS
If the Adoption Agreement so indicates, a Participant may receive a
loan from the Fund, subject to the following rules:
A. Loans shall be made available to all Participants on a
reasonably equivalent basis.
B. Loans shall not be made available to Highly Compensated
Employees, (as defined in Section 414(q) of the Code) in an
amount greater than the amount made available to other
Employee's.
C. Loans must be adequately secured and bear a reasonable
interest rate.
D. No Participant loan shall exceed the present value of the
Vested portion of a Participant's Individual Account.
E. A Participant must obtain the consent of his or her spouse, if
any, to the use of the Individual Account as security for the
loan. Spousal consent shall be obtained no earlier toil~an the
beginning of the 90 day period that ends on the date on which
the loan is to be so secured. The consent must be in writing,
must acknowledge the effect of the loan, and must be witnessed
by a plan representative or notary public. Such consent shall
thereafter be binding with respect to the consenting spouse or
any subsequent spouse with respect to that loan. A new consent
shall be required if the account balance is used for
renegotiation, extension, renewal, or other revision of the
loan. Notwithstanding the foregoing, no spousal consent is
necessary if, at the time the loan is secured, no consent
would be required for a distribution under Section
417(a)(2)(B). In addition ' spousal consent is not required if
the Plan or the Participant is not subject to Section
401(a)(11) at the time the Individual Account is used as
security, or if the total Individual Account subject to the
security is less than or equal to $3,500.
F. In the event of default, foreclosure on the note and
attachment of security will not occur until a distributable
event occurs in the Plan. Notwithstanding the preceding
sentence, a Participant's default on a loan will be treated as
a distributable event and as soon as administratively feasible
after the default, the Participant's Vested Individual Account
will be reduced by the lesser of the amount in default (plus
accrued interest) or the amount secured. If this Plan is a
401(k) plan, then to the extent the loan is attributable to a
Participant's Elective Deferrals, Qualified Nonelective
Contributions or Qualified Matching Contributions, the
Participant's Individual Account will not be reduced unless
the Participant has attained age 59 1/2 or has another
distributable event- A Participant will be deemed to have
consented to the provision at the time the loan is made to the
Participant.
G. No loans will be made to any shareholder-employee or
Owner-Employee. For purposes of this requirement, a
shareholder-employee means an employee or officer of an
electing small business (Subchapter S) corporation who owns
(or is considered as owning within the meaning of Section
318(a)(1) of the Code), on any day during the taxable year of
such corporation, more than 5% of the outstanding stock of the
corporation.
If a valid spousal consent has been obtained in accordance
with 6.08(E), then, notwithstanding any other provisions of
this Plan, the portion of the Participant's Vested Individual
Account used as a security interest held by the Plan by reason
of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account
balance payable at the time of death or distribution, but only
if the reduction is used as repayment of the loan. If less
than 100% of the Participant's Vested Individual Account
(determined without regard to the preceding sentence) is
payable to the surviving spouse, then the account balance
shall be adjusted by first reducing the Vested Individual
Account by the amount of the security used as repayment of the
loan, and then determining the benefit payable to the
surviving spouse.
<PAGE> 72
34
To avoid taxation to the Participant, no loan to any
Participant can be made to the extent that such loan when
added to the outstanding balance of all other loans to the
Participant would exceed the lesser of (a) $50,000 reduced by
the excess (if any) of the highest outstanding balance of loan
during the one year period ending on the day before the loan
is made, over the outstanding balance of loans from the Plan
on the date the loan is made, or (b) 50% of the present value
of the nonforfeitable Individual Account of the Participant
or, if greater, the total Individual Account up to $10,000.
For the purpose of the above limitation, all loans from all
plans of the Employer and other members of a group of
employers described in Sections 414(b), 414(c), and 414(m) of
the Code are aggregated. Furthermore, any loan shall by its
terms require that repayment (principal and interest) be
amortized in level payments, not less frequently than
quarterly, over a period not extending beyond 5 years from the
date of the loan, unless such loan is used to acquire a
dwelling unit which within a reasonable time (determined at
the time the loan is made) will be used as the principal
residence of the Participant. An assignment or pledge of any
portion of the Participant's interest in the Plan and a loan,
pledge, or assignment with respect to any insurance contract
purchased under the Plan, will be treated as a loan under this
paragraph.
The Plan Administrator shall administer the loan program in
accordance with a written document. Such written document
shall include, at a minimum, the following: 6) the identity of
the person or positions authorized to administer the
Participant loan program; (ii) the procedure for applying for
loans; (iii) the basis on which loans will be approved or
denied; (iv) limitations (if any) on the types and amounts of
loan offered, (v) the procedure under the program for
determining a reasonable rate of interest; (vi) the types of
collateral which may secure a Participant loan; and (vii) the
events constituting default and the steps that will be taken
to preserve Plan assets in the event of such default.
6.09 DISTRIBUTION IN KIND
The Plan Administrator may cause any distribution under this Plan to be
made either in a form actually held in the Fund, or in cash by
converting assets other than cash into cash, or in any combination of
the two foregoing ways.
6.10 DIRECT ROLLOVERS OF ELIGIBLE ROLLOVER DISTRIBUTIONS
A. Direct Rollover Option
This Section applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election
under this Section, a distributee may elect, at the time and
in the manner prescribed by the Plan Administrator, to have
any portion of an eligible rollover distribution that is equal
to at least $500 paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
B. DEFINITIONS
1. Eligible rollover distribution - An eligible rollover
distribution is any distribution of all or any
portion of the balance to the credit of the
distributee, except that an eligible rollover
distribution does not include:
a. any distribution that is one of a series of
substantially equal periodic payments (not
less frequently than annually) made for the
life (or life expectancy) of the distributee
or the joint lives (or joint life
expectancies) of the distributee and the
distributee's designated Beneficiary, or for
a specified period of ten years or more;
b. any distribution to the extent such
distribution is required under Section
401(a)(9) of the Code;
c. the portion of any other distribution that
is not includible in gross income
(determined without regard to the exclusion
for net unrealized appreciation with respect
to employer securities); and
d. any other distribution(s) that is reasonably
expected to total less than $200 during a
year.
2. Eligible retirement plan -An eligible retirement plan
is an individual retirement account described in
Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code,
or a qualified trust described in Section 401(a) of
the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an
eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
3. Distributee - A distributee includes an Employee or
former Employee. In addition, the Employee's or
former Employee's surviving spouse and the Employee's
or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the
Code, are distributees with regard to the interest of
the spouse or former spouse.
4. Direct rollover - A direct rollover is a payment by
the Plan to the eligible retirement plan specified by
the distributee.
<PAGE> 73
35
6.11 PROCEDURE FOR MISSING PARTICIPANTS OR BENEFICIARIES
The Plan Administrator must use all reasonable measures to locate
Participants or Beneficiaries who are entitled to distributions from
the Plan. In the event that the Plan Administrator cannot locate a
Participant or Beneficiary who is entitled to a distribution from the
Plan after using all reasonable measures to locate him or her, the Plan
Administrator may, consistent with applicable laws, regulations and
other pronouncements under ERISA, use any reasonable procedure to
dispose of distributable plan assets, including any of the following:
(1) establish a bank account for and in the name of the Participant or
Beneficiary and transfer the assets to such bank account, (2) purchase
an annuity contract with the assets in the name of the Participant or
Beneficiary, or (3) after the expiration of 5 years after the benefit
becomes payable, treat the amount distributable as a Forfeiture and
allocate it in accordance with the terms of the Plan and if the
Participant or Beneficiary is later located, restore such benefit to
the Plan.
SECTION SEVEN CLAIMS PROCEDURE
7.01 FILING A CLAIM FOR PLAN DISTRIBUTIONS
A Participant or Beneficiary who desires to make a claim for the Vested
portion of the Participant's Individual Account shall file a written
request with the Plan Administrator on a form to be furnished to him or
her by the Plan Administrator for such purpose. The request shall set
forth the basis of the claim. The Plan Administrator is authorized to
conduct such examinations as may be necessary to facilitate the payment
of any benefits to which the Participant or Beneficiary may be entitled
under the terms of the Plan.
7.02 DENIAL OF CLAIM
Whenever a claim for a Plan distribution by any Participant or
Beneficiary has been wholly or partially denied, the Plan Administrator
must furnish such Participant or Beneficiary written notice of the
denial within 60 days of the date the original claim was filed. This
notice shall set forth the specific reasons for the denial, specific
reference to pertinent Plan provisions on which the denial is based, a
description of any additional information or material needed to perfect
the claim, an explanation of why such additional information or
material is necessary and an explanation of the procedures for appeal.
7.03 REMEDIES AVAILABLE
The Participant or Beneficiary shall have 60 days from receipt of the
denial notice in which to make written application for review by the
Plan Administrator. The Participant or Beneficiary may request that the
review be in the nature of a hearing. The Participant or Beneficiary,
shall have the right to representation, to review pertinent documents
and to submit comments in writing. The Plan Administrator shall issue a
decision on such review within 60 days after receipt of an application
for review as provided for in Section 7.02. Upon a decision unfavorable
to the Participant or Beneficiary, such Participant or Beneficiary
shall be entitled to bring such actions in law or equity as may be
necessary or appropriate to protect or clarify his or her right to
benefits under this Plan.
SECTION EIGHT PLAN ADMINISTRATOR
8.01 EMPLOYER IS PLAN ADMINISTRATOR
A. The Employer shall be the Plan Administrator unless the
managing body of the Employer designates a person or persons
other than the Employer as the Plan Administrator and so
notifies the Trustee (or Custodian, if applicable). The
Employer shall also be the Plan Administrator if the person or
persons so designated cease to be the Plan Administrator. The
Employer may establish an administrative committee that will
carry out the Plan Administrator's duties. Members of the
administrative committee may allocate the Plan Administrator's
duties among themselves.
B. If the managing body of the Employer designates a person or
persons other than the Employer as Plan Administrator, such
person or persons shall serve at the pleasure of the Employer
and shall serve pursuant to such procedures as such managing
body may provide. Each such person shall be bonded as may be
required by law.
8.02 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR
A. The Plan Administrator may, by appointment, allocate the
duties of the Plan Administrator among several individuals or
entities. Such appointments shall not be effective until the
party designated accepts such appointment in writing.
B. The Plan Administrator shall have the authority to control and
manage the operation and administration of the Plan. The
Plan Administrator shall administer the Plan for the exclusive
benefit of the Participants and their Beneficiaries in
accordance with the specific terms of the Plan.
C. The Plan Administrator shall be charged with the duties of the
general administration of the Plan, including, but not limited
to the following:
1. To determine all questions of interpretation or
policy in a manner consistent with the Plan's
documents and the Plan Administrator's construction
or determination in good faith shall be conclusive
and binding on all persons except as otherwise
provided herein or by law. Any interpretation or
construction shall be done in a nondiscriminatory
manner and shall he consistent with the intent that
the Plan shall continue to be deemed a qualified plan
under the terms of Section 401(a) of the Code, as
amended from time-to-time, and shall comply with the
terms of ERISA, as amended from time-to-time.
2. To determine all questions relating to the
eligibility of Employees to become or remain
Participants hereunder;
<PAGE> 74
36
3. To compute the amounts necessary or desirable to be
contributed to the Plan;
4. To compute the amount and kind of benefits to which a
Participant or Beneficiary, shall be entitled under
the Plan and to direct the Trustee (or Custodian, if
applicable) with respect to all disbursements under
the Plan, and, when requested by the Trustee (or
Custodian), to furnish the Trustee (or Custodian)
with instructions, in writing, on matters pertaining
to the Plan and the Trustee (or Custodian) may rely
and act thereon;
5. To maintain all records necessary for the
administration of the Plan;
6. To be responsible for preparing and filing such
disclosure and tax forms as may be required from
time-to-time by the Secretary of Labor or the
Secretary of the Treasury; and
7. To furnish each Employee, Participant or Beneficiary
such notices, information and reports under such
circumstances as may be required by law.
D. The Plan Administrator shall have all of the powers necessary
or appropriate to accomplish his or her duties under the Plan,
including, but not limited to, the following:
1. To appoint and retain such persons as may be
necessary to carry out the functions of the Plan
Administrator,
2. To appoint and retain counsel, specialists or other
persons as the Plan Administrator deems necessary or
advisable in the administration of the Plan;
3. To resolve all questions of administration of the
Plan;
4. To establish such uniform and nondiscriminatory rules
which it deems necessary to cam, out the terms of the
Plan;
5. To make any adjustments in a uniform and
nondiscriminatory manner which it deems necessary to
correct any arithmetical or accounting errors which
may have been made for any Plan Year; and
6. To correct any defect, supply any omission or
reconcile any inconsistency in such manner and to
such extent as shall be deemed necessary or advisable
to carry out the purpose of the Plan.
8.03 EXPENSES AND COMPENSATION
All reasonable expenses of administration including, but not limited
to, those involved in retaining necessary professional assistance may
be paid from the assets of the Fund. Alternatively, the Employer may,
in its discretion, pay any or all such expenses. Pursuant to uniform
and nondiscriminatory rules that the Plan Administrator may establish
from time to time, administrative expenses and expenses unique to a
particular Participant may be charged to a Participant's Individual
Account or the Plan Administrator may allow Participants to pay such
fees outside of the Plan. The Employer shall furnish the Plan
Administrator with such clerical and other assistance as the Plan
Administrator may need in the performance of his or her duties.
8.04 INFORMATION FROM EMPLOYER
To enable the Plan Administrator to perform his or her duties, the
Employer shall supply full and timely information to the Plan
Administrator (or his or her designated agents) on all matters relating
to the Compensation of all Participants, their regular employment,
retirement, death, Disability or Termination of Employment, and such
other pertinent facts as the Plan Administrator (or his or her agents)
may require. The Plan Administrator shall advise the Trustee (or
Custodian, if applicable) of such of the foregoing facts as may be
pertinent to the Trustee's (or Custodian's) duties under the Plan. The
Plan Administrator (or his or her agents) is entitled to rely on such
information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
SECTION NINE AMENDMENT AND TERMINATION
9.01 RIGHT OF PROTOTYPE SPONSOR TO AMEND THE PLAN
A. The Employer, by adopting the Plan, expressly delegates to the
Prototype Sponsor the power, but not the duty, to amend the
Plan without any further action or consent of the Employer as
the Prototype Sponsor deems necessary for the purpose of
adjusting the Plan to comply with all laws and regulations
governing pension or profit sharing plans. Specifically, it is
understood that the amendments may be made unilaterally by the
Prototype Sponsor. However, it shall be understood that the
Prototype Sponsor shall be under no obligation to amend the
Plan documents and the Employer expressly waives any rights or
claims against the Prototype Sponsor for not exercising this
power to amend. For purposes of Prototype Sponsor amendments,
the mass submitter shall be recognized as the agent of the
Prototype Sponsor. If the Prototype Sponsor does not adopt the
amendments made by the mass submitter, it will no longer be
identical to or a minor modifier of the mass submitter plan.
B. An amendment by the Prototype Sponsor shall be accomplished by
giving written notice to the Employer of the amendment to be
made. The notice shall set forth the text of such amendment
and the date such amendment is to be effective. Such amendment
shall take effect unless within the 30 day period after such
notice is provided, or within such shorter period as the
notice may specify, the Employer gives the Prototype Sponsor
written notice of refusal to consent to the amendment. Such
written notice of refusal shall have the effect of withdrawing
the Plan as a prototype plan and shall cause the Plan to be
considered an individually designed plan. The right of the
Prototype Sponsor to cause the Plan to be amended shall
terminate should the Plan cease to conform as a prototype plan
as provided in this or any other section.
<PAGE> 75
37
9.02 RIGHT OF EMPLOYER TO AMEND THE PLAN
The Employer may (1) change the choice of options in the Adoption
Agreement; (2) add overriding language in the Adoption Agreement when
such language is necessary to satisfy Section 415 or Section 416 of the
Code because of the required aggregation of multiple plans; and (3) add
certain model amendments published by the Internal Revenue Service
which specifically provide that their adoption will not cause the Plan
to be treated as individually designed. An Employer that amends the
Plan for any other reason, including a waiver of the minimum funding
requirement under Section 412(d) of the Code, will no longer
participate in this prototype plan and will be considered to have an
individually designed plan.
An Employer who wishes to amend the Plan to change the options it has
chosen in the Adoption Agreement must complete and deliver a new
Adoption Agreement to the Prototype Sponsor and Trustee (or Custodian,
if applicable). Such amendment shall become effective upon execution by
the Employer and Trustee (or Custodian).
The Employer further reserves the right to replace the Plan in its
entirety by adopting another retirement plan which the Employer
designates as a replacement plan.
9.03 LIMITATION ON POWER TO AMEND
No amendment to the Plan shall be effective to the extent that it has
the effect of decreasing a Participant's accrued benefit.
Notwithstanding the preceding sentence, a Participant's Individual
Account may be reduced to the extent permitted under Section 412(c)(8)
of the Code. For purposes of this paragraph, a plan amendment which has
the effect of decreasing a Participant's Individual Account or
eliminating an optional form of benefit with respect to benefits
attributable to service before the amendment shall be treated as
reducing an accrued benefit. Furthermore, if the vesting schedule of a
Plan is amended, in the case of an Employee who is a Participant as of
the later of the date such amendment is adopted or the date it becomes
effective, the Vested percentage (determined as of such date) of such
Employee's Individual Account derived from Employer Contributions will
not be less than the percentage computed under the Plan without regard
to such amendment.
9.04 AMENDMENT OF VESTING SCHEDULE
If the Plan's vesting schedule is amended, or the Plan is amended in
any way that directly or indirectly affects the computation of the
Participant's Vested percentage, or if the Plan is deemed amended by an
automatic change to or from a top-heavy vesting schedule, each
Participant with at least 3 Years of Vesting Service with the Employer
may elect, within the time set forth below, to have the Vested
percentage computed under the Plan without regard to such amendment.
For Participants who do not have at least I Hour of Service in any Plan
Year beginning after December 31, 1988, the preceding sentence shall be
applied by substituting "5 Years of Vesting Service" for "3 Years of
Vesting Service" where such language appears.
The Period during which the election may be made shall commence with
the date the amendment is adopted or deemed to be made and shall end
the later of:
A. 60 days after the amendment is adopted;
B. 60 days after the amendment becomes effective; or
C. 60 days after the Participant is issued written notice of the
amendment by the Employer or Plan Administrator.
9.05 PERMANENCY
The Employer expects to continue this Plan and make the necessary
contributions thereto indefinitely, but such continuance and payment is
not assumed as a contractual obligation. Neither the Adoption Agreement
nor the Plan nor any amendment or modification thereof nor the making
of contributions hereunder shall be construed as giving any Participant
or any person whomsoever any legal or equitable right against the
Employer, the Trustee (or Custodian, if applicable) the Plan
Administrator or the Prototype Sponsor except as specifically provided
herein, or as provided by law.
9.06 METHOD AND PROCEDURE FOR TERMINATION
The Plan may be terminated by the Employer at any time by appropriate
action of its managing body. Such termination shall be effective on the
date specified by the Employer. The Plan shall terminate if the
Employer shall be dissolved, terminated, or declared bankrupt. Written
notice of the termination and effective date thereof shall be given to
the Trustee (or Custodian), Plan Administrator, Prototype Sponsor,
Participants and Beneficiaries of deceased Participants, and the
required filings (such as the Form 5500 series and others) must be made
with the Internal Revenue Service and any other regulatory body as
required by current laws and regulations. Until all of the assets have
been distributed from the Fund, the Employer must keep the Plan in
compliance with current laws and regulations by (a) making appropriate
amendments to the Plan and (b) taking such other measures as may be
required.
9.07 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER
Notwithstanding the preceding Section 9.06, a successor of the Employer
may continue the Plan and be substituted in the place of the present
Employer. The successor and the present Employer (or, if deceased, the
executor of the estate of a deceased Self-Employed Individual who was
the Employer) must execute a written instrument authorizing such
substitution and the successor must complete and sign a new plan
document.
<PAGE> 76
38
9.08 FAILURE OF PLAN QUALIFICATION
If the Plan fails to retain its qualified status, the Plan will no
longer be considered to be part of a prototype plan, and such Employer
can no longer participate under this prototype. In such event, the Plan
will be considered an individually designed plan.
SECTION TEN MISCELLANEOUS
10.01 STATE COMMUNITY PROPERTY LAWS
The terms and conditions of this Plan shall be applicable without
regard to the community property laws of any state.
10.02 HEADINGS
The headings of the Plan have been inserted for convenience of
reference only and are to be ignored in any construction of the
provisions hereof.
10.03 GENDER AND NUMBER
Whenever any words are used herein in the masculine gender they shall
be construed as though they were also used in the feminine gender in
all cases where they would so apply, and whenever any words are used
herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
10.04 PLAN MERGER OR CONSOLIDATION
In the case of any merger or consolidation of the Plan with, or
transfer of assets or liabilities of such Plan to, any other plan, each
Participant shall be entitled to receive benefits immediately after the
merger, consolidation, or transfer (if the Plan had then terminated)
which are equal to or greater than the benefit he or she would have
been entitled to receive immediately before the merger, consolidation,
or transfer (if the Plan had then terminated). The Trustee (or
Custodian) has the authority to enter into merger agreements or
agreements to directly transfer the assets of this Plan but only if
such agreements are made with trustees or custodians of other
retirement plans described in Section 401(a) of the Code.
10.05 STANDARD OF FIDUCIARY CONDUCT
The Employer, Plan Administrator, Trustee and any other fiduciary under
this Plan shall discharge their duties with respect to this Plan solely
in the interests of Participants and their Beneficiaries and with the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in like capacity and familiar with
such matters would use in the conduct of an enterprise of a like
character and with like aims. No fiduciary shall cause the Plan to
engage in any transaction known as a "prohibited transaction" under
ERISA.
10.06 GENERAL UNDERTAKING OF ALL PARTIES
All parties to this Plan and all persons claiming any interest
whatsoever hereunder agree to perform any and all acts and execute any
and all documents and papers which may be necessary or desirable for
the carrying out of this Plan and any of its provisions.
10.07 AGREEMENT BINDS HEIRS, ETC.
This Plan shall be binding upon the heirs, executors, administrators,
successors and assigns, as those terms shall apply to any and all
parties hereto, present and future.
10.08 DETERMINATION OF TOP-HEAVY STATUS
A. For any Plan Year beginning after December 31, 1983, this Plan
is a Top-Heavy Plan if any of the following conditions exist:
1. If the top-heavy ratio for this Plan exceeds 60% and
this Plan is not part of any required aggregation
group or permissive aggregation group of plans.
2. If this Plan is part of a required aggregation group
of plans but not part of a permissive aggregation
group and the top-heavy ratio for the group of plans
exceeds 60%.
3. If this Plan is a part of a required aggregation
group and part of a permissive aggregation group of
plans and the top-heavy ratio for the permissive
aggregation group exceeds 60%.
For purposes of this Section 10.08, the following
terms shall have the meanings indicated below:
B. KEY EMPLOYEE - Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the
determination period was an officer of the Employer if such
individual's annual compensation exceeds 50% of the dollar
limitation under Section 415(b)(1)(A) of the Code, an owner
(or considered an owner under Section 318 of the Code) of one
of the 10 largest interests in the Employer if such
individual's compensation exceeds 100% of the dollar
limitation under Section 415(c)(1)(A) of the Code, a 5% owner
of the Employer, or a 11/o owner of the Employer who has an
annual compensation of more than $150,000. Annual compensation
means compensation as defined in Section 415(c)(3) of the
Code, but including amounts contributed by the Employer
pursuant to a salary reduction agreement which are excludable
from the Employee's gross income under Section 125, Section
402(e)(3), Section 402(h)(1)(B) or Section 403(b) of the Code.
The determination period is the Plan Year containing the
determination date and the 4 preceding Plan Years.
<PAGE> 77
39
The determination of who is a Key Employee will be made in
accordance with Section 416(i)(1) of the Code and the
regulations thereunder.
C. Top-heavy ratio
1. If the Employer maintains one or more defined
contribution plans (including any simplified employee
pension plan) and the Employer has not maintained any
defined benefit plan which during the 5-year period
ending on the determination date(s) has or has had
accrued benefits, the top-heavy ratio for this Plan
alone or for the required or permissive aggregation
group as appropriate is a fraction, the numerator of
which is the sum of the account balances of all Key
Employees as of the determination date(s) (including
any part of any account balance distributed in the
5-year period ending on the determination date(s)),
and the denominator of which is the sum of all
account balances (including any part of any account
balance distributed in the 5-year period ending on
the determination date(s)), both computed in
accordance with Section 416 of the Code and the
regulations thereunder. Both the numerator and the
denominator of the top-heavy ratio are increased to
reflect any contribution not actually made as of the
determination date, but which is required to be taken
into account on that date under Section 416 of the
Code and the regulations thereunder.
2. If the Employer maintains one or more defined
contribution plans (including any simplified employee
pension plan) and the Employer maintains or has
maintained one or more defined benefit plan's which
during the 5-year period ending on the determination
date(s) has or has had any accrued benefits, the
top-heavy ratio for any required or permissive
aggregation group as appropriate is a fraction, the
numerator of which is the sum of account balances
under the aggregated defined contribution plan or
plans for all Key Employees, determined in accordance
with (1) above, and the present value of accrued
benefits under the aggregated defined benefit plan or
plans for all Key Employees as of the determination
date(s), and the denominator of which is the sum of
the account balances under the aggregated defined
contribution plan or plans for all Participants,
determined in accordance with (1) above, and the
present value of accrued benefits under the defined
benefit plan or plans for all Participants as of the
determination date(s), all determined in accordance
with Section 416 of the Code and the regulations
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 5-year
period ending on the determination date.
3. For purposes of (1) and (2) above, the value of
account balances and the present value of accrued
benefits will be determined as of the most recent
valuation date that falls within or ends with the
12-month period ending on the determination date,
except as provided in Section 416 of the Code and the
regulations thereunder for the first and second plan
years of a defined benefit plan. The account balances
and accrued benefits of a Participant (a) who is not
a Key Employee but who was a Key Employee in a Prior
Year, or (b) who has not been credited with at least
one Hour of Service with any employer maintaining the
plan at any time during the 5-year period ending on
the determination date will be disregarded. The
calculation of the top-heavy ratio, and the extent~to
which distributions, rollovers, and transfers are
taken into account will be made in accordance with
Section 416 of the Code and the regulations
thereunder. Deductible employee contributions will
not be taken into account for purposes of computing
the top-heavy ratio. When aggregating plans the value
of account balances and accrued benefits will be
calculated with reference to the determination dates
that fall within the same calendar year.
The accrued benefit of a Participant other than a Key
Employee shall be determined under (a) the method, if
any, that uniformly applies for accrual purposes
under all defined benefit plans maintained by the
Employer, or (b) if there is no such method, as if
such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional
rule of Section 411(b)(1)(C) of the Code.
4. Permissive aggregation group: The required
aggregation group of plans plus any other plan or
plans of the Employer which, when considered as a
group with the required aggregation group, would
continue to satisfy the requirements of Sections
401(a)(4) and 410 of the Code.
5. Required aggregation group: (a) Each qualified plan
of the Employer in which at least one Key Employee
participates or participated at any time during the
determination period (regardless of whether the Plan
has terminated), and (b) any other qualified plan of
the Employer which enables a plan described in (a) to
meet the requirements of Sections 401(a)(4) or 410 of
the Code.
6. Determination date: For any Plan Year subsequent to
the first Plan Year, the last day of the preceding
Plan Year. For the first Plan Year of the Plan, the
last day of that year.
<PAGE> 78
40
7. Valuation date: For purposes of calculating the
top-heavy ratio, the valuation date shall be the last
day of each Plan Year.
8. Present value: For purposes of establishing the
"present value" of benefits under a defined benefit
plan to compute the top-heavy ratio, any benefit
shall be discounted only for mortality and interest
based on the interest rate and mortality table
specified for this purpose in the defined benefit
plan, unless otherwise indicated in the Adoption
Agreement.
10.09 SPECIAL LIMITATIONS FOR OWNER-EMPLOYEES
If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan is
established and one or more other trades or businesses, this Plan and
the plan established for other trades or businesses must, when looked
at as a single plan, satisfy Sections 401(a) and (d) of the Code for
the employees of those trades or businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan
which satisfies Sections 401(a) and (d) of the Code and which provides
contributions and benefits not less favorable than provided for
Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which are not controlled and the
individual controls a trade or business, then the contributions or
benefits of the employees under the plan of the trade or business which
is controlled must be as favorable as those provided for him or her
under the most favorable plan of the trade or business which is not
controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or two or
more Owner-Employees, will be considered to control a trade or business
if the Owner-Employee, or two or more Owner-Employees, together:
A. own the entire interest in a unincorporated trade or business,
or
B. in the case of a partnership, own more than 50% of either the
capital interest or the profit interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or
more Owner-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.
10.10 INALIENABILITY OF BENEFITS
No benefit or interest available hereunder will be subject to
assignment or alienation, either voluntarily or involuntarily. The
preceding sentence shall also apply to the creation, assignment, or
recognition of a right to any benefit payable with respect to a
Participant pursuant to a domes~c relations order, unless such order is
determined to be a qualified domestic relations order, as defined in
Section 414(p) of the Code.
Generally, a domestic relations order cannot be a qualified domestic
relations order until January 1, 1985. However, in the case of a
domestic relations order entered before such date, the Plan
Administrator:
(1) shall treat such order as a qualified domestic relations order
if such Plan Administrator is paying benefits pursuant to such
order on such date, and
(2) may treat any other such order entered before such date as a
qualified domestic relations order even if such order does not
meet the requirements of Section 414(p) of the Code.
Notwithstanding any provision of the Plan to the contrary, a
distribution to an alternate payee under a qualified domestic relations
order shall be permitted even if the Participant affected by Such Order
is not otherwise entitled to a distribution and even if such
Participant has not attained earliest retirement age as defined in
Section 414(p) of the Code.
10.11 CANNOT ELIMINATE PROTECTED BENEFITS
Pursuant to Section 411(d)(6) of the Code, and the regulations
thereunder, the Employer cannot reduce, eliminate or make subject to
Employer discretion any Section 411 (d)(6) protected benefit. Where
this Plan document is being adopted to amend another plan thai contains
a protected benefit not provided for in this document, the Employer may
attach a supplement to the Adoption Agreement that describes such
protected benefit which shall become part of the Plan.
SECTION ELEVEN 401(K) PROVISIONS
In addition to Sections I through 10, the provisions of this Section 11
shall apply if the Employer has established a 401(k) cash or deferred
arrangement (CODA) by completing and signing the appropriate, Adoption
Agreement.
11.100 DEFINITIONS
The following words and phrases when used in the Plan with initial
capital letters shall, for the purposes of this Plan, have the meanings
set forth below unless the context indicates that other meanings are
intended.
<PAGE> 79
41
11.101 ACTUAL DEFERRAL PERCENTAGE (ADP)
Means, for a specified group of Participants for a Plan Year, the
average of the ratios (calculated separately for each Participant in
such group) of (1) the amount of Employer Contributions actually paid
over to the Fund on behalf of such Participant f~r the Plan Year to (2)
the Participant's Compensation for such Plan Year (taking into account
only that Compensation paid to the Employee during the portion of the
Plan Year he or she was an eligible Participant, unless otherwise
indicated in the Adoption Agreement). For purposes of calculating the
ADF, Employer Contributions on behalf of any Participant shall include:
(1) any Elective Deferrals made pursuant to the Participant's deferral
election, (including Excess Elective Deferrals of Highly Compensated
Employees), but excluding (a) Excess Elective Deferrals of Non-Highly
Compensated Employees that arise solely from Elective Deferrals made
under the Plan or plans of this Employer and (b) Elective Deferrals
that are taken into account in the Contribution Percentage test
(provided the ADP test is satisfied both with and without exclusion of
these Elective Deferrals); and (2) at the election of the Employer,
Qualified Nonelective Contributions and Qualified Matching
Contributions For purposes of computing Actual Deferral Percentages, an
Employee who would be a Participant but for the failure to make
Elective Deferrals shall be treated as a Participant on whose behalf no
Elective Deferrals are made.
11.102 AGGREGATE LIMIT
Means the sum of (1) 125% of the greater of the ADP of the Participants
who are not Highly Compensated Employees for the Plan Year or the ACP
of the Participants 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 CODA; and (2) the lesser of 200% or two
plus the lesser of such ADP or ACP. "Lesser" is substituted for
"greater" in "W" above, and "greater" is substituted for "lesser" after
"two plus the" in "(2)" if it would result in a larger Aggregate Limit.
11.103 AVERAGE CONTRIBUTION PERCENTAGE (ACP)
Means the average of the Contribution Percentages of the Eligible
Participants in a group.
11.104 CONTRIBUTING PARTICIPANT
Means a Participant who has enrolled as a Contributing Participant
pursuant to Section 11.201 and on whose behalf the Employer is
contributing Elective Deferrals to the Plan (or is making Nondeductible
Employee Contributions).
11.105 CONTRIBUTION PERCENTAGE
Means the ratio (expressed as a percentage) of the Participant's
Contribution Percentage Amounts to the Participant's Compensation for
the Plan Year (taking into account only the Compensation paid to the
Employee during the portion of the Plan Year he or she was an eligible
Participant, unless otherwise indicated in the Adoption Agreement).
11.106 CONTRIBUTION PERCENTAGE AMOUNTS
Means the sum of the Nondeductible Employee Contributions, Matching
Contributions, and Qualified Matching Contributions made under the Plan
on behalf of the Participant for the Plan Year. Such Contribution
Percentage Amounts shall not include Matching Contributions that are
forfeited either to correct Excess Aggregate Contributions or because
the contributions to which they relate are Excess Deferrals, Excess
Contributions, Excess Aggregate Contributions or excess annual
additions which are distributed pursuant to Section 11.508. If so
elected in the Adoption Agreement, the Employer may include Qualified
Nonelective Contributions in the Contribution Percentage Amount. The
Employer also may elect to use Elective Deferrals in the Contribution
Percentage Amounts so long as the ADP test is met before the Elective
referrals are used in the ACP test and continues to be met following
the exclusion of those Elective Deferrals that are used to meet the ACP
test.
11.107 ELECTIVE DEFERRALS
Means any Employer Contributions made to the Plan at the election of
the Participant, in lieu of cash compensation, and shall include
contributions made pursuant to a salary reduction agreement or other
deferral mechanism. With respect to any taxable year, a Participant's
Elective Deferral is the sum of all Employer contributories made on
behalf of such Participant pursuant to an election to defer under any
qualified CODA as described in Section 401(k) of the Code, any
simplified employee pension cash or deferred arrangement as described
in Section 402(h)(1)(B), any eligible deferred compensation plan under
Section 457, any plan as described under Section 501(c)(18), and any
Employer contributions made on the behalf of a Participant for the
purchase of an annuity contract under Section 403(b) pursuant to a
salary reduction agreement. Elective Deferrals shall not include any
deferrals properly distributed as excess annual additions.
No Participant shall be permitted to have Elective Deferrals made under
this Plan, or any other qualified plan maintained by the Employer,
during any taxable year, in excess of the dollar limitation contained
in Section 402(g) of the Code in effect at the beginning of such
taxable year.
Elective Deferrals may not be taken into account for purposes of
satisfying the minimum allocation requirement applicable to Top-Heavy
Plans described in Section 3.01(E).
11.108 ELIGIBLE PARTICIPANT
Means any Employee who is eligible to make a Nondeductible Employee
Contribution or an Elective Deferral (if the Employer takes such
contributions into account in the calculation of the Contribution
Percentage), Or to receive a Matching Contribution (including
Forfeitures thereof) or a Qualified Matching Contribution.
If a Nondeductible 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
an Eligible Participant on behalf of whom no Nondeductible Employee
Contributions are made.
<PAGE> 80
42
11.109 EXCESS AGGREGATE CONTRIBUTIONS
Means, with respect to any Plan Year, the excess of:
A. 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
B. The maximum Contribution Percentage Amounts permitted by the
ACP test (determined by reducing contributions made on behalf
of Highly Compensated Employees in order of their Contribution
Percentages beginning with the highest of such 91
percentages).
Such determination shall be made after first determining
Excess Elective Deferrals pursuant to Section 11.112 and then
determining Excess Contributions pursuant to Section 11.111.
11-110 EXCESS CONTRIBUTIONS
Means, with respect to any Plan Year, the excess of:
A. The aggregate amount of Employer Contributions actually taken
into account in computing the ADP of Highly Compensated
Employees for such Plan Year, over
B. The maximum amount of such contributions permitted by the ADP
test (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of the ADP, beginning
with the highest of such percentages).
11.111 EXCESS ELECTIVE DEFERRALS
Means those Elective Deferrals that are includible in a Participant's
gross income under Section 402(g) of the Code to the extent such
Participant's Elective Deferrals for a taxable year exceed the dollar
limitation under such Code section. Excess Elective Deferrals shall be
treated as annual additions under the Plan, unless such amounts are
distributed no later than the first April 15 following, the close of
the Participant's taxable year.
11.112 MATCHING CONTRIBUTION
Means an Employer Contribution made to this or any other defined
contribution plan on behalf of a Participant on account of an Elective
Deferral or a Nondeductible Employee Contribution made by such
Participant under a plan maintained by the Employer.
Matching Contributions may not be taken into account for purposes of
satisfying the minimum allocation requirement applicable to Top-Heavy
Plans described in Section 3.01(E).
11.113 QUALIFIED NONELECTIVE CONTRIBUTIONS
Means contributions (other than Matching Contributions or Qualified
Matching Contributions) made by the Employer and allocated to
Participants' Individual Accounts that the Participants may not elect
to receive in cash until distributed from the Plan, that are
nonforfeitable when made; and that are distributable only in accordance
with the distribution provisions that art applicable to Elective
Deferrals and Qualified Matching Contributions.
Qualified Nonelective Contribution may be taken into account for
purpose, of satisfying the minimum allocation requirement applicable to
Top-Heavy Plans described in Section 3.01(E).
11.114 QUALIFIED MATCHING CONTRIBUTIONS
Means Matching Contributions which are subject to the distribution and
nonforfeitability requirements under Section 401(k) of the Code when
made.
11.115 QUALIFYING CONTRIBUTING PARTICIPANT
Means a Contributing Participant who satisfies the requirements
described in Section 11.302 to be entitled to receive a Matching
Contribution (and Forfeitures, if applicable) for a Plan Year.
11.200 CONTRIBUTING PARTICIPANT
11.201 REQUIREMENTS TO ENROLL AS A CONTRIBUTING PARTICIPANT
A. Each Employee who satisfies the eligibility requirements
specified in the Adoption Agreement may enroll as a
Contributing Participant as of any subsequent Entry Date (or
earlier if required by Section 2.03) specified in the Adoption
Agreement for this purpose. A Participant who wishes to enroll
as a Contributing Participant must complete, sign and file a
salary reduction agreement (or agreement to make Nondeductible
Employee Contributions) with the Plan Administrator.
B. Notwithstanding the times set forth in Section 11.201(A) as of
which a Participant may enroll as a Contributing Participant,
the Plan Administrator shall have the authority to designate,
in a nondiscriminatory manner, additional enrollment times
during the 12 month period beginning on the Effective Date (or
the date that Elective Deferrals may commence, if later) in
order that an orderly first enrollment might be completed. In
addition, if the Employer has indicated in the Adoption
Agreement that Elective Deferrals may he based on bonuses,
then Participants shall be afforded a reasonable period of
time prior to the issuance of such bonuses to elect to defer
them into the Plan.
<PAGE> 81
43
11.202 CHANGING ELECTIVE DEFERRAL AMOUNTS
A Contributing Participant may modify his or her salary reduction
agreement (or agreement to make Nondeductible Employee Contributions)
to increase or decrease (within the limits placed on Elective Deferrals
(or Nondeductible Employee Contributions) in the Adoption Agreement)
the amount of his or her Compensation deferred into the Plan. Such
modification may only be made as of the dates specified in the Adoption
Agreement for this purpose, or as of any other more frequent date(s) if
the Plan Administrator permits in a uniform and nondiscriminatory
manner. A Contributing Participant who desires to make such a
modification shall complete, sign and file a new salary reduction
agreement (or agreement to make Nondeductible Employee Contribution)
with the Plan Administrator. The Plan Administrator may prescribe such
uniform and nondiscriminatory rules it deems appropriate to can-y out
the terms of this Section.
11.203 CEASING ELECTIVE DEFERRALS
A Participant may cease Elective Deferrals (or Nondeductible Employee
Contributions) and thus withdraw as a Contributing Participant as of
the dates specified in the Adoption Agreement for this purpose (or as
of any other date if the Plan Administrator so permits in a uniform
and nondiscriminatory manner) by revoking the authorization to the
Employer to make Elective Deferrals (or Nondeductible Employee
Contributions) on his or her behalf. A Participant who desires to
withdraw as a Contributing Participant shall give written notice of
withdrawal to the Plan Administrator at least thirty days (or such
lesser period of days as the Plan Administrator shall permit in a
uniform and nondiscriminatory manner) before the effective date of
withdrawal. A Participant shall cease to be a Contributing
Participant upon his or her Termination of Employment, or an account
of termination of the Plan.
11.204 RETURN AS A CONTRIBUTING PARTICIPANT AFTER CEASING ELECTIVE DEFERRALS
A Participant who has withdrawn as a Contributing Participant under
Section 11.203 (or because the Participant has taken a hardship
withdrawal pursuant to Section 11.503) may not again become a
Contributing Participant until the dates set forth in the Adoption
Agreement for this purpose, unless the~Plan Administrator, in a uniform
and nondiscriminatory manner, permits withdrawing Participants to
resume their status as Contributing Participants sooner.
11.205 CERTAIN ONE-TIME IRREVOCABLE ELECTIONS
This Section 11.205 applies where the Employer has indicated in the
Adoption Agreement that an Employee may make a onetime irrevocable
election to have the Employer make contributions to the Plan on such
Employee's behalf. In such event, an Employee may elect, upon the
Employee's first becoming eligible to participate in the Plan, to have
contributions equal to a specified amount or percentage of
the~Employee's Compensation (including no amount of Compensation) made
by the Employer on the Employee's behalf to the Plan (and to any other
plan of the Employer) for the duration of the Employee's employment
with the Employer. Any contributions made pursuant to a one-time
irrevocable election described in this Section are not treated as made
pursuant to a' cash or deferred election, are not Elective Deferrals
and are not includible in an Employee's gross income.
The Plan Administrator shall establish such uniform and
nondiscriminatory procedures as it deems necessary or advisable to
administer this provision.
11.300 CONTRIBUTIONS
11.301 CONTRIBUTIONS BY EMPLOYER
The Employer shall make contributions to the Plan in accordance with
the contribution formulas specified in the Adoption Agreement.
11.302 MATCHING CONTRIBUTIONS
The Employer may elect to make Matching Contributions under the Plan on
behalf of Qualifying Contributing Participants as provided in the
Adoption Agreement. To be a Qualifying Contributing Participant for a
Plan Year, the Participant must make Elective Deferrals (or
Nondeductible Employee Contributions, if the Employer has agreed to
match such contributions) for the Plan Year satisfy any age and Years
of Eligibility Service requirements that are specified for Matching
Contributions in the Adoption Agreement and also satisfy any additional
conditions set forth in the Adoption Agreement for this purpose. In a
uniform and nondiscriminatory, manner, the Employer may make Matching
Contributions at the same time as it contributes Elective Deferrals or
at any other time as permitted by laws and regulations.
11.303 QUALIFIED NONELECTIVE CONTRIBUTIONS
The Employer may elect to make Qualified Nonelective Contributions
under the Plan on behalf of Participants as provided in the Adoption
Agreement.
In addition, in lieu of distributing Excess Contributions as provided
in Section 11.50-5 of the Plan, or Excess Aggregate Contributions as
provided in Section 11.506 of the Plan, and to the extent elected by
the Employer in the Adoption Agreement, the Employer may make Qualified
Nonelective Contributions on behalf of Participants who are not Highly
Compensated Employees that are sufficient to satisfy either the Actual
Deferral Percentage test or the Average Contribution Percentage test,
or both, pursuant to regulations under the Code.
<PAGE> 82
44
11.304 QUALIFIED MATCHING CONTRIBUTIONS
The Employer may elect to make Qualified Matching Contributions under
the Plan on behalf of Participants as provided in the Adoption
Agreement.
11.305 NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS
Notwithstanding Section 3.02, if the Employer so allows in the Adoption
Agreement, a Participant may contribute Nondeductible Employee
Contributions to the Plan.
If the Employer has indicated in the Adoption Agreement that
Nondeductible Employee Contributions will be mandatory, then the
Employer shall establish uniform and nondiscriminatory rules and
procedures for Nondeductible Employee Contributions as it deems
necessary and advisable including, but not limited to, rules describing
in amounts or percentages of Compensation Participants may or must
contribute to the Plan.
A separate account will be maintained by the Plan Administrator for the
Nondeductible Employee Contributions for each Participant.
A Participant may, upon a written request submitted to the Plan
Administrator, withdraw the lesser of the portion of his or her
Individual Account attributable to his or her Nondeductible Employee
Contributions or the amount he or she contributed as Nondeductible
Employee Contributions.
Nondeductible Employee Contributions and earnings thereon will be
nonforfeitable at all times. No Forfeiture will occur solely as a
result of an Employee's withdrawal of Nondeductible Employee
Contributions.
11.400 NONDISCRIMINATION TESTING
11.401 ACTUAL DEFERRAL PERCENTAGE TEST (ADP)
A. Limits on Highly Compensated Employees - The Actual Deferral
Percentage (hereinafter "AD') for Participants who are Highly
Compensated Employees for each Plan Year and the ADP for
Participants who are not Highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
1. The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the AD
for Participants who are not Highly Compensated
Employees for the same Plan Year multiplied by 1.25;
or
2. The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP
for Participants who are not Highly Compensated
Employees for the same Plan Year multiplied by 2.0
provided that the ADP for Participants who are Highly
Compensated Employees does not exceed the ADP for
Participants who are not Highly Compensated Employees
by more than 2 percentage points.
B. Special Rules
1. The ADP for any Participant who is a Highly
Compensated Employee for the Plan Year and who is
eligible to have Elective Deferrals (and Qualified
Nonelective Contributions or Qualified Matching
Contributions, or both, if treated as Elective
Deferrals for purposes of the ADP test) allocated to
his or her Individual Accounts under two or more
arrangements described in Section 401(k) of the Code,
that are maintained by the Employer, shall be
determined as if such Elective Deferrals (and, if
applicable, such Qualified Nonelective 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, all cash or deferred arrangements ending with
or within the same calendar year shall be treated as
a single arrangement. Notwithstanding the foregoing,
certain plans shall be treated as separate if
mandatorily desegregated under regulations under
Section 401(k) of the Code.
2. In the event that this Plan satisfies the
requirements of Sections 401(k), 401(a)(4), or 410(b)
of the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the
requirements of such sections of the Code only if
aggregated with this Plan, then this Section 11-401
shall be applied by determining the ADP 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 Section 401(k) of the
Code only if they have the same Plan Year.
3. For purposes of determining the ADP of a Participant
who is a 5% owner or one of the 10 most highly paid
Highly Compensated Employees, the Elective Deferrals
(and Qualified Nonelective Contributions or Qualified
Matching Contributions, or both if treated as
Elective Deferrals for purposes of the ADP test) and
Compensation of such Participant shall include the
Elective Deferrals (and, if applicable, Qualified
Nonelective Contributions and Qualified ,Matching
Contributions, or both) and Compensation for the Plan
Year of family members (as defined in Section
Compensated Employees, shall be disregarded as
414(q)(6) of the Code). Family members, with respect
to such Highly separate Employees, in determining the
ADP both for Participants who are not Highly
Compensated Employees and for Participants who are
Highly Compensated Employees.
<PAGE> 83
45
4. For purposes of determining the ADP test, Elective
Deferrals, Qualified Nonelective Contributions and
Qualified Matching Contributions must be made before
the last day of the 12 month period immediately
following the Plan Year to which contributions
relate.
5. The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the
amount of Qualified Nonelective Contributions Or
Qualified Matching Contributions, or both, used in
such test.
6. The determination and treatment of the ADP amounts of
any Participant shall satisfy such other requirements
as may be prescribed by the Secretary of the
Treasury.
7. If the Employer elects to take Qualified Matching
Contributions into account as Elective Deferrals for
purposes of the ADP test, then (subject to such other
requirements as may be prescribed by the Secretary of
the Treasury) unless otherwise indicated in the
Adoption Agreement, only the amount of such Qualified
Matching Contributions that are needed to meet the
ADP test shall be taken into account.
8. In the event that the Plan Administrator determines
that it is not likely that the ADP test will be
satisfied for a particular Plan Year unless certain
steps are taken prior to the end of such Plan Year,
the Plan Administrator may require Contributing
Participants who are Highly Compensated Employees to
reduce their Elective Deferrals for such Plan Year in
order to satisfy that requirement. Said reduction
shall also be required by the Plan Administrator in
the event that the Plan Administrator anticipates
that the Employer will not be able to deduct all
Employer Contributions from its income for Federal
income tax purposes.
11.402 LIMITS ON NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS AND MATCHING CONTRIBUTIONS
A. LIMITS ON HIGHLY COMPENSATED EMPLOYEES - The Average
Contribution Percentage (hereinafter "ACP") for Participants
who are Highly Compensated Employees for each Plan Year and
the ACP for Participants who are not Highly Compensated
Employees for the same Plan Year must satisfy one of the
following tests:
1. The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP
for Participants who are not Highly Compensated
Employees for & same Plan Year multiplied by 1.25; or
2. The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP
for Participants who are not Highly Compensated
Employees for the same Plan Year multiplied by 2,
provided that the ACP for the Participants who are
Highly Compensated Employees does not exceed the ACP
for Participants who are not Highly Compensated
Employees by more than 2 percentage points.
B. SPECIAL RULES
1. Multiple Use - If one or more Highly Compensated
Employees participate in both a CODA and a plan
subject to the ACP test maintained by the Employer
and the sum of the ADP and ACP of those Highly
Compensated Employees subject to either or both tests
exceeds the Aggregate Limit, then, as elected in the
Adoption Agreement, the ACP or the ADP of those
Highly Compensated Employees who also participate in
a CODA will be reduced (beginning with such Highly
Compensated Employee whose ACP (or ADP, if elected)
is the highest) so that the limit is not exceeded.
The amount by which each Highly Compensated
Employee's Contribution Percentage Amounts (or ADP,
if elected) is reduced shall be treated as an Excess
Aggregate Contribution (or Excess Contribution, if
elected). The ADP and ACP of the Highly Compensated
Employees are determined after any corrections
required to meet the ADP and ACP tests. Multiple use
does not occur if the ADP and ACP of the Highly
Compensated Employees does not exceed 1.25 multiplied
by the ADP and ACP of the Participants who are not
Highly Compensated Employees.
2. For purposes of this Section 11.402, the Contribution
Percentage for any Participant who is a Highly
Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his or
her Individual Account under two or more plans
described in Section 401(a) of the Code, or
arrangements described in Section 401(k) of the Code
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.
Notwithstanding the foregoing, certain plans shall be
treated as separate If mandatorily desegregated under
regulations under Section 401(m) of the Code.
3. In the event that this Plan satisfies the
requirements of Sections 401(m), 401(a)(4) or 410(b)
of the Code only if aggregated with one or more other
plans, or if one or more other plans satisfy the
requirements of such Sections of the Code only if
aggregated with this Plan, then this Section 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 Section
401(m) of the Code only if they have the same Plan
Year.
<PAGE> 84
46
4. For purposes of determining the Contribution
Percentage of a Participant who is a 5% owner or one
of the 10 most highly paid Highly Compensated
Employees, the Contribution Percentage Amounts and
Compensation of such Participant shall include the
Contribution Percentage Amounts and Compensation for
the Plan Year of family members, (as defined in
Section 414(q)(6) of the Code). Family members, with
respect to Highly Compensated Employees, shall be
disregarded as separate Employees in determining the
Contribution Percentage both for Participants who are
not Highly Compensated Employees and for Participants
who are Highly Compensated Employees.
5. For purposes of determining the Contribution
Percentage test, Nondeductible Employee Contributions
are considered to have been made in the Plan Year in
which contributed to the Fund. Matching Contributions
and Qualified Nonelective Contributions will be
considered made for a Plan Year if made no later than
the end of the 12 month period beginning on the day
after the close of the Plan Year.
6. The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and the
amount of Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, used in
such test.
7. The determination and treatment of the Contribution
Percentage of any Participant shall satisfy such
other requirements as may be prescribed by the
Secretary of the Treasury.
8. If the Employer elects to take Qualified Nonelective
Contributions into account as Contribution Percentage
Amounts for purposes of the ACP test, then (subject
to such other requirements as may be prescribed by
the Secretary of the Treasury) unless otherwise
indicated in the Adoption Agreement, only the amount
of such Qualified Nonelective Contributions that are
needed to meet the ACP test shall be taken into
account.
9. If the Employer elects to take Elective Deferrals
into account as Contribution Percentage Amounts for
purposes of the ACP test, then (subject to such other
requirements as ma~ be prescribed by the Secretary of
the Treasury) unless otherwise indicated in the
Adoption Agreement, only the amount of such Elective
Deferrals that are needed to meet the ACP test, shall
be taken into account.
11.500 DISTRIBUTION PROVISIONS
11.501 GENERAL RULE
Distributions from the Plan are subject to the provisions of Section 6
and the provisions of this Section 11. In the event of a conflict
between the provisions of Section 6 and Section 11, the provisions of
Section 11 shall control.
11.502 DISTRIBUTION REQUIREMENTS
Elective Deferrals, Qualified Nonelective Contributions, and Qualified
Matching Contributions, and income allocable to each are not
distributable to a Participant or his or her Beneficiary or
Beneficiaries, in accordance with such Participant's or Beneficiary or
Beneficiaries' election, earlier than upon separation from service,
death or disability,,.
Such amounts may also be distributed upon:
A. Termination of the Plan without the establishment of another
defined contribution plan, other than an employee stock
ownership plan (as defined in Section 4975(e) or Section 409
of the Code) or a simplified employee pension plan as defined
in Section 408(k).
B. The disposition by a corporation to an unrelated corporation
of substantially all of the assets (within the meaning of
Section 409(d)(2) of the C~de used in a trade or business of
such corporation if such corporation continues to maintain
this Plan after the disposition, but only with respect to
Employees who continue employment with the corporation
acquiring such assets.
C. The disposition by a corporation to an unrelated entity of
such corporation's interest in a subsidiary (within the
meaning of Section 409(d)(3) of the Code) if such corporation
continues to maintain this Plan, but only with respect to
Employees who continue employment with such subsidiary.
D. The attainment of age 59 1/2 in the case of a profit sharing
plan.
E. If the Employer has so elected in the Adoption Agreement, the
hardship of the Participant as described in Section 11.503.
All distributions that may be made pursuant to one or more of
the foregoing distributable events are subject to the spousal
and Participant consent requirements (if applicable) contained
in Section 401(a)(11) and 417 of the Code. In addition,
distributions after March 31, 1988, that are triggered by any
of the first three events enumerated above must be made in a
lump sum.
<PAGE> 85
47
11.503 HARDSHIP DISTRIBUTION
A. GENERAL - If the Employer has so elected in the Adoption
Agreement, distribution of Elective Deferrals (and any
earnings credited to a Participant's account as of the end of
the last Plan Year, ending before July 1, 1989) may be made to
a Participant in the event of hardship. For the purposes of
this Section, hardship is defined as an immediate and heavy
financial need of the Employee where such Employee lacks other
available resources. Hardship distributions are subject to the
spousal consent requirements contained in Sections 401(a)(11)
and 417 of the Code.
B. SPECIAL RULES
1. The following are the only financial needs considered
immediate and heavy: expenses incurred or necessary
for medical care, described in Section 213(d) of the
Code, of the Employee, the Employee's spouse or
dependents; the purchase (excluding mortgage
payments) of a principal residence for the Employee;
payment of tuition and related educational fees for
the next 12 months of post-secondary education for
the Employee, the Employee's spouse, children or
dependents; or the need to prevent the eviction of
the~Employee from, or a foreclosure on the mortgage
of, the Employee's principal residence.
2. A distribution will be considered as necessary to
satisfy an immediate and heavy financial need of the
Employee only if:
a. The Employee 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 Employee's Elective Deferrals (and
Nondeductible Employee Contributions) will
be suspended for 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 (including amounts necessary to pay any
Federal, state or local income taxes or
penalties reasonably anticipated to result
from the distribution); and
d. All plans maintained by the Employer provide
that the Employee may not make Elective
Deferrals for the Employee's taxable year
immediately following the taxable year of
the hardship distribution in excess of the
applicable limit under Section 402(g) of the
Code for such taxable year less the amount
of such Employee's Elective Deferrals for
the taxable year of the hardship
distribution.
11.504 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
A. GENERAL RULE - A Participant may assign to this Plan any
Excess Elective Deferrals made during a taxable year of the
Participant by notifying the Plan Administrator on or b~fore
the date specified in the Adoption Agreement' of the amount of
the Excess Elective deferrals to be assigned to the Plan. A
Participant is deemed to notify the Plan Administrator of any
Excess Elective Deferrals that arise by taking into account
only those Elective Deferrals made to this Plan and any other
plans of the Employer.
Notwithstanding any other provision of the Plan, Excess
Elective Deferrals, plus any income and minus any loss
allocable thereto, shall be distributed no later than April 15
to any Participant to whose Individual Account Excess Elective
Deferrals were assigned for the preceding year and who claims
Excess Elective Deferrals for such taxable year.
B. DETERMINATION OF INCOME OR LOSS - Excess Elective Deferrals
shall be adjusted for any income or loss up to the date of
distribution. The income of loss allocable to Excess Elective
Deferrals is the sum of : (1) income or loss allocable to the
Participant's Elective Deferral account for the taxable year
multiplied by a fraction, the numerator of which is such
Participant's Elective Deferrals for the year and the
denominator is the participant's Individual Account balance
attributable to Elective Deferrals without regard to any
income or loss occurring during such taxable year; and (2) 10%
of the amount determined under (1) multiplied by the number of
whole calendar months between the end of the Participant's
taxable year and the date of distribution, counting the month
of distribution if distribution occurs after the 15th of such
month. Notwithstanding the preceding sentence, the Plan
Administrator may compute the income or loss allocable to
Excess Elective Deferrals in the manner described in Section 4
(i.e., the usual manner used by the Plan for allocating income
or loss to Participants' Individual Accounts), provided such
method is used consistently for all Participants and for all
corrective distributions under the Plan for the Plan Year.
11.505 DISTRIBUTION OF EXCESS CONTRIBUTIONS
A. GENERAL RULE - 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 Participants to whose Individual
Accounts such Excess Contributions were allocated for the
preceding Plan Year. If such excess amounts are distributed
more than 2 1/2 months after the last day of the Plan Year in
which such excess amounts arose, a 10% excise tax will be
imposed on the Employer maintaining the Plan 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 of Participants who are
subject to the family member aggregation rules shall be
allocated among the family members in proportion to the
Elective Deferrals (and amounts treated as Elective Deferrals)
of each family member that is combined to determine the
combined ADP.
Excess Contributions (including the amounts recharacterized)
shall be treated as annual additions under the Plan.
<PAGE> 86
48
B. DETERMINATION OF INCOME OR LOSS - 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: (1) income or loss allocable to
Participant' Elective Deferral account (and, if applicable,
the Qualified Nonelective Contribution account or the
Qualified Matching Contributions account or both) for the Plan
Year multiplied by a fraction, the numerator of which is such
Participant's Excess Contributions for the year and the
denominator is the Participant's Individual Account balance
attributable to Elective Deferrals (and Qualified Nonelective
Contributions or Qualified Matching Contributions, or both, if
any of such contributions are included in the ADP test)
without regard to any income or loss occurring during such
Plan Year; and (2) 10% of the amount determined under (1)
multiplied by the number of whole calendar months between the
end of the Plan Year and the date of distribution, counting
the month of distribution if distribution occurs after the
15th of such month. Notwithstanding the preceding sentence,
the Plan Administrator may compute the income or loss
allocable to Excess Contributions in the manner described in
Section 4 (i.e., the usual manner used by the Plan for
allocating income or loss to Participants' Individual
Accounts), provided such method is used consistently for all
Participants and for all corrective distributions under the
Plan for the Plan Year.
C. ACCOUNTING FOR EXCESS CONTRIBUTIONS - Excess Contributions
shall be distributed from the Participant's Elective Deferral
account and Qualified Matching Contribution account (if
applicable) in proportion to the Participant's Elective
Deferrals and Qualified Matching Contributions (to the extent
used in the ADP test) for the Plan Year. Excess Contributions
shall be distributed from the Participants Qualified
Nonelective Contribution account only to the extent that such
Excess Contributions exceed the balance in the Participant's
Elective Deferral account and Qualified Matching Contribution
account.
11.506 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS
A. GENERAL RULE - 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 th~n
the last day c each Plan Year to Participants to whose
accounts such Excess Aggregate Contributions were allocated
for the preceding Plan Year. Excess Aggregate Contributions of
Participants who are subject to the family member aggregation
rules shall b( allocated among the family members in
proportion to the Employee and Matching Contributions (or
amounts treated as Matching Contributions) of each family
member that is combined to determine the combined ACP. If such
Excess Aggregate Contributions are distributed more than 2 1/2
months after the last day of the Plan Year in which such
excess amounts arose, a 10% excise tax will be imposed on the
Employer maintaining the Plan with respect to those amounts.
Excess Aggregate Contributions shall be treated as annual
additions under the Plan.
B. DETERMINATION OF INCOME OR LOSS - 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: (1) income or
loss allocable to the Participant's Nondeductible Employee
Contribution account, Matching Contribution account (if any,
and if all amounts therein are not used in the ADP ~est) and,
if applicable, Qualified Nonelective Contribution account and
Elective Deferral account for the Plan Year multiplied by a
fraction, the numerator of which is such Participant's Excess
Aggregate Contributions for the year and the denominator is
the Participant's Individual Account balance(s) attributable
to Contribution Percentage Amounts without regard to any
income or loss occurring during such Plan Year; and (2) 10% of
the amount determined under (1) multiplied by the number of
whole calendar months between the end of the Plan Year and the
date of distribution, counting the month of distribution if
distribution occurs after the 15th of such month
Notwithstanding the preceding sentence, the Plan Administrator
may compute the income or loss allocable to Excess Ag
Aggregate Contributions in the manner described in Section 4
(i.e., the usual manner used by the Plan for allocating income
or loss to Participants' Individual Accounts), provided such
method is used consistently for all Participants and for all
corrective distributions under the Plan for the Plan Year.
C. FORFEITURES OF EXCESS AGGREGATE CONTRIBUTIONS - Forfeitures of
Excess Aggregate Contributions may either be reallocated to
the accounts of Contributing Participants who are not Highly
Compensated Employees or applied to reduce Employer
contributions, as elected by the Employer in the Adoption
Agreement.
D. ACCOUNTING FOR EXCESS AGGREGATE CONTRIBUTIONS - Excess
Aggregate Contributions shall be forfeited, if forfeitable or
distributed on a pro rata basis from the Participant's
Nondeductible Employee Contribution account, Matching
Contribution account, and Qualified Matching Contribution
account (and, if applicable, the Participant's Qualified
Nonelective Contribution account or Elective Deferral account,
or both).
<PAGE> 87
49
11.507 RECHARACTERIZATION
A Participant may treat his or her Excess Contributions as an amount
distributed to the Participant and then contributed by t! Participant
to the Plan. Recharacterized amounts will remain nonforfeitable and
subject to the same distribution requirement as Elective Deferrals.
Amounts may not be recharacterized by a Highly Compensated Employee to
the extent that such amount in combination with other Nondeductible
Employee Contributions made by that Employee would exceed any stated
limit under the Plan on Nondeductible Employee Contributions.
Recharacterization must occur no later than two and one-half months
after the last day 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 Participant for the Participant's tax year in
which the Participant would have received them in cash.
11.508 DISTRIBUTION OF ELECTIVE DEFERRALS IF EXCESS ANNUAL ADDITIONS
Notwithstanding any other provision of the Plan, a Participant's
Elective Deferrals shall be distributed to him or her to the extent
that the distribution will reduce an excess annual addition (as that
term is described in Section 3.05 of the Plan).
11.600 VESTING
11.601 100% VESTING ON CERTAIN CONTRIBUTIONS
The Participant's accrued benefit derived from Elective Deferrals,
Qualified Nonelective Contributions, Nondeductible Employee
Contributions, and Qualified Matching Contributions is nonforfeitable.
Separate accounts for Elective Deferrals, Qualified Nonelective
Contributions, Nondeductible Employee Contributions, Matching
Contributions, and Qualified Matching Contributions be maintained for
each Participant. Each account will be credited with the applicable
contributions and earnings thereon.
11.602 FORFEITURES AND VESTING OF MATCHING CONTRIBUTIONS
Matching Contributions shall be Vested in accordance with the vesting
schedule for Matching Contributions in the Adoption Agreement. In any
event, Matching Contributions shall be fully Vested at Normal
Retirement Age, upon the complete or partial termination of the profit
sharing plan, or upon the complete discontinuance of Employer
Contributions. Notwithstanding any other provisions of the Plan,
Matching Contributions or Qualified Matching Contributions must be
forfeited if the contributions to which they relate are Excess Elective
Deferrals, Excess Contributions, Excess Aggregate Contributions or
excess annual additions which are distributed pursuant to Section
11-508. Such Forfeitures shall be allocated in accordance with Section
3.01 (C).
When a Participant incurs a Termination of Employment, whether a
Forfeiture arises with respect to Matching Contributions shall be
determined in accordance with Section 6.01(D).
<PAGE> 1
EXHIBIT 14(f)
SIMPLE IRA
AN
EMPLOYER SPONSORED RETIREMENT ACCOUNT
EMPLOYEE FORMS
and
DISCLOSURE STATEMENT/CUSTODIAL AGREEMENT
J.D.Bradford & Co.
Members New York Stock Exchange, Inc. - Member S.I.P.C.
<PAGE> 2
SETTING UP A SIMPLE IRA
Employee Instructions
Dear Employee,
Thank you for choosing to establish your SIMPLE IRA Account with J.C. Bradford &
Co. Please follow the instructions below to complete the enclosed paperwork.
STEP 1 Complete, sign and date the following:
- SIMPLE IRA ADOPTION AGREEMENT: Keep the copy and return the
original to your Bradford Broker.
- SALARY REDUCTION AGREEMENT (SRA): This is necessary to authorize
your employer of the specific amount you wish to withhold from
your paycheck to have deposited into your SIMPLE IRA retirement
account. You will need to complete a new form any time you choose
to change your salary deferral election. Return the SRA to your
employer.
- CUSTOMER ACCOUNT AGREEMENT & W-9 FORM: Provided by your Bradford
Broker.
STEP 2 Please keep copies of all forms
STEP 3 READ AND RETAIN THE IRS APPROVAL LETTER AND DISCLOSURE PROTION OF THIS
BOOKLET. IT CONTAINS IMPORTANT INFORMATION REGARDING YOUR PLAN
BENEFITS.
Feel free to contact your Bradford Broker, if you have any questions regarding
your investments or this account..
- --------------------------------------------------------------------------------
Page 2
<PAGE> 3
J.C. Bradford & Co.
Members New York Stock Exchange, Inc. Member S.I.P.C.
SIMPLE IRA ADOPTION AGREEMENT
CHECK ONE CHECK ONE INITIAL CONTRIBUTION
[ ] 1 New [ ] 2 Transfer This SIMPLE IRA is for the: Employee (E9_) $_______
[ ] 3 Rollover [ ] 4 Amended [ ] 5 Owner (62) (61) Employer (ES_) $_______
[ ] 6 Employee
Date of Contribution______
Name __________________________ Account Number___________________________
Address______________________ City________________ State_________ Zip________
hereby adopts the J.C. Bradford & Co. Self-Directed SIMPLE Individual Retirement
Account.
Date of Birth ______/_______/_______ Social Security Number __________________
PRIMARY BENEFICIARIES
NAME RELATIONSHIP DATE OF BIRTH SOCIAL SECURITY NO.
ALTERNATE BENEFICIARY
NAME RELATIONSHIP DATE OF BIRTH SOCIAL SECURITY NO.
IMPORTANT: Please be advised that if a QTIP Trust is named as beneficiary of
this SIMPLE IRA, the QTIP Trustee has sole responsibility for the computation
and timing of all payouts. The Trustee must provide this information in writing
to J.C. Bradford & Co. who serves as Custodian.
IMPORTANT
IF YOU ARE A RESIDENT OF A COMMUNITY PROPERTY STATE SUCH AS: ARIZONA,
CALIFORNIA, IDAHO, LOUISIANA, NEVADA, NEW MEXICO, TEXAS, WASHINGTON, OR
WISCONSIN, YOU MUST COMPLETE THIS SECTION:
CURRENT MARITAL STATUS
[ ] 7 I am not married, but I understand that if I become married in the
future, I must complete a new SIMPLE IRA Adoption Agreement.
[ ] 8 I am married and I understand that if I choose to designate a primary
beneficiary other than my spouse, my spouse must sign below.
SPOUSAL CONSENT
This section should be reviewed if either the trust or the residence of the
SIMPLE IRA holder is located in a community property state AND married. Due to
the tax consequences resulting from releasing one's community property interest,
individuals signing this section should consult with a competent tax or legal
advisor. I am the spouse of the above-named SIMPLE IRA owner. I acknowledge that
I have received a fair and reasonable disclosure of my spouse's property and
<PAGE> 4
financial obligations. Due to the tax consequences of releasing my interest in
this SIMPLE IRA, it has been recommended that I consult with a tax professional.
I hereby give the SIMPLE IRA owner any interest I have in the funds or property
deposited in this SIMPLE IRA, including all future earnings and increases, and
irrevocably consent to the beneficiary designation(s) indicated above. I assume
full responsibility for any adverse consequences that may result. No tax or
legal advice has been offered by the Custodian.
________________________________ ________________________
(Signature of spouse) (Date)
On ____________, 199__ before me, ________________________________, a Notary
Public, State of ____________, personally appeared ___________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument the person, or the entity upon
behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
_________________________________
NOTARY PUBLIC
COMPLETE ONLY IF ROLLOVER
I hereby irrevocably designate this contribution of cash in the amount of
$___________ and/or specific SIMPLE IRA assets having an approximate value of:
$___________ as a SIMPLE IRA rollover contribution. I am rolling over this
contribution within sixty days of receipt. This rollover contribution is from
another SIMPLE IRA.
My annual individual contribution limit will not exceed $6,000 or such limits as
may be prescribed by law.
I appoint J.C. Bradford & Co. to serve as custodian in accordance with the terms
and conditions of this document and hereby acknowledge that I have received and
read the J.C. Bradford & Co. SIMPLE IRA Disclosure Statement/Custodial Agreement
and agree to the conditions of the following fee schedule: $35.00 Annual
Maintenance Fee, $50.00 Transfer Fee plus current year's maintenance fee. I
realize these fees are subject to change and that J.C. Bradford & Co. has the
right to liquidate my SIMPLE IRA assets or to close my SIMPLE IRA account, if
these fees are not paid by September 1 of each year.
By Date
____________________________ ______________________
SIGNATURE
_______________________________
CUSTODIAN'S SIGNATURE
<PAGE> 5
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 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 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 for 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
-----------------------------------
*This amount will be adjusted to reflect any annual cost-of-living increases
announced by the IRS.
<PAGE> 6
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
Plan Name: SIMPLE IRA Custodial Account Washington, DC 20224
FFN: 50108720009-901 Case: 9770232 EIN: 62-0136910
Letter Serial No: D190030a Contact Person: Ms. Arrington
J.C. Bradford & Co. Telephone Number: (202) 622-8173
330 Commerce Street In Reference to: CP:E:EP:T5
Nashville, TN 37201 Date: 09/26/97
Dear Applicant:
In our opinion, the form of the prototype trust, custodial account or annuity
contract identified above is acceptable under section 408 of the Internal
Revenue Code, as amended through the Taxpayer Relief Act of 1997, for use as a
SIMPLE IRA under Code section 408(p). This opinion letter may not be relied on
with respect to whether a SIMPLE IRA Plan, under which contributions are made by
an employer to the SIMPLE IRA, satisfies the requirements of Code section
408(p).
Each individual who adopts this approved prototype will be considered to have a
SIMPLE IRA that satisfies the requirements of Code section 408, provided he or
she follows the terms of the approved prototype document, does not engage in
certain transactions specified in Code section 408(e), and, if the SIMPLE IRA is
a trust or custodial account, the trustee or custodian is a bank within the
meaning of Code section 408(n) or has been approved by the Internal Revenue
Service pursuant to Code section 408(a)(2).
Code section 408(i) and related regulations require that the trustee, custodian
or issuer of a contract provide a disclosure statement to each adopting
individual as specified in the regulations. Publication 590, Tax Information on
Individual Retirement Arrangements, gives information about the items to be
disclosed. The trustee, custodian or issuer of a contract is also required to
provide each adopting individual with annual reports of all transactions related
to the SIMPLE IRA.
The Internal Revenue Service has not evaluated the merits of this SIMPLE IRA and
does not guarantee contributions or investments made under the SIMPLE IRA.
Furthermore, this letter does not express any opinion as to the applicability of
Code section 4975, regarding prohibited transactions.
The prototype SIMPLE IRA may have to be amended to include or revise provisions
in order to comply with future changes in the law or regulations.
If you have any questions concerning IRS processing of this case, call us at the
above telephone number. Please refer to the File Folder Number (FFN) shown in
the heading of this letter. Please provide those adopting this prototype with
your telephone number, and advise them to contact your office if they have any
questions about the operation of their SIMPLE IRA. Please provide a copy of this
letter to each adopting individual.
You should keep this letter as a permanent record. Please notify us if you
terminate sponsorship of this prototype SIMPLE IRA.
Sincerely yours,
Chief, Employee Plans Technical Branch 5
<PAGE> 7
SIMPLE IRA CUSTODIAL ACCOUNT AGREEMENT
THIS AGREEMENT entered into by and between each individual who executes
an Adoption Agreement incorporating this Agreement (hereinafter referred to as
"Depositor") and J. C. BRADFORD & CO., (hereinafter referred to as "Custodian"),
having its principal place of business at 330 Commerce Street, Nashville,
Tennessee 37201.
WITNESSETH:
WHEREAS, the Depositor desires to provide for his retirement and for the support
of his Beneficiaries upon his death; and
WHEREAS, to accomplish this purpose, the Depositor desires to establish a SIMPLE
individual retirement account (hereinafter referred to as "the account") as
described in Sections 408(a) and 408(p) of the Internal Revenue Code of 1986, as
amended, or any successor statute; and
WHEREAS, the Custodian has provided the Depositor with the disclosure statement
required under the Income Tax Regulation under Section 408(i) of the Code;
NOW, THEREFORE, the Depositor (or the spouse of the Depositor) has transferred,
assigned, and conveyed to the Custodian the property described in the Adoption
Agreement, and it is agreed by and between the Depositor and the Custodian the
following:
ARTICLE I
Contributions
(1) The SIMPLE IRA will accept only cash contributions made on behalf
of the Depositor pursuant to the terms of a SIMPLE IRA Plan described in Section
408(p) of the Internal Revenue Code. A rollover contribution or a transfer of
assets from another SIMPLE IRA of the Depositor will also be accepted. No other
contributions will be accepted.
(2) If contributions made on behalf of the Depositor pursuant to a
SIMPLE IRA Plan maintained by the Depositor's employer are received directly by
the Custodian from the employer, the Custodian will provide the employer with
the summary description required by Section 408(l)(2) of the Internal Revenue
Code.
ARTICLE II
Nonforfeiture
The Depositor's interest in the balance in the custodial account shall
at all times be nonforfeitable.
<PAGE> 8
ARTICLE III
Investment in General
(1) No part of the custodial funds shall 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) of the Code).
(2) No part of the custodial funds may be invested in collectibles (within
the meaning of Section 408(m) of the Code).
(3) This custodial account is created, administered and held for the
exclusive benefit of the Depositor and his Beneficiaries.
ARTICLE IV
Distribution
(1) Notwithstanding any provision of this Agreement to the contrary, the
distribution of a Depositor's interest in the custodial account shall be
made in accordance with the minimum distribution requirements of Section
408(a)(6) or Section 408(b)(3) of the Code and the Income Tax
Regulations thereunder, including the incidental death benefit
provisions of Section 1.401 (a)(9)-2 of the proposed Income Tax
Regulations, all of which are herein incorporated by reference.
(2) The Depositor's entire interest in the custodial account must be
distributed, or begin to be distributed, by the Depositor's "required
beginning date," which is the April 1 following the calendar year in
which the Depositor attains age 70 1/2. For such succeeding year, a
distribution must be made on or before December 31. By the required
beginning date the Depositor shall elect, in a manner and at such time
as may be acceptable to the Custodian, to have the balance in the
custodial account distributed in one of the following forms: (a) a
single lump sum payment;
(b) an annuity contract providing equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor;
(c) an annuity contract providing equal or substantially equal monthly,
quarterly or annual payments over the joint and last survivor lives of
the Depositor and his designated Beneficiary;
(d) equal or substantially equal monthly, quarterly or annual payments over
a specified period that may not be longer than the Depositor's life
expectancy; or
2
<PAGE> 9
(e) equal or substantially equal monthly, quarterly or annual payments over
a specified period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his designated Beneficiary.
Even if distributions have begun to be made under option (d) or (e),
the Depositor may receive a distribution of the balance in the custodial account
at any time by giving written notice to the Custodian. The Depositor shall be
solely responsible for making the necessary election and commencing distribution
by the required beginning date.
The amount to be distributed each year, beginning with the first
calendar year for which distributions are required and then for each succeeding
calendar year, shall not be less than the quotient obtained by dividing the
Depositor's benefit by the lesser of (i) the applicable life expectancy, or (ii)
if the Depositor's spouse is not the designated beneficiary, the applicable
divisor determined from the table set forth in Q&A-4 or Q&A-5, as applicable, of
Section 1.401(a)(9)-2 of the proposed Income Tax Regulations.
Distributions after the death of the Depositor shall be distributed
using the applicable life expectancy as the relevant divisor without regard to
Section 1.401(a)(9)-2 of the proposed Income Tax Regulations.
(3) If the Depositor dies before his entire interest is distributed to him,
the entire remaining interest in the custodial account will be
distributed as follows:
(a) If the Depositor dies on or after distributions have begun
under paragraph (2) of this Article,the entire remaining
interest must be distributed at least as rapidly as provided
under paragraph (2) of this Article.
(b) If the Depositor dies before distributions have begun under
paragraph (2) of this Article, the entire remaining interest
must be distributed as elected by die Depositor or, if the
Depositor has not so elected, as elected by the Beneficiary or
Beneficiaries, as follows:
(i) by December 3 1 st of the year containing the fifth
anniversary of the Depositor's death; or
(ii) in equal or substantially equal monthly, quarterly or
annual payments over the life or life expectancy of
the designated Beneficiary or Beneficiaries starting
by December 31st of the year following the year of
the Depositor's death. If however,the Beneficiary is
the Depositor's surviving spouse and subject to
paragraph (e) of this Article, then this distribution
is not required to begin before December 3 1 st of
the year in which the Depositor would have attained
age 70 1/2.
(c) Subject to paragraph (e) of this Article, in the event of the
death of the Depositor the surviving spouse Beneficiary may
elect to treat theaccount as the spouse's own individual
retirement account in accordance with 1.408-8 of the Proposed
Income Tax Regulations.
3
<PAGE> 10
(d) Distributions under paragraph (2) of this Article are
considered to have begun if the distributions are made on
account of the Depositor reaching his required beginning date.
If the Depositor receives distributions prior to the required
beginning date and the Depositor dies, distributions will not
be considered to have begun.
(e) Notwithstanding the foregoing provisions, if the Beneficiary
is a trust for the surviving spouse, and if a qualified
terminal interest property marital deduction for federal
estate tax purposes is allowable with respect to the
distributions from the custodial account payable to such
trust, then the distributions under this paragraph (3) shall
be increased, if necessary, to assure that all of the annual
income of the custodial account is distributed at least
annually to the trust. Furthermore, if the Beneficiary is such
a trust, all administrative charges and expenses of the
custodial account shall be charged to principal and shall not
reduce the annual income of the custodial account. The trustee
of the trust shall have the right to request immediate payment
of any part or all of the custodial account in order to
satisfy any request by the surviving spouse to convert
unproductive property into productive property or in order to
make withdrawals in excess of the minimum required
distributions. The provisions of this subparagraph (e) are
subject to the applicable minimum distribution requirements.
The Depositor shall be responsible for completing an
appropriate Beneficiary designation to carry out the
provisions of this subparagraph (e).
(4) Life expectancy is computed by use of the expected return
multiples in Table V and VI of Section 1.72-9 of the Income
Tax Regulations. Unless otherwise elected by the Depositor
prior to the commencement of distributions under paragraph (2)
of this Article or, if applicable, by the surviving spouse
where the Depositor dies before distributions have commenced,
life expectancies of a Depositor or spouse Beneficiary shall
be recalculated annually for purposes of distributions under
paragraph (2) and paragraph (3) of this Article. An election
not to recalculate shall be irrevocable and shall apply to all
subsequent years. The life expectancy of a nonspouse
Beneficiary shall not be recalculated. Instead, life
expectancy will be calculated using the attained age of such
Beneficiary during the calendar year in which the individual
attains age 70 1/2, and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for
each calendar year which has clasped since the calendar year
life expectancy was first calculated.
(5) An individual may satisfy the minimum distribution
requirements under Sections 408(a)(6) and 408(b)(3) of the
Code by receiving a distribution from one Individual
Retirement Account or Individual Retirement Annuity ("IRA")
that is equal to the amount required to satisfy the minimum
distribution requirements for two or more IRAs. For this
purpose, the Depositor of two or more IRAs may use the
"alternative method" described in Internal Revenue Service
Notice 88-38, 1988-1 C.B. 524, to satisfy the minimum
distribution requirements described above.
4
<PAGE> 11
ARTICLE V
Depositor's Declaration
Except in the case of the Depositor's death, disability (as defined in
Section 72(m) of the Code) or attainment of age 59 1/2, before distributing an
amount from the account, the Custodian may require from the Depositor a
declaration of the Depositor's intention as to the disposition of the amount
distributed.
ARTICLE VI
Reports
(1) The Depositor agrees to provide information to the Custodian at
such time and in such manner and containing such information as may be necessary
for the Custodian to prepare any reports required pursuant to Section 408(i) of
the Code and the Income Tax Regulations thereunder.
(2) The Custodian agrees to submit reports to the Internal Revenue
Service and the Depositor at such time and in such manner and containing such
information as is prescribed by die Internal Revenue Service.
(3) The Custodian shall furnish the Depositor annual calendar year-end
reports concerning the status of the custodial account as required by 1.408-5 of
the Income Tax Regulations.
ARTICLE VII
Preemption
Notwithstanding any other articles which may be added or incorporated,
the provisions of Articles I through III and this sentence shall be controlling.
Furthermore, any such additional Article shall be wholly invalid, if it is
inconsistent, in whole or in part, with Section 408(a) of the Code and the
Income Tax Regulations thereunder.
ARTICLE VIII
Amendments in General
This Agreement shall be amended, from time to time, in order to comply
with the provisions of the Code and Income Tax Regulations thereunder.
Furthermore, other amendments may be made to this Agreement by the Custodian as
provided herein.
5
<PAGE> 12
ARTICLE IX
Accounting
(1) All contributions made by the Depositor or the spouse of the
Depositor and all investments made with such contributions and the earnings
thereon shall be credited to an account maintained for the Depositor or the
spouse of the Depositor by the Custodian. The Custodian shall keep accurate and
detailed records of all contributions, receipts, investments, distributions,
disbursements, and all other transactions. Any contribution or investment in the
custodial account shall be held without distinction between income and
principal.
(2) After the close of each calendar year the Custodian shall render to
the Depositor a written report of the Depositor's account as of each December 3
1. Such report shall be made available to the Depositor within the time and in a
form prescribed by the Internal Revenue Service. The Custodian shall also render
such reports as are regularly issued by J. C. Bradford & Co. to its customers
(which may consist of copies of account statements regularly issued by J. C.
Bradford & Co.).
(3) In the absence of the filing in writing with the Custodian by the
Depositor of exceptions or objections to the annual report within sixty days
after the mailing of such report, the Depositor shall be deemed to have approved
such report and the Custodian shall be released, relieved and discharged from
all liability to anyone (including the Beneficiary) with respect to all matters
set forth in such report as though such account had been settled by the decree
of a court of competent jurisdiction. No person other than a Depositor may
require an accounting or bring any action against the Custodian with respect to
the account.
(4) The Custodian shall have the right at any time to apply to a court
of competent jurisdiction for judicial settlement of its accounts or for
determination of any questions of construction which may arise or for
instructions. The only necessary party defendant to such action shall be the
Depositor but the Custodian may, if it so elects, bring in as a party defendant
any other person or persons. The cost of any such accounting, including, but not
limited to, attorney's fees and court costs, shall be charged to the account as
an administration expense under Article XV.
ARTICLE X
Investment Powers
(1) The Depositor shall have the full responsibility for directing the
investment of all accounts credited to his account, including amounts earned
therefrom. The Depositor further agrees that such directions shall be limited to
investments approved by 1. C. Bradford & Co. from time to time for investments
in IRA accounts. Further, non-brokered certificates of deposit, non-brokered
notes (mortgages), closely held securities (in which J. C. Bradford & Co. does
not participate in the subscription offer), and real estate (hereinafter
collectively referred to as "Special Assets") are not permitted investments in
the individual retirement account unless the Custodian has agreed to permit such
investments in the account. The Depositor shall provide Custodian with an annual
written valuation of all Special Assets valued as of each December 31 and upon
such other times as the Custodian may require. If the Depositor fails to provide
such
6
<PAGE> 13
valuations the Custodian may employ such appraisers as needed to make the
valuation and charge the account for such appraisal. If Special Assets are
received into the account, the Custodian will charge additional fees for
receiving, maintaining, administering, safekeeping and selling such assets.
(2) The Depositor's investment directions may be given to the Custodian
either orally or in writing. The Depositor may delegate to an investment manager
the Depositor's power to direct investment of the account; providing that the
Custodian must be given a written notice in which the Depositor names and
appoints the delegate, a signed copy of the written agreement between the
Depositor and his delegate and any additional information and documents that the
Custodian may then require. Any direction given by such delegate shall
conclusively be presumed to be the direction of the Depositor until the
Custodian receives written notice of revocation of such delegation.
(3) The Custodian upon receipt of the Depositor's investment direction
shall execute the direction as soon as practical, and shall send a written
confirmation to the Depositor acknowledging the completion of the Depositor's
transaction.
(4) The Custodian shall have no right or responsibility (except as
provided below) to make any investments or dispose of any investment held in the
account, unless pursuant to the Depositor's direction. The Custodian shall have
no responsibility to inquire into or question any such directions of the
Depositor, to review the investments held in the account, or to give advice to
the Depositor with respect to the retention or disposition of any assets in the
account.
(5) Dividends and earnings from the assets of the account will be
retained in the account. Until such time as the Depositor has directed the
Custodian with respect to his account, the Custodian shall invest the amounts so
received in interest bearing accounts (at then current interest rates)
maintained by the Custodian.
(6) Notwithstanding anything herein contained to the contrary, the
Depositor may direct the investment of dividends and earnings from the assets of
the account pursuant to paragraph (2) of this Article.
(7) The Custodian may retain cash in the account without investing the
same.
(8) As soon as practical after the Custodian shall have received
notification of the death of a Depositor, all subsequent earnings in his account
shall be reinvested in the money market fund designated by the Depositor prior
to his death for the purpose of investment of income in accordance with
paragraph (6) of this Article. All other assets in his account shall remain as
invested until distributed in full to the Beneficiary of the Depositor or until
the Beneficiary otherwise designates.
ARTICLE XI
Responsibility of the Custodian
(1) The Custodian shall have no responsibilities or duties except for
those specifically set forth in this Agreement. The Custodian shall have the
power to hold any investment in bearer form or in the name of the Custodian or
in the name of any nominee without qualification or description.
7
<PAGE> 14
(2) The Custodian shall have the power, pursuant to the Depositor's
directions, to write covered listed call options against existing positions or
to close such option contracts, to exercise conversion privileges, or rights to
subscribe for additional securities and to make payments therefor.
(3) The Custodian shall have the power, pursuant to the Depositor's
directions, to invest and reinvest the assets of die account.
(4) Pursuant to the directions of the Depositor, the Custodian shall
have the power to consent or to participate in dissolutions, reorganizations,
consolidations, mergers, sales, leases, mortgages, transfers or other changes
affecting investments held by the Custodian. In the absence of such directions
the Custodian shall take no action.
(5) The Custodian shall have no duty or responsibility to diversify the
assets of the account or to insure that the investment of such assets is
authorized by the laws of any jurisdiction for purposes of trust investment.
(6) The Custodian shall not vote any shares of investments held in the
account except in accordance with the written instructions of a Depositor.
(7) Neither the Custodian nor any agent of the Custodian shall have any
power, authority or discretion to enter into a mutual agreement, arrangement or
understanding on behalf of the Custodian or the agent, in which the Custodian or
such agent agrees to render to the Depositor, advice which will serve as a
primary basis for investment with respect to the assets of the account and which
investment advice is individualized to the particular needs of the account.
ARTICLE XII
Designation of Beneficiary
(1) Subject to applicable state law, the Depositor from time to time,
may designate any Beneficiary or Beneficiaries (concurrently, contingently or
successively) to whom the assets in the account are to be paid upon the
Depositor's death. In certain community property states, the Custodian may
require spousal consent to a non-spouse Beneficiary. Such designation shall be
in writing and shall continue in effect until revoked by the Depositor during
his lifetime by a subsequent designation in writing. 'Me Depositor is solely
responsible for securing the spouse's consent and the Custodian shall not be
liable to the spouse, any Beneficiary or any entity in regard to such consent or
any payments related thereto.
(2) If no such designation is in effect at the time of the Depositor's
death or if the designated beneficiary of the Depositor shall not survive the
Depositor, the Beneficiary shall be the spouse of the Depositor, or if there is
no spouse living at the time of the Depositor's death, the Beneficiary shall be
the estate of the Depositor.
(3) After all custodian fees have been paid, the Beneficiary shall be
entitled to the Depositor's entire interest in the event of the Depositor's
death prior to the complete distribution of the entire interest.
8
<PAGE> 15
ARTICLE XIII
Payment of Benefits
(1) The Depositor shall notify the Custodian in writing signed by the
Depositor of the time he wishes to receive his benefits and the form of the
benefit in accordance with Article IV. The Custodian shall not be liable, for
the proper application of any part of the account if the distributions are made
in accordance with the written directions of the Depositor.
(2) If the distribution is to be made in cash or kind the Depositor
shall direct the Custodian as to what investments arc to be sold or distributed
in order to comply with the direction. If the Depositor fails to so direct, the
Custodian shall, to the extent necessary to comply with the direction to
distribute, either sell investments for cash or distribute the assets of the
account in the sole discretion of the Custodian and without liability to the
Custodian.
(3) If the Depositor dies before his entire interest in the custodial
account is distributed to him, or if the distribution has been commenced to his
surviving spouse and such surviving spouse dies before the entire interest is
distributed to such spouse, the balance of his account shall be distributed to
the Beneficiary in accordance with paragraph (3) of Article IV at the time and
in the manner as directed by the Beneficiary entitled thereto.
(4) If the Custodian is unable to make a distribution to a Depositor or
a Beneficiary within a reasonable time after such payment is due because the
Custodian cannot ascertain the whereabouts of the Depositor or the Beneficiary
by mailing to the last known address of such individual, the Custodian shall
take no action (other than paying Custodian's fees from the account) until such
time as disbursement is possible or such funds escheat to a governmental agency
by operation of law.
(5) If the Depositor provides the Custodian written notice and evidence
satisfactory to the Custodian that the Depositor is disabled within the meaning
of Section 72(m)(7) of the Code, the Depositor may elect to receive his interest
in his account in accordance with any of the settlement options set forth in
Article IV of this Agreement. The Custodian shall not be liable for any
penalties or tax assessed because distributions under this paragraph fail to
qualify as payments attributable to disability.
(6) Prior to the expiration of the 2-year period beginning on the date
the Depositor first participated in any SIMPLE IRA Plan maintained by the
Depositor's employer, any rollover or transfer by the Depositor of funds from
this SIMPLE IRA must be made to another SIMPLE IRA of the Depositor. Any
distribution of funds to the Depositor during this 2-year period may be subject
to a 25-percent additional tax if the Depositor does not roll over the amount
distributed into a SIMPLE IRA. After the expiration of this 2-year period, the
Depositor may roll over or transfer funds to any IRA of the Depositor that is
qualified under Section 408(a) or (b) of the Internal Revenue Code.
ARTICLE XIV
Rollover Contributions
(1) The Custodian may receive from any individual a rollover
contribution as described in Section 402(c); 403(a)(4); 403(b)(8) and 408(d)(3)
of the Code, to be invested and
9
<PAGE> 16
distributed, pursuant to this agreement. Unless the Depositor otherwise directs
the Custodian in writing, each rollover contribution received shall be held by
the Custodian in a separate account and all earnings therefrom shall be credited
to such account. The Custodian shall not accept other contributions to such an
account unless the Depositor otherwise requests in writing. The Custodian shall
have no obligation to ascertain whether or not such rollover is proper pursuant
to the Code or the provisions of any other plan.
(2) The Custodian may receive rollover contributions consisting of
property which is obtainable through J. C. Bradford & Co. The Custodian may also
receive as a rollover contribution such other property which is approved by the
Custodian's Trust Division.
ARTICLE XV
Compensation
(1) Depositor shall be charged by the Custodian for its services under
this Agreement in accordance with the fee schedule of the Custodian in effect
from time to time. The Depositor hereby covenants and agrees to pay the same.
(2) The Depositor shall pay to the Custodian any taxes paid by the
Custodian which may be imposed upon the account or the income thereof which the
Custodian is required to pay, as well as all expenses of administration of the
account including fees for legal services. The Depositor shall pay to the
Custodian fees charged by the Custodian (including, but not limited to, legal
fees incurred by the Custodian) for review of any divorce decrees, divorce
agreements and/or court orders involving the custodial account and reserves the
right to reject any such decrees, agreements or orders if such documents are not
specific or correct.
(3) The Depositor's account will be charged for all brokerage fees,
other selling and buying expenses, and mutual fund management fees which arc
allocable to the account.
(4) In the event a Depositor (or his Beneficiary) fails to promptly pay
the taxes, expenses, liabilities, or the Custodian's fees or compensation
allocable to the account, after a demand for such payment has been made by the
Custodian on the Depositor (or his Beneficiary, as the case may be) such
liability shall be charged against the account. In this connection, the
Custodian shall to the extent necessary to pay the liabilities, liquidate the
assets of the account without liability to the Custodian.
(5) If the account is insufficient to satisfy such liabilities
(including if the account cannot be liquidated) or in the event a deficit should
occur in the-account for any reason, the Custodian will charge the Depositor for
such amounts as are unsatisfied and may terminate the account as provided in
Article XVIII. All monies and property carried by the Custodian at any time in
any account of the Depositor (held either jointly, individually or otherwise)
other than a Regulated Commodity account, or which may at any time be in the
Custodian's possession or under its control for any purpose shall be collateral
subject to a general lien and security interest for the discharge of all
liabilities arising under this Agreement and of all deficits arising in the
account, however and whenever arising. Should the Depositor fail to make any
payment or satisfy any liability arising under this agreement or any deficit
arising in the account, the Custodian is hereby authorized to sell any property
in the account of the Depositor with the Custodian, or buy in any property which
any such account may be short, or otherwise effect
10
<PAGE> 17
settlement for the purpose of satisfying any such liability or deficit which may
arise. Any such sale, purchase or settlement may be made at the Custodian's
discretion and at its prevailing commission rates on any exchange or market
where such business is then transacted or at public auction or private sale
without notice to the Depositor and without advertisement, tender or demand any
kind on the Depositor, such notice, advertisement, tender or demand being hereby
expressly waived by the Depositor.
(6) The Custodian may at any time liquidate sufficient assets in the
IRA to satisfy any obligations of the IRA and the Depositor and his Beneficiary
or Beneficiaries agree to hold Custodian harmless from any taxes, interest,
penalties or other claims, liabilities or damages resulting from or arising out
of such asset liquidation and/or account termination. Further, Depositor and his
Beneficiary or Beneficiaries release Custodian from all damage claims resulting
from or arising out of such asset liquidation.
ARTICLE XVI
Amendment
(1) This Custodial Account Agreement is intended to be and to continue
as a qualified individual retirement custodial account within the meaning of
Section 408 of the Code. The Depositor irrevocably delegates to the Custodian
the power to amend this document in writing from time to time without the
consent of the Depositor if such amendment is necessary to comply with
provisions of the Code and related regulations, or to comply with regulatory or
statutory revision or to maintain compliance with Federal and State laws. The
Depositor irrevocably delegates to Custodian power to amend this Agreement in
writing from time to time without the consent of the Depositor for any other
amendments upon thirty (30) days prior written notice to the Depositor setting
forth such amendment. Any amendment to the Agreement may be retroactively
effective unless otherwise required by law.
(2) Notwithstanding anything herein contained to the contrary, the
Depositor may change his investment directions (in accordance with Article X),
his Beneficiary designation (in accordance with Article XII), or the time or
form for payment of benefits (in accordance with Articles IV and XIII).
(3) Neither the Depositor nor the Custodian shall have the power to
amend the Custodial Account Agreement in such manner as would cause or permit
any pan of the benefits in the account to be diverted to purposes other than for
the exclusive benefit of the Depositor or his Beneficiaries unless such
amendment is necessary to conform the Custodial Account Agreement to or satisfy
the conditions of any law, governmental regulation or ruling or to meet the
requirements of the Code or any amendment thereof. Further, neither the
Depositor nor the Custodian shall have the power to amend the Custodial Account
Agreement in such manner as would cause the account to fail to qualify as an
individual retirement account under Section 408 of the Code.
11
<PAGE> 18
ARTICLE XVII
Termination and Transfer
(1) A Depositor may terminate this Custodial Account Agreement at any
time by delivery of written notice of such termination to the Custodian. Upon
such termination, the Custodian shall continue to hold the assets and distribute
them in accordance with the previous instructions of the Depositor and the
provisions of this Agreement unless the Custodian receives other instructions
from the Depositor (such as those involving a rollover) which the Custodian may
follow, without liability and without any duty to ascertain whether such payout
is proper under the provisions of the Code or of any other plan. If such other
instructions involve a payout of the Depositor's benefits, the procedures set
forth in Article XIII hereof shall be applicable.
(2) Upon request of a Depositor in writing to the Custodian, the
Custodian shall transfer all benefits of the Depositor to the Depositor, to a
qualified employee retirement plan or to another individual retirement account
established by the Depositor. The Custodian is authorized, however, to reserve
such sum of money or investments as it may deem advisable for payment of all its
fees, compensation, costs and expenses, or for any other liabilities
constituting a charge against the assets of the account or against the Custodian
with any balance of such reserve remaining after the payment of all such items
to be paid over to the successor trustee or custodian. If investments are
retained for the aforesaid reasons, they shall be disposed of in accordance with
Article XIII. Upon any such transfer, the Custodian's accounting procedures set
forth in Article IX hereof shall be applicable. The Depositor assumes all
responsibility and liability for determining whether a transfer of benefits from
this Agreement is permitted by the Code or state law.
(3) This Custodial Account Agreement will be terminated in the case of
complete distribution of the assets of the Depositor's Account.
(4) The death of the Depositor shall not cause a termination of this
Custodial Account Agreement.
ARTICLE XVIII
Resignation or Removal of Custodian
(1) The Custodian may resign at any time upon thirty (30) days' notice
in writing to the Depositor and may be removed by the Depositor at any time upon
thirty (30) days' notice in writing to the Custodian. Upon such resignation or
removal, the Depositor shall appoint a qualified successor custodian or trustee.
Upon receipt by the Custodian of written acceptance of such appointment by the
successor custodian or trustee, the Custodian shall transfer and pay over to
such successor the assets of the accounts or account and all records pertaining
thereto. The Custodian is authorized, however, to reserve such sum of money or
investments as it may deem advisable for payment of all its fees, compensation,
costs and expenses, or for payment of any other liabilities constituting a
charge against the assets of the accounts or account or against the Custodian
with any balance of such reserve remaining after the payment of ail such items
to be
12
<PAGE> 19
paid over to the successor custodian or trustee. If investments are retained for
the aforesaid reasons, they shall be disposed of in accordance with Article
XIII.
(2) It shall be a condition of the removal of the Custodian by the
Depositor that the Depositor shall have appointed a qualified successor
custodian or trustee. In the event of the resignation of the Custodian and
failure to appoint a qualified successor, the Custodian may designate a
successor custodian(s) or trustee(s). Such designation or designations may be
made in the alternative specifying the order in which the custodians or trustees
names are to serve. Unless and until a custodian or trustee named shall commence
to act hereunder, the designation of such custodian or trustee may be revoked by
the custodian or trustee then acting in the same manner as the designation of
such custodian or trustee was made.
(3) In the event the Depositor fails to pay the Custodian's fees or
compensation, the account cannot be liquidated in order to pay such fees or
Compensation, and the Depositor fails to appoint a successor custodian or
trustee within thirty (30) days after written notice is mailed by Custodian,
then Custodian may terminate its custodial relationship and this individual
retirement account and transfer the assets in the account to a regular brokerage
account at J.C. Bradford & Co. In such event Custodian shall not be liable for
taxes, penalties, interest or other damages resulting therefrom.
(4) The Custodian shall substitute another trustee or custodian if the
Custodian receives notice from the Commissioner of Internal Revenue that such
substitution is required because it has failed to comply with the requirements
of Section 1.401-(12)(n) of the Income Tax Regulations.
(5) In the event a successor custodian or trustee is appointed the
Custodian shall have the power to sell all the property in the account in order
to convert such property into a form which the successor custodian or trustee
may receive.
ARTICLE XIX
Miscellaneous
(1) Unless specifically authorized in this agreement, the Custodian
shall not, with respect to the account, exercise any discretionary authority or
discretionary control respecting the management or disposition of its assets, or
any discretionary authority or responsibility in its administration.
(2) The Custodian shall not be liable for any tax attributable to the
contribution or receipt of any excess contribution. The Custodian shall have no
duty to determine whether contributions in any year exceed the maximum
deductible for contributions to an account for federal or state income tax
purposes.
(3) The Custodian is not liable to the Depositor, his spouse, or other
Beneficiaries for any loss, income tax liability or any other detriment to an
account held by the Custodian pursuant to this Agreement caused by a transaction
engaged in by the Depositor, his spouse, or other Beneficiary that is prohibited
by Section 4975 of the Code.
(4) The Custodian shall be fully protected in acting upon any
instrument, certificate, power of attorney, appointment of investment manager or
paper believed by it to be genuine and the Custodian shall be under no duty to
make any investigation or inquiry as to any statement contained in any such
writing or other legality of such writing, but may accept the same as
13
<PAGE> 20
conclusive evidence of the truth and accuracy of the statements therein
contained. The Custodian may rely upon, and act in accordance with, a power of
attorney given by the Depositor to any person or persons or institution. The
Depositor shall at all times duly indemnify and save harmless the Custodian from
any liability which may arise hereunder except liability arising from the
negligence or willful misconduct of the Custodian.
(5) The Custodian shall not be liable for any losses which may result
from its failure to act in the absence of directions from the Depositor, when
such directions are prescribed by this Agreement.
(6) The Custodian shall not be liable for any act or omission made
with respect to the Custodial Account Agreement except for its intentional
misconduct or negligence.
(7) The Depositor may transfer part or all of his interest in his
custodial account to the former spouse of the Depositor, or an individual
retirement account established by such spouse, pursuant to a divorce decree or
under a written instrument incident to a divorce.
(8) Unless otherwise required by law, the terms and conditions of this
Custodial Account Agreement shall be applicable without regard to the community
property laws of any state.
(9) The terms and provisions of this Custodial Account Agreement shall
be construed according to the principles, and in the priority, as follows:
first, in accordance with the meaning under, and which will bring the Agreement
into conformity with, the Internal Revenue Code of 1986, as amended, and the
Employee Retirement Income Security Act of 1974, as amended; and secondly, in
accordance with the laws of the State of Tennessee. If any provisions of this
Agreement shall be construed as if such provision had never been included, then
this Agreement shall be deemed to contain the provision necessary to comply with
such laws. Wherever applicable, the masculine pronoun as used herein shall
include the feminine, and the singular the plural.
(10) The Depositor herein agrees that he shall look solely to the
assets of his account for the payment of any benefits to which he is entitled.
(11) The Depositor shall notify the Custodian of any change in the
Depositor's address.
(12) If the custodial account acquires collectibles within the meaning
of Section 408(m) of the Code after December 31, 1981, the investment in
collectibles will be treated as a taxable distribution in an amount equal to the
cost of such collectible and taxable as such.
(13) If this custodial account is established by an employer for the
exclusive benefit of its employees or their beneficiaries, then separate records
will be maintained for the interest of each individual; provided, however, that
the employer shall secure Internal Revenue Service approval of the custodial
account pursuant to Section 408(c) of the Code.
(14) This Agreement shall not be deemed to create a trust between the
Custodian and the Depositor and his spouse or other Beneficiaries.
(15) The Depositor certifies that:
(a) all contributions made to the custodial account are
within the limits specified by applicable law;
(b) all contributions made by or on behalf of the
Depositor have been made on a timely basis; and
14
<PAGE> 21
(c) Depositor satisfied the eligibility requirements
specified in the law to make such contributions.
The Custodian may rely upon all such certifications of the Depositor,
and shall not be liable for any mistake of fact or judgment with respect to any
contribution into the custodial account
(16) It is the Depositor's (or Beneficiary's in the event of the
Depositor's death) responsibility and obligation to give written notice to the
Custodian of the amount of each minimum distribution required in order to avoid
the minimum distribution excise tax penalty under federal and state laws or to
satisfy any qualified terminal interest property marital deduction distribution
requirements. Such notice shall be delivered to the Custodian not more than
thirty (30) days nor less than seven (7) days prior to each required minimum
distribution date. The Custodian shall have no duty, obligation or
responsibility to notify the Depositor or any Beneficiary of any obligation
hereunder or to determine the amount of any minimum distribution and the
Custodian shall not be liable for any penalties, taxes or interest of any kind
related thereto.
(17) If a custodial account is established for a minor, the guardian,
custodian or other legal representative of the minor shall agree in writing to
guarantee full payment of all compensation or fees payable to the Custodian
herein. No investment direction shall be accepted by the Custodian from the
minor and shall only be accepted from the guardian, custodian or other legal
representative of the minor.
ARTICLE XX
Rights of Revocation
(1) This Custodian Account Agreement may be revoked by the Depositor or
rejected by the Custodian within seven (7) calendar days after the date upon
which the Adoption Agreement is signed by the Depositor, in which event this
Agreement shall be void from its inception, and all property contributed and all
fees paid by the Depositor to the Custodian shall be returned to the Depositor.
Notwithstanding the preceding sentence, the Custodian shall execute any
investment directions of the Depositor during the seven (7) calendar days
immediately following the date upon which the Depositor signed the Custodian
Account Adoption Agreement.
ARTICLE XXI
Definitions
The following words and phrases, when used herein, shall have the
following respective meanings (unless their context clearly indicates
otherwise):
(1) Depositor: The individual who is eligible to establish a Simple
Individual Retirement Custodial Account and who establishes a simple individual
retirement custodial account under this Agreement by executing the IRA Adoption
Agreement.
15
<PAGE> 22
(2) Beneficiary: A person, trustee, or entity (including but not
limited to the Depositor's (or spouse's) estate, dependent (or dependents),
designated in writing by the Depositor (or surviving spouse) to receive benefits
payable under this Agreement, subsequent to the death of the Depositor (or
surviving spouse).
(3) Custodian: J. C. Bradford & Co., its successors and assigns.
(4) Code: The Internal Revenue Code of 1986, as amended. Reference to a
section of the Code shall include that section and any comparable section or
sections of any future legislation that amends, supplements or supersedes said
section.
J. C. BRADFORD & CO.
SIMPLE INDIVIDUAL RETIREMENT ACCOUNT DISCLOSURE STATEMENT
The following disclosure statement is provided to you in accordance with the
Internal Revenue Code. It should be reviewed along with the Simple Individual
Retirement Custodial Account Adoption Agreement, Simple Individual Retirement
Custodial Account Agreement and Explanation of Fees. The information provided
below reflects the provisions of the Internal Revenue Code as are effective
January 1, 1997.
(A) Right of Depositor to Revoke Within Seven Days
Within seven (7) days after the date Depositor signs the Simple Individual
Retirement Custodial Account Adoption Agreement, thereby acknowledging receipt
of the Disclosure Statement, the Depositor shall have the right to revoke the
Adoption Agreement. Such notification of revocation shall be in writing
(specifically stating the Depositor's intention to revoke). Oral revocation is
not permitted. The written notification of revocation shall be mailed or hand
delivered to the Retirement Services Department, J. C. Bradford & Co., 330
Commerce Street, Nashville, Tennessee, 37201 on or before the end of the
seven-day period. In the event the written notification is mailed, it shall be
deemed mailed on the date of the postmark, or if sent by certified or registered
mail, it shall be deemed to be mailed as of the date of certification or
registration. If mailed, the written notice of revocation shall be mailed in the
United States in an envelope, or other appropriate wrapper, and it shall be
mailed by first class mail with the postage prepaid and properly addressed.
Notification mailed or delivered after the sever, day period will be considered
null and void, and will not cause an effective revocation. The phone number of
the Retirement Services Department of J. C. Bradford & Co. is (615) 748-9434.
The Custodian shall execute any investment directions of the Depositor during
the seven (7) day revocation period.
(B) Internal Revenue Code Requirements with Respect to your Custodial Account
The Internal Revenue Code of 1986 (hereinafter referred to as die "Code")
defines a Simple Individual Retirement Account as an Individual Retirement
Account as a trust or custodial account (hereinafter referred to as die
"account") maintained for the exclusive benefit of the Depositor or his
beneficiaries pursuant to a written instrument, which contains the following
provisions:
16
<PAGE> 23
(1) Except in the case of rollover contributions from another
Simple Individual Retirement Account, contributions must be
made in cash on behalf of the Depositor pursuant to a
qualified salary reduction arrangement under the Simple plan
described in Section 408(p) of the Code of die Depositor's
employer.
(2) The Custodian must be a bank or other organization, such as J.
C. Bradford & Co., which has been qualified by the Internal
Revenue Service to serve as trustee or custodian.
(3) No portion of the funds in the account may be invested in life
insurance contracts or collectibles.
(4) The interest of a Depositor in his account is nonforfeitable.
(5) The assets of the account will not be commingled with other
property except in a common trust fund or common investment
fund (within the meaning of Section 408(a)(5) of the Code).
(6) Distributions may begin when the Depositor reaches age 59 1/2;
however, distributions must begin on or before the first day
of April following the calendar year in which the Depositor
attains age 70 3A ("required beginning date"). A Depositor who
becomes disabled may elect to receive distributions without
regard to age. Upon reaching the required beginning date,
distribution must be made in a single sum payment, or in equal
or substantially equal monthly, quarterly or annual payments
over a specified period that may not be longer than the
Depositor's life expectancy or in equal or substantially equal
monthly, quarterly or annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and his designated beneficiary.
Life expectancy is calculated based upon Treasury regulation
tables. Even if payments based on life expectancy have begun,
the Depositor may give written notice to the Custodian to
receive a distribution of the balance of the account. However,
the Depositor must give written notice to the Custodian not
more than 30 days and not less than 7 days prior to the date a
minimum distribution is required.
(7) If the Depositor dies on or after his required beginning date
and distribution of his interest has begun, then the remaining
portion of such interest will continue to be distributed under
the method being used prior to the Depositor's death. If the
Depositor dies beforedistribution of his interest commences,
then the entire account will be distributed at the election of
the beneficiary or beneficiaries in accordance with one of the
following:
(a) The entire account will be paid by December 31 of the
year in which the fifth anniversary of die
Depositor's death occurs.
17
<PAGE> 24
(b) If the Depositor's account is payable to a designated
beneficiary who is an individual, the account will be
distributed in equal or substantially equal payments
over the life or life expectancy of the designated
beneficiary or beneficiaries. If the spouse of the
Depositor is not the beneficiary, payment must begin
by the December 31 of the year following the
Depositor's death. If the spouse is the beneficiary,
then payments shall begin prior to the date on which
the deceased Depositor would have attained age 70
1/2. The beneficiary (including the spouse) may at
any time elect to receive greater payments.
The election of either (a) or (b) must be
made by the December 31 following the year of the
Depositor's death. If the beneficiary or
beneficiaries do not elect either (a) or (b), then
distribution will be made in accordance with (b) if
the beneficiary is the spouse of the Depositor, or
(a) if the beneficiary or beneficiaries are or
include anyone other than the spouse.
(8) If the spouse of the Depositor is the designated beneficiary,
and if the entire account is paid in a single sum, the spouse
can rollover all or part of the payment to the spouse's IRA
provided the rollover is made within 60 days of receipt of
payment. In such a case the surviving spouse would not have to
begin receiving distributions from the IRA until age 70 1/2.
However, distributions prior to 591/2 would generally be
subject to the 10% premature distribution penalty.
(9) If the spouse of the Depositor is the designated beneficiary,
then the spouse may elect to maintain the account as her own
account. The surviving spouse shall be deemed to have elected
to maintain the account as her own if the spouse fails to
elect either (a) or (b) above or the spouse makes additional
contributions to the account. If the spouse dies prior to
receiving distributions from the Depositor's Simple IRA,
distributions must be made under the rules applicable as if
the spouse were the Depositor.
(10) If the designated beneficiary is a trust for the Depositor's
surviving spouse and a qualified terminal interest property
marital deduction for federal estate tax purposes is allowable
with respect to the distributions from the custodial account
payable to such trust, then the distributions required above
Will be increased, if necessary, to assure that all of the
annual income of the account is distributed at least annually
to the trust. Furthermore, all administrative charges and
expenses of the account shall be charged to principal and
shall not reduce the annual income of the account. The trustee
of the trust shall have the right to request immediate payment
of any part or all of the custodial account in order to
satisfy any request by the surviving spouse to convert
unproductive property into productive property or in order to
make withdrawals in excess of the minimum required
distributions. The
18
<PAGE> 25
provisions of this subparagraph are subject to the applicable
minimum distribution requirements. The Depositor shall be
responsible for completing an appropriate Beneficiary
designation to carry out the provisions of this subparagraph
(10).
(11) If the Depositor dies before his account balance has been
distributed to him, and the beneficiary is other than the
surviving spouse, no additional cash contributions or rollover
contributions may be accepted by the Custodian. Further, the
Simple IRA may not be rolled over to another IRA.
(C) Income Tax Consequences of Establishing An Account
(1) No Income Tax Deduction
(a) Except for rollover contributions from another Simple
IRA, a Depositor may not make a contribution to the
account since all contributions must result from a
Simple IRA Plan of the Depositor's employer.
Accordingly, the Depositor does not take a deduction
on the Depositor's income tax return for amounts
transferred or contributed to the account. Earnings
while in the Simple IRA are generally tax-deferred
until distributed.
(2) Taxation Upon Distribution
(a) The full amount of any distribution from the Simple
IRA will be taxed as ordinary income to the
recipient.
(b) A distribution from this Simple IRA may be a
tax-free-rollover if the entire amount received is
rolled over within 60 days of receipt to another IRA.
However, a twenty-five (25%) percent penalty tax
(discussed below) may apply if the rollover is not
made to another Simple IRA. Tax-free rollovers from
one Simple IRA to another IRA may occur only once
each year.
(3) Rollover Contributions to this Account.
(a) A rollover contribution is a tax-free transfer of
funds from one retirement savings program to another.
No tax deduction is allowed for a rollover
contribution. All rollover contributions to this
Simple IRA must come from another Simple IRA and must
satisfy the following requirements:
(i) The entire amount received must be paid into
this Simple IRA within sixty (60) days after
the amount is received.
(ii) Withdrawal of assets from another Simple IRA
for the purpose of a rollover to this Simple
IRA may occur only once within any one-year
period. The one-year rule does not apply to
direct transfers between Simple IRA
custodians or trustees.
19
<PAGE> 26
(iii) The rollover contribution must include the
entire interest which the Depositor received
from other Simple IRA and must be in the
form of the identical property received from
that Simple IRA.
(iv) A minimum distribution from another Simple
IRA may not be rolled over to this Simple
IRA.
(4) Rollover Contributions from this Account
(a) A tax-free rollover from this Simple IRA to another
IRA (either Simple or regular) must satisfy the
following requirements:
(i) The entire amount received must be paid into
the other IRA within sixty (60) days after
the amount is received. If the other IRA is
not a Simple IRA a twenty-five (25%) percent
penalty tax (discussed below) may apply.
(ii) Withdrawal of assets from this Simple IRA
for the purpose of a rollover to another IRA
may occur only once within any one-year
period. The one-year rule does not apply to
direct transfers between this Simple IRA and
another IRA custodian or trustee.
(iii) The rollover contribution must include the
entire interest which the Depositor received
from this Simple IRA and must be in the form
of the identical property received from this
Simple IRA.
(iv) A minimum required distribution from this
Simple IRA may not be rolled over to another
IRA.
(5) Estate and Gift Taxes
(a) Upon the death of the Depositor, the value of the
account is part of the Depositor's gross estate for
Federal estate tax purposes and may incur Federal
estate taxes. Depending upon the applicable state
law, the account may or may not be subject to state
inheritance or estate taxes.
(b) The account may be made payable to a trust that
qualifies for the qualified terminal interest
property marital deduction.
(c) Amounts withdrawn from the account and given as a
gift are subject to Federal (and possibly state) gift
tax laws and may incur gift taxes.
20
<PAGE> 27
However, a Depositor's revocable election to have a
distribution payable to a beneficiary upon the death
of the Depositor will not be treated as a gift
subject to gift tax. Because of the complexity of the
rules relating to income taxes, estate and gift
taxes, rollover contributions and the tax
implications, you should consult your tax advisor
before taking any action.
(D) Additional Limitations and Prohibitions
(1) A Depositor, his spouse and his beneficiary are prohibited from
engaging in a prohibited transaction described in Section 4975(c) of the Code
with respect to his account. If such a transaction is engaged in, the account
will lose its tax-exempt status and the fair market value of the account will be
subject to income tax in the taxable year in which the prohibited transaction
occurs (this is considered a premature distribution under subsection 4 below).
Generally, prohibited transactions include the direct or indirect (a) sale or
exchange, or leasing, of any property; (b) lending of money or other extension
of credit; (c) furnishing of goods, services or facilities between die Depositor
or a beneficiary or other disqualified person and the Simple IRA; (d) transfer
to, or use by or for the benefit of the Depositor or a beneficiary or other
disqualified person, of the income or assets of the Simple IRA; (e) dealing by
the Depositor, beneficiary or other disqualified person with the assets of the
Simple IRA in his or her own interest or own account; or (f) receipt by any
disqualified person who is a fiduciary from a party dealing with the Simple IRA
of any consideration in connection with any transaction involving the income or
assets of the Simple IRA.
(2) The acquisition in die account of any collectible will be treated
for purposes of Sections 402 and 408 of the Code as a distribution from the
account in an amount equal to the cost to the account of the collectible and
will be taxable as such. This is considered a premature distribution under
subsection (4) below. The term "collectible" means any work of art, rug,
antique, metal, gem, stamp, coin, alcoholic beverage, or other tangible personal
property specified as such by the Secretary of the Treasury for the purposes of
Section 408(m) of the Code. However, certain designated gold Or silver coins and
certain coins issued by States of the United States are permitted investments.
(3) If a Depositor uses all or any portion of his account as security
for a loan, then the portion of the account so used is treated as having been
distributed to such individual and the benefited individual must include such
distribution in his gross income for the year in which he so uses the account.
This is considered a premature distribution under subsection (4) below.
(4) A ten (10%) percent penalty tax is imposed on distribution made
before the Depositor attains age 59 1/2, unless such distribution is made on
account of (a) death, (b) disability, or (c) the distribution is part of a
series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Depositor or the joint
lives (or joint life expectancies) of the Depositor and his designated
beneficiary. If a distribution occurs during the first 2 year period beginning
on the first day on which contributions are made by the Depositor's employer
into the account) which incurs the penalty tax, then the ten (10%)
21
<PAGE> 28
percent penalty tax in the preceding sentence is increased to a twenty-five
(25%) percent penalty tax. The penalty tax will not apply to a rollover to
another Simple IRA. Further, after the Depositor has participated in a qualified
salary reduction arrangement pursuant to a Simple plan maintained by the
Depositor's employer for the 2 year described above, the penalty tax will not
apply to a rollover to a regular IRA.
(5) After a Depositor attains age 70 1/2, if the required distributions
do not equal or exceed certain minimums, a non-deductible excise tax of fifty
(50%) percent will be imposed upon the difference between the amount required to
be distributed and the amount actually distributed.
(6) The Depositor (and Spouse in the case of a Spousal IRA) must file
Form 5329 (Return for Individual Retirement Arrangements Taxes) with the
Internal Revenue Service only if he owes a penalty tax for a premature
distribution or an under-distribution.
(7) The Custodial Account Agreement is on a form approved by the
Internal Revenue Service for use in establishing custodial accounts.
(8) Further information pertaining to the laws and regulations
governing Simple Individual Retirement Accounts may be obtained from any
district office of the Internal Revenue Service.
(9) If the Depositor is a resident of a community property state and
the Depositor desires to name a beneficiary other than the Depositor's spouse,
then the Depositor is solely responsible for securing the spouse's consent and
the Custodian shall not be liable to the spouse, any beneficiary or entity in
regard to such consent. The Depositor should consult an attorney in regard to
any such spousal consents.
(E) Investments
(1) The Depositor is responsible for directing the Custodian with
respect to the investment of all contributions and earnings therefrom. The
Custodian has no discretion or duty, in the absence of the Depositor's direction
or as mandated in the Custodial Account Agreement, to invest any funds. Further,
the Depositor assumes all investment risks with regard to such investments.
Non-brokered certificates of deposit, non-brokered notes (mortgages), closely
held securities (in which J. C. Bradford & Co. does not participate in the
subscription offer), and real estate (collectively referred to as "Special
Assets") are not permitted investments in the account unless the Custodian has
agreed to permit such investments in the account. The Depositor shall provide
valuations of any Special Assets. If the Depositor fails to provide such
valuations then the Custodian may employ appraisers to make such valuations. Any
appraiser fees shall be charged against the IRA account and the Depositor will
be liable for any deficiency.
22
<PAGE> 29
The Depositor may only direct the investment of the assets of the
account into investments obtainable through J. C. Bradford & Co. Assets of the
account may not be invested in "Collectibles" as defined in Section 408(m) of
the Code (see paragraph D(2) above).
(2) The Depositor may delegate to any person or institution (other than
the Custodian) the Depositor's power to direct investment of the account as long
as the Custodian is given advance written notice in which the Depositor names
and appoints the delegate, a signed copy of the written agreement between die
Depositor and his delegate and any additional information and documents the
Custodian may require. Any direction given by the delegate is conclusively
presumed to be the Depositor's direction until the Custodian receives written
notice of revocation of the delegate's authority.
(3) The Custodian upon receipt of the Depositor's investment direction
shall execute the direction as soon as practical, and shall send a written
confirmation to the Depositor acknowledging the completion of the Depositor's
transaction.
(4) Dividends and earnings from the assets of the account will be
retained in the account. Until such time as the Depositor has directed the
Custodian with respect to his account, the Custodian shall invest the amounts so
received in interest bearing accounts (at then current interest rates)
maintained by the Custodian.
(5) The Depositor shall have the power to make a continuing investment
direction with respect to the dividends and earnings received by the account
from the assets of the account. A continuing investment direction can be made
either orally or in writing to the Custodian.
(6) Such amounts received shall be reinvested as directed in the
Depositor's continuing investment direction; provided that such amount equals or
exceeds the minimum investment requirements then in effect for the designated
investment.
(7) The Custodian may retain cash in the account without investing the
same.
(8) As soon as practical after the Custodian receives notification of
the death of a Depositor, all subsequent earnings on his account shall be
reinvested in the money market fund designated by the Depositor prior to his
death for the purpose of investment of income. All other assets in his account
shall remain as invested until distributed in full to the Beneficiary of the
Depositor or until the Beneficiary otherwise designates.
(F) Fees and Financial Matters
(1) A fee schedule setting forth the annual maintenance and transfer
fee and any other fees is outlined in the Explanation of Fees. Such fee schedule
may be amended from time to time
23
<PAGE> 30
by the Custodian. Annual maintenance fees and any other fees will be charged to
the Simple IRA account each June for that calendar year or upon termination of
the Simple IRA if the fee has not been charged for such year. This applies to
Simple IRA's and rollover Simple IRAs. Fees will not be prorated.
A Depositor may pay the maintenance fee within the times specified by
the Custodian. If the Depositor fails to pay the maintenance fee within such
times, then Custodian will liquidate sufficient assets within the Simple IRA to
satisfy the fees and cannot be held accountable or liable for choosing a
specific asset or assets to liquidate.
Payments received after June I cannot be used to reimburse the Simple
IRA account but will apply as a credit against the next year's annual
maintenance fee after satisfying any current outstanding fee balance. If
sufficient assets cannot be liquidated, the Simple IRA account will be closed
out and remaining assets transferred to an individual brokerage account at J. C.
Bradford & Co. The Depositor is personally liable for full payment to the
Custodian for all fee deficiencies including any debit balances. By entering
into the Adoption Agreement, Depositor and his beneficiary or beneficiaries
agree to hold Custodian harmless from any taxes, interest, penalties or other
claims, liabilities or damages resulting from or arising out of such asset
liquidation and/or account termination. Further, Depositor and his beneficiary
or beneficiaries release Custodian from all damage claims resulting from or
arising out of such asset liquidation and account termination. J. C. Bradford &
Co. cannot be held responsible for any taxes, interest and penalties that may be
assessed on such distributions.
(2) Normal J. C. Bradford & Co. brokerage fees, and buying and selling
expenses will be charged for each transaction involving an investment.
(3) The Custodian will charge this Simple IRA for any special reports
or returns required to be filed with the Internal Revenue Service such as Form
990T.
(4) The Custodian may at any time liquidate sufficient assets in the
Simple IRA to satisfy any obligations of the Simple IRA and the Depositor and
his beneficiary or beneficiaries agree to hold Custodian harmless from any
taxes, interest, penalties or other claims, liabilities or damages resulting
from or arising out of such asset liquidation and/or account termination.
Further, Depositor and his beneficiary or beneficiaries release Custodian from
all damage claims resulting from or arising out of such asset liquidation.
(5) Any taxes of any kind which may be imposed with respect to the
account and any administrative expenses, including but not limited to custodial
and brokerage fees, shall be paid by the Depositor. If not paid by the
Depositor, such amounts shall be paid from the account and will constitute a
lien against such account until paid.
(6) The earnings of each separate account will be allocated to such
account.
(7) Growth in value of this account is neither guaranteed nor capable
of projection.
24
<PAGE> 31
(8) The Custodian will charge a one-time fee for handling Special
Assets. Additionally, die Custodian may charge for any valuation of Special
Assets.
(9) The Custodian may charge the account for review (including legal
fees incurred) of any separation and divorce orders, decrees or agreements.
IRA as an Investment Conduit - "Rollovers"
Permissible Tax-Free Transfers
1. From a Simple IRA to a Simple IRA.
2. After the 2 year period beginning on the date which the Depositor's
employer first contributes to the Simple IRA, from a Simple IRA to a
regular IRA.
General Conditions
1. Rollovers or transfers to this Simple IRA must come from another Simple
IRA.
2. Rollovers; must be received by the Simple IRA within 60 days after
distribution is received.
3. Only one tax-free rollover per year. However there are no restrictions
on the number of transfers between custodians or trustees.
Limits on Amount of Rollovers and Transfers
1. No dollar limit.
2. All or any portion of the distribution minus any required minimum
distribution for such year. Note: Any amount not rolled over does not
qualify for capital gains provision and/or special ten year averaging
provision.
3. No endowment or life insurance contracts.
Additional Information For Simple IRAs
Permissible Investments
1. As examples, stocks, mutual funds, corporate and government bonds, plus
savings media approved by the Trustee.
2. Not limited to the example above but cannot purchase collectibles.
Further, Special Assets are not permitted investments in the individual
retirement account unless permitted by the Custodian.
25
<PAGE> 32
3. Custodian will hold assets in an account with your Broker.
4. Investments not generating confirms must be accompanied by written
instructions.
Distributions
1. Permitted after 59 1/2 years or in the event of permanent disability or
death or if distributions paid in substantially equal periodic payments
(not less frequently than annually) over life expectancy.
2. If any individual receives a distribution prior to one of these events,
there is a non-deductible penalty tax of 10% which increases to 25% if
the distribution occurs within the first 2 year period after funds are
first contributed to the Simple IRA by the Depositor employer.
3. Distributions must start not later than April I of the following
calendar year in which die Participant attains 70 1/2 years of age.
4. If the distribution selected does not equal or surpass IRS minimums, a
non-deductible excise tax of 50% will be imposed upon the difference
between the amount required and the amount distributed.
5. The taxability at distribution is as normal income received. Ten Year
and Five Year Averaging are not permissible. The tax status during the
accumulation period is exempt.
Explanation of Fees
Annual Maintenance Fee for each Simple IRA - $35 (not prorated)
The Custodian will charge a one-time S 100 fee for receiving, maintaining,
administering, safekeeping and selling non-brokered certificates of deposit,
non-brokered notes (mortgages), closely held securities (in which J. C. Bradford
& Co. does not participate in the subscription offer), and real estate.
Additionally, the Custodian may charge for appraisals of such Special Assets.
The Custodian will charge a $100 fee for riling IRS Form 990T.
Transfer Fee - $50 plus that year's maintenance fee
This fee is charged when Simple IRA assets are transferred to another financial
institution. The fee must be paid prior to transfer by the Depositor or the
successor custodian or trustee. This fee schedule may be amended at any time by
the Custodian (J. C. Bradford & Co.).
26
<PAGE> 33
By entering into the Adoption Agreement, Depositor and his beneficiary or
beneficiaries agree to hold Custodian harmless from any taxes, interest,
penalties or other claims, liabilities or damages resulting from or arising out
of such asset liquidation and/or account termination. Further, Depositor and his
beneficiary or beneficiaries release Custodian from all damage claims resulting
from or arising out of such asset liquidation and account termination. J. C.
Bradford & Co. cannot be held responsible for any taxes, interest and penalties
that may be assessed on such distributions.
27
<PAGE> 34
SIMPLE IRA
DISCLOSURE STATEMENT AMENDMENT
AMENDMENT TO YOUR SIMPLE IRA
This SIMPLE IRA disclosure statement amendment updates your Individual
Retirement Account (SIMPLE IRA) documents we previously provided to you. The
information provided below amends your disclosure statement for recent law
changes resulting from the Taxpayer Relief Act of 1997.
Unless directed by us to do so, you do not need to sign or return anything to us
for this amendment to apply to your SIMPLE IRA. Your beneficiary designation we
have on file will remain in effect unless you change it by completing and
signing the form which we have for this purpose.
We recommend that you review this information carefully and keep it with your
other SIMPLE IRA information.
DISCLOSURE STATEMENT
PERMISSIBLE SIMPLE IRA INVESTMENTS EXPANDED - You may not invest the assets of
your SIMPLE IRA in collectibles (within the meaning of Internal Revenue Code
(IRC) Section 408 (m)). A collectible is defined as any work of art, rug or
antique, metal or gem, stamp or coin, alcoholic beverage, or any other tangible
personal property specified by the Internal Revenue Service. Specially minted
United States gold and silver bullion coins and certain state-issued coins are
permissible SIMPLE IRA investments. Beginning January 1, 1998, platinum coins
and certain gold, silver, platinum or palladium bullion (as described in
Internal Revenue Code Section 408(m)(3)) are also permitted as SIMPLE IRA
investments.
SIMPLE IRA TO ROTH IRA ROLLOVERS - If your adjusted gross income is less than
$100,000, you are eligible to roll over (or convert) all or any portion of your
existing SIMPLE (or Traditional) IRA(s) into your Roth IRA(s). To roll assets
from your SIMPLE IRA to a Roth IRA, at least two years must have passed since
you first participated in a SIMPLE IRA plan sponsored by your employer.
The amount of the rollover from your SIMPLE (or Traditional) IRA to your Roth
IRA shall be treated as a distribution for income tax purposes and is includible
in your gross income (except for any nondeductible contributions). Although the
rollover amount is generally included in income, the 10 percent early
distribution penalty shall not apply to rollovers or conversions from a SIMPLE
(or Traditional IRA) to a Roth IRA, regardless of whether you qualify for any
exceptions to the 10 percent penalty.
If you roll over assets from your SIMPLE (or Traditional) IRA to your Roth IRA
prior to January 1, 1999, you may spread the amount of the distributions which
must be included in gross income ratably over a four year period beginning with
the year in which the payment or distribution is made.
NEW EXCEPTIONS TO 10 PERCENT EARLY DISTRIBUTION PENALTY - If you are under age
59 1/2 and receive a SIMPLE IRA distribution, an additional tax of 10 percent
will apply, unless made on account of death, disability, a qualifying rollover,
a direct transfer, the timely withdrawal of an excess contribution; or if the
distribution is part of a series of substantially equal period payments (at
least annual payments) made over your life expectancy or the joint life
expectancy of you and your beneficiary. Payments made to pay medical expenses
which exceed 7.5 percent of your adjusted gross income and distributions to pay
for health insurance by an individual who has separated from employment and who
has received unemployment compensation under a federal or state program for at
least 12 weeks are also exempt from the 10 percent tax. Beginning January 1,
1998, payments to cover certain qualified education expenses and distributions
for first-home purchases (up to a life-time maximum of $10,000) are exempt from
the 10 percent tax. This additional tax will apply only to the portion of a
distribution which is includible in your income. If less than two years have
passed since you first participated in a SIMPLE IRA plan sponsored by your
employer, the early distributions penalty shall be increased from 10% to 25%.
REPEAL OF EXCESS DISTRIBUTION PENALTY - Prior to 1997, you would have been taxed
an additional 15 percent on any amount received and included in income during a
calendar year from qualified retirement plans, tax-sheltered annuities,
Traditional IRAs and SIMPLE IRAs which exceeded $112,500 (indexed each year for
the cost of living). Certain exceptions applied. If you received an excess
distribution as described above, your tax advisor could determine if these
exceptions applied to you. This tax is referred to as an excess distribution
penalty. However, this tax is repealed effective for all payouts received after
December 31, 1996, as a result of the Taxpayer Relief Act of 1997.
REPEAL OF EXCESS ESTATE ACCUMULATION PENALTIES - In the past, your estate would
have paid additional federal estate tax if you died with an excess retirement
accumulation. An excess retirement accumulation existed if, at the time of your
death, the value of all your interests in qualified plans, tax-sheltered
annuities and Traditional and SIMPLE IRAs exceeded the present value of an
annuity with annual payments of $112,500 (indexed each year for the cost of
living), payable over your life expectancy immediately before your death. This
tax was referred to as an excess retirement accumulation tax penalty. However,
this tax is repealed for estates of decedents dying after December 31, 1996, as
a result of the Taxpayer Relief Act of 1997.
<PAGE> 1
EXHIBIT 14(g)
THE CHOICE ACCOUNT
Your 403(b) Custodial Account
THE BROKERS OF
J.C. BRADFORD & CO.
<PAGE> 2
INSTRUCTIONS FOR ESTABLISHING
A J.C. BRADFORD CUSTODIAL
403(B) CHOICE ACCOUNT
1. Complete in full each section of the 403(B)(1)/403(B)(7) ACCOUNT
APPLICATION before dating and executing. Retain your copy of the
application and return the original to your Bradford Broker.
2. The 403(B)(1)/403(B)(7) CUSTODIAL ACCOUNT AGREEMENT discloses specific
information regarding the J.C. Bradford Custodial 403(b) account.
Retain for your files.
3. Complete and execute an ACCOUNT TRANSFER FORM, which will be provided
to you by your Bradford broker. This form authorizes your current
403(b) custodian to transfer assets to your new J.C. Bradford Custodial
403(b) account. Return this form, along with a copy of your most recent
403(b) statement for the account you are transferring, to your Bradford
Broker.
Please contact your Bradford Broker if you have any questions.
THANK YOU FOR DECIDING TO ESTABLISH
A J.C. BRADFORD & CO. 403(B) CHOICE ACCOUNT.
FOR J.C. BRADFORD USE ONLY!
Forms necessary to open the account:
- 403(B) ACCOUNT APPLICATION
- CUSTOMER ACCOUNT AGREEMENT
- WITHHOLDING CERTIFICATION FORM (W-9)
An ACCOUNT TRANSFER FORM must be used to transfer assets from the client's
existing 403(b) account.
The branch must open a 241 account for the participant as shown below:
403(B) FBO JANE DOE (CLIENT'S NAME)
J.C. BRADFORD & CO. CUSTODIAN
CLIENT'S ADDRESS
<PAGE> 3
J.C. BRADFORD & CO.
Members New York Stock Exchange, Inc. Member S.I.P.C.
403(B)(1)/403(B)(7) ACCOUNT APPLICATION
PARTICIPANT INFORMATION
Name:_____________________________________ Account No.____________________
Address:_______________________________________________________________________
SSN:_______________ Home Phone:__________________ Bus. Phone:_______________
Birthdate:_______________________ Year you will be age 70 1/2:________________
ACCOUNT INFORMATION
[ ] My initial investment is a transfer of funds from another 403(b)
account. I have completed the appropriate transfer paperwork.
[ ] Rollover/Direct Rollover
[ ] Other (Describe):_____________________________________________________
My December 31, 1986 403(b) balance was _______________________________________
BENEFICIARY(IES) DESIGNATION
Primary Contingent Name:_____________ SSN:_______________ Birthdate:________
[ ] [ ] Address:__________ Relationship:______ Share:_______%
Primary Contingent Name:_____________ SSN:_______________ Birthdate:________
[ ] [ ] Address:__________ Relationship:______ Share:_______%
Primary Contingent Name:_____________ SSN:_______________ Birthdate:________
[ ] [ ] Address:__________ Relationship:______ Share:_______%
In the event of my death, the balance in this account shall be paid to the
Primary Beneficiaries who survive me in equal shares (or in the specified
shares, if indicated). If the Primary or Contingent Beneficiary box is not
checked for a beneficiary, the beneficiary will be deemed to be a Primary
Beneficiary. If none of the Primary Beneficiaries survive me, the balance in
this account shall be paid to the Contingent Beneficiaries who survive me in
equal shares (or in the specified shares, if indicated).
CONSENT OF SPOUSE
Consent is required if Non-Spouse Beneficiary(ies) are named as Primary
Beneficiary
I consent to the above Beneficiary Designation(s).
Signature of Spouse:_______________________ Date:_____________
Witness:___________________________________ Date:_____________
Attest:___________________________________
<PAGE> 4
DISCLAIMER FOR COMMUNITY AND MARITAL PROPERTY STATES: The Participant's Spouse
may have a property interest in the account and the right to dispose of the
interest by will. Therefore, the Custodian disclaims any warranty as to the
effectiveness of the Participant's beneficiary designation or as to the
ownership of the account after the death of the Participant's Spouse. For
additional information, please consult your legal advisor.
SIGNATURES
Under penalties of perjury I certify that the above information (including my
social security number) is correct and I am an employee of the Employer. I also:
(1) agree to promptly give instructions to the Custodian necessary to enable
them to carry out their duties under the Custodial Agreement; (2) agree that in
any taxable year, whenever information is required to be filed with the Internal
Revenue Service, that I will file such information unless filed by the
Custodian; and (3) agree to participate in the 403(b)(1)/403(b)(7) Custodial
Account offered by the Custodian. I acknowledge receipt of a copy of the
Custodial Account Agreement under which this 403(b)(1)/403(b)(7) Custodial
Account is established and agree to all of the terms and conditions therein. I
understand that any disputes which arise shall be settled through arbitration
per Section 11 of the Custodial Account Agreement. I also acknowledge receipt of
a copy of this Account Application and agree to the conditions of the following
fee schedule: $35 Annual Maintenance Fee, $50 Outgoing Transfer Fee. I realize
these fees are subject to change and that J.C. Bradford & Co. has the right to
liquidate my account assets or to close my account if these fees are not paid by
September 1 of each year. I direct that all benefits upon my death be paid as
indicated above. In the event that this is a rollover contribution, the
undersigned hereby irrevocably elects, pursuant to the requirements of Section
1.402(a)(5)-IT of the IRS regulation, to treat this contribution as a rollover
contribution.
Participant Signature: Date:
------------------------------------- ------------
Authorized Signature of Custodian: Date:
------------------------ ------------
<PAGE> 5
THE
J.C. BRADFORD & CO.
403(B)(1)/403(B)(7)
CUSTODIAL ACCOUNT AGREEMENT
UNDER SECTION 403(B) OF THE INTERNAL REVENUE CODE
J.C. BRADFORD & CO.
330 COMMERCE STREET NASHVILLE, TN 615-748-9000 800-251-1060
<PAGE> 6
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
Washington, DC 20224
Person to Contact:
J.C. Bradford & Co. Mr. C. Thompson
330 Commerce Street Telephone Number:
Nashville, TN 37201 (202) 622-7021
Refer Reply to:
CP:E:EP:T:1
Date:
April 2, 1997
EIN: 62-0136910
Ladies and Gentlemen:
This is in response to a letter dated March 6, 1997, in which you
informed us that you will be handling 403(b)(7) custodial accounts as soon as
administratively feasible. You also informed us, in your letter, that your
address has changed to: 330 Commerce Street, Nashville, TN 37201.
On February 9, 1982, the Internal Revenue Service issued to J.C.
Bradford & Co. a letter approving it to serve as an active trustee or custodian
for Keogh plans and IRAs. Your letter indicates that there are no other changes
that affect the accuracy of the application you filed, pursuant to Section
1.401-12(n)* of the Income Tax Regulations, to serve as a nonbank trustee or
custodian.
We have updated our files accordingly. No further action will be taken
by this office.
This is not a new determination, nor a determination as to whether J.C.
Bradford & Co. continues to meet the requirements of Section 1.408-2(e) of the
Income Tax Regulations.
Sincerely,
John Swieca
Chief, Employee Plans
Technical Branch 1
- ------------------------------
* Effective December 20, 1995, Section 1.401-12(n) of the regulations was
changed to Section 1.408-2(e). See T.D. 8635, I.R.B. 1996-3 5.
<PAGE> 7
403(b)(1)/403(b)(7)
Tax-sheltered Investments for employees of
public schools and tax-exempt organizations
with J.C. Bradford & Co., as Custodian.
SECTION 1. DEFINITIONS
1.1 Agreement: This instrument setting forth the terms and conditions of
the Sponsor's Custodial Account Agreement as set forth hereafter.
1.2 Alternate Payee: A spouse, former spouse, child or other dependent of a
Participant who is assigned under a qualified domestic relations order
(as defined in ss. 414(p) of the Code) a right to receive all or a
portion of the benefits payable with respect to a Participant.
1.3 Annuity Contract or Annuity: The written agreement required under
Section 403(b) of the Code between a Participant and an Insurer which
establishes a contract into which Contributions made for a Participant
hereunder are accumulated toward the purchase of a retirement annuity.
1.4 Application: The written application which incorporates this Agreement
and is signed by the Participant and accepted by the Custodian and
serves to establish a Section 403(b)(1)403(b)(7) Custodial Account for
the Participant.
1.5 Approved Funds: The group of investment funds including all mutual fund
and insurance companies that J.C. Bradford has a broker dealer
agreement with and any other investment approved by the Sponsor.
1.6 Beneficiary: Except as provided in Section 5.5, a person designated in
writing by a Participant to receive a benefit under this Agreement in
the event of such Participant's death.
1.7 Code: The Internal Revenue Code of 1986, as amended, including any
regulations issued thereunder.
1.8 Compensation: The Participant's wages, salaries or other remuneration
received for personal services actually rendered in the course of
employment with the Employer and any other amounts treated as
compensation under Section 415 of the Code.
1.9 Custodial Account or Account: The individual account(s) or annuity(ies)
established and maintained under this Agreement for the Participant
pursuant to Section 403(b)(1) and 403(b)(7) of the Code.
1.10 Custodian: J.C. Bradford & Co., or any successor thereto.
1.11 Disabled: With respect to a Participant, that is unable to engage in
any substantial gainful activity by reason of a medically determinable
physical or medical impairment which can be expected to result in death
or
<PAGE> 8
to be of long-continued and indefinite duration, as defined under ss.
72(m)(7) of the Code.
1.12 Employee: Any person regularly employed by the Employer. Neither
"leased employees" within the meaning of Section 414(n) or (o) of the
Code, nor independent contractors shall be considered to be Employees
for the purposes of this Agreement.
1.13 Employer: Any organization that is (i) described in Section 501(c)(3)
of the Code and exempt from tax under Section 501(a) of the Code, or
(ii) an educational organization described in Section 170(b)(1)(A)(ii)
of the Code which is a State, political subdivision of a State, or any
agency or instrumentality of any one or more of the foregoing.
1.14 ERISA: The Employee Retirement Income Security Act of 1974, as amended,
including any regulations thereunder.
1.15 Insurer: An organization providing Annuity Contracts hereunder into
which contributions made for Participants are deposited.
1.16 Investment Company: Any "Regulated Investment Company" within the
meaning of Section 851(a) of the Code that is Sponsor approved.
1.17 Participant: An individual who is, or has been, employed by the
Employer, who has been designated by the Employer as a Participant, and
who contacts in writing with the Employer for contributions hereto.
1.18 Sponsor: J.C. Bradford & Co.
1.19 Year of Service: Each full tax year during which the Participant was a
full-time Employee of the Employer. A fraction of a year shall be
counted for each full tax year during which the Participant was a
part-time Employee of the Employer and for each part of a year during
which the employee was a full-time or part-time Employee of the
Employer. In no case shall the Years of Service be less than one (1).
SECTION 2. ESTABLISHING OF CUSTODIAL ACCOUNTS
The Custodian and Insurer shall open and maintain a Custodial Account or Annuity
Contract for each eligible Employee who completes an Application; and the
Custodian shall hold and administer, in accordance with the terms hereof,
contributions to the Custodial Account/Annuity and any gain or income from the
investment thereof. The Employee shall notify the Custodian and Insurer in
writing of any change in name, address, or Social Security Number.
This Custodial Agreement will only accept transfer and rollover contributions as
outlined in this Section 3.
SECTION 3. TRANSFERS & ROLLOVERS
3.1 Transfer/Rollover Contributions:
<PAGE> 9
(a) The Participant may transfer cash from a custodial account
qualified under Section 403(b)(7) of the Code and/or from an
annuity contract qualified under Section 403(b) of the Code to
the Custodial Account if the Participant certifies that the
transaction meets the requirements for a tax-free transfer
under IRS Revenue Ruling 90-24 and other applicable laws or
rulings of the Internal Revenue Service, or is a rollover
contribution described in Sections 403(b)(8) or
408(d)(3)(A)(iii) of the Code. Once transferred, such assets
shall be treated as a contribution on behalf of such
Participant for purposes of this Custodial Agreement and shall
be invested, distributed and otherwise dealt with as such.
Such transferred funds shall be accounted for separately and
continue to be subject to any distribution rules under the
prior 403(b)(1) or (7) plan, which were more stringent than
the rules contained in this Custodial Account.
(b) The Participant may cause the transfer, in cash, of all or any
portion of the balance credited to a Participant's account
from this Custodial Account/ Annuity directly to the custodian
of a custodial account qualified under Section 403(b)(7) of
the Code or to an insurance company designated by the
Participant for the purchase, for the benefit of the
Participant, of an annuity contract qualified under Section
403(b) of the Code if the Participant certifies that the
transaction meets the requirements for a tax-free transfer
under IRS Revenue Ruling 90-24, and any other applicable laws
or rulings of the Internal Revenue Service. Once transferred,
such assets shall be treated as a contribution on behalf of
such Participant for purposes of the successor custodial
account and/or annuity contract and shall be invested,
distributed and otherwise dealt with as such.
3.2 Direct Rollovers:
(a) This Section applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the plan to the
contrary that would otherwise limit a distributee's election
under this Section, a Distributee may elect, at the time and
in the manner prescribed by the Custodian, to have any portion
of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by the Distributee in a
direct rollover.
(b) Definitions:
(i) ELIGIBLE ROLLOVER DISTRIBUTIONS: An Eligible Rollover
Distribution is any distribution of all or any
portion of the balance to the credit of the
distributee, except that an eligible rollover
distribution does not include any distribution that
is one of a series of substantially equal periodic
payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee and
the distributee's designed beneficiary, or for a
specified period of ten years or more; any
distribution to the extent such
<PAGE> 10
distribution is required under Section 401(a)(9) of
the Code; and the portion of any distribution that is
not includible in gross income (determined without
regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(ii) ELIGIBLE RETIREMENT PLAN: An Eligible Retirement Plan
is an individual retirement account described in
Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, a
tax-sheltered annuity plan described in Section
403(b) of the Code, or a custodial account described
in Section 403(b)(7) of the Code, that accepts the
distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover
Distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account
or individual retirement annuity.
(iii) DISTRIBUTEE: A Distributee includes an employee or
former employee. In addition, the employee's or
former employee's surviving spouse 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.
(iv) DIRECT ROLLOVER: A Direct Rollover is a payment by
the Plan to the Eligible Retirement Plan specified by
the Distributee.
SECTION 4. INVESTMENT OF ACCOUNT ASSETS
4.1 Investment of Contributions: The Custodian shall invest the amount of
the contributions credited to the Employee's Account in full and
fractional shares of any sponsor approved mutual fund upon the
direction of the Participant.
4.2 Administration of Investments: Contributions made by or on behalf of a
Participant shall continue to be invested in the manner selected by the
Participant until a new designation has been properly completed and
filed by the Participant. Unless otherwise restricted by a Custodial
Account or Annuity Contract, a designation filed by a Participant
changing his investment option may apply to investment of future
deposits and/or to amounts already accumulated in his accounts as the
Participant elects. A Participant may change his investment options
only as permitted under the applicable Custodial Agreements or Annuity
Contracts.
4.3 Investment of Gains and Dividends: The Participant can elect to have
dividends and capital gains distributions on shares held in the
Employee's Account reinvested.
4.4 Voting and Other Action: All mutual fund shares of the Investment
Company acquired by the Custodian pursuant to the Agreement shall be
held in the
<PAGE> 11
name of the Custodian for the benefit of the Employee. The Custodian or
the Sponsor shall cause to be delivered to the Employee all notices,
prospectuses, financial statements, proxies and proxy soliciting
materials relating to shares held in the Custodial Account. The
Custodian shall not vote any such shares except in accordance with
written instructions received from the Employee.
4.5 Identification of Accounts: All mutual fund shares of the Investment
Company acquired by the Custodian shall be held in the name of the
Custodian or its nominee for the benefit of the Participant (or the
Beneficiary after the Participant's death). The Account will not be
joined for rights of accumulation with Accounts of other Employees of
the same Employer.
SECTION 5. DISTRIBUTIONS FROM THE CUSTODIAL ACCOUNT
5.1 Request for Distribution: Distribution from the Custodial Account shall
be made by the Custodian only to a Participant, his designated
Beneficiary or Alternate Payee, and no purported sale, transfer, pledge
or assignment by the Participant, his spouse or Beneficiary of all or
any part of an interest in the Custodial Account shall be recognized by
the Custodian. The interest of a Participant, his spouse or Beneficiary
in the Custodial Account shall not be subject to the debts, contracts,
liabilities, engagements or torts of such person or to attachment or
legal process against such person.
5.2 Limitations on Distributions: The Custodian shall distribute, or
commence distribution of, pursuant to the Participant's written
direction, the balance credited to a Participant's account upon receipt
of evidence satisfactory to it that one or more of the following events
have occurred:
(a) the Participant becomes Disabled:
(b) the Participant separates from service with the Employer;
(c) the Participant dies; or
(d) the Participant attains age 59 1/2.
5.3 Timing of Distributions:
(a) Distribution from the Custodial Account shall commence within
30 days after the Participant notifies the Custodian of his
entitlement to distributions, unless the Participant makes a
prior election to defer distribution or the commencement of
distribution to a subsequent date which is not later than the
end of the tax year in which the Participant attains age 70
1/2, unless a later date is permitted by the Code, the
regulations issued thereunder, or other Internal Revenue
Service pronouncements. Such election shall be made by written
notice filed with the Custodian. Notwithstanding this
provision, the Custodian shall not be responsible for making
any distribution until such time as it has received proper
written notification from the Participant, his surviving
spouse or Beneficiary of the occurrence of an event described
in Section 5.2.
<PAGE> 12
(b) The Required Beginning Date shall mean the April 1st following
the later of the year the Participant attains age 70 1/2 or
the year in which the participant retires.
5.4 Form of Distribution: Unless otherwise required, distribution shall be
made in cash or in kind in any one or more of the following ways:
(a) in a single payment; or
(b) in installments for a period certain not to exceed the life
expectancy of the Participant or the Participant's Beneficiary
or the joint lives and last survivor expectancies of the
Participant and the Participant's designated Beneficiary; or
(c) in a combination of (a) and (b).
5.5 Designation of Beneficiary.
(a) Each Participant may, by written notice filed with the
Custodian and in a form acceptable to the Custodian, designate
a Beneficiary or Beneficiaries to receive the Participant's
benefit at the Participant's death. Such designation may be
changed or revised from time to time by written instrument
filed with the Custodian. If no designation has been made, or
if no beneficiary is living at the time of a Participant's
death, his Beneficiary shall be: (a) his surviving spouse; but
if he has no surviving spouse; then (b) his estate.
(b) Notwithstanding the foregoing provisions, if the Beneficiary
is a trust for the surviving spouse, and if a qualified
terminal interest property marital deduction for federal
estate tax purposes is allowable with respect to the
distributions from the custodial account payable to such
trust, then distributions under this paragraph shall be
increased, if necessary, to assure that all of the annual
income of the custodial account is distributed at least
annually to the trust. Furthermore, if the Beneficiary is such
trust, all administrative charges and expenses of the
custodial account shall be charged to principal and shall not
reduce the annual income of the custodial account. The trustee
of the trust shall have the right to request immediate payment
of any part or all of the custodial account in order to
satisfy any request by the surviving spouse to convert
unproductive property into productive property or in order to
make withdrawals in excess of the minimum required
distributions. The provisions of this paragraph are subject to
the applicable minimum distribution requirements. The
Depositor shall be responsible for completing an appropriate
Beneficiary designation to carry out the provisions of this
paragraph.
5.6 Minimum Distribution Requirements:
(a) IN GENERAL: All distributions required hereunder shall be
determined and made in accordance with the proposed
regulations under Section 401(a)(9) of the Code, including the
minimum distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed regulations.
<PAGE> 13
(b) PRE-1987 ACCOUNT BALANCE OR BIFURCATED ACCOUNT: The 403(b)
plan in effect on December 31, 1986 shall govern the required
distributions of such account balance on such date with
respect to amounts which accrued on behalf of a Participant as
of December 31, 1986. If such plan no longer exists or such
provision cannot be located, the pre-1987 account balance will
not be required to be distributed until the end of the
calendar year in which the Participant attains age 75.
(c) DEATH PRIOR TO DISTRIBUTION: If the Participant dies before he
has started to withdraw installments from his Account, the
entire interest in the Participant's Account shall be
distributed within five (5) years after the death of the
Participant. However, if any portion of the Participant's
interest is payable to a designated Beneficiary (within the
meaning of Section 401(a)(9)(E) of the Code), then, at the
Beneficiary's election, distributions may be made over the
life expectancy of such designated Beneficiary. Such
distributions must begin by December 31 of the calendar year
following the calendar year of the Participant's death.
However, if the sole designated Beneficiary is the surviving
spouse of the Participant, distributions need not commence
until the later of December 31 of the calendar year in which
the Participant would have attained age 70 1/2, or December 31
of the calendar year immediately following the calendar year
in which Participant died.
For purposes of this Section 5.6, payments will be calculated
by use of the return multiples specified in Section 1.72-9 of
the Income Tax Regulations. Life expectancy of a surviving
spouse may be recalculated annually. Like expectancy of any
non-spouse Beneficiary will be calculated at the time of the
first payment without further recalculation.
(d) DEATH AFTER DISTRIBUTIONS HAVE COMMENCED: If the Participant
was withdrawing his interest in installments over a fixed
period, the remaining installments will be continued to the
Beneficiary at least as rapidly as under the method of
distribution selected prior to death.
(e) REQUIRED DISTRIBUTION DEFAULT PROVISIONS:
(1) Unless otherwise elected by the Participant (or
spouse, if applicable) by the time distributions are
required to begin, life expectancies shall not 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.
(2) If the Participant does not choose any of the
distribution methods under this Section 5.6 by such
Participant's Required Beginning Date, distribution
shall be made to the Participant based on such
Participant's nonrecalculated Single Life expectancy.
<PAGE> 14
5.7 DISTRIBUTION UNDER A QUALIFIED DOMESTIC RELATIONS ORDER:
(a) Distributions of all or any part of a Participant's account
pursuant to the provisions of a qualified domestic relations
order (QDRO) as defined in Section 414(p) of the Code is
specifically authorized.
(b) The earliest retirement age shall be the earlier of:
(1) The earliest date benefits are payable under the Plan to the
Participant; or
(2) The later of the date the Participant attains age 50 or the
date on which the Participant could obtain a distribution from
the Plan if the Participant had separated from service.
(c) The alternate payee may receive a payment of benefits under
this Plan in any optional form of benefit available pursuant
to Section 5.4.
(d) The alternate payee may receive a payment of a benefit under
this Plan prior to the earliest retirement age as defined in
Section 5.7(b) if the QDRO specifically provides for such
earlier payment. If the present value of the payment exceeds
$3,500, the alternate payee must consent in writing to such
distribution.
SECTION 6. NONFORFEITABILITY
6.1 Nonforfeitability: A Participant's interest in the balance of his
account attributable to his salary reduction contributions shall at all
times be nonforfeitable.
SECTION 7. THE CUSTODIAN AND SPONSOR
7.1 All notices, requests and other communications to the Custodian by the
Employer or any Participant (or his spouse or Beneficiary) shall be in
writing and in such form as the Custodian may from time to time
prescribe. The Custodian shall be entitled to rely on any such
instruments believed by it to be genuine.
7.2 The Custodian shall have the power and authority in the administration
of the Custodial Account to do all acts, to execute and deliver all
instruments and to exercise for the benefit of the Participants and
their beneficiaries any and all powers which would be lawful were it in
its own right the actual owner of the property held.
7.3 Custodian's Fees and Expenses of the Account: In consideration of its
services hereunder, the Custodian may deduct annual maintenance fees.
These fees shall be outlined in Section 12 and may be amended from time
to time by the Custodian. Any income taxes or other taxes of any kind
<PAGE> 15
whatsoever that may be levied or assessed upon or in respect of the
Account shall be paid from the assets of the Account. Any transfer
taxes, investment fees or similar expenses incurred in connection with
the investment of the assets of the Account, and all other
administrative expenses incurred by the Custodian in the performance of
its duties including fees for legal services rendered to the Custodian
shall similarly be paid from the assets of the Custodial Account.
7.4 The Custodian may resign at any time upon 30 days notice in writing to
the Participant (unless such notice is waived) and may be removed by
the Participant at any time upon 30 days notice in writing to the
Custodian. Upon such resignation or removal, the Participant shall
appoint a successor custodian. If within 30 days after the Custodian's
resignation or removal, the Participant has not appointed a qualified
successor custodian which has accepted such appointment, the Custodian
may appoint, unless it elects to terminate the Account, such successor
itself. Upon receipt by the Custodian of written acceptance of such
appointment by the successor custodian, the Custodian shall transfer
and pay over to such successor the assets of the Custodial Account and
all records pertaining thereto, reserving such sum as it may deem
advisable for payment of all its fees, compensation, costs and expenses
and any other liabilities constituting a charge on or against the
assets of the Custodial Account. The successor custodian shall
thereafter be the Custodian of the 403(b) assets of the Participant.
7.5 The Custodian shall not be responsible in any way, except as
specifically provided herein, for the collection of contributions, the
purpose or propriety of any distribution, or any other action taken at
the direction of the Employer, the Participant, or a Beneficiary.
Each Participant and Employer shall at all times fully indemnify and
hold harmless the Custodian, its successors and assigns, from any
liability arising from distributions so made or actions taken at the
direction of such Employer, Participant, or Beneficiary.
7.6 The Custodian's liability under this Agreement and matters which it
contemplates shall be limited to matters arising from the Custodian's
negligence or willful misconduct. To the extent permitted by applicable
law, the Custodian shall be protected in acting upon any written order
from the Employer or Participant or any other notice, request,
instruction or direction, 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. The Custodian may submit any question arising
hereunder or in respect of the Account to counsel, including its own
general counsel, and shall be protected to the extent permitted by
applicable law, in acting on the advice of such counsel.
Subject to the provisions of applicable law, the Participant, his
designated Beneficiary or the executor or administrator or either of
these shall have the sole authority to enforce this Agreement on behalf
of any and all persons having or claiming any interest in the Account
by virtue
<PAGE> 16
of this Agreement. To protect the Account from expenses which might
otherwise be incurred, it has been imposed as a condition to the
acquisition of any interest in the Account, and it is hereby agreed,
that subject to the provisions of applicable law, no person other than
the Participant, his designated Beneficiary or personal representative,
may institute or maintain any action or proceeding against the
Custodian in the absence of a determination of a court of competent
jurisdiction to the contrary.
SECTION 8. REPORTS AND RETURNS
8.1 The Custodian shall:
(a) maintain separate records of the interest of each Participant
(or his designated Beneficiary(ies)) in the Custodial Account
indicating (i) the amounts and dates of all contributions,
(ii) the investment of such contributions, (iii) the earnings
on such investments, (iv) the amounts and dates of all
distributions and (v) such other data as the Custodian deems
useful in carrying out its duties hereunder;
(b) shall send each Participant, as soon as practicable after any
contribution is made hereunder, a written confirmation
containing information with respect to the investment of such
contribution, and the current status of the account; and
(c) mail at least once during each calendar year a statement of
all transactions in the Custodial Account during the preceding
year and a statement showing the value of the assets held in
the Custodial Account as of the end of such year.
8.2 The Custodian shall file such returns or reports with respect to the
Custodial Account as are required to be filed by it under the Code and
the Regulations thereunder, or by the Department of Labor, and the
Employer and each Participant shall provide the Custodian with such
information available to them as the Custodian may require to file such
reports.
SECTION 9. AMENDMENTS AND TERMINATION
9.1 This Custodial Agreement may be amended by the Sponsor by submitting a
copy of the amendment to the Participant. The Participant hereby
delegates to the Sponsor the power to amend this Custodial Agreement
and shall be deemed to have consented to any such amendment.
Notwithstanding the above, no amendment shall be made by the Sponsor
which shall cause or permit: (a) any part of the assets in the Account
to be diverted to purposes other than for the exclusive benefit of the
Participant or his Beneficiaries; or (b) except as may be permitted,
any part of such assets to revert to or become the property of the
Employer; or (c) any Participant, or his Beneficiary, to be deprived of
any benefit to which he was entitled under the Account by reason of
contributions made by the Participant prior to such amendment, unless
such amendment is necessary either to conform the Account to, or to
satisfy the condition of, any law, governmental regulation or ruling,
or to permit the Account to meet the requirements of the Code; or (d)
any responsibilities of the Custodian under the Agreement to be
increased without its written consent.
<PAGE> 17
9.2 This Custodial Agreement shall terminate upon the complete distribution
of the Custodial Account or in the event that a determination is made
by the Internal Revenue Service that the Custodial Account does not
satisfy the requirements of Section 401(f)(2) of the Code or that
contributions thereto are not treated under Section 403(b)(7)(A) of the
Code as contributed for annuity contracts. In event of termination as
aforesaid, the balance in the Custodial Account shall be distributed to
the Participants (or their respective surviving spouses or
Beneficiaries, as the case may be) in accordance with their interests
in the Custodial Account.
SECTION 10. CONSTRUCTION AND GOVERNING LAW
10.1 The Custodial Account is established with the intention that it qualify
as a Custodial Account under Section 401(f)(2) of the Code and that
contributions thereto be treated under Section 403(b)(7)(A) of the Code
as amounts contributed for annuity contracts, and the provisions of
this Agreement shall be construed in accordance with such intention.
This Agreement shall be governed by the laws of the State of Tennessee,
to the extent such laws are not preempted by the laws of the United
States, and if applicable the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
10.2 The determination that any provision of this Agreement is not
enforceable shall not affect the validity or enforceability of the
remaining provisions of this Agreement. Unenforceable provisions shall
be stricken or modified in accordance with such determination only as
to such parties and this Agreement, as modified, shall continue to bind
the specific parties involved therein and otherwise all other parties
in unmodified form.
SECTION 11. ARBITRATION
11.1 THE PARTICIPANT AGREES THAT ALL CONTROVERSIES BETWEEN THE PARTICIPANT
AND/OR BENEFICIARIES AND THE CUSTODIAN (INCLUDING THEIR OFFICERS,
DIRECTORS, PRESENT OR FORMER EMPLOYEES) CONCERNING OR ARISING FROM (I)
ANY RETIREMENT ACCOUNT(S) MAINTAINED WITH THE CUSTODIAN; (II) ANY
TRANSACTION INVOLVING THE PARTICIPANT'S ACCOUNT(S), WHETHER OR NOT SUCH
TRANSACTION OCCURRED IN SUCH ACCOUNT(S); OR (III) THE CONSTRUCTION,
PERFORMANCE, OR BREACH OF THIS AGREEMENT, WHETHER SUCH CONTROVERSY
AROSE PRIOR, ON, OR SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED
BY ARBITRATION UNDER THE COMMERCIAL ARBITRATION RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS OR THE NEW YORK STOCK EXCHANGE, INC..
ANY DISPUTES ON THE ARBITRABILITY OF A MATTER OR THE MANNER OF
ARBITRATION SHALL BE DETERMINED IN SUCH ARBITRATION.
11.2 ARBITRATION DISCLOSURES: ARBITRATION IS FINAL AND BINDING ON THE
PARTIES. THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT,
INCLUDING THE RIGHT TO JURY TRIAL. PRE-ARBITRATION DISCOVERY IS
GENERALLY MORE
<PAGE> 18
LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS. THE ARBITRATORS'
AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING,
AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY
THE ARBITRATORS IS STRICTLY LIMITED.
SECTION 12. EXPLANATION OF FEES
ANNUAL MAINTENANCE FEE FOR EACH 403(B)(1)/403(B)(7) - $35 (NOT PRORATED). Annual
maintenance fees will be charged to the 403(b) Custodial account each JUNE for
that calendar year or upon termination of the 403(b) if the fee has not been
charged for such year. Fees will not be prorated. A Participant must pay the
annual maintenance fee within the times specified by the Custodian. If the
Participant fails to pay the annual maintenance fee within such times, then
Custodian will liquidate sufficient assets within the account to satisfy the
fees and cannot be held accountable or liable for choosing a specific asset or
assets to liquidate.
Payments received after JUNE 1 cannot be used to reimburse the 403(b) account
but will apply as a credit against the next year's annual maintenance fee after
satisfying any current outstanding fee balance. The Participant is personally
liable for full payment to the Custodian for all fee deficiencies including any
debit balances.
TRANSFER FEE - $50 PLUS THAT YEAR'S MAINTENANCE FEE. This fee is charged when
403(b)(7) assets are transferred to another financial institution. The fee must
be paid prior to transfer by the Participant or the successor Custodian.
The Custodian may charge the account for review (including any legal fees
incurred) of any separation and divorce orders, decrees or agreements.
By executing the Account Application, the Participant and his beneficiary or
beneficiaries agree to hold the Custodian harmless from any taxes, interest,
penalties or other claims, liabilities or damages resulting from or arising out
of such asset liquidation and account termination. The Custodian cannot be held
responsible for any taxes, interest and penalties that may be assessed on such
distributions.
This fee schedule may be amended at anytime by the Custodian (J.C. Bradford &
Co.).
<PAGE> 1
EXHIBIT (19)(a)
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our
firm under the caption "MISCELLANEOUS - Counsel" included in or made a part of
the Registration Statement on Form N-1A, File No. 33-25137, filed under the
Securities Act of 1933, as amended, of The Bradford Funds, Inc., The Bradford
Money Fund.
BAKER & HOSTETLER LLP
Columbus, Ohio
April 28, 1998
<PAGE> 1
[ARTICLE] 6
[LEGEND]
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS AND SUPPORTING SCHEDULES OF BRADFORD MONEY FUND AS OF THE END OF THE
MOST CURRENT PERIOD AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
[/LEGEND]
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1997
[PERIOD-START] JAN-01-1997
[PERIOD-END] DEC-31-1997
[INVESTMENTS-AT-COST] 1,564,245,322
[INVESTMENTS-AT-VALUE] 1,564,245,322
[RECEIVABLES] 194,742
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,564,440,064
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,151,916
[TOTAL-LIABILITIES] 1,151,916
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1,563,302,506
[SHARES-COMMON-STOCK] 1,563,302,506
[SHARES-COMMON-PRIOR] 1,234,335,754
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (14,358)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1,563,288,148
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 79,769,295
[OTHER-INCOME] 0
[EXPENSES-NET] 10,480,620
[NET-INVESTMENT-INCOME] 69,288,675
[REALIZED-GAINS-CURRENT] (18)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 69,288,675
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 6,757,471,254
[NUMBER-OF-SHARES-REDEEMED] 6,496,879,767
[SHARES-REINVESTED] 68,375,264
[NET-CHANGE-IN-ASSETS] 328,966,733
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (14,358)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 5,228,609
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 10,691,850
[AVERAGE-NET-ASSETS] 1,426,989,635
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .049
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] .049
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .74
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
