1933 Act File No.: 333-104669
1940 Act File No.: 811-266
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] REGISTRATION STATEMENT UNDER SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ____________
[X] Post-Effective Amendment No. 3
and/or
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 37
(212) 850-1864 or (800) 221-2450
If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. [ ]
It is proposed that this filing will become effective (check appropriate box)
[X] when declared effective pursuant to section 8(c)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 486.
If appropriate, check the following box:
[ ] This Post-Effective Amendment designates a new effective date for a previously filed Post-Effective Amendment or Registration Statement.
[ ] This Post-Effective Amendment on Form N-2 is filed to register additional securities for an offering pursuant to Rule 462(b)(1) under the Securities Act of 1933 and the Securities Act Registration Statement Number of the earlier effective Registration Statement for the same offering is: ______
[LOGO] Tri-Continental Corporation
AN INVESTMENT YOU CAN LIVE WITH
Prospectus
May 1, 2006
100 Park Avenue
New York, NY 10017
New York City Telephone (212) 682-7600
Toll-Free Telephone (800) 874-1092
For Retirement Plan Information -- Toll-Free Telephone (800) 445-1777
Tri-Continental Corporation is a diversified, closed-end investment company--a publicly traded investment fund. The Corporation's Common Stock is traded on the New York Stock Exchange under the symbol "TY." The closing market price of the Common Stock on February 28, 2006 was $19.83 per share.
The Corporation invests primarily for the longer term, and over the years the Corporation's objective has been to produce future growth of both capital and income while providing reasonable current income. Common stocks have made up the bulk of investments. However, assets may be held in cash or invested in all types of securities. See "Investment Objective and Other Policies and Related Risks." No assurance can be given that the Corporation's investment objective will be realized. The Corporation's manager is J. & W. Seligman & Co. Incorporated.
This Prospectus applies to all shares of Common Stock purchased under the Corporation's various Investment Plans. See "Investment Plans and Other Services." The shares of Common Stock covered by this Prospectus also may be issued from time to time by the Corporation to acquire the assets of personal holding companies, private investment companies or publicly owned investment companies. See "Issuance of Shares in Connection with Acquisitions."
This Prospectus sets forth concisely the information that a prospective investor should know about the Corporation before investing. Investors are advised to read this Prospectus carefully and to retain it for future reference. Additional information about the Corporation, including a Statement of Additional Information ("SAI") dated May 1, 2006, has been filed with the Securities and Exchange Commission. The SAI, as well as the Corporation's most recent Annual and Semi-Annual Reports are also available upon request and without charge by writing or calling the Corporation at the address or telephone numbers listed above. Investors may also write or call the Corporation in order to request other available information or to make stockholder inquiries. The SAI is dated the same date as this Prospectus and is incorporated herein by reference in its entirety. The table of contents of the SAI appears on page 27 of this Prospectus. The 2005 Annual Report contains financial statements of the Corporation for the year ended December 31, 2005, which are incorporated by reference into the SAI. The SAI, as well as the Corporation's most recent Annual and Semi-Annual Reports are also available at www.tricontinental.com. The website references in this Prospectus are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this Prospectus. The Securities and Exchange Commission maintains a web site (www.sec.gov) that contains the Prospectus, SAI, material incorporated by reference, and other information filed electronically by the Corporation.
THE SECURITIES AND EXCHANGE COMMISSION HAS NEITHER APPROVED NOR DISAPPROVED THESE SECURITIES, AND IT HAS NOT DETERMINED THIS PROSPECTUS TO BE ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Common Stock
($0.50 par value)
CETRI 1 5/06
TABLE OF CONTENTS
PAGE PAGE
---- ----
Summary of Corporation Expenses............ 3 Computation of Net Asset Value........... 19
Prospectus Summary......................... 4 Dividend Policy and Taxes................ 20
The Corporation............................ 5 Investment Plans and Other Services...... 22
Financial Highlights....................... 6 Issuance of Shares in Connection with 26
Capitalization at February 28, 2006........ 9 Acquisitions........................... 27
Trading and Net Asset Value Information.... 9 Table of Contents of the Statement of 28
Investment Objective and Other Policies and 10 Additional Information................. 29
Related Risks............................ 13 Authorization Form for Automatic Dividend
Management of the Corporation.............. 18 Investment and Cash Purchase Plan......
Description of Capital Stock............... 19 Authorization Form for Automatic Check
Description of Warrants.................... Service................................
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SUMMARY OF CORPORATION EXPENSES
The following table illustrates the expenses and fees that the Corporation expects to incur and that you can expect to bear as a stockholder of the Corporation.
STOCKHOLDER TRANSACTION EXPENSES
Automatic Dividend Investment and Cash Purchase Plan Fees........ --/(1)/
ANNUAL EXPENSES FOR 2005 (AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE
TO COMMON STOCK)
Management Fees.................................................. 0.41%
Other Expenses/(2)/.............................................. 0.24%
----
Total Annual Expenses........................................ 0.65%
====
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/(2)/ Based on actual expenses incurred in 2005.
The following example illustrates the costs you would pay on a $1,000 investment, assuming a 5% annual return:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Tri-Continental Corporation Common Stock $7 $21 $36 $81
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The purpose of the table above is to assist you in understanding the various costs and expenses you will bear directly or indirectly. For more complete descriptions of the various costs and expenses, see "Management of the Corporation" and "Investment Plans and Other Services--Automatic Dividend Investment and Cash Purchase Plan."
The example does not represent actual costs, which may be more or less than those shown. Moreover, the Corporation's actual rate of return may be more or less than the hypothetical 5% return shown in the example.
PROSPECTUS SUMMARY
The following is qualified in its entirety by the more detailed information included elsewhere in this Prospectus.
This Prospectus applies to shares of Common Stock of the Corporation. The Corporation invests primarily for the longer term and has no Charter restrictions with respect to such investments. Over the years the Corporation's objective has been to produce future growth of both capital and income while providing reasonable current income. There can be no assurance that this objective will be achieved. While common stocks have made up the bulk of investments, assets may be held in cash or invested in all types of securities in whatever amounts or proportions J. & W. Seligman & Co. Incorporated (the "Manager") believes best suited to current and anticipated economic and market conditions. These may include preferred stock, debt securities, repurchase agreements, options, illiquid securities and securities of foreign issuers, each of which could involve certain risks. See "Investment Objective and Other Policies and Related Risks."
The Manager manages the investment of the assets of the Corporation and administers its business and other affairs pursuant to a Management Agreement approved by the Board of Directors and the stockholders of the Corporation. The Manager also serves as manager of twenty-three other U.S. registered investment companies which, together with the Corporation, make up the "Seligman Group of Funds." The aggregate assets of the Seligman Group of Funds as of March 31, 2006 were approximately $11.8 billion. The Manager also provides investment management or advice to institutional and other accounts having a value as of March 31, 2006 of approximately $8.4 billion. The Manager's fee is based in part on the average daily net assets of the Corporation. The management fee rate for the year ended December 31, 2005 was equivalent to 0.41% of the Corporation's average daily net investment assets. See "Management of the Corporation."
Shares of Common Stock covered by this Prospectus may be purchased from time to time by Seligman Data Corp. ("SDC"), the Plan service agent for Automatic Dividend Investment and Cash Purchase Plans, Individual Retirement Accounts ("IRAs"), Retirement Plans for Self-Employed Individuals, Partnerships and Corporations, the J. & W. Seligman & Co. Incorporated Matched Accumulation Plan and the Seligman Data Corp. Employees' Thrift Plan (collectively, the "Plans"), as directed by participants, and may be sold from time to time by the Plan service agent for participants in Systematic Withdrawal Plans. See "Investment Plans and Other Services." Shares will be purchased for the Plans on the New York Stock Exchange or elsewhere when the market price of the Common Stock is equal to or less than its net asset value, and any brokerage commissions applicable to such purchases will be charged pro rata to the Plan participants. Shares will be purchased for the Plans from the Corporation at net asset value when the net asset value is lower than the market price, all as more fully described in this Prospectus.
A discussion regarding the basis for the Corporation's Board of Director's approval of the investment management agreement between the Corporation and the Manager is available in the Corporation's annual report for 2005.
On November 17, 2005, the Board of Directors authorized the renewal of the Corporation's ongoing share repurchase plan. The program authorizes the Corporation to repurchase during the period January 1, 2006 through December 31, 2006 up to 5% of its then outstanding Common Stock, provided that the excess of net asset value of a share of Common Stock over its market price (the discount) remains greater than 10%. The
shares repurchased under this program are cancelled increasing the number of authorized but unissued shares available for issuance to participants in the Plan. The stock repurchase program seeks, among other things, to moderate the growth in the number of shares outstanding, increase the net asset value of the Corporation's outstanding shares, reduce the dilutive impact on stockholders who do not take capital gains distributions in additional shares and increase the liquidity of the Corporation's Common Stock in the marketplace. Shares acquired by the Corporation from participants in the Systematic Withdrawal Plan and other stockholder plans, as well as shares purchased for the Corporation in the open market to meet demand under the Automatic Dividend Investment and Cash Purchase Plan, are counted towards the repurchase limit under the program. For the period from November 19, 2004 through December 31, 2005, the Corporation repurchased 6,460,302 shares, representing 5.69% of outstanding shares at the beginning of the period. This compares to 5,931,023 shares repurchased in the year ended November 18, 2004, representing 5.0% of the shares outstanding.
THE CORPORATION
The Corporation is a Maryland corporation formed in 1929 by the consolidation of two predecessor corporations. It is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified management investment company of the closed-end type. The Corporation's Common Stock is listed on the New York Stock Exchange under the symbol "TY." The average weekly trading volume on that and other exchanges during 2005 was 415,356 shares. The Corporation's Common Stock has historically been traded on the market at less than net asset value. As of February 28, 2006, the Corporation had 107,343,211 shares of Common Stock outstanding and net assets attributable to Common Stock of $2,447,393,085.
FINANCIAL HIGHLIGHTS
The Corporation's financial highlights for the years presented below have been audited by Deloitte & Touche LLP, Independent Registered Public Accounting Firm. This information, which is derived from the financial and accounting records of the Corporation, should be read in conjunction with the financial statements and notes contained in the Corporation's 2005 Annual Report, which may be obtained from the Corporation as provided on the cover page of this Prospectus.
"Per share operating performance" data is designed to allow you to trace the operating performance, on a per Common share basis, from the beginning net asset value to the ending net asset value so that you can understand what effect the individual items have on your investment, assuming it was held throughout the year. Generally, the per share amounts are derived by converting the actual dollar amounts incurred for each item, as disclosed in the financial statements, to their equivalent per Common share amount, using average shares outstanding.
PER SHARE OPERATING PERFORMANCE, TOTAL (FOR A SHARE OF COMMON STOCK
----------------------------------
2005 2004 2003
---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................................ $ 21.87 $ 19.55 $ 15.72
---------- ---------- ----------
Net investment income..................................................... 0.26 0.26 0.18
Net realized and unrealized investment gain (loss)........................ 0.29 2.31 3.84
Net realized and unrealized gain (loss) from foreign currency transactions -- -- --
---------- ---------- ----------
Increase (decrease) from investment operations............................ 0.55 2.57 4.02
Dividends paid on Preferred Stock......................................... (0.02) (0.02) (0.02)
Dividends paid on Common Stock............................................ (0.24) (0.23) (0.17)
Distribution from net gain realized....................................... -- -- --
Issuance of Common Stock in gain distributions............................ -- -- --
---------- ---------- ----------
Net increase (decrease) in net asset value................................ 0.29 2.32 3.83
---------- ---------- ----------
Net asset value, end of year.............................................. $ 22.16 $ 21.87 $ 19.55
========== ========== ==========
Adjusted net asset value, end of year*.................................... $ 22.10 $ 21.82 $ 19.51
Market value, end of year................................................. $ 18.58 $ 18.28 $ 16.40
TOTAL INVESTMENT RETURN:
Based upon market value................................................... 2.98% 12.95% 25.24%
Based upon net asset value................................................ 2.66% 13.36%# 25.84%
RATIOS AND SUPPLEMENTAL DATA:
Expenses to average net investment assets................................. 0.64% 0.65% 0.68%
Expenses to average net assets for Common Stock........................... 0.65% 0.66% 0.70%
Net investment income to average net investment assets.................... 1.18% 1.26% 1.03%
Net investment income to average net assets for
Common Stock............................................................. 1.20% 1.28% 1.05%
Portfolio turnover rate................................................... 70.77% 47.36% 138.65%
Net investment assets, end of year (000s omitted):
For Common Stock........................................................ $2,392,304 $2,470,781 $2,310,999
For Preferred Stock..................................................... 37,637 37,637 37,637
---------- ---------- ----------
Total net investment assets............................................... $2,429,941 $2,508,418 $2,348,636
========== ========== ==========
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* Assumes the exercise of outstanding warrants. Warrant exercise terms were:
December 28, 1995 to July 1, 1996--13.54 shares at $1.66 per share; July 2,
1996 to December 20, 1996--13.79 shares at $1.63 per share; December 21,
1996 to July 1, 1997--14.69 shares at $1.53 per share; July 2, 1997 to
December 19, 1997--14.99 shares at $1.50 per share; December 20, 1997 to
June 23, 1998--16.06 shares at $1.40 per share; June 24, 1998 to December
18, 1998--16.78 shares at $1.34 per share; December 19, 1998 to June 24,
1999--17.85 shares at $1.26 per share; June 25, 1999 to December 16,
1999--18.14 shares at $1.24 per share;
The total investment return based on market value measures the Corporation's performance assuming you purchased shares of the Corporation at the market value as of the beginning of the year, invested dividends and capital gains paid as provided for in the Corporation's Automatic Dividend Investment and Cash Purchase Plan, and then sold your shares at the closing market value per share on the last day of the year. The computation does not reflect any sales commissions you may incur in purchasing or selling shares of the Corporation. The total investment return based on net asset value is similarly computed except that the Corporation's net asset value is substituted for the corresponding market value.
The ratios of expenses and net investment income to average net investment assets and to average net assets for Common Stock for the periods presented do not reflect the effect of dividends paid to Preferred Stockholders.
INVESTMENT RETURN, RATIOS AND SUPPLEMENTAL DATA
OUTSTANDING THROUGHOUT EACH YEAR)
2002 2001 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 21.69 $ 25.87 $ 32.82 $ 34.13 $ 32.06 $ 29.28 $ 27.58
---------- ---------- ---------- ---------- ---------- ---------- ----------
0.25 0.32 0.35 0.48 0.54 0.60 0.68
(5.95) (3.02) (3.25) 2.90 7.01 6.94 4.84
-- -- -- -- (0.01) (0.17) (0.02)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(5.70) (2.70) (2.90) 3.38 7.54 7.37 5.50
(0.01) (0.01) (0.02) (0.02) (0.02) (0.02) (0.02)
(0.26) (0.28) (0.33) (0.48) (0.52) (0.60) (0.66)
-- (1.11) (3.30) (3.79) (4.28) (3.45) (2.72)
-- (0.08) (0.40) (0.40) (0.65) (0.52) (0.40)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(5.97) (4.18) (6.95) (1.31) 2.07 2.78 1.70
---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 15.72 $ 21.69 $ 25.87 $ 32.82 $ 34.13 $ 32.06 $ 29.28
========== ========== ========== ========== ========== ========== ==========
$ 15.69 $ 21.65 $ 25.82 $ 32.75 $ 34.06 $ 31.99 $ 29.22
$ 13.25 $ 18.75 $ 21.1875 $ 27.875 $ 28.50 $ 26.6875 $ 24.125
(28.18)% (5.22)% (11.56)% 12.57% 26.19% 27.96% 21.98%
(26.35)% (10.20)% (8.29)% 10.67% 25.80% 26.65% 21.45%
0.67% 0.59% 0.54% 0.56% 0.58% 0.60% 0.62%
0.68% 0.60% 0.54% 0.56% 0.58% 0.60% 0.63%
1.29% 1.36% 1.10% 1.36% 1.59% 1.80% 2.27%
1.31% 1.37% 1.11% 1.38% 1.60% 1.82% 2.31%
152.79% 124.34% 54.13% 42.83% 63.39% 83.98% 53.96%
$1,958,295 $2,873,655 $3,458,009 $4,109,863 $4,002,516 $3,391,816 $2,835,026
37,637 37,637 37,637 37,637 37,637 37,637 37,637
---------- ---------- ---------- ---------- ---------- ---------- ----------
$1,995,932 $2,911,292 $3,495,646 $4,147,500 $4,040,153 $3,429,453 $2,872,663
========== ========== ========== ========== ========== ========== ==========
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December 17, 1999 to June 21, 2000--19.56 shares at $1.15 per share; June 22, 2000 to December 17, 2000--19.90 shares at $1.13 per share; December 18, 2000 to December 17, 2001--21.63 shares at $1.04 per share; and subsequently, 22.50 shares at $1.00 per share. **Per share amount is less than + or - $0.01.
# Excluding the effect of a payment received from the Manager, the total return would have been 13.33%.
SENIOR SECURITIES -- $2.50 CUMULATIVE PREFERRED STOCK
The following information is being presented with respect to the Corporation's $2.50 Cumulative Preferred Stock. The first column presents the number of Preferred shares outstanding at the end of each of the periods presented. Asset Coverage represents the total amount of net assets of the Corporation in relation to each share of Preferred Stock outstanding as of the end of the respective periods. The involuntary liquidation preference is the amount each share of Cumulative Preferred Stock would be entitled to upon involuntary liquidation of these shares.
YEAR-END INVOLUNTARY AVERAGE DAILY
ASSET LIQUIDATION MARKET
TOTAL SHARES COVERAGE PREFERENCE VALUE
YEAR OUTSTANDING PER SHARE PER SHARE PER SHARE
---- ------------ --------- ----------- -------------
2005 752,740 $3,228 $50 $45.70
2004 752,740 3,332 50 45.40
2003 752,740 3,120 50 44.16
2002 752,740 2,654 50 40.61
2001 752,740 3,868 50 37.57
2000 752,740 4,644 50 34.72
1999 752,740 5,510 50 37.31
1998 752,740 5,367 50 40.27
1997 752,740 4,556 50 35.62
1996 752,740 3,816 50 34.28
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CAPITALIZATION AT FEBRUARY 28, 2006
AMOUNT HELD
BY REGISTRANT
OR FOR ITS
TITLE OF CLASS AUTHORIZED OUTSTANDING ACCOUNT
-------------- ---------- ----------- -------------
$2.50 Cumulative Preferred Stock,
$50 par value.................. 1,000,000 shs. 752,740 shs. -0- shs.
Common Stock,
$0.50 par value................ 159,000,000 shs.* 107,343,211 shs. -0- shs.
Warrants to purchase
Common Stock................... 12,822 wts. 12,082 wts. -0- wts.
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* 271,845 shares of Common Stock were reserved for issuance upon the exercise of outstanding Warrants.
TRADING AND NET ASSET VALUE INFORMATION
The following table shows the high and low sale prices of the Corporation's Common Stock on the composite tape for issues listed on the New York Stock Exchange for each calendar quarter since the beginning of 2004 as well as the net asset values and the range of the percentage discounts to net asset value per share that correspond to such prices.
CORRESPONDING
CORRESPONDING DISCOUNT TO
MARKET PRICE NET ASSET VALUE NET ASSET VALUE
- ------------- --------------- ---------------
2004 HIGH LOW HIGH LOW HIGH LOW
---- ------ ------ ------ ------ ------ ------
1st Q $17.69 $16.40 $20.56 $19.52 (13.96)% (15.98)%
2nd Q 17.45 16.00 20.41 19.28 (14.50) (17.01)
3rd Q 16.79 15.82 20.14 19.03 (16.63) (16.87)
4th Q 18.31 16.39 21.89 19.69 (16.35) (16.76)
2005
----
1st Q 18.38 17.49 21.91 20.85 (16.11) (16.12)
2nd Q 18.35 17.16 21.67 20.42 (15.32) (15.96)
3rd Q 18.55 17.79 22.23 21.39 (16.55) (16.83)
4th Q 18.83 17.62 22.50 20.86 (16.31) (15.53)
2006
----
1st Q 20.40 18.86 23.30 22.44 (12.45) (15.95)
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The Corporation's Common Stock has historically been traded on the market at less than net asset value. The closing market price, net asset value and percentage discount to net asset value per share of the Corporation's Common Stock on March 31, 2006 were $20.24, $23.13 and 12.49%, respectively.
INVESTMENT OBJECTIVE AND OTHER POLICIES AND RELATED RISKS
The Corporation is a Maryland corporation formed in 1929 by the consolidation of two predecessor corporations. It is registered under the 1940 Act, as a diversified management investment company of the closed-end type.
The Corporation invests primarily for the longer term and has no Charter restrictions with respect to such investments. Over the years, the Corporation's investment objective has been to produce future growth of both capital and income while providing reasonable current income. There can be no assurance that this objective will be achieved. While common stocks have made up the bulk of investments, assets may be held in cash or invested in all types of securities, that is, in bonds, debentures, notes, preferred and common stocks, rights and warrants (subject to limitations as set forth in the SAI), options, and other securities, in whatever amounts or proportions the Manager believes best suited to current and anticipated economic and market conditions.
The management's present investment policies, in respect to which it has freedom of action, are:
(1) it keeps investments in individual issuers within the limits
permitted diversified companies under the 1940 Act (i.e., 75% of its total
assets must be represented by cash items, government securities, securities
of other investment companies, and securities of other issuers which, at the
time of investment, do not exceed 5% of the Corporation's total assets at
market value in the securities of any issuer and do not exceed 10% of the
voting securities of any issuer);
(2) it does not make investments with a view to exercising control or
management except that it has an investment in SDC;
(3) it ordinarily does not invest in other investment companies, but it may purchase up to 3% of the voting securities of such investment companies, provided purchases of securities of a single investment company do not exceed in value 5% of the total assets of the Corporation and all investments in investment company securities do not exceed 10% of total assets; and
(4) it has no fixed policy with respect to portfolio turnover and purchases and sales in the light of economic, market and investment considerations. The portfolio turnover rates for the ten fiscal years ended December 31, 2005 are shown under "Financial Highlights."
The foregoing investment objective and policies may be changed by management without stockholder approval, unless such a change would change the Corporation's status from a "diversified" to a "non-diversified" company under the 1940 Act.
The Corporation's stated fundamental policies relating to the issuance of senior securities, the borrowing of money, the underwriting of securities of other issuers, the concentration of investments in a particular industry or groups of industries, the purchase or sale of real estate, the purchase or sale of commodities or commodity contracts, and the making of loans may not be changed without a vote of stockholders. A more detailed description of the Corporation's investment policies, including a list of those restrictions on the Corporation's investment activities which cannot be changed without such a vote, appears in the SAI. Within the limits of these fundamental policies, management has reserved freedom of action.
REPURCHASE AGREEMENTS: The Corporation may enter into repurchase agreements with respect to debt obligations which could otherwise be purchased by the Corporation. A repurchase agreement is an instrument
under which the Corporation may acquire an underlying debt instrument and simultaneously obtain the commitment of the seller to repurchase the security at an agreed upon price and date within a number of days (usually not more than seven days from the date of purchase). The value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including the interest factor. The Corporation will make payment for such securities only upon physical delivery or evidence of book transfer to the account of the Corporation's custodian. Repurchase agreements could involve certain risks in the event of default or insolvency of the other party, including possible delays or restrictions upon the Corporation's ability to dispose of the underlying securities.
ILLIQUID SECURITIES: The Corporation may invest up to 15% of its net investment assets in illiquid securities, including restricted securities (i.e., securities not readily marketable without registration under the Securities Act of 1933, as amended ("1933 Act")) and other securities that are not readily marketable. The Corporation may purchase restricted securities that can be offered and sold to "qualified institutional buyers" under Rule 144A of the 1933 Act, and the Corporation's Board of Directors may determine, when appropriate, that specific Rule 144A securities are liquid and not subject to the 15% limitation on illiquid securities. Should this determination be made, the Board of Directors will carefully monitor the security (focusing on such factors, among others, as trading activity and availability of information) to determine that the Rule 144A security continues to be liquid. This investment practice could have the effect of increasing the level of illiquidity in the Corporation, if and to the extent that qualified institutional buyers become for a time uninterested in purchasing Rule 144A securities.
FOREIGN SECURITIES: The Corporation may invest in commercial paper and certificates of deposit issued by foreign banks and may invest in other securities of foreign issuers directly or through American Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"), European Depositary Receipts ("EDRs") or Global Depositary Receipts ("GDRs") (collectively, "Depositary Receipts"). Foreign investments may be affected favorably or unfavorably by changes in currency rates and exchange control regulations. There may be less information available about a foreign company than about a U.S. company and foreign companies may not be subject to reporting standards and requirements comparable to those applicable to U.S. companies. Foreign securities may not be as liquid as U.S. securities. Securities of foreign companies may involve greater market risk than securities of U.S. companies, and foreign brokerage commissions and custody fees are generally higher than those in the United States. Investments in foreign securities may also be subject to local economic or political risks, political instability and possible nationalization of issuers. ADRs and ADSs are instruments generally issued by domestic banks or trust companies that represent the deposits of a security of a foreign issuer. ADRs and ADSs may be publicly traded on exchanges or over-the-counter in the United States and are quoted and settled in dollars at a price that generally reflects the dollar equivalent of the home country share price. EDRs and GDRs are typically issued by foreign banks or trust companies and traded in Europe. Depositary Receipts may be issued under sponsored or unsponsored programs. In sponsored programs, the issuer has made arrangements to have its securities traded in the form of a Depositary Receipt. In unsponsored programs, the issuers may not be directly involved in the creation of the program. Although regulatory requirements with respect to sponsored and unsponsored programs are generally similar, the issuers of securities represented by unsponsored Depositary Receipts are not obligated to disclose material information in the United States and, therefore, the import of such information may not be reflected in the market value of such receipts. The Corporation may invest up to 10% of its total assets in foreign securities that it holds directly, but this 10% limit does not apply to foreign securities held through Depositary Receipts or to commercial paper and certificates of deposit issued by foreign banks.
LEVERAGE: Senior securities issued or money borrowed to raise funds for investment have a prior fixed dollar claim on the Corporation's assets and income. Any gain in the value of securities purchased or in income
received in excess of the cost of the amount borrowed or interest or dividends payable causes the net asset value of the Corporation's Common Stock or the income available to it to increase more than otherwise would be the case. Conversely, any decline in the value of securities purchased or income received on them to below the asset or income claims of the senior securities or borrowed money causes the net asset value of the Common Stock or income available to it to decline more sharply than would be the case if there were no prior claim. Funds obtained through senior securities or borrowings thus create investment opportunity, but they also increase exposure to risk. This influence ordinarily is called "leverage." As of February 28, 2006, the only senior securities of the Corporation outstanding were 752,740 shares of its $2.50 Cumulative Preferred Stock, $50 par value. The dividend rate as of February 28, 2006 on such preferred stock was $2.50 per annum payable quarterly. Based on its February 28, 2006 asset value, the Corporation's portfolio requires an annual return of 0.08% in order to cover dividend payments on the Preferred Stock. For a description of such payments, see "Description of Capital Stock." The following table illustrates the effect of leverage relating to presently outstanding Preferred Stock on the return available to a holder of the Corporation's Common Stock.
Assumed return on portfolio (net of expenses)....................... -10% -5% 0% 5% 10% Corresponding return to common stockholder -10.23% -5.15% -0.08% 5.00% 10.08% |
The purpose of the table above is to assist you in understanding the effects of leverage. The percentages appearing in the table are hypothetical. Actual returns may be greater or less than those shown above.
OTHER RISKS: Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the Corporation's net asset value and market price will fluctuate, especially in the short term. You may experience a decline in the value of your investment and you could lose money if you sell your shares at a price lower than you paid for them.
The Corporation may not invest 25% or more of its total assets in securities of companies in any one industry. The Corporation may, however, invest a substantial percentage of its assets in certain industries or economic sectors believed to offer good investment opportunities. If an industry or economic sector in which the Corporation is invested falls out of favor, the Corporation's performance may be negatively affected.
The Corporation's performance may be affected by the broad investment environment in the U.S. or international securities markets, which is influenced by, among other things, interest rates, inflation, politics, fiscal policy, and current events.
Foreign securities or illiquid securities in the Corporation's portfolio involve higher risk and may subject the Corporation to higher price volatility. Investing in securities of foreign issuers involves risks not associated with U.S. investments, including settlement risks, currency fluctuations, local withholding and other taxes, different financial reporting practices and regulatory standards, high costs of trading, changes in political conditions, expropriation, investment and repatriation restrictions, and settlement and custody risks.
Options transactions can involve a high degree of risk, including the possibility of a total loss of the amount invested. When options are purchased over-the-counter, there is a risk that the counterparty that wrote the option will be unable or unwilling to perform its obligations under the option contract. Such over-the-counter options may also be illiquid and, in such cases, the Corporation may have difficulty closing out its position.
An investment in the Corporation is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
MANAGEMENT OF THE CORPORATION
THE MANAGER: In accordance with the applicable laws of the State of Maryland, the Board of Directors provides broad supervision over the affairs of the Corporation. Pursuant to a Management Agreement approved by the Board and the stockholders, the Manager manages the investment of the assets of the Corporation and administers its business and other affairs. In that connection, the Manager makes purchases and sales of portfolio securities consistent with the Corporation's investment objective and policies.
The Manager is a successor firm to an investment banking business founded in 1864 which has thereafter provided investment services to individuals, families, institutions and corporations. The Manager also serves as manager of twenty-three other U.S. registered investment companies of the Seligman Group of Funds. These other companies are: Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Global Fund Series, Inc., Seligman Growth Fund, Inc., Seligman High Income Fund Series, Seligman Income and Growth Fund, Inc., Seligman Investment Grade Fixed Income Fund, Inc., Seligman LaSalle Real State Fund Series, Inc. Seligman Municipal Fund Series, Inc., Seligman Municipal Series Trust, Seligman New Jersey Municipal Fund, Inc., Seligman New Technologies Fund, Inc., Seligman New Technologies Fund II, Inc., Seligman Pennsylvania Municipal Fund Series, Seligman Portfolios, Inc., Seligman Quality Municipal Fund, Inc., Seligman Select Municipal Fund, Inc., Seligman TargetHorizon ETF Portfolios, Inc., Seligman Time Horizon/Harvester Series, Inc. and Seligman Value Fund Series, Inc. The address of the Manager is 100 Park Avenue, New York, NY 10017. Mr. William C. Morris, Chairman of the Manager and Chairman of the Board of Directors of the Corporation, owns a majority of the outstanding voting securities of the Manager and is a controlling person of the Manager.
As compensation for the services performed and the facilities and personnel provided by the Manager, the Corporation pays to the Manager promptly after the end of each month a fee, calculated on each day during such month, equal to the Applicable Percentage of the daily net assets of the Corporation at the close of business on the previous business day. The term "Applicable Percentage" means the amount (expressed as a percentage and rounded to the nearest one millionth of one percent) obtained by dividing (i) the Fee Amount by (ii) the Fee Base. The term "Fee Amount" means the sum on an annual basis of:
0.45 of 1% of the first $4 billion of Fee Base 0.425 of 1% of the next $2 billion of Fee Base 0.40 of 1% of the next $2 billion of Fee Base, and 0.375 of 1% of the Fee Base in excess of $8 billion.
The term "Fee Base" as of any day means the sum of the net assets at the close of business on the previous day of each of the investment companies registered under the 1940 Act for which the Manager or any affiliated company acts as investment adviser or manager (including the Corporation).
The Corporation's portfolio is managed by the Manager's Core Investment Team, headed by Mr. John B. Cunningham, Managing Director and Chief Investment Officer of the Manager. Mr. Cunningham is Vice President and Portfolio Manager of the Corporation. He is also Vice President and Portfolio Manager of Seligman Common Stock Fund, Inc., Vice President and Co-Portfolio Manager of Seligman Income and Growth Fund, Inc. and Seligman TargetHorizon ETF Portfolios, Inc., and Vice President of Seligman Portfolios, Inc. and
Portfolio Manager of its Seligman Common Stock Portfolio. Prior to joining the
Manager, Mr. Cunningham was, beginning in 2001, a Managing Director, Senior
Portfolio Manager of Salomon Brothers Asset Management ("SBAM") and Group Head
of SBAM's Equity Team. Prior to 2001, he was a Director, Portfolio Manager of
SBAM.
Mr. Michael F. McGarry, a Managing Director of the Manager, is Vice President and Co-Portfolio Manager of the Corporation. He is also Vice President and Co-Portfolio Manager of Seligman Common Stock Fund, Inc. and Vice President of Seligman Portfolios, Inc. and Co-Portfolio Manager of its Seligman Common Stock Portfolio. Mr. McGarry joined the Manager in August 1990 as an Institutional Portfolio Administrator and has been a member of the team managing the Corporation since October 2001.
Mr. Cunningham and Mr. McGarry each have decision-making authority with respect to the Corporation's investments, although, as team leader of the Core Investment Team, Mr. Cunningham typically makes the final decisions with respect to the investments made by the Corporation.
The Corporation's SAI provides additional information about the Portfolio Managers' compensation, other accounts managed by the Portfolio Managers and the Portfolio Managers' ownership of the securities of the Corporation.
The Corporation pays all its expenses other than those assumed by the Manager, including brokerage commissions, fees and expenses of independent attorneys and auditors, taxes and governmental fees, cost of stock certificates, expenses of printing and distributing prospectuses, expenses of printing and distributing reports, notices and proxy materials to stockholders, expenses of printing and filing reports and other documents with governmental agencies, expenses of stockholders' meetings, expenses of corporate data processing and related services, stockholder record-keeping and stockholder account services, fees and disbursements of transfer agents and custodians, expenses of disbursing dividends and distributions, fees and expenses of directors of the Corporation not employed by the Manager or its affiliates, insurance premiums, interest on borrowings and extraordinary expenses such as litigation expenses.
The Management Agreement provides that it will continue in effect until December 29 of each year if such continuance is approved in the manner required by the 1940 Act (i.e., by a vote of a majority of the Board of Directors or of the outstanding voting securities of the Corporation and by a vote of a majority of Directors who are not parties to the Management Agreement or interested persons of any such party) and if the Manager shall not have notified the Corporation at least 60 days prior to December 29 of any year that it does not desire such continuance. The Management Agreement may be terminated by the Corporation, without penalty, on 60 days' written notice to the Manager and will terminate automatically in the event of its assignment.
CUSTODIAN. State Street Bank and Trust Company serves as custodian for the Corporation's portfolio securities and is located at 801 Pennsylvania Avenue, Kansas City, Missouri 64105.
STOCKHOLDER SERVICE AGENT. Seligman Data Corp. serves as stockholder service agent to the Corporation and is located at 100 Park Avenue, New York, New York 10017.
FREQUENTLY ASKED QUESTIONS ABOUT REGULATORY MATTERS
In late 2003, the Manager conducted an extensive internal review in response to public announcements concerning mutual fund trading practices. The following discussion has been prepared to provide shareholders with important information.
For purposes of this discussion, J. & W. Seligman & Co. Incorporated and its affiliates and related parties are referred to as "Seligman" or the "Manager," and the Seligman registered investment companies are referred to as the "Seligman Funds."
Q1. HAVE ANY SELIGMAN EMPLOYEES ENGAGED IN IMPROPER TRADING?
A. The Manager conducted an internal review of employee trading in shares of the Seligman Funds in the fall of 2003 and continues to monitor employee trading in the Seligman Funds. The Manager has not found any improper trading activity by Seligman employees.
Q2. DOES SELIGMAN HAVE ANY POLICIES RELATING TO EMPLOYEE INVESTMENT IN THE SELIGMAN FUNDS?
A. A majority of Seligman employees invest in the Seligman Funds, either directly or through the Seligman 401(k) plans. Trading by employees is monitored by the Manager's legal department and is subject to the Manager's Code of Ethics. In addition, unlike many 401(k) plans that permit daily trading, the Seligman 401(k) plans permit only weekly trading activity. All Seligman employees have been informed that excessive trading with respect to the Seligman Funds, or trading in the Seligman Funds based upon inside information, is inappropriate and may, in certain cases, be illegal. Employees who engage in inappropriate trading will be subject to disciplinary action, which may include termination of employment.
Q3. HAS SELIGMAN ENGAGED IN IMPROPER DISCLOSURE OF A FUND'S PORTFOLIO HOLDINGS?
A. The Manager has found no improprieties relating to the disclosure of a Fund's portfolio holdings. The Manager has not disclosed and does not disclose a Fund's portfolio holdings prior to public dissemination, unless such disclosure is made for legitimate business purposes and only if the Manager believes that such disclosure will not be detrimental to a Fund's interest. A description of the policies and procedures with respect to the disclosure of each Fund's portfolio securities is set forth in each Fund's Statement of Additional Information.
Q4. WHAT IS SELIGMAN'S POLICY WITH REGARD TO RECEIPT OF LATE TRADES (I.E., AFTER 4:00 PM EASTERN TIME)?
A. Seligman does not accept late trades directly from Fund shareholders or prospective shareholders. The large majority of mutual fund trades submitted to Seligman are from broker-dealer firms and other financial intermediaries on behalf of their clients. These intermediaries have an obligation to ensure that trades submitted to the Seligman Funds after 4:00 pm on a trading day for that day's net asset value were, in fact, received by those entities by 4:00 pm on that day. This applies to all trades from intermediaries, including those that are transmitted electronically to Seligman after the market closes. Although the Seligman Funds and the Manager, like other mutual fund groups, cannot determine the time at which orders received through financial intermediaries were placed, the Manager expects mutual fund trades submitted to Seligman by financial intermediaries to comply with all applicable laws and regulations. Seligman has contacted every financial intermediary that offers, sells, or purchases shares of the Seligman Funds in order to remind all of them of their responsibility to have reasonable policies and procedures to ensure that they comply with their legal and contractual obligations.
The Manager has found no instances of Fund shareholders engaging in late trading directly with the Seligman Funds. Seligman will cooperate with and support any governmental or regulatory investigation to identify and hold accountable any financial intermediary that has submitted orders in violation of applicable laws or regulations.
Q5. WHAT IS SELIGMAN'S POLICY REGARDING MARKET TIMING?
A. Seligman has policies and procedures in place to restrict trades that, in its judgment, could prove disruptive in the management of portfolios of the Seligman Funds. As part of the Manager's procedures, the Manager frequently rejects trades, issues warning letters, and prohibits accounts from making further exchanges. Since September 2003, when the first proceedings relating to trading practices within the mutual fund industry were publicly announced, Seligman has taken additional steps to strengthen its policies and procedures. A general description of the Seligman Funds' policies is set forth in each Fund's prospectus.
Q6. HAS SELIGMAN CONDUCTED AN INTERNAL REVIEW RELATING TO MARKET TIMING?
A. The Manager completed its internal review in the fall of 2003. As of September 2003, the Manager had one arrangement that permitted frequent trading. This arrangement was in the process of being closed down by the Manager before September 2003. Based on a review of the Manager's records for 2001 through 2003, the Manager identified three other arrangements that had permitted frequent trading in the Seligman Funds. All three had already been terminated prior to the end of September 2002. The results of the Manager's internal review were presented to the Independent Directors of the Seligman Funds. In order to resolve matters with the Independent Directors relating to the four arrangements, the Manager in May 2004 paid approximately $75,000 to Seligman Global Growth Fund, $300,000 to Seligman Global Smaller Companies Fund and $1.6 million to Seligman Global Technology Fund in recognition that these global investment funds presented some potential for time zone arbitrage. The amounts paid by the Manager represented less than 1/2 of 1% of each such Fund's net asset value as of the date such payments were made. In addition, with respect to Seligman Communications and Information Fund and notwithstanding that time zone arbitrage opportunities did not exist, the Manager, at the request of the Independent Directors, agreed to waive a portion of its management fee, amounting to five basis points (0.05%) per annum, for that Fund for a period of two years commencing on June 1, 2004.
Q7. DOES SELIGMAN DISCLOSE ITS INTERNAL MARKET TIMING CONTROL PROCEDURES?
A. Seligman's market timing control procedures are proprietary. The Manager believes that disclosing these procedures will reduce their effectiveness.
Q8. WHAT NEW PRACTICES ARE BEING CONSIDERED TO PREVENT MARKET TIMING ABUSES?
A. Like other members of the mutual fund industry, Seligman has considered, and continues to consider numerous options, including the implementation of redemption fees. Seligman also has contacted every financial intermediary that offers, sells, or purchases shares of the Seligman Funds in order to inform all of them that they must have reasonable policies and procedures to ensure that they do not knowingly permit or facilitate excessive trading of the Seligman Funds or knowingly use or facilitate any methods designed to disguise such trading in the Seligman Funds.
Q9. IS SELIGMAN INVOLVED WITH ANY FEDERAL OR STATE INVESTIGATION RELATING TO MARKET TIMING OR LATE TRADING?
A. Since February 2004, Seligman has been in discussion with the New York staff of the SEC and the Office of the New York Attorney General ("Attorney General") in connection with their review of frequent trading in certain of the Seligman mutual funds. No late trading is involved. This review was apparently stimulated by Seligman's voluntary public disclosure of the foregoing arrangements in January 2004. In March 2005, negotiations to settle the matter were initiated by the New York staff of the SEC. After several months of negotiations, tentative agreement was reached, both with the New York staff of the SEC and the Attorney General, on the financial terms of a settlement. However, settlement discussions with the Attorney General ended when the Attorney General sought to impose operating conditions on Seligman that were unacceptable to Seligman, would have applied in perpetuity and were not requested or required by the SEC. Subsequently, the New York staff of the SEC indicated that, in lieu of moving forward under the terms of the tentative financial settlement, the staff was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman. Seligman believes that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Funds.
Immediately after settlement discussions with the Attorney General ended, the Attorney General issued subpoenas to certain of the Seligman Funds and their directors. The subpoenas seek various Board materials and information relating to the deliberations of the Independent Directors as to the advisory fees paid by the Seligman mutual funds to Seligman. Seligman has objected to the Attorney General's seeking of such information and, on September 6, 2005, filed suit in federal district court seeking to enjoin the Attorney General from pursuing a fee inquiry. Seligman believes that the Attorney General's inquiry is improper because Congress has vested exclusive regulatory oversight of investment company advisory fees in the SEC.
At the end of September 2005, the Attorney General indicated that it intends to file an action at some point in the future alleging, in substance, that Seligman permitted other persons to engage in frequent trading other than the arrangements described above and, as a result, the prospectus disclosure used by the Seligman Funds is and has been misleading. Seligman believes any such action would be without merit.
Any resolution of these matters with regulatory authorities may include, but not be limited to, sanctions, penalties, injunctions regarding Seligman, restitution to mutual fund shareholders or changes in procedures. Any penalties or restitution will be paid by Seligman and not by the Seligman Funds.
Seligman does not believe that the foregoing possible actions or any threatened legal actions should have a material adverse impact on Seligman or the Seligman Funds; however, there can be no assurance of this or that these matters and any related publicity will not result in reduced demand for shares of the Seligman Funds or other adverse consequences.
Q10. DOES SELIGMAN HAVE ANY MARKET TIMING ARRANGEMENTS AT THE CURRENT TIME?
A. Market timing arrangements in the Seligman Funds have been prohibited. In addition, Seligman has strengthened existing controls to discourage and help prevent market timing.
Q11. HAVE ANY EMPLOYEES BEEN DISCIPLINED IN CONNECTION WITH THE MANAGER'S OVERALL INTERNAL REVIEW?
A. One employee has left Seligman.
DESCRIPTION OF CAPITAL STOCK
(a) DIVIDEND RIGHTS: Common Stockholders are entitled to receive dividends only if and to the extent declared by the Board of Directors and only after (i) such provisions have been made for working capital and for reserves as the Board may deem advisable, (ii) full cumulative dividends at the rate of $0.625 per share per quarterly dividend period have been paid on the Preferred Stock for all past quarterly periods and have been provided for the current quarterly period, and (iii) such provisions have been made for the purchase or for the redemption (at a price of $55 per share) of the Preferred Stock as the Board may deem advisable. In any event, no dividend may be declared upon the Common Stock unless, at the time of such declaration, the net assets of the Corporation, after deducting the amount of such dividend and the amount of all unpaid dividends declared on the Preferred Stock, shall be at least equal to $100 per outstanding share of Preferred Stock. The equivalent figure was $3,301.31 at February 28, 2006.
(b) VOTING RIGHTS: The Preferred Stock is entitled to two votes and the Common Stock is entitled to one vote per share at all meetings of stockholders. In the event of a default in payments of dividends on the Preferred Stock equivalent to six quarterly dividends, the Preferred Stockholders are entitled, voting separately as a class to the exclusion of Common Stockholders, to elect two additional directors, such right to continue until all arrearages have been paid and current Preferred Stock dividends are provided for. Notwithstanding any provision of law requiring any action to be taken or authorized by the affirmative vote of the holders of a designated portion of all the shares or of the shares of each class, such action shall be effective if taken or authorized by the affirmative vote of a majority of the aggregate number of the votes entitled to vote thereon, except that a class vote of Preferred Stockholders is also required to approve certain actions adversely affecting their rights. Any change in the Corporation's fundamental policies may also be authorized by the vote of 67% of the votes present at a meeting if the holders of a majority of the aggregate number of votes entitled to vote are present or represented by proxy.
Consistent with the requirements of Maryland law, the Corporation's Charter provides that the affirmative vote of two-thirds of the aggregate number of votes entitled to be cast thereon shall be necessary to authorize any of the following actions: (i) the dissolution of the Corporation; (ii) a merger or consolidation of the Corporation (in which the Corporation is not the surviving corporation) with (a) an open-end investment company or (b) a closed-end investment company, unless such closed-end investment company's Articles of Incorporation require a two-thirds or greater proportion of the votes entitled to be cast by such company's stock to approve the types of transactions covered by clauses (i) through (iv) of this paragraph; (iii) the sale of all or substantially all of the assets of the Corporation to any person (as such term is defined in the 1940 Act); or (iv) any amendment of the Charter of this Corporation which makes any class of the Corporation's stock a redeemable security (as such term is defined in the 1940 Act) or reduces the two-thirds vote required to authorize the actions listed in this paragraph. This could have the effect of delaying, deferring or preventing changes in control of the Corporation.
(c) LIQUIDATION RIGHTS: In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment to the Preferred Stockholders of an amount equal to $50 per share plus dividends accrued or in arrears, the Common Stockholders are entitled, to the exclusion of the Preferred Stockholders, to share ratably in all the remaining assets of the Corporation available for distribution to stockholders.
(d) OTHER PROVISIONS: Common Stockholders do not have preemptive, subscription or conversion rights, and are not liable for further calls or assessments. The Corporation's Board of Directors (other than any directors
who may be elected to represent Preferred Stockholders as described above) are classified as nearly as possible into three equal classes with a maximum three-year term so that the term of one class of directors expires annually. Such classification provides continuity of experience and stability of management while providing for the election of a portion of the Board of Directors each year. Such classification could have the effect of delaying, deferring or preventing changes in control of the Corporation.
The Board of Directors may classify or reclassify any unissued stock of any class with or without par value (including Preferred Stock and Common Stock) into one or more classes of preference stock on a parity with, but not having preference or priority over, the Preferred Stock by fixing or altering before the issuance thereof the designations, preferences, voting powers, restrictions and qualifications of, the fixed annual dividends on, the times and prices of redemption, the terms of conversion, the number and/or par value of the shares and other provisions of such stock to the full extent permitted by the laws of Maryland and the Corporation's Charter. Stockholder approval of such action is not required.
DESCRIPTION OF WARRANTS
The Corporation's Charter and Warrant certificates provide that each Warrant represents the right during an unlimited time to purchase one share of Common Stock at a price of $22.50 per share, subject to increase in the number of shares purchasable and adjustment of the price payable pursuant to provisions of the Charter requiring such adjustments whenever the Corporation issues any shares of Common Stock at a price less than the Warrant purchase price in effect immediately prior to issue. Each Warrant presently entitles the holder to purchase 22.50 shares of Common Stock at $1.00 per share. There were 12,082 Warrants outstanding at February 28, 2006. Fractional shares of Common Stock are not issued upon the exercise of Warrants. In lieu thereof, the Corporation issues scrip certificates representing corresponding fractions of the right to receive a full share of Common Stock if exchanged by the end of the second calendar year following issuance or of the proceeds of the sale of a full share if surrendered during the next four years thereafter.
COMPUTATION OF NET ASSET VALUE
Net asset value of the Common Stock is determined daily, Monday through Friday, as of the close of regular trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time) each day the New York Stock Exchange is open for trading.
Net asset value per share of Common Stock is determined by dividing the current value of the assets of the Corporation less its liabilities and the prior claim of the Preferred Stock by the total number of shares of Common Stock outstanding.
Generally, securities owned by the Corporation are valued at the last sale price on the securities exchange or securities market on which such securities primarily are traded. Securities not listed on an exchange or security market or for which there is no last sales price are valued at the mean of the most recent bid and asked price, or by the Manager based on quotations provided by primary market makers in such securities. If the Manager concludes that the most recently reported (or closing) price of a security held by the Corporation is no longer valid or reliable, or such price is otherwise unavailable, the Manager will value the security at its fair value as
determined in accordance with procedures approved by the Board of Directors. This can occur in the event of, among other things, natural disasters, acts of terrorism, market disruptions, intra-day trading halts or extreme market volatility. Short-term holdings maturing in 60 days or less are generally valued at amortized cost if their original maturity was 60 days or less. Short-term holdings with more than 60 days remaining to maturity will be valued at current market value until the 61st day prior to maturity, and will then be valued on an amortized cost basis based on the value of such date unless the Board determines that this amortized cost value does not represent fair market value.
All assets and liabilities initially expressed in foreign currencies will be converted into U.S. dollars by a pricing service based upon the mean of the bid and asked prices of such currencies against the U.S. dollar quoted by a major bank which is a regular participant in the institutional foreign exchange markets.
DIVIDEND POLICY AND TAXES
DIVIDENDS: Dividends are paid quarterly on the Preferred Stock and on the Common Stock in amounts representing substantially all of the net investment income earned each year. Payments on the Preferred Stock are in a fixed amount, but payments on the Common Stock vary in amount, depending on investment income received and expenses of operation. Substantially all of any taxable net gain realized on investments is paid to Common Stockholders at least annually in accordance with requirements under the Internal Revenue Code of 1986, as amended, and other applicable statutory and regulatory requirements. At December 31, 2005, the Corporation had a net capital loss carry-forward for federal income tax purposes of $285,514,996, which is available for offset against future taxable net capital gains with $248,552,472 expiring in 2010 and $36,962,524 expiring in 2011. Accordingly, no capital gain distributions are expected to be paid to stockholders until net capital gains have been realized in excess of the available capital loss carry-forward.
Unless SDC is otherwise instructed by you, dividends on the Common Stock are paid in cash and capital gain distributions are paid in book shares of Common Stock which are entered in your Tri-Continental account as "book credits." Long-term gain distributions ordinarily are paid in shares of Common Stock, or, at your option, 75% in book shares and 25% in cash, or, in the alternative, 100% in cash. Shares distributed in payment of gain distributions are valued at market price or at net asset value, whichever is lower, on the valuation date. Distributions or dividends received by you will have the effect of reducing the net asset value of the shares of the Corporation by the amount of such distributions. If the net asset value of shares is reduced below your cost by a distribution, the distribution will be taxable as described below even though it is in effect a return of capital.
TAXES: The Corporation intends to continue to qualify and elect to be treated as a regulated investment company under the Internal Revenue Code. As a regulated investment company, the Corporation will generally be exempt from federal income taxes on net ordinary income and capital gains that it distributes to stockholders, provided that at least 90% of its net ordinary income and net short-term capital gains are distributed to stockholders each year.
Qualification does not, of course, involve governmental supervision of management or investment practices or policies. Investors should consult their own counsel for a complete understanding of the requirements the
Corporation must meet to qualify for such treatment. The information set forth below relates solely to the U.S. Federal income taxes on dividends and distributions by the Corporation and assumes that the Corporation qualifies as a regulated investment company.
Dividends on Common or Preferred Stock representing net investment income and distributions from the excess of net short-term capital gains over net long-term capital losses are taxable to stockholders as ordinary income, whether received in cash or invested in additional shares. To the extent designated as derived from the Corporation's dividend income that would be eligible for the dividends received deduction if the Corporation were not a regulated investment company, they are eligible, subject to certain restrictions, for the 70% dividends received deduction for corporations. Distributions of net capital gain (i.e., the excess of net long-term capital gains over any net short-term capital losses) are taxable as long-term capital gain, whether received in cash or invested in additional shares, regardless of how long you have held your shares. The tax rate on net long-term capital gains for individuals is reduced generally from 20% to 15% (5% for individuals in lower tax brackets) for such gain held for more than one year and realized before January 1, 2009. Such distributions are not eligible for the dividends received deduction allowed to corporate stockholders. If you receive distributions in the form of additional shares issued by the Corporation, you will be treated for federal income tax purposes as having received a distribution in an amount equal to the fair market value on the date of distribution of the shares received.
Dividends declared in October, November or December, payable to stockholders of record on a specified date in such a month and paid in the following January will be treated as having been paid by the Corporation and received by each stockholder in December. Under this rule, therefore, stockholders may be taxed in one year on dividends or distributions actually received in January of the following year.
The Corporation is subject to a 4% nondeductible excise tax on the underdistribution of amounts required to be paid pursuant to a prescribed formula. The formula requires payment to stockholders during a calendar year of distributions representing at least 98% of the Corporation's ordinary income for the calendar year, at least 98% of its capital gain net income realized during the one-year period ending October 31 during such year, and all ordinary income and capital gain net income for prior years that was not previously distributed. The Corporation intends to make sufficient distributions or deemed distributions of its ordinary income and capital gain net income prior to the end of each calendar year to avoid liability for the excise tax.
Any gain or loss you realize upon a sale or redemption of Common or Preferred Stock will generally be treated as a long-term capital gain or loss if you held your shares for more than one year and as a short-term capital gain or loss if you held your shares for one year or less. Individual stockholders will be subject to federal income tax on net capital gains at a maximum rate of 15% in respect of shares held for more than one year and disposed of before January 1, 2009. Net capital gain of a corporate stockholder is taxed at the same rate as ordinary income. However, if shares on which a long-term capital gain distribution has been received are subsequently sold or redeemed and such shares have been held for six months or less, (after taking into account certain hedging transactions), any loss you realize will be treated as long-term capital loss to the extent that it offsets the long-term capital gain distribution. No loss will be allowed on the sale or other disposition of shares of the Corporation if, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, you acquire (such as through the Automatic Dividend Investment and Cash Purchase Plan), or enter into a contract or option to acquire, securities that are substantially identical to the shares of the Corporation.
The tax treatment of the Corporation and of stockholders under the tax laws of the various states may differ from the federal tax treatment. You are urged to consult your own tax advisor regarding specific questions as to federal, state or local taxes, including questions regarding the alternative minimum tax.
THE CORPORATION IS REQUIRED TO WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF TAXABLE DIVIDENDS AND OTHER REPORTABLE PAYMENTS PAID ON YOUR ACCOUNT IF YOU PROVIDE THE CORPORATION WITH EITHER AN INCORRECT TAXPAYER IDENTIFICATION NUMBER (THIS IS YOUR SOCIAL SECURITY NUMBER FOR INDIVIDUALS) OR NO NUMBER AT ALL OR YOU FAIL TO CERTIFY THAT YOU ARE NOT SUBJECT TO SUCH WITHHOLDING. YOU SHOULD BE AWARE THAT, UNDER REGULATIONS PROMULGATED BY THE INTERNAL REVENUE SERVICE, THE CORPORATION MAY BE FINED ON AN ANNUAL BASIS FOR EACH ACCOUNT FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED. THE CORPORATION MAY CHARGE YOU A SERVICE FEE EQUAL TO SUCH FINE FOR ACCOUNTS NOT HAVING A CERTIFIED TAXPAYER IDENTIFICATION NUMBER. CERTIFICATES WILL NOT BE ISSUED UNLESS AN ACCOUNT IS CERTIFIED.
INVESTMENT PLANS AND OTHER SERVICES
AUTOMATIC DIVIDEND INVESTMENT AND CASH PURCHASE PLAN
The Automatic Dividend Investment and Cash Purchase Plan is available for any Common stockholder who wishes to purchase additional shares of the Corporation's Common Stock with dividends or other cash payments on shares owned, with cash dividends paid by other corporations in which stock is owned or with cash funds. The tax treatment of dividends and capital gain distributions is the same whether you take them in cash or reinvest them to buy additional shares of the Corporation. Details of the services offered under the Plan are given in the Authorization Form appearing in this Prospectus. Under the Plan, you appoint the Corporation as your purchase agent to receive or invest such dividends and cash funds forwarded by you for your accounts in additional shares of the Corporation's Common Stock (after deducting a service charge), as described under "Method of Purchase" below. Funds forwarded by you under the Plan should be made payable to Tri-Continental Corporation and mailed to Tri-Continental Corporation, P.O. Box 9766, Providence, RI 02940-9766. Checks for investment must be in U.S. dollars drawn on a domestic bank. Credit card convenience checks and third party checks (i.e., checks made payable to a party other than Tri-Continental Corporation) may not be used to purchase shares under this Plan. You should direct all correspondence concerning the Plan to Seligman Data Corp., 100 Park Avenue, New York, NY 10017. At present, a service fee of up to a maximum of $2.00 will be charged for each cash purchase transaction. There is no charge for Automatic Dividend Investment. As of February 28, 2006, 19,806 stockholders, owning approximately 29,900,825 shares of Common Stock, were using the Plan. You may choose one or more of the services under the Plan and you may change your choices (or terminate participation) at any time by notifying SDC in writing. The Plan may be amended or terminated by written notice to Planholders.
AUTOMATIC CHECK SERVICE
The Automatic Check Service enables you, if you are an Automatic Dividend Investment and Cash Purchase Planholder, to authorize checks to be drawn on your regular checking account at regular intervals for fixed amounts to be invested in additional shares of Common Stock for your account. An Authorization Form to be used to start the Automatic Check Service is included in this Prospectus.
SHARE KEEPING SERVICE
You may send certificates for shares of the Corporation's Common Stock to SDC to be placed in your account. Certificates should be sent to Seligman Data Corp., 101 Sabin Street, Pawtucket, RI 02860-1427, with a letter requesting that they be placed in your account. You should not sign the certificates and they should be sent by certified or registered mail. Return receipt is advisable; however, this may increase mailing time. When your certificates are received by SDC, the shares will be entered in your Tri-Continental account as "book credits" and shown on the Statement of Account received from SDC. If you use the Share Keeping Service you should keep in mind that you must have a stock certificate for delivery to a broker if you wish to sell shares. A certificate will be issued and sent to you on your written request to SDC, usually within two business days of the receipt of your request. You should consider the time it takes for a letter to arrive at SDC and for a certificate to be delivered to you by mail before you choose to use this service.
TAX-DEFERRED RETIREMENT PLANS
Shares of the Corporation may be purchased for:
--Individual Retirement Accounts (IRAs) (available to current stockholders only);
--Savings Incentive Match Plans for Employees (SIMPLE IRAs);
--Simplified Employee Pension Plans (SEPs);
--Section 401(k) Plans for corporations and their employees; and
--Money Purchase Pension and Profit Sharing Plans for sole proprietorships, partnerships and corporations.
These types of plans may be established only upon receipt of a written application form. The Corporation may register an IRA investment for which an account application has not been received as an ordinary taxable account.
For more information, write Retirement Plan Services, Seligman Data Corp.,
100 Park Avenue, New York, NY 10017. You may telephone toll-free by dialing
(800) 445-1777 in the United States.
State Street Bank and Trust Company acts as trustee and custodian and performs other related services with respect to the Plans.
J. & W. SELIGMAN & CO. INCORPORATED MATCHED ACCUMULATION PLAN
The Manager has a Matched Accumulation Plan ("Profit-Sharing Plan") which provides that, through payroll deductions which may be combined with matching contributions and through any profit sharing distribution made by the Manager to the Profit-Sharing Plan, eligible employees of the Manager, Seligman Advisors, Inc. and Seligman Services, Inc. may designate that the payroll deductions and contributions made by the Manager and invested by the Plan trustee, be invested in certain investment companies for which the Manager serves as investment adviser. One such fund consists of Common Stock of the Corporation purchased by the trustee as described under "Method of Purchase."
SELIGMAN DATA CORP. EMPLOYEES' THRIFT PLAN
SDC has an Employees' Thrift Plan ("Thrift Plan") which provides a systematic means by which savings, through payroll deductions, of eligible employees of SDC may be combined with matching contributions made by the company and invested by the Plan trustee, in certain investment companies for which the Manager serves as investment adviser, as designated by the employee. One such fund consists of Common Stock of the Corporation purchased by the trustee as described under "Method of Purchase."
METHOD OF PURCHASE
Purchases will be made by the Corporation from time to time on the New York Stock Exchange or elsewhere to satisfy dividend and cash purchase investments under the Automatic Dividend Investment and Cash Purchase Plan, tax-deferred retirement plans, and the investment plans noted above. Purchases will be suspended on any day when the closing price (or closing bid price if there were no sales) of the Common Stock on the New York Stock Exchange on the preceding trading day was higher than the net asset value per share (without adjustment for the exercise of Warrants remaining outstanding). If on the dividend payable date or the date shares are issuable to stockholders making Cash Purchase investments under the Plan (the "Issuance Date"), shares previously purchased by the Corporation are insufficient to satisfy dividend or Cash Purchase investments and on the last trading day immediately preceding the dividend payable date or the Issuance Date the closing sale or bid price of the Common Stock is lower than or the same as the net asset value per share, the Corporation will continue to purchase shares until a number of shares sufficient to cover all investments by stockholders has been purchased or the closing sale or bid price of the Common Stock becomes higher than the net asset value, in which case the Corporation will issue the necessary additional shares. If on the last trading date immediately preceding the dividend payable date or Issuance Date, the closing sale or bid price of the Common Stock was higher than the net asset value per share, and if shares of the Common Stock previously purchased on the New York Stock Exchange or elsewhere are insufficient to satisfy dividend or Cash Purchase investments, the Corporation will issue the necessary additional shares from authorized but unissued shares of the Common Stock.
Shares will be issued on the dividend payable date or the Issuance Date at a price equal to the lower of (1) the closing sale or bid price, plus commission, of the Common Stock on the New York Stock Exchange on the ex-dividend date or Issuance Date or (2) the greater of the net asset value per share of the Common Stock on such trading day (without adjustment for the exercise of Warrants remaining outstanding) and 95% of the closing sale or bid price of the Common Stock on the New York Stock Exchange on such trading day. In the past, the Common Stock ordinarily has been priced in the market at less than net asset value per share.
The net proceeds to the Corporation from the sale of any shares of Common Stock to the Plans will be added to its general funds and will be available for additional investments and general corporate purposes. The Manager anticipates that investment of any proceeds, in accordance with the Corporation's investment objective and policies, will take up to thirty days from their receipt by the Corporation, depending on market conditions and the availability of appropriate securities, but in no event will such investment take longer than six months. Pending such investment in accordance with the Corporation's objective and policies, the proceeds will be held in U.S. Government Securities (which term includes obligations of the United States Government, its agencies or instrumentalities) and other short-term money market instruments.
If you are participating in the Automatic Dividend Investment and Cash Purchase Plan and your shares are held under the Plan in book credit form, you may terminate your participation in the Plan and receive a certificate
for all or a part of your shares or have all or a part of your shares sold for you by the Corporation and retain unsold shares in book credit form or receive a certificate for any shares not sold. Instructions must be signed by all registered stockholders and should be sent to Seligman Data Corp., 101 Sabin Street, Pawtucket, RI 02860-1427. If you elect to have shares sold, you will receive the proceeds from the sale, less any brokerage commissions. Only participants whose shares are held in book credit form may elect upon termination of their participation in the Plan to have shares sold in the above manner. All other stockholders of the Corporation must sell shares through a registered broker/dealer. As an additional measure to protect you and the Corporation, SDC may confirm written instructions by telephone before sending your money when the value of the shares being sold is $25,000 or more, or when proceeds are directed to be paid to an address or payee different from that on our records. This will not affect the date on which your instruction to sell shares is actually processed. Whenever the value of the shares being sold is $50,000 or more, or the proceeds are to be paid or mailed to an address or payee different from that on our records, the signature of all stockholders must be guaranteed by an eligible financial institution including, but not limited to, the following: banks, trust companies, credit unions, securities brokers and dealers, savings and loan associations and participants in the Securities Transfer Association Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange Medallion Signature Program. Notarization by a notary public is not an acceptable signature guarantee. The Corporation reserves the right to reject a signature guarantee where it is believed that the Corporation will be placed at risk by accepting such guarantee.
SYSTEMATIC WITHDRAWAL PLAN
This Plan is available if you wish to receive fixed payments from your investment in the Common Stock in any amount at specified regular intervals. You may start a Systematic Withdrawal Plan if your shares of the Corporation's Common Stock have a market value of $5,000 or more. Shares must be held in your account as book credits. SDC will act for you, make payments to you in specified amounts on either the 1st or 15th day of each month, as designated by you, and maintain your account. There is a charge by the agent of $1.00 per withdrawal payment for this service. This charge may be changed from time to time.
Payments under the Systematic Withdrawal Plan will be made by selling exactly enough full and fractional shares of Common Stock to cover the amount of the designated withdrawal. Sales may be made on the New York Stock Exchange, to the agent or a trustee for one of the other Plans, or elsewhere. Payments from sales of shares will reduce the amount of capital at work and dividend earning ability, and ultimately may liquidate the investment. Sales of shares may result in gain or loss for income tax purposes. Withdrawals under this Plan or any similar withdrawal plan of any other investment company, concurrent with purchases of shares of the Common Stock or of shares of any other investment company, will ordinarily be disadvantageous to the Planholder because of the payment of duplicative commission or sales loads.
STOCKHOLDER INFORMATION
SDC maintains books and records for all of the Plans, and confirms transactions to stockholders. To insure prompt delivery of checks, account statements and other information, you should notify SDC immediately, in writing, of any address changes. If you close your account during any year it is important that you notify SDC of any subsequent address changes to ensure that you receive a year-end statement and tax information for that year. You will be sent reports quarterly regarding the Corporation. General information about the Corporation may be requested by writing the Corporate Communications/Investor Relations Department, J. & W. Seligman & Co.
Incorporated, 100 Park Avenue, New York, NY 10017 or by telephoning the Corporate Communications/Investor Relations Department toll-free at (800) 221-7844 in the U.S. You may call (212) 850-1864 outside the U.S. Information about your account (other than a retirement plan account), may be requested by writing Stockholder Services, Seligman Data Corp., at the same address or by telephone by dialing toll-free (800) 874-1092 in the U.S. or 212-682-7600 outside the U.S. For information about a retirement account, call Retirement Plan Services toll-free at (800) 445-1777 or write Retirement Plan Services, Seligman Data Corp. at the above address. SDC may be telephoned Monday through Friday (except holidays) between the hours of 8:30 a.m. and 6:00 p.m. Eastern time. Your call will be answered by a service representative.
24-HOUR AUTOMATED TELEPHONE ACCESS IS AVAILABLE BY DIALING (800) 622-4597 (WITHIN THE UNITED STATES) ON A TOUCHTONE TELEPHONE, WHICH PROVIDES INSTANT ACCESS TO PRICE, ACCOUNT BALANCE, MOST RECENT TRANSACTION AND OTHER INFORMATION. IN ADDITION, YOU MAY REQUEST ACCOUNT STATEMENTS AND FORM 1099-DIV.
ISSUANCE OF SHARES IN CONNECTION WITH ACQUISITIONS
The Corporation may issue shares of its Common Stock in exchange for the assets of another investment company in transactions in which the number of shares of Common Stock of the Corporation to be delivered will be generally determined by dividing the current value of the seller's assets by the current per share net asset value or market price on the New York Stock Exchange of the Common Stock of the Corporation, or by an intermediate amount. In such acquisitions, the number of shares of the Corporation's Common Stock to be issued will not be determined on the basis of the market price of such Common Stock if such price is lower than its net asset value per share, except pursuant to an appropriate order of the Securities and Exchange Commission or approval by stockholders of the Corporation, as required by law. The Corporation is not presently seeking to acquire the assets of any investment company, but it may acquire the assets of companies from time to time in the future.
Some or all of the stock so issued may be sold from time to time by the recipients or their stockholders through brokers in ordinary transactions on stock exchanges at current market prices. The Corporation has been advised that such sellers may be deemed to be underwriters as that term is defined in the 1933 Act.
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
Additional Investment Policies...................................................................... 2 Directors and Officers.............................................................................. 5 Management of the Corporation....................................................................... 12 Portfolio Managers.................................................................................. 12 Holdings of Preferred Stock, Common Stock and Warrants.............................................. 14 Brokerage Allocation and Other Practices............................................................ 15 Financial Statements................................................................................ 16 Custodian, Stockholder Service Agent and Dividend Paying Agent and Experts.......................... 16 Report of Independent Registered Public Accounting Firm on Financial Highlights--Senior Securities-- $2.50 Cumulative Preferred Stock.................................................................. 17 |
[LOGO] Tri-Continental
Corporation AUTHORIZATION
FORM
To: Seligman Data Corp. FOR
P.O. Box 9759
Providence, Rhode AUTOMATIC
Island 02940-9759 DIVIDEND
INVESTMENT
AND
CASH
PURCHASE
PLAN
.
AUTOMATIC
DIVIDEND
INVESTMENT
.
AUTOMATIC
INVESTMENT
OF
OTHER
CORPORATIONS'
DIVIDENDS
.CASH
PURCHASE
PLAN
.
AUTOMATIC
CHECK
SERVICE
Date.....................
|
Gentlemen:
I own shares of Tri-Continental Corporation Common Stock registered as shown below:
ACCOUNT REGISTRATION
-------------------------------------------------------
Stockholder's Name (print Stockholder's Signature*
or type)
-------------------------------------------------------
Co-Holder's Name Co-Holder's Signature*
-------------------------------------------------------
Address (street and Taxpayer Identification
number) Number
-------------------------------------------------------
City State Zip Code.. Stockholder Account
Number, if known
|
* If shares are held or to be held in more than one name, all must sign, and plural pronouns will be implied in the text. In the case of co-holders, a joint tenancy with right of survivorship will be presumed unless otherwise specified.
Under penalties of perjury I certify that the number shown on this form is my correct Taxpayer Identification Number (Social Security Number) and that I am not subject to backup withholding either because I have not been notified that I am subject to backup withholding as a result of failure to report all interest or dividends, or the Internal Revenue Service has notified me that I am no longer subject to backup withholding. I certify to my legal capacity to purchase or sell shares of the Corporation for my own Account, or for the Account of the organization named above. I have received a current Prospectus of the Corporation and appoint Seligman Data Corp. as my agent to act in accordance with my instructions herein.
----- ----------------------- Date Stockholder's Signature |
I have read the Terms and Conditions of the Automatic Dividend Investment and Cash Purchase Plan and the current Prospectus, a copy of which I have received, and I wish to establish a Plan to use the Services checked below:
SERVICE(S) DESIRED
[_] AUTOMATIC INVESTMENT OF TRI-CONTINENTAL DIVIDENDS
I wish to have my quarterly dividends invested in additional shares, and
distributions from gains paid as follows:
[_] Credited to my account in additional full and fractional shares.
[_] Credited 75% to my account in shares and 25% paid to me in cash.
[_] AUTOMATIC INVESTMENT OF OTHER CORPORATION'S DIVIDENDS
I intend to give orders for the payment of cash dividends from other
corporations to be invested in shares of Tri-Continental Common Stock for
my account.
Note: Checks in payment of dividends from other corporations should
indicate your name and Tri-Continental account number. The checks should be
made payable to the order of Tri-Continental Corporation and be mailed to
Seligman Data Corp., P.O. Box 9766, Providence, Rhode Island 02940-9766.
[_] CASH PURCHASES
I intend to send funds from time to time to be invested in shares of
Tri-Continental Common Stock for my account.
Note: Your checks should indicate your name and Tri-Continental account
number. Make all checks payable to Tri-Continental Corporation and mail to
Seligman Data Corp., P.O. Box 9766, Providence, Rhode Island 02940-9766.
[_] AUTOMATIC CHECK SERVICE
I have completed the Authorization Form to have pre-authorized checks drawn on my regular checking account at regular intervals for investment in shares of Tri-Continental Common Stock.
5/06
[LOGO] Tri-Continental
Corporation AUTHORIZATION
FORM
FOR
AUTOMATIC CHECK SERVICE
To start your Automatic Check Service, fill out this
form and forward it with an unsigned bank check from
your regular checking account (marked "void") to:
Seligman Data Corp.
P.O. Box 9759
Providence, Rhode Island 02940-9759
Date.................
Gentlemen:
I own shares of Tri-Continental Corporation
Common Stock, registered as shown below, which are
entered in the Automatic Dividend Investment and
Cash Purchase Plan.
1. Stockholder Account Number (if known) ____________
2. AUTOMATIC CHECK SERVICE
Please arrange with my bank to draw pre-authorized
checks on my regular checking account and invest
$__________________ in shares of Tri-Continental
Common Stock every:
[_] month
[_] 3
months
I have completed the "Bank Authorization to Honor
Pre-Authorized Checks" which appears below and
have enclosed one of my bank checks marked "void."
I understand that my checks will be invested on
the fifth day of the month and that I must
remember to deduct the amount of my investment as
it is made from my checking account balance.
BANK AUTHORIZATION TO HONOR PRE-AUTHORIZED CHECKS
To: _________________________________________________
(Name of Bank)
___________________________________________________
(Address of Bank or Branch, Street, City, State
and Zip)
Please honor pre-authorized checks drawn on my
account by Seligman Data Corp., 100 Park Avenue, New
York, NY 10017, to the order of Tri-Continental
Corporation, and charge them to my checking account.
Your authority to do so shall continue until you
receive written notice from me revoking it. You may
terminate your participation in this arrangement at
any time by written notice to me. I agree that your
rights with respect to each pre-authorized check
shall be the same as if it were a check drawn and
signed by me. I further agree that should any such
check be dishonored, with or without cause,
intentionally or inadvertently, you shall be held
under no liability whatsoever.
-------------------------------------------------------------------------------------------------------------------------
Checking Account No.
-------------------------------------------------------------------------------------------------------------------------
Name(s) of Signature(s) of
Depositor(s)--Please Print Depositor(s)--As carried
by Bank
-------------------------------------------------------------------------------------------------------------------------
Address (Street)
City
State
Zip Code
|
5/06
This page intentionally left blank
TERMS AND CONDITIONS
The Automatic Dividend Investment and Cash Purchase Plan provides
Tri-Continental Common stockholders with four ways to add to their investments:
1) with Tri-Continental dividends and distributions, 2) with cash dividends
from other corporations, 3) with cash payments, in any amount at any time, and
4) with cash provided by pre-authorized checks through the Automatic Check
Service. A Planholder may use any or all of these Services, subject to the
following terms and conditions:
1. Seligman Data Corp. ("SDC"), as Plan service agent, will maintain accounts and confirm to Planholders, as soon as practicable after each investment, the number of shares of Common Stock acquired and credited to the accounts and the cost. Tri-Continental Corporation (the "Corporation"), as purchase agent, will purchase shares for Planholders. All checks for dividends payable by other corporations or for cash purchase payments sent by Planholders for investment in additional shares of Tri-Continental Common Stock should be drawn to the order of Tri-Continental Corporation and mailed to Seligman Data Corp., P.O. Box 9766, Providence, Rhode Island 02940-9766.
2. Funds received by the Corporation for a Planholder will be combined with funds of other Planholders and those funds may be combined with funds available under the other Plans for the purchase of Tri-Continental Common Stock in order to minimize brokerage commissions on shares purchased. Shares will be purchased in accordance with the current Prospectus. Dividends from other corporations and purchase cash received from Planholders or through the Automatic Check Service will be invested at least once each 30 days.
3. Shares will be issued under the Plan in accordance with the current Prospectus.
4. No stock certificates will be delivered for shares acquired unless the Plan account is terminated or the Planholder requests their delivery by writing to SDC. The shares acquired will be held in each Planholder's account as book credits.
5. Certificates held by a Planholder, or subsequently received, may be sent to SDC for credit to a Plan account. A certificate for any full shares held in a Plan account will be issued at a Planholder's request. The time required to obtain a certificate to sell through a broker, or for other purposes, will be that needed to send a written request to SDC to withdraw the certificate (normally two business days) and to mail the certificate to the Planholder through the U.S. Postal Service.
6. A maximum service charge of $2.00 will be deducted before each investment is made for a Plan account. There is no charge for Automatic Dividend Investment.
7. Applications for the Automatic Check Service are subject to acceptance by the Planholder's bank and SDC. SDC will prepare Automatic Check Service checks with the same magnetic ink numbers that are on a Planholder's check and will arrange with the Planholder's bank to start the Service in accordance with the Planholder's instructions. A minimum of 30 days from the date of receipt of an application by SDC is required to contact the bank and initiate the Service. If for any reason the bank is unable to honor a pre-authorized check request, the Planholder will be notified promptly.
Shares with a market value of at least two times the amount of the authorized checks must be held as book credits for the Planholder's account by SDC. If any check is dishonored or if the value of shares held by SDC in an account falls below the required minimum, the Service may be suspended. The Service may be reinstated upon written request by the Planholder including an indication that the cause of the interruption has been corrected.
If a Planholder's check is not honored by the Planholder's bank at any time, SDC is authorized to sell exactly enough full and fractional shares from the Planholder's account to equal the amount of the dishonored check.
8. A Planholder or SDC may terminate a Plan account at any time upon notice in writing before the record date of a dividend or distribution by Tri-Continental. A Plan account will terminate automatically if the Planholder sells or transfers all of the shares in the Plan account. If a Plan account is terminated, a certificate for the full shares held may be issued and sent to the Planholder, and any fractional shares may be liquidated at the Planholder's request. Terminating Planholders may elect to have all or part of their shares sold by the Corporation, if their shares are held in book credit form. If a Plan account is terminated between the record and payment dates of a dividend, the dividend payment will be made in cash.
9. In acting under this Plan, the Corporation and SDC will be liable only for willful misfeasance or gross negligence.
10. A Planholder may adopt or suspend one or more of the Plan Services by sending a revised Authorization Form or notice in writing to SDC.
11. All additional shares registered in a Planholder's name which are acquired under one or more of the Plan Services or by other means will participate automatically in each of the Plan services elected.
[LOGO] Tri-Continental Corporation
an investment you can live with
INVESTMENT MANAGER
J. & W. Seligman & Co.
Incorporated
STOCKHOLDER
SERVICE AGENT
Seligman Data Corp.
PORTFOLIO SECURITIES
CUSTODIAN
State Street Bank and
Trust Company
Listed on the
New York Stock Exchange
TY
[GRAPHIC] Go paperless -
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at www.seligman.com
TRI-CONTINENTAL CORPORATION
Statement of Additional Information
May 1, 2006
100 Park Avenue
New York, New York 10017
New York City Telephone: (212) 682-7600
Toll-Free Telephone: (800) 874-1092 in the United States
For Retirement Plan Information -Toll-Free Telephone: (800) 445-1777
This Statement of Additional Information ("SAI") is not a prospectus. This SAI relates to the current Prospectus of Tri-Continental Corporation (the "Corporation"), dated May 1, 2006 (the "Prospectus"), and should be read in conjunction therewith. A copy of the Prospectus may be obtained by writing or calling the Corporation at the above address or telephone numbers. The SAI, as well as the Corporation's most recent Annual and Semi-Annual Reports are also available at the Corporation's website, www.tricontinental.com. The website references in this SAI are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this SAI.
A registration statement relating to these securities has been filed with the Securities and Exchange Commission ("SEC").
Table of Contents
Additional Investment Policies (See "Investment Objective and Other Policies and Related Risks" in the Prospectus)........................... 2 Directors and Officers..................................................... 5 Management of the Corporation (See "Management of the Corporation" in the Prospectus).............................................................. 12 Portfolio Managers......................................................... 12 Holdings of Preferred Stock, Common Stock and Warrants..................... 14 Brokerage Allocation and Other Practices................................... 15 Financial Statements....................................................... 16 |
Custodian, Stockholder Service Agent and Dividend Paying Agent and Experts. 16 Report of Independent Registered Public Accounting Firm on Financial Highlights -- Senior Securities -- $2.50 Cumulative Preferred Stock...... 17
CETRI1A
ADDITIONAL INVESTMENT POLICIES
The investment objectives and policies of the Corporation are set forth in the Prospectus. Certain additional investment information is set forth below. Defined terms used herein and not otherwise defined shall have the meanings ascribed to them in the Prospectus.
Fundamental Policies
The Corporation's stated fundamental policies, which may not be changed without a vote of stockholders, are listed below. Within the limits of these fundamental policies, J. & W. Seligman and Co. Incorporated (the "Manager") has reserved freedom of action. The Corporation:
(1) may issue senior securities such as bonds, notes or other evidences of indebtedness if immediately after issuance the net assets of the Corporation provide 300% coverage of the aggregate principal amount of all bonds, notes or other evidences of indebtedness and that amount does not exceed 150% of the capital and surplus of the Corporation;
(2) may issue senior equity securities on a parity with, but not having preference or priority over, the Preferred Stock if immediately after issuance its net assets are equal to at least 200% of the aggregate amount (exclusive of any dividends accrued or in arrears) to which all shares of the Preferred Stock, then outstanding, shall be entitled as a preference over the Common Stock in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation;
(3) may borrow money for substantially the same purposes as it may issue senior debt securities, subject to the same restrictions and to any applicable limitations prescribed by law;
(4) may engage in the business of underwriting securities either directly or through majority-owned subsidiaries subject to any applicable restrictions and limitations prescribed by law;
(5) does not intend to concentrate its assets in any one industry although it may from time to time invest up to 25% of the value of its assets, taken at market value, in a single industry;
(6) may not, with limited exceptions, purchase and sell real estate directly but may do so through majority-owned subsidiaries, so long as its real estate investments do not exceed 10% of the value of the Corporation's total assets;
(7) may not purchase or sell commodities or commodity contracts; and
(8) may make money loans (subject to restrictions imposed by law and by charter) (a) only to its subsidiaries, (b) as incidents to its business transactions or (c) for other purposes. It may lend its portfolio securities to brokers or dealers in corporate or government securities, banks or other recognized institutional borrowers of securities subject to any applicable requirements of a national securities exchange or of a governmental regulatory body against collateral consisting of cash or direct obligations of the United States, maintained on a current basis, so long as all such loans do not exceed 10% of the value of total assets, and it may make loans represented by repurchase agreements, as described in the Prospectus, so long as such loans do not exceed 10% of the value of total assets.
During its last three fiscal years, the Corporation did not: (a) issue senior securities; (b) borrow any money; (c) underwrite securities; (d) concentrate investments in particular industries or groups of industries; (e) purchase or sell real estate, commodities, or commodity contracts; or (f) make money loans or lend portfolio securities.
Other Policies
Leverage. When securities are loaned, the Corporation receives from the borrower the equivalent of dividends or interest paid by the issuer of securities on loan and, at the same time, makes short-term investments with the cash collateral and retains the interest earned, after payment to the borrower or placing broker of a negotiated portion of such interest, or receives from the borrower an agreed upon rate of interest in the case of loans collateralized by direct obligations of the United States. The Corporation does not have the right to vote securities on loan, but would expect to terminate the loan and regain the right to vote if that were considered important with respect to the investment.
Foreign Securities. In order to take advantage of opportunities that may be provided by debt instruments of foreign issuers, the Corporation may from time to time invest up to 3% of its assets in debt securities issued or guaranteed by a foreign government or any of its political subdivisions, authorities, agencies or instrumentalities and in related forward contracts. The Manager will determine the percentage of assets invested in securities of a particular country or denominated in a particular currency in accordance with its assessment of the relative yield and appreciation potential of such securities and the relationship of a country's currency to the US dollar. Currently, the Corporation may invest in securities denominated in foreign currencies or US dollars of issuers located in the following countries: Australia, Austria, Belgium, Canada, Denmark, France, Germany, Hong Kong, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, Thailand and the United Kingdom. An issuer of debt securities purchased by the Corporation may be domiciled in a country other than the country in whose currency the instrument is denominated.
The Corporation's returns on foreign currency denominated debt instruments can be adversely affected by changes in the relationship between the US dollar and foreign currencies. The Corporation may engage in currency exchange transactions to protect against uncertainty in the level of future exchange rates in connection with hedging and other non-speculative strategies involving specific settlement transactions or portfolio positions. The Corporation will conduct its currency exchange transactions either on a spot (i.e., cash) basis at the rate prevailing in the currency market or through forward contracts.
Rights and Warrants. The Corporation may not invest in rights and warrants if, at the time of acquisition, the investment in rights and warrants would exceed 5% of the Corporation's net assets, valued at the lower of cost or market. In addition, no more than 2% of net assets may be invested in warrants not listed on the New York or American Stock Exchanges. For purposes of this restriction, warrants acquired by the Corporation in units or attached to securities may be deemed to have been purchased without cost.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange contract (or forward contract) is an agreement to purchase or sell a specific currency at a future date and at a price set at the time the contract is entered into. The Corporation will generally enter into forward foreign currency exchange contracts to fix the US dollar value of a security it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for, or, to hedge the US dollar value of securities it owns.
The Corporation may enter into a forward contract to sell or buy the amount of a foreign currency it believes may experience a substantial movement against the US dollar. In this case, the contract would approximate the value of some or all of the Corporation's portfolio securities denominated in such foreign currency. Under normal circumstances, the portfolio manager will limit forward currency contracts to not greater than 75% of the Corporation's portfolio position in any one country as of the date the contract is entered into. This limitation will be measured at the point the hedging transaction is entered into by the Corporation. Under extraordinary circumstances, the Manager may enter into forward currency contracts in excess of 75% of the Corporation's portfolio position in any one country as of the date the contract is entered into. The precise matching of the forward contract amounts and the value of securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market involvement in the value of those securities between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movement is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Under certain circumstances, the Corporation may commit up to the entire value of its assets which are denominated in foreign currencies to the consummation of these contracts. The Manager will consider the effect a substantial commitment of its assets to forward contracts would have on the investment program of the Corporation and its ability to purchase additional securities.
Except as set forth above and immediately below, the Corporation will also not enter into such forward contracts or maintain a net exposure to such contracts where the consummation of the contracts would oblige the Corporation to deliver an amount of foreign currency in excess of the value of the Corporation's portfolio securities or other assets denominated in that currency. The Corporation, in order to avoid excess transactions and transaction costs, may nonetheless maintain a net exposure to forward contracts in excess of the value of the Corporation's portfolio securities or other assets denominated in that currency provided the excess amount is "covered" by cash or liquid, high-grade debt securities, denominated in any currency, at least equal at all times to the amount of such excess. Under normal circumstances, consideration of the prospect for currency parties will be incorporated into the longer-term investment decisions made with regard to overall diversification strategies. However, the Manager believes that it is important to have the flexibility to enter into such forward contracts when it determines that the best interests of the Corporation will be served.
At the maturity of a forward contract, the Corporation may either sell the portfolio security and make delivery of the foreign currency, or it may retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an "offsetting" contract obligating it to purchase, on the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of the forward contract. Accordingly, it may be necessary for the Corporation to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the Corporation is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security if its market value exceeds the amount of foreign currency the Corporation is obligated to deliver. However, the Corporation may use liquid, high-grade debt securities, denominated in any currency, to cover the amount by which the value of a forward contract exceeds the value of the securities to which it relates.
If the Corporation retains the portfolio security and engages in offsetting transactions, the Corporation will incur a gain or a loss (as described below) to the extent that there has been movement in forward contract prices. If the Corporation engages in an offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline during the period between the Corporation's entering into a forward contract for the sale of a foreign currency and the date it enters into an offsetting contract for the purchase of the foreign currency, the Corporation will realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should forward prices increase, the Corporation will suffer a loss to the extent the price of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell.
The Corporation's dealing in forward foreign currency exchange contracts will be limited to the transactions described above. Of course, the Corporation is not required to enter into forward contracts with regard to its foreign currency-denominated securities and will not do so unless deemed appropriate by the Manager. It also should be realized that this method of hedging against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange at a future date. Additionally, although such contracts tend to minimize the risk of loss due to a decline in the value of a hedged currency, at the same time, they tend to limit any potential gain which might result from an increase in the value of that currency.
Stockholders should be aware of the costs of currency conversion. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (the "spread") between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the Corporation at one rate, while offering a lesser rate of exchange should the Corporation desire to resell that currency to the dealer.
Investment income received by the Corporation from sources within foreign countries may be subject to foreign income taxes withheld at the source. The United States has entered into tax treaties with many foreign countries which entitle the Corporation to a reduced rate of such taxes or exemption from taxes on such income. It is impossible to determine the effective rate of foreign tax in advance since the amounts of the Corporation's assets to be invested within various countries is not known.
Options. The Manager must seek approval of the Board of Directors to invest in any option if it is of a type the Corporation has not previously utilized. Pursuant to this policy, the Board has approved the Manager's request that the Corporation be permitted to purchase put options, call options, put spreads, call spreads and collars, and to sell covered call options (i.e., where the Corporation owns the underlying security) and covered put options (i.e., where the Corporation maintains the cash or collateral to cover the obligation created by the put). These instruments are described below.
An option is a contract that gives the holder the right to purchase ("call") or sell ("put") a specified security for an agreed upon price at any time before the contract's expiration date. The amount paid for an option is known as the premium, and the exercise price is known as the strike price. The purchaser of an option has the right, but not the obligation, to purchase or sell a security. The seller (or "writer") of an option, conversely, has an obligation to sell or purchase a security if the option is exercised. Some options have standardized terms and are traded on securities exchanges. Others are privately negotiated and have no or only a limited trading market. Options may be used individually or in combinations (e.g., put spreads and collars) to hedge securities positions or to seek increased investment returns.
Put spreads and collars are designed to protect against a decline in value of a security an investor owns. A collar involves the purchase of a put and the simultaneous writing of a call on the same security at a higher strike price. The put protects the investor from a decline in the price of the security below the put's strike price. The call means that the investor will not benefit from increases in the price of the stock beyond the call's strike price. In a put spread, an investor purchases a put and simultaneously writes a put on the same security at a lower strike price. This combination protects the investor against a decline in the stock price down to the lower strike price. The premium received for writing the call (in the case of a collar) or writing the put (in the case of a put spread) offsets, in whole or in part, the premium paid to purchase the put. In a call spread, an investor purchases a call and simultaneously sells a call on the same security, with the call sold having a higher strike price than the call purchased. The purchased call is designed to provide exposure to a potential increase in the value of a security an investor owns. The premium received for writing the call offsets, in part, the premium paid to purchase the corresponding call, but it also means that the investor will not benefit from increases in the price of the security beyond the sold call's strike price.
Options transactions can involve a high degree of risk, including the possibility of a total loss of the amount invested. A person who purchases options runs the risk of losing the entire premium paid if the option expires "out of the money" (i.e., if the strike price for a call option is higher than the market price, or the strike price for a put option is lower than the market price). A person who writes options earns premium income but is subject to the risk of having to sell a security at less than its market price (or buy a security at more than its market price). When options are purchased over-the-counter, there is a risk that the counterparty that wrote the option will be unable or unwilling to perform its obligations under the option contract. Such over-the-counter options may also be illiquid and, in such cases, the Corporation may have difficulty closing out its position.
Portfolio Turnover
The Corporation's portfolio turnover rate for the years ended December 31, 2005 and 2004 were 70.77% and 47.36%, respectively.
DIRECTORS AND OFFICERS
Board of Directors
The Board of Directors provides broad supervision over the affairs of the Corporation.
Management Information
Information with respect to Directors and officers of the Corporation and their business experience for the past five years is shown below. Unless otherwise noted, their addresses are 100 Park Avenue, New York, New York 10017.
Number
of
Portfolios
Term of in Fund
Office and Complex
Length of Overseen
Name, (Age), Position(s) Time Principal Occupation(s) During Past 5 Years, Directorships by
With Corporation Served* and Other Information Director
------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
------------------------------------------------------------------------------------------------------------------------
John R. Galvin (76) 2006-2009; Dean Emeritus, Fletcher School of Law and Diplomacy at Tufts 58
Director 1995 to Date University; Director or Trustee of each of the investment companies
of the Seligman Group of Funds**; and Chairman Emeritus, American
Council on Germany. Formerly, Director, Raytheon Co. (defense and
commercial electronics); Governor of the Center for Creative
Leadership, and Trustee, Institute for Defense Analyses. From
February 1995 until June 1997, he was a Director, USLIFE Corporation
(life insurance). From June 1987 to June 1992, he was the Supreme
Allied Commander, NATO, and the Commander-in-Chief, United States
European Command.
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Number
of
Portfolios
Term of in Fund
Office and Complex
Length of Overseen
Name, (Age), Position(s) Time Principal Occupation(s) During Past 5 Years, Directorships by
With Corporation Served* and Other Information Director
------------------------------------------------------------------------------------------------------------------------
Alice S. Ilchman (71) 2004-2007; President Emerita, Sarah Lawrence College; Director or Trustee of 58
Director 1990 to Date each of the investment companies of the Seligman Group of Funds**;
Director, Jeannette K. Watson Fellowship (internships for college
students); Trustee, the Committee for Economic Development; Governor,
Court of Governors, London School of Economics; and Director, Public
Broadcasting Service (PBS). Formerly, Trustee, Save the Children
(non-profit child-assistance organization); Chairman (from January
1996 until December 2000), The Rockefeller Foundation (charitable
foundation); and Director (from September 1987 until September 1997),
New York Telephone Company.
Frank A. McPherson (73) 2004-2007; Retired Chairman of the Board and Chief Executive Officer of 58
Director 1995 to Date Kerr-McGee Corporation (diversified energy and chemical company);
Director or Trustee of each of the investment companies of the
Seligman Group of Funds**; and Director, DCP Midstream GP, LLP
(natural gas processing), Integris Health (owner of various
hospitals), Oklahoma Chapter of the Nature Conservancy, Oklahoma
Medical Research Foundation, Boys and Girls Clubs of Oklahoma,
Oklahoma City Public Schools Foundation and Oklahoma Foundation for
Excellence in Education. Formerly, Director, ConocoPhillips
(integrated international oil corporation); BOK Financial (bank
holding company); Kimberly-Clark Corporation (consumer products); and
Director (from 1990 until 1994), the Federal Reserve System's Kansas
City Reserve Bank.
Betsy S. Michel (63) 2005-2008; Attorney; Director or Trustee of each of the investment companies of 58
Director 1985 to Date the Seligman Group of Funds**; and Trustee, The Geraldine R. Dodge
Foundation (charitable foundation). Formerly, Chairman of the Board
of Trustees of St. George's School (Newport, RI) and Trustee, World
Learning, Inc. (international educational training) and Council of
New Jersey Grantmakers.
Leroy C. Richie (64) 2004-2007; Counsel, Lewis & Munday, P.C. (law firm); Chairman and Chief 57
Director 2000 to Date Executive Officer, Q Standards Worldwide, Inc. (library of technical
standards); Director or Trustee of each of the investment companies
of the Seligman Group of Funds** (with the exception of Seligman Cash
Management Fund, Inc.); Director, Kerr-McGee Corporation (diversified
energy and chemical company), Infinity, Inc. (oil and gas services
and exploration) and Vibration Control Technologies, LLC (auto
vibration technology); Lead Outside Director, Digital Ally, Inc.
(digital imaging); Director and Chairman, Highland Park Michigan
Economic Development Corp; and Chairman, Detroit Public Schools
Foundation. Formerly, Trustee, New York University Law Center
Foundation; Vice Chairman, Detroit Medical Center and Detroit
Economic Growth Corp.; and Vice President and General Counsel (from
1990 until 1997), Automotive Legal Affairs, Chrysler Corporation.
Robert L. Shafer (73) 2006-2009; Ambassador and Permanent Observer of the Sovereign Military Order of 58
Director 1991 to Date Malta to the United Nations; and Director or Trustee of each of the
investment companies of the Seligman Group of Funds**. Formerly,
Director (from May 1987 until June 1997), USLIFE Corporation (life
insurance); and Vice President (from December 1973 until January
1996), Pfizer Inc. (pharmaceuticals).
James N. Whitson (71) 2005-2008; Retired Executive Vice President and Chief Operating Officer, Sammons 58
Director 1993 to Date Enterprises, Inc. (diversified holding company); Director or Trustee
of each of the investment companies of the Seligman Group of Funds**;
Director, CommScope, Inc. (manufacturer of coaxial cable). Formerly,
Director and Consultant, Sammons Enterprises, Inc. and Director,
C-SPAN (cable television networks).
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Number
of
Portfolios
Term of in Fund
Office and Complex
Length of Overseen
Name, (Age), Position(s) Time Principal Occupation(s) During Past 5 Years, Directorships by
With Corporation Served* and Other Information Director
-------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS AND PRINCIPAL OFFICERS
-------------------------------------------------------------------------------------------------------------------------
William C. Morris*** (68) 2006-2009; Chairman, J. & W. Seligman & Co. Incorporated; Chairman of the Board
Director and Chairman of 1988 to Date and Director or Trustee of each of the investment companies of the
the Board Seligman Group of Funds**; Chairman, Seligman Advisors, Inc.,
Seligman Services, Inc. and Carbo Ceramics Inc. (manufacturer of
ceramic proppants for oil and gas industry); Director, Seligman Data
Corp.; and President and Chief Executive Officer, The Metropolitan
Opera Association. Formerly, Director, Kerr-McGee Corporation
(diversified energy and chemical company) and Chief Executive Officer
of each of the investment companies of the Seligman Group of Funds. 58
Brian T. Zino*** (53) 2005-2008; Director and President, J. & W. Seligman & Co. Incorporated; Chief
Director, President and Dir.: 1993 Executive Officer, President and, with the exception of Seligman Cash
Chief Executive Officer to Date Management Fund, Inc., Director or Trustee of each of the investment
Pres.: 1995 companies of the Seligman Group of Funds**; Director, Seligman
to Date Advisors, Inc. and Seligman Services, Inc.; Chairman, Seligman Data
CEO.: 2002 Corp.; Member of the Board of Governors of the Investment Company
to Date Institute; and Director (formerly Chairman), ICI Mutual Insurance
Company. 57
Charles W. Kadlec (60) 1996 to Date Director and Managing Director, J. & W. Seligman & Co. Incorporated
Vice President and Director and President, Seligman Advisors, Inc. and Seligman
Services, Inc. He is also Vice President and Portfolio Manager of
Seligman Time Horizon Harvester Series, Inc and Vice President and
Co-Portfolio Manager of Seligman TargetHorizon ETF Portfolios, Inc. N/A
John B. Cunningham (41) 2004 to Date Managing Director and Chief Investment Officer, J. & W. Seligman &
Vice President and Co. Incorporated; Vice President and Portfolio Manager of Seligman
Portfolio Manager Common Stock Fund, Inc., and Seligman Income and Growth Fund, Inc.
Vice President of Seligman Portfolios, Inc. and Portfolio Manager of
Seligman Common Stock Portfolio and Vice President and Co-Portfolio
Manager of Seligman TargetHorizon ETF Portfolios, Inc. Formerly,
beginning in 2001, Managing Director, Senior Portfolio Manager,
Salomon Brothers Asset Management ("SBAM") and Group Head, SBAM's
Equity Team. Prior to 2001, Director, Portfolio Manager of SBAM. N/A
Michael F. McGarry (42) 2004 to Date Managing Director, J. & W. Seligman & Co. Incorporated; Vice
Vice President and President and Co-Portfolio Manager of Seligman Common Stock Fund,
Co-Portfolio Manager Inc.; and Vice President of Seligman Portfolios, Inc. and
Co-Portfolio Manager of Seligman Common Stock Portfolio. He joined
Seligman in August 1990 as an Institutional Portfolio Administrator
and has been a member of the team managing the Funds since October
2001. N/A
Eleanor T.M. Hoagland (54) 2004 to Date Managing Director, J. & W Seligman & Co. Incorporated; and Vice
Vice President and Chief President and Chief Compliance Officer of each of the investment
Compliance Officer companies of the Seligman Group of Funds**. N/A
Thomas G. Rose (48) 2000 to Date Managing Director, Chief Financial Officer and Treasurer, J. & W.
Vice President Seligman & Co. Incorporated, Senior Vice President, Finance, Seligman
Advisors, Inc. and Seligman Data Corp.; and Vice President of each of
the investment companies of the Seligman Group of Funds**, Seligman
Services, Inc. and Seligman International, Inc. N/A
Lawrence P. Vogel (49) V.P.: 1992 Senior Vice President and Treasurer, Investment Companies, J. & W.
Vice President to Date Seligman & Co. Incorporated; Vice President and Treasurer of each of
and Treasurer Treas.: 2000 the investment companies of the Seligman Group of Funds**; and
to Date Treasurer, Seligman Data Corp. N/A
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Number
of
Portfolios
Term of in Fund
Office and Complex
Length of Overseen
Name, (Age), Position(s) Time Principal Occupation(s) During Past 5 Years, Directorships by
With Corporation Served* and Other Information Director
------------------------------------------------------------------------------------------------------------------------
Frank J. Nasta (41) 1994 to Date Director, Managing Director, General Counsel and Corporate Secretary, N/A
Secretary J. & W. Seligman & Co. Incorporated; Director, Seligman Advisors,
Inc. and Seligman Services, Inc.; Secretary of each of the investment
companies of the Seligman Group of Funds**; and Corporate Secretary,
Seligman Advisors, Inc., Seligman Services, Inc., Seligman
International, Inc. and Seligman Data Corp.
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** The Seligman Group of Funds currently consists of twenty-four registered
investment companies, including the Corporation.
*** Mr. Morris and Mr. Zino are considered "interested persons" of the
Corporation, as defined in the Investment Company Act of 1940, as amended
by virtue of their positions with J. & W. Seligman & Co. Incorporated and
its affiliates.
General Galvin and Messrs. Morris and Schafer are running for re-election as Directors at the Corporation's 2006 Annual Meeting of Stockholders, which is scheduled to be held on May 4, 2006. A group of dissident stockholders (the "Group") is soliciting proxies in support of the Group's candidates for seats on the Corporation's Board currently held by such persons. According to statements by the Group, its members believe that steps should be taken to reduce the discount to net asset value at which the Corporation's shares of common stock currently trade, such as large scale stock buybacks or tender-offers, or converting the Corporation into an open-end fund.
The standing committees of the Board include the Board Operations Committee, Audit Committee and Director Nominating Committee. These Committees are comprised solely of Directors who are not "interested" persons of the Corporation as that term is defined in the Investment Company Act of 1940, as amended ("1940 Act"). The duties of these Committees are described below.
Board Operations Committee. This Committee has authority generally to direct the operations of the Board, including the nomination of members of other Board Committees and the selection of legal counsel for the Corporation. The Committee met seven times during the year ended December 31, 2005. Members of the Committee are Messrs. McPherson (Chairman), Galvin, Richie, Shafer and Whitson, and Dr. Ilchman and Ms. Michel.
Audit Committee. This Committee recommends an independent public accounting firm for selection as auditors by the Board annually. In addition, the Committee assists the Board in its oversight of the Fund's financial reporting process and operates pursuant to a written charter, which is periodically included as an annex to the Corporation's annual proxy statement. The Committee met three times during the year ended December 31, 2005. Members of the Committee are Messrs. Whitson (Chairman), Galvin and Richie, and Ms. Michel.
Director Nominating Committee. This Committee selects and nominates persons for election as Directors by the Board. In addition, if a stockholder meeting is held where Directors are to be elected, the Committee will select and nominate persons for election as Directors at such stockholder meeting. The Committee met once during the year ended December 31, 2005. Members of the Committee are Messrs. Shafer (Chairman) and McPherson, and Dr. Ilchman.
The Nominating Committee will consider candidates submitted by a stockholder or group of stockholders who have owned at least $10,000 of the Corporation's outstanding common stock for at least one year at the time of submission and who timely provide specified information about the candidates and the nominating stockholder or group. To be timely for consideration by the Nominating Committee, the submission, including all required information, must be submitted in writing to the attention of the Secretary at 100 Park Avenue, New York, NY 10017 not less than 120 days before the date of the proxy statement for the previous year's annual meeting of stockholders. The Nominating Committee will consider only one candidate submitted for nomination by such a stockholder or group for election at an annual meeting of stockholders. The Nominating Committee will not consider self-nominated candidates or candidates nominated by members of a candidate's family, including such candidate's spouse, children, parents, uncles, aunts, grandparents, nieces and nephews.
The Nominating Committee will consider and evaluate candidates submitted by the nominating stockholder or group on the basis of the same criteria as those used to consider and evaluate candidates submitted from other sources. These criteria may include the candidate's relevant knowledge, experience and expertise, the candidate's ability to carry out his or her duties in the best interests of the Corporation and the candidate's ability to qualify as a disinterested Director. The charter for the Nominating Committee, which provides a detailed description of the criteria used by the Nominating Committee as well as information required to be provided by stockholders submitting candidates for consideration by the Nominating Committee, is periodically included as an annex to the Corporation's annual proxy statement.
Beneficial Ownership of Shares
As of December 31, 2005, the Directors beneficially owned shares in the Corporation and the Seligman Group of Funds as follows:
Aggregate Dollar Range of Shares
Dollar Range of Fund Shares Owned Owned by Director in the Seligman
Name By Director Group of Funds
--------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
--------------------------------------------------------------------------------------
John R. Galvin $10,001-$50,000 $50,001 - $100,000
Alice S. Ilchman Over $100,000 Over $100,000
Frank A. McPherson Over $100,000 Over $100,000
Betsy S. Michel $10,001-$50,000 Over $100,000
Leroy C. Richie $10,001-$50,000 $10,001-$50,000
Robert L. Shafer $50,001-$100,000 Over $100,000
James N. Whitson Over $100,000 Over $100,000
--------------------------------------------------------------------------------------
INTERESTED DIRECTORS
--------------------------------------------------------------------------------------
William C. Morris Over $100,000 Over $100,000
Brian T. Zino Over $100,000 Over $100,000
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Compensation Table
Pension or Total Compensation
Aggregate Retirement Benefits from Corporation and
Compensation from Accrued as part of Fund Complex Paid
Name and Position with Corporation Corporation (1) Corporation Expenses to Directors (1)(2)
---------------------------------- ----------------- -------------------- --------------------
Robert B. Catell, Director(3) $27,968 N/A $ 83,120
John R. Galvin, Director 34,233 N/A 100,500
Alice S. Ilchman, Director 32,651 N/A 97,500
Frank A. McPherson, Director 32,651 N/A 97,500
John E. Merow, Director(4) 14,040 N/A 97,500
Betsy S. Michel, Director 36,770 N/A 39,577
Leroy C. Richie, Director 36,770 N/A 106,500
Robert L. Shafer, Director 33,926 N/A 100,500
James N. Whitson, Director 34,233 N/A 100,500
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(1) Based on remuneration received by the Directors of the Corporation for the
year ended December 31, 2005.
(2) At December 31, 2005, the Seligman Group of Funds consisted of twenty-four
registered investment companies, including the Corporation.
(3) Mr. Catell retired as a member of the Board of Directors effective on
November 28, 2005.
(4) Mr. Merow retired as a member of the Board of Directors at he 2005 annual
meeting of stockholders of the Corporation.
No compensation is paid by the Corporation to Directors or officers of the Corporation who are employees of the Manager.
The Corporation has adopted a deferred compensation plan under which independent directors may elect to defer receiving their fees. A director who has elected deferral of his or her fees may choose a rate of return equal to either (1) the interest rate on short-term Treasury Bills, or (2) the rate of return on the shares of certain of the investment companies advised by the Manager, as designated by the director. The annual cost of such fees and interest is included in the director's fees and expenses and the accumulated balance thereof is included in "Liabilities" in the Corporation's financial statements.
Mr. Whitson had previously deferred compensation pursuant to the deferred compensation plan. Mr. Whitson no longer defers his current compensation; however, he had accrued deferred compensation (including earnings/losses) in respect of the Corporation in the amount of $247,499 as of December 31, 2005, all of which was paid to him in January 2006.
Mr. Merow had previously deferred compensation pursuant to the deferred compensation plan; however, he had stopped deferring his current compensation prior to his retirement. The accrued balance of Mr. Merow's deferred compensation (including earnings/losses) in respect of the Corporation as of December 31, 2004 was $22,873, all of which was paid to him in January 2005.
Directors and officers of the Corporation are also directors, trustees and officers of some or all of the other investment companies in the Seligman Group of Funds.
Code of Ethics
The Manager, Seligman Advisors, Inc. ("Seligman Advisors"), their subsidiaries and affiliates, and the Seligman Group of Funds have adopted a Code of Ethics that sets forth the circumstances under which officers, directors and employees (collectively, "Employees") are permitted to engage in personal securities transactions. The Code of Ethics proscribes certain practices with regard to personal securities transactions and personal dealings, provides a framework for the reporting and monitoring of personal securities transactions by the Manager's Chief Compliance Officer, and sets forth a procedure of identifying, for disciplinary action, those individuals who violate the Code of Ethics. The Code of Ethics prohibits Employees (including all investment team members) from purchasing or selling any security or an equivalent security that is being purchased or sold by any client, or where the Employee intends, or knows of another's intention, to purchase or sell a security on behalf of a client. The Code also prohibits all Employees from acquiring securities in a private placement or in an initial or secondary public offering, unless prior approval has been obtained from the Manager's Chief Compliance Officer.
The Code of Ethics prohibits (1) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days either before or after the purchase or sale of the security by a client's
account (including investment company accounts) that the portfolio manager or
investment team manages; (2) each Employee from profiting from short-term
trading (a profitable purchase and sale or vice-versa within 60 days); and
(3) each member of an investment team from profiting from short sales of a
security if, at that time, any client managed by that team has a long position
in that security. Any profit realized pursuant to any of these prohibitions
must be disgorged to charitable organizations.
Employees are required, except under very limited circumstances, to engage in personal securities transactions through a broker-dealer designated by the Manager. All Employee personal securities transactions must be pre-cleared through the Manager's compliance system. This system is designed to prevent transactions in securities that would conflict with the interests of clients. All Employees are also required to disclose all securities beneficially owned by them upon commencement of employment and at the end of each calendar year.
A copy of the Code of Ethics is on public file with the SEC and can be reviewed and copied at the SEC's Public Reference Room in Washington, DC. The information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. A copy of the Code of Ethics is also available on the EDGAR Database on the SEC's Internet site at www.sec.gov. Copies of the Code of Ethics may also be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, DC 20549-0102.
Proxy Voting Policies
Introduction. On behalf of the Corporation, one or more independent third parties under the supervision of the Manager votes the proxies of the securities held in the Corporation's portfolios in accordance with the Manager's criteria of what is in the best interests of the Corporation's stockholders.
The financial interest of the stockholders of the Corporation is the primary consideration in determining how proxies should be voted. The Manager has a responsibility to analyze proxy issues and to ensure that voting is accomplished in a way consistent with those financial interests. In the case of social and political responsibility issues which do not involve financial considerations, it is not possible to fairly represent the diverse views of the Corporation's stockholders. As a result, the Manager's policy generally is to abstain from voting on these issues. Notwithstanding the above, proposals seeking disclosure of certain matters relating to social and political issues may be supported if such disclosure is not deemed to be unduly burdensome.
The Proxy Voting Process. Proxies for securities held in the portfolios of the Corporation will be received, processed and voted by one or more independent third parties under the supervision of the Manager pursuant to the guidelines (the "Guidelines") established by the Manager's Proxy Voting Committee (the "Committee"). A description of the Guidelines can be found below.
The Committee was established to set the Manager's policy and Guidelines, to consider new corporate governance issues as they arise, to assist in determining how the Manager will respond to such issues and to provide oversight of
the proxy voting process. The Committee currently consists of the Manager's Chief Investment Officer (Chair), the Manager's Chief Financial Officer and the Manager's General Counsel.
The Manager subscribes to a service offered by an independent third party that provides research on proposals to be acted upon at shareholder meetings and assistance in the tracking, voting and recordkeeping of proxies.
Conflicts of Interests. The Manager's Chief Compliance Officer maintains a Proxy Watch List, which contains the names of those companies that may present the potential for conflict in the voting process with the Manager, Seligman Advisors or any Seligman affiliate thereof. For example, the Proxy Watch List will include those portfolio companies for which the Manager separately manages assets in private accounts or which are significant distributors of the Manager' s products and services. As described below, proxy voting for these companies will be subject to a higher level of consideration.
Deviations from Guidelines and Special Situations. The Manager recognizes that it may not always be in the best interest of the stockholders of the Corporation to vote in accordance with the Guidelines on a particular issue. In such circumstances, the Manager may deviate from the Guidelines. A member of the Committee must approve any deviation from the Guidelines. Furthermore, a majority of the Committee's members must approve any deviation of the Guidelines for issuers included on the Proxy Watch List.
Similarly, one member of the Committee must approve the voting decision for proposals of a unique nature requiring a case-by-case analysis. A majority of the Committee must approve the voting decision for such proposals if the issuer is included on the Proxy Watch List. The Manager may consider the views of the management of a portfolio company, as well as the view of the Manager's investment professionals when analyzing potential deviations from the Guidelines and for those proposals requiring a case-by-case evaluation.
Guidelines Summary. The Guidelines are briefly described as follows:
1. The Manager votes with the recommendations of a company's board of directors on general corporate governance issues such as changing the company's name, ratifying the appointment of auditors and procedural matters relating to shareholder meetings.
2. The Manager opposes, and supports the elimination of, anti-takeover proposals, including those relating to classified Boards, supermajority votes, poison pills, issuance of blank check preferred and establishment of classes with disparate voting rights.
3. The Manager abstains from voting on issues relating to social and/or political responsibility, except for matters relating to disclosure issues if not deemed unduly burdensome for the company (e.g., political contributions).
4. The Manager votes for stock option plans, increases in the number of shares under existing stock option plans and other amendments to the terms of such plans; provided, that the overall dilution of all active stock option plans and stock purchase plans does not exceed 10% on a fully diluted basis and are otherwise considered to align the interest of the company with those of shareholders (e.g., all such plans must specifically prohibit repricing).
5. The Manager generally votes with the recommendations of a company's board of directors on other matters relating to executive compensation, unless considered excessive.
6. The Manager will withhold voting for the entire board of directors (or individual directors as the case may be) if: (a) less than 75% of the board is independent; (b) the board has a nominating or compensation committee of which less than 75% of its members are independent; (c) the board has recommended shareholders vote for an anti-takeover device which the Manager votes against; or (d) the board has recommended a matter relating to a stock option plan or stock purchase plan which the Manager votes against.
7. The Manager will vote for proposals relating to the authorization of additional common stock up to 5 times that currently outstanding.
8. The Manager will vote for proposals to effect stock splits.
9. The Manager will vote for proposals authorizing share repurchase programs.
10. The Manager will vote against authorization to transact unidentified business at the meeting.
11. Acquisitions, mergers, reorganizations, reincorporations and other similar transactions will be voted on a case-by-case basis.
12. Proposals to amend a company's charter or by-laws (other than as identified above) will be voted on a case-by-case basis.
13. The Manager will vote against all proposals where the company did not provide adequate information to make a decision.
14. The Manager abstains from voting shares which have recently been sold or for which information was not received on a timely basis.
Information regarding how the Corporation voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30 is available
(i) without charge upon request by calling toll free (800) 221-2450 in the US
or collect (212) 682-7600 outside the US and (ii) on the SEC's website at
www.sec.gov. Information for each new 12-month period ending June 30 will be
available no later than August 31 of that year.
MANAGEMENT OF THE CORPORATION
The Manager
The Manager, subject to the control of the Corporation's Board of Directors, manages the investments of the assets of the Corporation and administers its business and other affairs pursuant to a management agreement (the "Management Agreement"). The Manager also serves as investment manager to twenty-three other US registered investment companies which, together with the Corporation, make up the "Seligman Group of Funds." There are no other management-related service contracts under which services are provided to the Corporation. No person or persons, other than the Directors, officers or employees of the Manager and the Corporation regularly advise the Corporation with respect to its investments.
The Manager is a successor firm to an investment banking business founded in 1864 which has provided investment services to individuals, families, institutions and corporations. Mr. William C. Morris, Chairman of the Manager and Chairman of the Board of Directors of the Corporation, owns a majority of the outstanding voting securities of the Manager and is a controlling person of the Manager.
The Corporation pays the Manager a management fee for its services, calculated daily and payable monthly, equal to a percentage of the daily net assets of the Corporation. The method for determining this percentage, referred to as the management fee rate, is set forth in the Prospectus. For the years ended December 31, 2005, 2004 and 2003, the management fee amounted to $10,024,375, $9,733,362 and $8,651,000, respectively, which was equivalent to an annual rate of 0.41%, 0.41% and 0.41%, respectively, of the average daily net assets of the Corporation.
As part of its services to the Corporation, the Manager provides the Corporation with such office space, administrative and other services and executive and other personnel as are necessary for the operations of the Corporation. The Manager also provides senior management for Seligman Data Corp. (a wholly-owned subsidiary of the Corporation) and certain of the other investment companies in the Seligman Group of Funds. The Manager pays all of the compensation of the Directors of the Corporation who are employees or consultants of the Manager and its affiliates, of the officers and employees of the Corporation and of certain executive officers of Seligman Data Corp.
PORTFOLIO MANAGERS
For purposes of this discussion, each member of the portfolio team is referred to herein as a "portfolio manager" and collectively as the "portfolio managers." The following table sets forth certain additional information with respect to the portfolio managers of the Corporation. Unless noted otherwise, all information is provided as of December 31, 2005.
Other Accounts Managed by Portfolio Managers. The table below identifies, for each of the portfolio managers, the number of accounts managed (other than the Corporation) and the total assets in such accounts within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. None of the accounts noted below has an advisory fee based on performance of the account.
------------------------------------------------------------------------------------------------
Registered Investment Other Pooled Investment
Portfolio Manager Companies Vehicles Other Accounts
------------------------------------------------------------------------------------------------
John B. Cunningham 6 Registered Investment 0 Pooled Investment 10 Other Accounts
Companies with approximately Vehicles. with $1.703 million
$377 million in total assets in total assets
under management. under management.
------------------------------------------------------------------------------------------------
Michael F. McGarry 2 Registered Investment 0 Pooled Investment 3 Other Accounts
Companies with approximately Vehicles. with $320,000 in
$264 million in total assets total assets under
under management. management.
------------------------------------------------------------------------------------------------
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Compensation/Material Conflicts of Interest. Set forth below is an explanation of the structure of, and method(s) used to determine, portfolio manager compensation. Also set forth below is an explanation of material conflicts of interest that may arise between a portfolio manager's management of the Corporation's investments and investments in other accounts.
Compensation:
As compensation for his responsibilities for the year ended December 31, 2005, including those relating to his responsibilities as Chief Investment Officer of the Manager, Mr. Cunningham received a base salary and a bonus. The amount of Mr. Cunningham's bonus was based on (i) a guaranteed minimum amount; (ii) a performance component based on the weighted average pre-tax investment performance of the Corporation and two other investment companies for which Mr. Cunningham serves as portfolio manager as compared to the funds constituting the Lipper Large-Cap Core Index (or otherwise agreed upon appropriate group of funds) for 2005 and; (iii) a potential discretionary component.
Mr. McGarry received a base salary and discretionary bonus for the year ended December 31, 2005.
Discretionary bonuses for investment professionals are subjective and based on numerous qualitative and quantitative factors. The factors, which have no pre-determined weightings and may apply differently from person to person may include, among other things, the portfolio manager's relative investment performance versus one or more competitive universes or benchmarks and; the Manager's overall profitability and profitability attributable to the assets under management for the portfolio manager's investment team.
The structure of a portfolio manager's compensation may be modified from time to time reflect, among other things, changes in responsibilities or the competitive environment.
Conflicts of Interest:
Actual or potential conflicts of interest may arise from the fact that the Manager, and the portfolio managers of the Corporation have day-to-day management responsibilities with respect to accounts of clients of the Manager other than the Corporation ("Other Accounts"). The Manager has policies and procedures intended to mitigate or manage the conflicts of interest described below. There is no guarantee that any such policies or procedures will detect each and every situation in which a conflict of interest arises.
The Manager may receive higher compensation with respect to Other Accounts (including accounts which are private investment funds or have performance or higher fees paid to the Manager, or in which one or more portfolio managers have direct or indirect personal interest in the receipt of such fees) than that received with respect to the Corporation. This may create a potential conflict of interest for the Manager or its portfolio managers by providing an incentive to favor these Other Accounts when, for example, placing securities transactions. In addition, the Manager could be viewed as having a conflict of interest to the extent that the Manager or an affiliate has a proprietary investment in one or more Other Accounts, the portfolio managers have personal investments, directly or indirectly, in one or more Other Accounts or the Other Accounts are investment options in the Manager's employee benefit plans. Potential conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation of limited investment opportunities. Allocations of aggregated trades, particularly trade orders that were only partially completed due to limited availability, and allocation of investment opportunities generally, could raise a potential conflict of interest, as the Manager may have an incentive to allocate securities that are expected to increase in value to favored accounts. Initial public offerings, in particular, are frequently of very
limited availability. The Manager may be perceived as causing accounts it manages to participate in an offering to increase the Manager's overall allocation of securities in that offering. A potential conflict of interest also may be perceived to arise if transactions in one account closely follow related transactions in a different account, such as when a purchase increases the value of securities previously purchased by another account or when a sale in one account lowers the sale price received in a sale by a second account. Because the Manager manages accounts that engage in short sales of securities of the type in which many clients may invest, the Manager could be seen as harming the performance of certain client accounts (i.e., those not engaging in short sale transactions) for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall. Conversely, the Manager could be seen as benefiting those accounts that may engage in short sales through the sale of securities held by other clients to the extent that such sales reduce the cost to cover the short positions.
The Manager and its affiliates may at times give advice or take action with respect to accounts that differs from the advice given other accounts. A particular security may be bought or sold only for certain clients even though it could have been bought or sold for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling the security. Simultaneous portfolio transactions in the same security by multiple clients may tend to decrease the prices received by clients for sales of such securities and increase the prices paid by clients for purchases of such securities.
Employees of the Manager, including portfolio managers, may engage in personal trading, subject to the Manager's Code of Ethics. In addition to the general conflicts noted above, personal trading by employees may create apparent or actual conflicts to the extent that one or more employees personally benefit or appear to benefit from subsequent trading by clients in similar securities.
Because portfolio managers of the Manager manage multiple client accounts, portfolio mangers may devote unequal time and attention to the portfolio management of client accounts.
Securities Ownership. As of December 31, 2005, each of Messrs. Cunningham and McGarry owned between $10,001 and $50,000 of the shares of the Corporation.
HOLDINGS OF PREFERRED STOCK, COMMON STOCK AND WARRANTS
As of March 31, 2006, holders of record of Preferred Stock totaled 317; holders of record of Common Stock totaled 28,651; and holders of record of Warrants totaled 89.
Control Persons
As of March 31, 2006, there was no person or persons who controlled the Corporation, either through a significant ownership of shares or any other means of control.
Principal Holders
As of March 31, 2006, the principal holders owned of record 5% or more of the outstanding equity securities of the Corporation as follows:
Percentage
of
Name and Address Security Shares Held
---------------- --------------- -----------
Cede & Co., Depository Trust/Central Delivery, 55 Common Stock 42.65%
Water Street, New York, NY 10041
Tri-Continental Corp Investment Plan; UBS Warburg Common Stock 11.65%
Repurchase Program, 100 Park Avenue, New York, NY
10017
Tri-Continental Corp Investment Plan Account, 100 Common Stock 11.14%
Park Avenue, New York, NY 10017
Cede & Co., Depository Trust/Central Delivery, 55 Preferred Stock 83.30%
Water Street, New York, NY 10041
Cede & Co., Depository Trust/Central Delivery, 55 Warrants 54.59%
Water Street, New York, NY 10041
|
Dwight Goldthrope, PO Box 2778, Palm Beach, FL 33480 Warrants 12.86% Gerald William Ashfield, Wilmhurst Fletching, Fletching NR Warrants 6.43% Uckfiled, East Sussex TN22 3YB United Kingdom Treasurer State of Illinois Unclaimed Property Division, PO Warrants 5.37% Box 19495, Springfield, IL 62794 |
Management Ownership
As of March 31, 2006, the Directors and officers of the Corporation, as a group, owned less than 1% of the Corporation's Common Stock. As of the same date, the Directors or officers of the Corporation did not own any of the Corporation's Preferred Stock or Warrants.
BROKERAGE ALLOCATION AND OTHER PRACTICES
Brokerage Selection and Brokerage Transactions
The Manager selects broker-dealers with the goal of obtaining "best execution". The Manager will consider a full range and quality of a broker-dealer's services, such as price, market familiarity, reliability, integrity, commission rates, execution and settlement capabilities, ability to handle large orders, financial condition, technological infrastructure and operational capabilities, willingness to commit capital and the brokerage and research services provided or made available by the broker-dealer. These brokerage and research services, including supplemental investment research, analysis, and reports concerning issuers, industries, and securities, may be useful to the Manager in connection with its services to clients other than the Corporation. The relative weighting given to any of the criteria mentioned above depends on a variety of factors including the nature of the transaction, the market on which a particular trade is being executed and the number of broker-dealers making a market in the security to be traded.
Although sales of investment company shares will not be considered in selecting broker-dealers to effect securities transactions, the Manager offers its services primarily through the broker-dealer selling networks and expects that nearly all broker-dealers that effect securities transactions for the Seligman Funds will have a relationship with the Manager or its affiliates to distribute shares of the investment companies or other investment products offered by the Manager. The Manager ranks broker-dealers through an internal voting process which considers the services provided by broker-dealers excluding investment company or product sales by that broker-dealer.
In connection with any agency trades, the Manager determines the reasonableness of the commissions to be paid to a broker-dealer based upon the quality of the brokerage and research services provided, or arranged for, and as a result, may select a broker-dealer whose commission costs may be higher than another would have charged.
The Manager monitors and evaluates the performance and execution capabilities of broker-dealers through which it places orders and periodically reviews its policy with regard to negotiating commissions or mark-ups for the Seligman Funds in light of current market conditions, statistical studies and other available information.
In over-the-counter markets, the Corporation deals with primary market makers unless a more favorable execution or price is believed to be obtainable. The Corporation may buy securities from or sell securities to dealers acting as principal, except dealers with which its directors and/or officers are affiliated.
When two or more of the investment companies of the Seligman Group of Funds or other investment advisory clients of the Manager desire to buy or sell the same security at the same time, the securities purchased or sold are allocated by the Manager in a manner believed to be equitable. There may be possible advantages or disadvantages of such transactions with respect to price or the size of positions readily obtainable or saleable.
Commissions
Total brokerage commissions (not including any spreads on principal transactions on a net basis) paid by the Corporation during the years ended December 31, 2005, 2004 and 2003, were $6,494,140, $3,163,744 and $8,763,817, respectively. Commissions increased in 2005 as compared to 2004 as a result of, among other factors, an increase in portfolio turnover noted above. Commissions paid by the Corporation in 2005 as compared to 2003 decreased as a result of, among other factors, the reduction in portfolio turnover.
Regular Broker-Dealers
During the year ended December 31, 2005, the Corporation acquired securities of its regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or of their parents. At December 31, 2005, the Corporation held securities of Citigroup, Inc., the parent company of Salomon Smith Barney, with an aggregate value of $72,330,568; held securities of Morgan Stanley Dean Witter, with an aggregate value of $13,712,356; held securities of Merrill Lynch & Co. Incorporated, the parent company of Merrill Lynch, Pierce Fenner & Smith, Incorporated, with an aggregate value of $17,487,886; and held securities of Goldman Sachs Group, with an aggregate value of $12,106,908.
FINANCIAL STATEMENTS
The Corporation's financial statements for the year ended December 31, 2005 are incorporated into this SAI by reference to the 2005 Annual Report to Stockholders of the Corporation, filed with the SEC pursuant to Section 30(b) of the 1940 Act and the rules and regulations thereunder. The 2005 Annual Report contains schedules of the Corporation's portfolio investments as of December 31, 2005 and certain other financial information as of this date. The Corporation will furnish, without charge, a copy of such Annual Report, which includes the Report of Independent Registered Public Accounting Firm, to any person who requests a copy of the SAI.
The financial information of the Corporation included in the Prospectus under the caption "Financial Highlights" and the financial statements that are incorporated by reference in this SAI have been so included or incorporated by reference in reliance on the reports of Deloitte & Touche LLP given upon their authority as experts in auditing and accounting.
CUSTODIAN, STOCKHOLDER SERVICE AGENT AND DIVIDEND PAYING AGENT AND EXPERTS
Custodian. State Street Bank and Trust Company, 801 Pennsylvania Avenue, Kansas City, Missouri 64105, serves as custodian for the Corporation. It also maintains, under the general supervision of the Manager, the accounting records and determines the net asset value for the Corporation.
Stockholder Service Agent and Dividend Paying Agent. Seligman Data Corp., a wholly-owned subsidiary of the Corporation, and certain other investment companies of the Seligman Group of Funds, acts as the stockholder service agent and dividend paying agent and performs, at cost, certain recordkeeping functions for the Corporation, maintains the records of stockholder accounts and furnishes dividend paying, redemption and related services.
Independent Registered Public Accounting Firm. Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, serves as the Independent Registered Public Accounting Firm for the Corporation and in such capacity audits the Corporation's annual financial statements and financial highlights.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL
HIGHLIGHTS -
SENIOR SECURITIES-- $2.50 CUMULATIVE PREFERRED STOCK
To the Board of Directors and Security Holders of Tri-Continental Corporation:
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the statements of assets and liabilities and the statements of capital stock and surplus of Tri-Continental Corporation, including the portfolios of investments, as of December 31 for each of the ten years in the period ended December 31, 2005, and the related statements of operations, the statements of changes in net investment assets, and the financial highlights for each of the years then ended (none of which are presented herein); and we expressed unqualified opinions on those financial statements.
In our opinion, the information appearing on page 8 of the Prospectus, under the caption "Financial Highlights - Senior Securities--$2.50 Cumulative Preferred Stock", for each of the ten years in the period ended December 31, 2005 is fairly stated in all material respects in relation to the financial statements from which it has been derived.
DELOITTE & TOUCHE LLP
New York, New York
February 3, 2006
PART C. OTHER INFORMATION
Item 25. Financial Statements and Exhibits.
1. Financial Statements.
Part A. Financial Highlights for the ten years ended December 31, 2005;
Table for the ten years ended December 31, 2005 under the caption "Senior Securities - $2.50 Cumulative Preferred Stock."
Part B. The required financial statements are included in the Corporation's 2005 Annual Report, which is incorporated by reference into the Statement of Additional Information. These statements include: Portfolio of Investments at December 31, 2005; Statement of Assets and Liabilities at December 31, 2005; Statement of Capital Stock and Surplus at December 31, 2005; Statement of Operations for the year ended December 31, 2005; Statements of Changes in Net Investment Assets for the years ended December 31, 2005 and 2004; Notes to Financial Statements; Financial Highlights for the five years ended December 31, 2005; Report of Independent Registered Public Accounting Firm.
2. Exhibits. All Exhibits listed below are incorporated herein by reference, except those Exhibits marked with an asterisk (*) which are filed herewith.
(a) Amended and Restated Charter of the Registrant. (Incorporated by reference to Registrant's Amendment No. 27 to the Registration Statement on Form N-2 filed on April 16, 1998.)
(b) *Amended and Restated By-laws of the Registrant.
(c) Not Applicable.
(d)(1) Specimen certificates of Common Stock. (Incorporated by reference to Registrant's Amendment No. 1 to the Registration Statement on Form N-2 filed on March 6, 1981.)
(d)(2) Specimen certificates of $2.50 Cumulative Preferred Stock. (Incorporated by reference to Registrant's Amendment No. 1 to the Registration Statement on Form N-2 filed on March 6, 1981.)
(d)(3) Specimen of Warrant of the Registrant. (Incorporated by reference to Registrant's Amendment No. 1 to the Registration Statement on Form N-2 filed on March 6, 1981.)
(d)(4) Form of Subscription Certificate--Subscription Right for shares of Common Stock. (Incorporated by reference to Registrant's Registration Statement on Form N-2 filed on September 17, 1992.)
(d)(5) The Registrant's Charter is the constituent instrument defining the rights of the $2.50 Cumulative Preferred Stock, par value $50, and the Common Stock of the Registrant. (Incorporated by reference to Registrant's Amendment No. 27 to the Registration Statement on Form N-2 filed on April 16, 1998.)
(e) Registrant's Automatic Dividend Investment and Cash Purchase Plan is set forth in Registrant's Prospectus which is filed as
Part A of this Registration Statement.
(f) Not Applicable.
(g)(1) Amended Management Agreement between Registrant and J. & W. Seligman & Co. Incorporated. (Incorporated by reference to Registrant's Amendment No. 24 to the Registration Statement on Form N-2 filed April 13, 1995.)
(h) Not Applicable.
PART C. OTHER INFORMATION (continued)
(i)(1) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated. (Incorporated by reference to Exhibit 7 of Post-Effective Amendment No. 21 to the Registration Statement on Form N-1A of Seligman Frontier Fund, Inc. (File No. 2-92487) filed on January 28, 1997.)
(i)(2) Deferred Compensation Plan for Directors. (Incorporated by reference to Exhibit (f) of Post-Effective Amendment No. 1 of the Registration Statement on Form N-1A of Seligman LaSalle Real Estate Fund Series, Inc. (File No. 811-21365) filed on July 9, 2003.)
(j) Form of Custodian Agreement between Registrant and Investors Fiduciary Trust Company. (Incorporated by reference to Registrant's Amendment No. 26 to the Registration Statement on Form N-2 filed on April 24, 1997.)
(k) Not Applicable.
(l) Opinion and Consent of Counsel. (Incorporated by reference to Registrant's Amendment No. 33 to the Registration Statement on Form N-2 filed on April 22, 2003.)
(m) Not Applicable.
(n) *Consent of Independent Registered Public Accounting Firm.
(o) Not Applicable.
(p) Not Applicable.
(q)(1) The Seligman Roth/Traditional IRA Information Kit. (Incorporated by reference to Registrant's Amendment No. 27 to the Registration Statement on Form N-2 filed on April 16, 1998.)
(q)(2) Flexible Standardized 401(k) Profit Sharing Plan Adoption Agreement. (Incorporated by reference to Registrant's Amendment No. 27 to the Registration Statement on Form N-2 filed on April 16, 1998.)
(q)(3) Flexible Nonstandardized Safe Harbor 401(k) Profit Sharing Plan Adoption Agreement. (Incorporated by reference to Registrant's Amendment No. 27 to the Registration Statement on Form N-2 filed on April 16, 1998.)
(q)(4) *Seligman Qualified Retirement Plan and Trust Defined Contribution Basis Plan.
(q)(5) *Seligman Profit Sharing Plan Forms: Super Simplified Standardized Profit Sharing Plan; and Simplified Profit Sharing Plan.
(r) Amended Code of Ethics of Registrant and J. & W. Seligman & Co. Incorporated, Seligman Advisors and affiliates. (Incorporated by reference to Exhibit (p) of Post-Effective Amendment No. 42 to the Registration Statement on Form N-1A of Seligman Municipal Fund Series, Inc. (File No. 811-3828) filed on January 28, 2005.)
PART C. OTHER INFORMATION (continued)
(Other Exhibits) (a) Power of Attorney for Leroy C. Richie. (Incorporated by reference to Registrant's Amendment No. 31 to the Registration Statement on Form N-2 filed on April 19, 2001.)
Item 26. Marketing Arrangements. Not Applicable.
Item 27. Other Expenses of Issuance and Distribution.
Registration fees $-0- NYSE listing fees -0- Registrar fees -0- Legal fees -0- Accounting fees -0- Miscellaneous (mailing, etc.) -0- |
Item 28. Persons Controlled by or Under Common Control with Registrant.
Seligman Data Corp., a New York Corporation, is owned by the
Registrant and certain associated investment companies. The
Registrant's investment in Seligman Data Corp. is recorded at a cost
of $43,681.
Item 29. Number of Holders of Securities.
As of March 31, 2006:
Title of Class Number of Recordholders -------------- ----------------------- $2.50 Cumulative Preferred 317 Common Stock 28,651 Warrants 89 |
Item 30. Indemnification. Reference is made to the provisions of Article
Eleventh of Registrant's Amended and Restated Charter filed as an
exhibit to Registrant's Registration Statement on Form N-2 filed on
April 16, 1998 and Article X of Registrant's Amended and Restated
By-laws filed herewith.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised by 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.
Item 31. Business and Other Connections of Investment Adviser. J. & W.
Seligman & Co. Incorporated, a Delaware corporation (the "Manager"),
is the Registrant's investment manager and is an investment manager
registered under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). The list required by this Item 31 of officers and
directors of the Manager, together with information as to any other
business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two fiscal
years, is incorporated by reference to Part C, Item 26 of
Post-Effective Amendment No. 43 to the Registration Statement of
Seligman Municipal Fund Series, Inc. (File No. 811-3828) which was
filed on January 30, 2006.
PART C. OTHER INFORMATION (continued)
Item 32. Location of Accounts and Records. The accounts, books and other
documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the Rules 17 CFR
270.31(a)(1)-31(a)(3) promulgated thereunder, are maintained by J. &
W. Seligman & Co. Incorporated, 100 Park Avenue, New York, NY 10017,
and at the following locations: (1) Custodian: State Street Bank and
Trust Company, 801 Pennsylvania, Kansas City, Missouri 64105 and
(2) Transfer Agent, Redemption and Other Shareholder Account Services:
Seligman Data Corp., 100 Park Avenue, New York, NY 10017.
Item 33. Management Services. Not Applicable.
Item 34. Undertakings.
I. Registrant undertakes: to suspend the offering of shares until the prospectus is amended if (1) subsequent to the effective date of its registration statement, the net asset value declines more than 10% from its net asset value as of the effective date of the registration statement.
II. Registrant undertakes:
(a) to file, during any period in which offers or sales are being
made, a post-effective amendment to the registration statement: (1) to
include any prospectus required by Section 10(a)(3) of the 1933 Act;
(2) to reflect in the prospectus any facts or events after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and (3) to include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(b) and that, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof.
III. The Registrant undertakes: to send by first class mail or other means designed to ensure equally prompt delivery within two business days of receipt of a written or oral request, the Registrant's Statement of Additional Information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 13th day of April, 2006.
TRI-CONTINENTAL CORPORATION
By: /s/ Brian T. Zino
-----------------------------
Brian T. Zino, President
|
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on April 13, 2006.
Signature Title
--------- -----
/s/ Brian T. Zino Director, President and Chief
-------------------------------------- Executive Officer
Brian T. Zino (Principal Executive Officer)
/s/ William C. Morris Chairman of the Board and Director
--------------------------------------
William C. Morris
/s/ Lawrence P. Vogel Treasurer (Principal Financial
-------------------------------------- and Accounting Officer)
Lawrence P. Vogel
John R. Galvin, Director )
Alice S. Ilchman, Director )
Frank A. McPherson, Director )
Betsy S. Michel, Director ) /s/ Brian T. Zino
Leroy C. Richie, Director ) -------------------------------------
Robert L. Shafer, Director ) Brian T. Zino, Attorney-in-Fact
James N. Whitson, Director )
|
TRI-CONTINENTAL CORPORATION
FORM N-2
EXHIBIT INDEX
Item 25(2)(n) Consent of Independent Registered Public
Accounting Firm.
Item 25(2)(q)(4) Seligman Qualified Retirement Plan and
Trust Defined Contribution Plan.
Item 25(2)(q)(5) Seligman Profit Sharing Plan Forms: Super
Simplified Standardized Profit Sharing
Plan; and Simplified Profit Sharing Plan.
EXHIBIT (25)(2)(b)
TRI-CONTINENTAL CORPORATION
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
SECTION 1. Principal Office. The principal office of the Corporation in the State of Maryland shall be located at such place as the Board of Directors may designate.
SECTION 2. Additional Offices. The Corporation may have additional offices, including a principal executive office, at such places, which may be within or outside the State of Maryland, as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place. Subject to Section 3(b)(4) of this Article II, all meetings of stockholders shall be held at the principal executive office of the Corporation or at such other place as shall be set by the Board of Directors and stated in the notice of the meeting.
SECTION 2. Annual Meeting. The Corporation shall not be required to hold an annual meeting of stockholders in any year in which the election of directors is not required to be acted upon under the Investment Company Act of 1940, as amended (the "1940 Act"). In the event that the Corporation is required to hold a meeting of stockholders to elect directors under the 1940 Act, such meeting shall be designated the annual meeting of stockholders for that year and shall be held on a date and at the time set by the Board of Directors in accordance with the Maryland General Corporation Law (the "MGCL").
SECTION 3. Special Meetings.
(a) General. The chairman of the board, president, chief executive officer or Board of Directors may call a special meeting of the stockholders. Subject to subsection (b) of this Section 3, a special meeting of stockholders shall also be called by the secretary of the Corporation upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.
(b) Stockholder Requested Special Meetings.
(1) Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the secretary (the "Record Date Request Notice") by registered mail, return receipt requested, request the Board of Directors to fix a record date to determine the stockholders entitled to request a special meeting (the "Request Record Date"). The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at it, shall be signed by one or more stockholders of record as
of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice), shall bear the date of signature of each such stockholder (or such agent) and shall set forth all information relating to each such stockholder that must be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within ten days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth day after the first date on which the Record Date Request Notice is received by the secretary.
(2) In order for any stockholder to request a special meeting, one or more written requests for a special meeting signed by stockholders of record (or their agents duly authorized in a writing accompanying the request) as of the Request Record Date entitled to cast not less than a majority (the "Special Meeting Percentage") of all of the votes entitled to be cast at such meeting (the "Special Meeting Request") shall be delivered to the secretary. In addition, the Special Meeting Request (a) shall set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice received by the secretary), (b) shall bear the date of signature of each such stockholder (or such agent) signing the Special Meeting Request, (c) shall set forth the name and address, as they appear in the Corporation's books, of each stockholder signing such request (or on whose behalf the Special Meeting Request is signed) and the class, series and number of all shares of stock of the Corporation which are owned by each such stockholder, and the nominee holder for, and number of, shares owned by such stockholder beneficially but not of record, (d) shall be sent to the secretary by registered mail, return receipt requested, and (e) shall be received by the secretary within 60 days after the Request Record Date. Any requesting stockholder (or agent duly authorized in a writing accompanying the revocation or the Special Meeting Request) may revoke his, her or its request for a special meeting at any time by written revocation delivered to the secretary.
(3) The secretary shall inform the requesting stockholders of the
reasonably estimated cost of preparing and mailing the notice of meeting
(including the Corporation's proxy materials). The secretary shall not be
required to call a special meeting upon stockholder request and such meeting
shall not be held unless, in addition to the documents required by paragraph
(2) of this Section 3(b), the secretary receives payment of such reasonably
estimated cost prior to the mailing of any notice of the meeting.
(4) Except as provided in the next sentence, any special meeting shall be held at such place, date and time as may be designated by the chairman of the board, the president, the chief executive officer or the Board of Directors, whoever has called the meeting. In the case of any special meeting called by the secretary upon the request of stockholders (a "Stockholder Requested Meeting"), such meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided, however, that the date of any
Stockholder Requested Meeting shall be not more than 90 days after the record date for such meeting (the "Meeting Record Date"); and provided further that if the Board of Directors fails to designate, within ten days after the date that a valid Special Meeting Request is actually received by the secretary (the "Delivery Date"), a date and time for a Stockholder Requested Meeting, then such meeting shall be held at 2:00 p.m. local time on the 90th day after the Meeting Record Date or, if such 90th day is not a Business Day (as defined below), on the first preceding Business Day; and provided further that in the event that the Board of Directors fails to designate a place for a Stockholder Requested Meeting within ten days after the Delivery Date, then such meeting shall be held at the principal executive office of the Corporation. In fixing a date for any special meeting, the chairman of the board, the president, the chief executive officer or the Board of Directors may consider such factors as he, she or it deems relevant within the good faith exercise of business judgment, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for the meeting and any plan of the Board of Directors to call an annual meeting or a special meeting. In the case of any Stockholder Requested Meeting, if the Board of Directors fails to fix a Meeting Record Date that is a date within 30 days after the Delivery Date, then the close of business on the 30th day after the Delivery Date shall be the Meeting Record Date. The Board of Directors may revoke the notice for any Stockholder Requested Meeting in the event that the requesting stockholders fail to comply with the provisions of paragraph (3) of this Section 3(b).
(5) If written revocations of requests for the special meeting have been delivered to the secretary and the result is that stockholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting to the secretary, the secretary shall: (i) if the notice of meeting has not already been mailed, refrain from mailing the notice of the meeting and send to all requesting stockholders who have not revoked such requests written notice of any revocation of a request for the special meeting, or (ii) if the notice of meeting has been mailed and if the secretary first sends to all requesting stockholders who have not revoked requests for a special meeting written notice of any revocation of a request for the special meeting and written notice of the secretary's intention to revoke the notice of the meeting, revoke the notice of the meeting at any time before ten days before the commencement of the meeting. Any request for a special meeting received after a revocation by the secretary of a notice of a meeting shall be considered a request for a new special meeting.
(6) The Board of Directors, the chairman of the board, the president or the chief executive officer may appoint independent inspectors of elections to act as the agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the secretary. For the purpose of permitting the inspectors to perform such review, no such purported request shall be deemed to have been delivered to the secretary until the earlier of (i) five Business Days after receipt by the secretary of such purported request and (ii) such date as the independent inspectors certify to the Corporation that the valid requests received by the secretary represent at least the Special Meeting Percentage. Nothing contained in this paragraph (6) shall in any way be construed to suggest or imply that the Corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such five Business Day period, or to take any
other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).
(7) For purposes of these Bylaws, "Business Day" shall mean any day other than a Saturday, a Sunday or other day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
SECTION 4. Notice. Not less than ten nor more than 90 days before each meeting of stockholders, the secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose or purposes for which the meeting is called, either by mail, by presenting it to such stockholder personally, by leaving it at the stockholder's residence or usual place of business, by overnight delivery service, by transmitting the notice by electronic mail or any other electronic means or by any other means permitted by Maryland law. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at the stockholder's address as it appears on the records of the Corporation, with postage thereon prepaid.
Subject to Section 10(a) of this Article II, any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice.
SECTION 5. Organization and Conduct. Every meeting of stockholders shall be
conducted by an individual appointed by the Board of Directors to be chairman
of the meeting or, in the absence of such appointment, by the chairman of the
board or, in the case of a vacancy in the office or absence of the chairman of
the board, by one of the following officers present at the meeting: the vice
chairman of the board, if there be one, the chief executive officer, if there
be one, the president, the vice presidents in their order of rank and
seniority, the secretary, the treasurer, or, in the absence of such officers, a
chairman chosen by the stockholders by the vote of a majority of the votes cast
by stockholders present in person or by proxy. The secretary or, in the
secretary's absence, an assistant secretary, or in the absence of both the
secretary and assistant secretaries, an individual appointed by the Board of
Directors or, in the absence of such appointment, an individual appointed by
the chairman of the meeting shall act as secretary. In the event that the
secretary presides at a meeting of the stockholders, an assistant secretary, or
in the absence of assistant secretaries, an individual appointed by the Board
of Directors or the chairman of the meeting, shall record the minutes of the
meeting. The order of business and all other matters of procedure at any
meeting of stockholders shall be determined by the chairman of the meeting. The
chairman of the meeting may prescribe such rules, regulations and procedures
and take such action as, in the discretion of such chairman, are appropriate
for the proper conduct of the meeting, including, without limitation,
(a) restricting admission to the time set for the commencement of the meeting;
(b) limiting attendance at the meeting to stockholders of record of the
Corporation, their duly authorized proxies and other such individuals as the
chairman of the meeting may determine; (c) limiting participation at the
meeting on any matter to
stockholders of record of the Corporation entitled to vote on such matter,
their duly authorized proxies or other such individuals as the chairman of the
meeting may determine; (d) limiting the time allotted to questions or comments
by participants; (e) determining when the polls should be opened and closed;
(f) maintaining order and security at the meeting; (g) removing any stockholder
or any other individual who refuses to comply with meeting procedures, rules or
guidelines as set forth by the chairman of the meeting; and (h) concluding the
meeting or recessing or adjourning the meeting to a later date and time and at
a place announced at the meeting. Unless otherwise determined by the chairman
of the meeting, meetings of stockholders shall not be required to be held in
accordance with the rules of parliamentary procedure.
SECTION 6. Quorum. At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum; but this section shall not affect any requirement under any statute or the charter of the Corporation for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the stockholders, the chairman of the meeting shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.
The stockholders present either in person or by proxy, at a meeting which has been duly called and convened, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
SECTION 7. Voting. Each director shall be elected by the affirmative vote of the holders of a majority of the votes entitled to be cast thereon. Subject to the rights of the holders of preferred stock, each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the charter of the Corporation. Unless otherwise provided in the charter, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders.
SECTION 8. Proxies. A stockholder may cast the votes entitled to be cast by the shares of stock owned of record by the stockholder in person or by proxy executed by the stockholder or by the stockholder's duly authorized agent in any manner permitted or not prohibited by law. Such proxy or evidence of authorization of such proxy shall be filed with the secretary of the Corporation before or at the meeting. No proxy shall be valid more than eleven months after its date unless otherwise provided in the proxy.
SECTION 9. Inspectors. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more individual inspectors or one or more entities that designate individuals as inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or
act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the chairman of the meeting. The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, and determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. Each such report shall be in writing and signed by him or her or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.
SECTION 10. Advance Notice of Stockholder Nominees for Director and Other Stockholder Proposals.
(a) Annual Meetings of Stockholders.
(1) Nominations of individuals for election to the Board of Directors
and the proposal of other business to be considered by the stockholders may be
made at an annual meeting of stockholders (i) pursuant to the Corporation's
notice of meeting, (ii) by or at the direction of the Board of Directors, or
(iii) by any stockholder of the Corporation who was a stockholder of record
both at the time of giving of notice by the stockholder as provided for in this
Section 10(a) and at the time of the annual meeting, who is entitled to vote at
the meeting and who has complied with this Section 10(a).
(2) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this Section 10, the stockholder must have given timely notice thereof in writing to the secretary of the Corporation and such other business must otherwise be a proper matter for action by the stockholders. In any year in which an annual meeting is to be held, to be timely, a stockholder's notice shall set forth all information required under this Section 10 and shall be delivered to the secretary at the principal executive office of the Corporation not earlier than the 150th day prior to the anniversary of the date of the notice for the preceding annual meeting nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the anniversary of the date of the notice for the preceding annual meeting; provided that, in the case of the 2006 annual meeting, a stockholder's notice shall be delivered to the secretary at the principal executive office of the Corporation after November 17, 2005 and prior to 5:00 p.m., Eastern Time, on December 31, 2005; and provided further, that in the event that the date of the annual meeting (including the 2006 annual meeting) is advanced or delayed by more than 30 days from the anniversary of the date of the preceding annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the 150th day prior to the date of such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a stockholder's notice as described above. Such stockholder's
notice shall set forth (i) as to each individual whom the stockholder proposes
to nominate for election or reelection as a director, (A) the name, age,
business address and residence address of such individual, (B) the class,
series and number of any shares of stock of the Corporation that are
beneficially owned by such individual, (C) the date such shares were acquired
and the investment intent of such acquisition, (D) whether such stockholder
believes any such individual is, or is not, an "interested person" of the
Corporation, as defined in the 1940 Act and information regarding such
individual that is sufficient, in the discretion of the Board of Directors or
any committee thereof or any authorized officer of the Corporation, to make
such determination and (E) all other information relating to such individual
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest (even if an election contest is not involved),
or is otherwise required, in each case pursuant to Regulation 14A (or any
successor provision) under the Exchange Act and the rules thereunder (including
such individual's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (ii) as to any other business
that the stockholder proposes to bring before the meeting, a description of
such business, the reasons for proposing such business at the meeting and any
material interest in such business of such stockholder and any Stockholder
Associated Person (as defined below), individually or in the aggregate,
including any anticipated benefit to the stockholder and the Stockholder
Associated Person therefrom; (iii) as to the stockholder giving the notice and
any Stockholder Associated Person, the class, series and number of all shares
of stock of the Corporation which are owned by such stockholder and by such
Stockholder Associated Person, if any, and the nominee holder for, and number
of, shares owned beneficially but not of record by such stockholder and by any
such Stockholder Associated Person; (iv) as to the stockholder giving the
notice and any Stockholder Associated Person covered by clauses (ii) or
(iii) of this paragraph (2) of this Section 10(a), the name and address of such
stockholder, as they appear on the Corporation's stock ledger and current name
and address, if different, and of such Stockholder Associated Person; and
(v) to the extent known by the stockholder giving the notice, the name and
address of any other stockholder supporting the nominee for election or
reelection as a director or the proposal of other business on the date of such
stockholder's notice.
(3) In any year an annual meeting of stockholders is to be held, notwithstanding anything in this subsection (a) of this Section 10 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement of such action at least 130 days prior to the anniversary of the date of the notice for the preceding annual meeting, a stockholder's notice required by this Section 10(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive office of the Corporation not later than 5:00 p.m., Eastern Time, on the tenth day following the day on which such public announcement is first made by the Corporation.
(4) For purposes of this Section 10, "Stockholder Associated Person" of any stockholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (ii) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder and (iii) any person controlling, controlled by or under common control with such Stockholder Associated Person.
(b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of individuals for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 10 and at the time of the special meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 10. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more individuals to the Board of Directors, any such stockholder may nominate an individual or individuals (as the case may be) for election as a director as specified in the Corporation's notice of meeting, if the stockholder's notice required by paragraph (2) of this Section 10(a) shall be delivered to the secretary at the principal executive office of the Corporation not earlier than the 150/th/ day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120/th/ day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. The public announcement of a postponement or adjournment of a special meeting shall not commence a new time period for the giving of a stockholder's notice as described above.
(c) General.
(1) Upon written request by the secretary or the Board of Directors
or any committee thereof, any stockholder proposing a nominee for election as a
director or any proposal for other business at a meeting of stockholders shall
provide, within five Business Days of delivery of such request (or such other
period as may be specified in such request), written verification,
satisfactory, in the discretion of the Board of Directors or any committee
thereof or any authorized officer of the Corporation, to demonstrate the
accuracy of any information submitted by the stockholder pursuant to this
Section 10. If a stockholder fails to provide such written verification within
such period, the information as to which written verification was requested may
be deemed not to have been provided in accordance with this Section 10.
(2) Only such individuals who are nominated in accordance with this
Section 10 shall be eligible for election by stockholders as directors, and
only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with this Section 10. The
chairman of the meeting shall have the power to determine whether a nomination
or any other business proposed to be brought before the meeting was made or
proposed, as the case may be, in accordance with this Section 10.
(3) For purposes of this Section 10, (a) the "date of the notice for the preceding annual meeting" shall mean the date of the Corporation's proxy statement released to stockholders in connection with the preceding annual meeting and (b) "public announcement" shall mean disclosure (i) in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or comparable news service or (ii) in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to the Exchange Act or the 1940 Act.
(4) Notwithstanding the foregoing provisions of this Section 10, a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 10. Nothing in this Section 10 shall be deemed to affect any right of a stockholder to request inclusion of a proposal in, nor the right of the Corporation to omit a proposal from, the Corporation's proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act.
ARTICLE III
DIRECTORS
SECTION 1. General Powers. Except as set forth in the charter, the business and affairs of the Corporation shall be managed under the direction of its Board of Directors.
SECTION 2. Number, Tenure and Qualifications. At any regular meeting or at any special meeting called for that purpose, the Board of Directors may establish, increase or decrease the number of directors, provided that the number thereof (exclusive of any class of directors which may be elected by holders of preferred stock of the Corporation (the "Preferred Stock Directors")) shall never be (a) less than the greater of three and the minimum number required by the MGCL nor (b) more than 20, and further provided that the tenure of office of a director shall not be affected by any decrease in the number of directors. Each director, and each nominee for election as a director, shall be a stockholder of the Corporation.
The directors, exclusive of the Preferred Stock Directors, shall be divided into three classes, each class consisting as nearly as possible of one-third of the entire Board of Directors and each class to hold office for the term of three years, so that the term of office of one class of directors shall expire in each year, but each director, of whatever class (other than Preferred Stock Directors) and whenever elected, shall hold office until his successor shall have been elected and shall qualify, or until his death, or until he shall resign or shall have been removed.
The Board of Directors may reallocate Directors to one or more classes, in such manner that after such allocation, each class shall consist as nearly as possible of one-third of the entire Board of Directors, exclusive of Preferred Stock Directors. In the case of any increase in the number of Directors, the increased number shall be allocated to one or more classes in such manner that after such increase, each class shall consist as nearly as possible of one-third of the entire Board of Directors, exclusive of Preferred Stock Directors. In the case of any decrease in the number of Directors, the decreased number shall be allocated to one or more classes in such manner that after such decrease, each class shall consist as nearly as possible of one-third of the entire Board of Directors, exclusive of Preferred Stock Directors.
During any period when, by the terms of the charter of the Corporation, the preferred stockholders, voting separately as a class, shall be entitled to elect two Preferred Stock Directors, the number of directors of the Corporation shall automatically be increased by two and the
vacancies in the Board thus created shall be filled by the vote of the preferred stockholders as required by the terms of the charter of the Corporation. Commencing with the date of the annual meeting of stockholders at which the holders of the preferred stock are, by the terms of the charter of the Corporation, no longer entitled to elect two Preferred Stock Directors, the number of directors of the Corporation shall automatically be decreased by two.
Any director may give notice to the Board of Directors at any time of his or her resignation therefrom.
SECTION 3. Annual and Regular Meetings. An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. In the event such meeting is not so held, the meeting may be held at such time and place, which may be within or outside the State of Maryland, as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors. Regular meetings of the Board of Directors shall be held from time to time at such places and times as provided by the Board of Directors by resolution, without notice other than such resolution.
SECTION 4. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of a majority of the directors, the chairman of the board, the chief executive officer, if one is appointed, or the president. The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of Directors called by them. The Board of Directors may provide, by resolution, the time and place for the holding of special meetings of the Board of Directors without notice other than such resolution.
SECTION 5. Notice. Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, electronic mail, facsimile transmission, United States mail or courier to each director at his or her business or residence address. Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least 24 hours prior to the meeting. Notice by United States mail shall be given at least three days prior to the meeting. Notice by courier shall be given at least two days prior to the meeting. Telephone notice shall be deemed to be given when the director or his or her agent is personally given such notice in a telephone call to which the director or his or her agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Notice by United States mail shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws.
SECTION 6. Quorum. A majority of the directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided that, if less than a
majority of such directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to applicable law, the charter of the Corporation or these Bylaws, the vote of a majority of a particular group of directors is required for action, a quorum must also include a majority of such group.
The directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum.
SECTION 7. Voting. The action of the majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the charter or these Bylaws. If enough directors have withdrawn from a meeting to leave less than a quorum but the meeting is not adjourned, the action of the majority of that number of directors necessary to constitute a quorum at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the charter or these Bylaws.
SECTION 8. Organization. At each meeting of the Board of Directors, the chairman of the board or, in the absence of the chairman, the vice chairman of the board, if any, shall act as chairman of the meeting. In the absence of both the chairman and vice chairman of the board, the chief executive officer or in the absence of the chief executive officer, the president or in the absence of the president, a director chosen by a majority of the directors present, shall act as chairman of the meeting. The secretary or, in his or her absence, an assistant secretary of the Corporation, or in the absence of the secretary and all assistant secretaries, a person appointed by the chairman of the meeting, shall act as secretary of the meeting.
SECTION 9. Telephone Meetings. Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.
SECTION 10. Written Consent by Directors. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent to such action is given in writing or by electronic transmission by each director and is filed with the minutes of proceedings of the Board of Directors.
SECTION 11. Vacancies. If for any reason any or all the directors cease to be directors, such event shall not terminate the Corporation or affect these Bylaws or the powers of the remaining directors hereunder, if any. Except as may be provided by the Board in setting the terms of any class or series of preferred stock, (a) any vacancy on the Board of Directors may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum and (b) any director elected to fill a vacancy shall serve for the remainder of the full term of the class in which the vacancy occurred and until a successor is elected and qualifies.
SECTION 12. Compensation. Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive compensation per year and/or per meeting by the Corporation and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they performed or engaged in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefor. No Director shall receive any stated compensation or fees from the Corporation for his services as a Director if such Director is, otherwise than by reason of his being such a Director, an "interested person" (as such term is defined by the 1940 Act) of the Corporation or of its investment adviser or principal underwriter.
ARTICLE IV
COMMITTEES
SECTION 1. Appointment. The Board of Directors may appoint from among its members an Executive Committee, an Audit Committee, a Board Operations Committee, a Nominating Committee and other committees, composed of two or more directors, to serve at the pleasure of the Board of Directors. Any director may give notice to the Board of Directors at any time of his or her resignation from any committee on which he or she serves.
SECTION 2. Powers. The Board of Directors may delegate to committees appointed under Section 1 of this Article any of the powers of the Board of Directors, except as prohibited by law.
SECTION 3. Meetings. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two members of any committee (if there are at least two members of the Committee) may fix the time and place of its meeting unless the Board shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings.
SECTION 4. Telephone Meetings. Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.
SECTION 5. Written Consent by Committees. Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting,
if a consent to such action in writing or by electronic transmission is given by each member of the committee and filed with the minutes of proceedings of such committee.
SECTION 6. Vacancies. Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee. Subject to the power of the Board of Directors, the members of a committee shall have the power to fill any vacancies on such committee.
ARTICLE V
CHAIRMAN OF THE BOARD OF DIRECTORS
AND OFFICERS
SECTION 1. General Provisions. The officers of the Corporation shall include a president, a secretary and a treasurer and may include a chief executive officer, one or more vice presidents, a chief financial officer, one or more assistant secretaries and one or more assistant treasurers. In addition, the Board of Directors may from time to time elect such other officers with such powers and duties as it shall deem necessary or desirable. The officers of the Corporation shall be elected annually by the Board of Directors, except that the chief executive officer or president may from time to time appoint one or more vice presidents, assistant secretaries, assistant treasurers or other officers. Each officer shall hold office until his or her successor is elected and qualifies or until his or her death, or his or her resignation or removal in the manner hereinafter provided. Any two or more offices except president and vice president may be held by the same person. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent.
SECTION 2. Removal and Resignation. Any officer or agent of the Corporation may be removed, with or without cause, by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Corporation may resign at any time by giving written notice of his or her resignation to the Board of Directors, the chairman of the board, the president or the secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the notice of resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.
SECTION 3. Vacancies. A vacancy in any office may be filled by the Board of Directors for the balance of the term.
SECTION 4. Chairman of the Board of Directors. The Board of Directors may designate a chairman of the board and a vice chairman of the board, who shall not, solely by reason of such designation, be officers of the Corporation but shall have such powers and duties as determined by the Board of Directors from time to time.
SECTION 5. Chief Executive Officer. The Board of Directors may designate a chief executive officer. The chief executive officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. He or she may execute any deed, mortgage, bond, contract or other instrument in the name of the Corporation, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed by the Board of Directors from time to time.
SECTION 6. Chief Financial Officer. The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as set forth by the Board of Directors or the chief executive officer.
SECTION 7. President. In the absence of the designation of a chief executive officer by the Board of Directors, the president shall be the chief executive officer. He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time.
SECTION 8. Vice Presidents. In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to such vice president by the president, the chief executive officer or the Board of Directors. The Board of Directors may designate one or more vice presidents as executive vice president, senior vice president or as vice president for particular areas of responsibility.
SECTION 9. Secretary. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of the seal
of the Corporation; (d) keep a register of the post office address of each
stockholder, which shall be furnished to the secretary by such stockholder;
(e) have general charge of the stock transfer books of the Corporation; and
(f) in general perform such other duties as from time to time may be assigned
to him or her by the chief executive officer, the president or by the Board of
Directors.
SECTION 10. Treasurer. The treasurer shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. In the absence of a designation of a chief financial officer by the Board of Directors, the treasurer shall be the chief financial officer of the Corporation.
The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his or her transactions as treasurer and of the financial condition of the Corporation.
SECTION 11. Assistant Secretaries and Assistant Treasurers. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the president or the Board of Directors. The assistant treasurers shall, if required by the Board of Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors.
SECTION 12. Salaries. The salaries and other compensation of the officers shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he or she is also a director.
ARTICLE VI
STOCK
SECTION 1. Certificates. Except as may be otherwise provided by the Board of Directors, stockholders of the Corporation are not entitled to certificates representing the shares of stock held by them. In the event that the Corporation issues shares of stock represented by certificates, such certificates shall be signed by the officers of the Corporation in the manner permitted by the MGCL and contain the statements and information required by the MGCL. In the event that the Corporation issues shares of stock without certificates, the Corporation shall provide to record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates.
SECTION 2. Transfers. Upon surrender to the Corporation or the transfer agent of the Corporation of a stock certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland.
Notwithstanding the foregoing, transfers of shares of any class of stock will be subject in all respects to the charter of the Corporation and all of the terms and conditions contained therein.
SECTION 3. Replacement Certificate. The president, treasurer, secretary or any other officer designated by the Board of Directors may direct a new certificate to be issued in place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, an officer designated by the Board of Directors may, in his or her discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or the owner's legal representative to advertise the same in such manner as he or she shall require and/or to give bond, with sufficient surety, to the Corporation to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate.
SECTION 4. Closing of Transfer Books or Fixing of Record Date. The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of stockholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not longer than 20 days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days before the date of such meeting.
If no record date is fixed and the stock transfer books are not closed for the determination of stockholders, (a) the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the directors, declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired, or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein.
SECTION 5. Stock Ledger. The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, which may be within or outside the State
of Maryland, as determined by the Board of Directors, an original or duplicate share ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder.
SECTION 6. Fractional Stock; Issuance of Units. The Board of Directors may issue fractional stock or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the charter or these Bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit.
ARTICLE VII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.
ARTICLE VIII
DISTRIBUTIONS
SECTION 1. Authorization. Dividends and other distributions upon the stock of the Corporation may be authorized by the Board of Directors, subject to the provisions of law and the charter of the Corporation. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the charter.
SECTION 2. Contingencies. Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve.
ARTICLE IX
SEAL
SECTION 1. Seal. The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation and the words "Incorporated Maryland." The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.
SECTION 2. Affixing Seal. Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word "(SEAL)" adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.
ARTICLE X
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law, as in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to (a) any individual who is a present or former director or officer of the
Corporation and who is made, or threatened to be made, a party to the
proceeding by reason of his or her service in any such capacity or (b) any
individual who, while a director or officer of the Corporation and at the
request of the Corporation, serves or has served as a director, officer,
partner or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise
and who is made, or threatened to be made, a party to the proceeding by reason
of his or her service in any such capacity. The Corporation may, with the
approval of its Board of Directors or any duly authorized committee thereof,
provide such indemnification and advance for expenses to a person who served a
predecessor of the Corporation in any of the capacities described in (a) or
(b) above and to any employee or agent of the Corporation or a predecessor of
the Corporation. The termination of any claim, action, suit or other proceeding
involving any person, by judgment, settlement (whether with or without court
approval) or conviction or upon a plea of guilty or nolo contendere, or its
equivalent, shall not create a presumption that such person did not meet the
standards of conduct required for indemnification or payment of expenses to be
required or permitted under Maryland law, these Bylaws or the charter of the
Corporation. Any indemnification or advance of expenses made pursuant to this
Article shall be subject to applicable requirements of the 1940 Act. The
indemnification and payment of expenses provided in these Bylaws shall not be
deemed exclusive of or limit in any way other rights to which any person
seeking indemnification or payment of expenses may be or may become entitled
under any bylaw, regulation, insurance, agreement or otherwise.
Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Bylaws or charter of the Corporation inconsistent with this Article, shall apply to or affect in any respect the applicability of the preceding paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.
ARTICLE XII
BOOKS AND RECORDS
The books of account, stock ledger, and other documents, books and records of the Corporation shall be kept at such place or places, which may be within or outside the State of Maryland, as determined by the Board of Directors.
A stockholder that is otherwise eligible under applicable law to inspect the Corporation's books of account, stock ledger, or other specified documents of the Corporation shall have no right to make such inspection if the Board of Directors determines that such stockholder has an improper purpose for requesting such inspection.
ARTICLE XIII
AMENDMENT OF BYLAWS
The stockholders shall have full power to alter or repeal these Bylaws, or any provision thereof, at any stated meeting as part of the general business of such meeting, or at any special meeting where notice of the proposed alteration or repeal has been given. The Board of Directors may alter or repeal Bylaws or make Bylaws but any Bylaws of the Corporation may be altered or repealed by the stockholders.
Exhibit (25)(2)(n)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Post-Effective Amendment No. 37 to Registration Statement No. 811-266 on Form N-2 of our report dated February 3, 2006, relating to the financial statements and financial highlights of Tri-Continental Corporation appearing in the Annual Report to Stockholders on Form N-CSR of Tri-Continental Corporation for the year ended December 31, 2005, and to our report dated February 3, 2006, relating to "Financial Highlights--Senior Securities - $2.50 Cumulative Preferred Stock" appearing in the Statement of Additional Information, and to the references to us under the headings "Financial Highlights" in the Prospectus and "Custodian, Stockholder Service Agent and Dividend Paying Agent and Experts--Independent Registered Public Accounting Firm" and "Financial Statements" in the Statement of Additional Information, which are part of such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
April 10, 2006
Exhibit (25)(2)(q)(4)
Seligman
[GRAPHIC APPEARS HERE]
Qualified Retirement Plan and Trust
Defined Contribution Basic Plan
Document 01
DEFINITIONS
ACP Test Safe Harbor Matching Contributions 6 Actual Deferral Percentage (ADP) 6 Adopting Employer 6 Adoption Agreement 6 ADP Test Safe Harbor Contributions 6 Aggregate Limit 6 Alternate Payee 7 Annual Additions 7 Annuity Starting Date 7 Applicable Life Expectancy 7 Average Contribution Percentage (ACP) 8 Basic Matching Contributions 8 Basic Plan Document 8 Beneficiary 8 Break in Eligibility Service 8 Break in Vesting Service 8 Code 8 Compensation 8 Contributing Participant 11 Contribution Percentage 11 Contribution Percentage Amounts 11 Custodian 12 Deductible Employee Contributions 12 Defined Benefit Fraction 12 Defined Contribution Dollar Limitation 12 Defined Contribution Fraction 12 Determination Date 13 Determination Period 13 Direct Rollover 13 Directed Trustee 13 Disability 13 Discretionary Trustee 13 Distribution Calendar Year 14 Domestic Relations Order 14 Earliest Retirement Age 14 Early Retirement Age 14 Earned Income 14 Effective Date 15 Election Period 15 Elective Deferrals 15 Eligible Employee 15 Eligible Employer 15 Eligible Participant 16 Eligible Retirement Plan 16 Eligible Rollover Distribution 16 Eligibility Computation Period 16 Employee 16 Employer 17 Employer Contribution 17 Employer Money Purchase Pension Contribution 17 |
Employer Target Benefit Pension Contribution 17 Employer Profit Sharing Contribution 17 Employment Commencement Date 17 Enhanced Matching Contributions 17 Entry Dates 17 ERISA 18 Excess Aggregate Contributions 18 Excess Annual Additions 18 Excess Contributions 18 Excess Elective Deferrals 18 Fiduciary 18 Fiscal Year 18 Forfeiture 19 Fund 19 Highest Average Compensation 19 Highly Compensated Employee 19 Hours of Service 19 Individual Account 21 Investment Fiduciary 22 Investment Fund 22 Key Employee 22 Leased Employee 22 Life Expectancy 23 Limitation Year 23 Master or Prototype Plan 23 Matching Contribution 23 Maximum Permissible Amount 23 Nondeductible Employee Contributions 24 Normal Retirement Age 24 Owner-Employee 24 Participant 24 Participant's Benefit 24 Permissive Aggregation Group 24 Plan 24 Plan Administrator 24 Plan Sequence Number 25 Plan Year 25 Pre-Age 35 Waiver 25 Present Value 25 Prior Plan 25 Projected Annual Benefit 25 Prototype Sponsor 26 Qualified Domestic Relations Order 26 Qualified Election 27 Qualified Joint and Survivor Annuity 27 Qualified Matching Contributions 27 Qualified Nonelective Contributions 28 Qualified Preretirement Survivor Annuity 28 Qualifying Contributing Participant 28 Qualifying Participant 28 Recipient 28 Related Employer 28 Related Employer Participation Agreement 28 Required Aggregation Group 29 Required Beginning Date 29 Safe Harbor Nonelective Contributions 30 |
Self-Employed Individual 30 Separate Fund 30 Spouse (Surviving Spouse) 30 Taxable Wage Base 30 Termination of Employment 31 Top-Heavy Plan 31 Trustee 31 Valuation Date 31 Vested 31 Vested Account Balance 31 Year 31 Year of Eligibility Service 31 Year of Vesting Service 31 SECTION ONE: EFFECTIVE DATES 32 SECTION TWO: ELIGIBILITY REQUIREMENTS 32 2.01 Eligibility to Participate 32 2.02 Plan Entry 33 2.03 Transfer To or From Ineligible Class 33 2.04 Return as a Participant After Break in Eligibility Service 34 2.05 Determinations Under This Section 34 2.06 Terms of Employment 34 |
SECTION THREE: CONTRIBUTIONS 34
3.01 Employer Contributions 34
3.02 Certain One-Time Irrevocable Elections 40
3.03 Rollover Contributions 41
3.04 Transfer Contributions 41
3.05 Deductible Employee Contributions 41
3.06 Elective Deferrals 42
3.07 Matching Contributions 44
3.08 Nondeductible Employee Contributions 45
3.09 Qualified Nonelective Contributions 45
3.10 Qualified Matching Contributions 45
3.11 Other Limitations on SIMPLE 401(k) Contributions 46
3.12 Limitation on Allocations 46
3.13 Actual Deferral Percentage Test (ADP) 49
3.14 Limits on Nondeductible Employee Contributions and
Matching Contributions 51
3.15 Safe Harbor CODA 54
|
SECTION FOUR: VESTING AND FORFEITURES 54
4.01 Distributions to Participant 54 4.02 100 Percent Vesting on Certain Contributions 58 4.03 Forfeitures and Vesting of Matching Contributions 58 |
SECTION FIVE: DISTRIBUTIONS AND LOANS TO PARTICIPANTS 58
5.01 Distributions 58 5.02 Form of Distributions to Participants 62 5.03 Distributions Upon the Death of Participants 64 5.04 Form of Distribution to Beneficiaries 65 5.05 Distribution Requirements 66 5.06 Annuity Contracts 69 5.07 Distribution in Kind 69 5.08 Direct Rollovers of Eligible Rollover Distributions 69 5.09 Procedure for Missing Participants or Beneficiaries 70 5.10 Filing a Claim for Plan Distributions 70 |
5.11 Denial of a Claim 70 5.12 Remedies Available 70 5.13 Joint and Survivor Annuity Requirements 71 5.14 Liability for Withholding on Distributions 74 5.15 Distribution of Excess Elective Deferrals 75 5.16 Distribution of Excess Contributions 75 5.17 Distribution of Excess Aggregate Contributions 76 5.18 Recharacterization 77 5.19 Loans To Participants 77 |
SECTION SIX: DEFINITIONS 78
SECTION SEVEN: MISCELLANEOUS 79
7.01 The Fund 79
7.02 Individual Accounts 79
7.03 Powers and Duties of the Plan Administrator 80
7.04 Expenses and Compensation 82
7.05 Information from Employer 82
7.06 Plan Amendments 82
7.07 Plan Merger or Consolidation 85
7.08 Permanency 85
7.09 Method and Procedure for Termination 85
7.10 Continuance of Plan by Successor Employer 85
7.11 Failure of Plan Qualification 85
7.12 Governing Laws and Provisions 86
7.13 State Community Property Laws 86
7.14 Headings 86
7.15 Gender and Number 86
7.16 Standard of Fiduciary Conduct 86
7.17 General Undertaking of all Parties 86
7.18 Agreement Binds Heirs, Etc. 86
7.19 Determination of Top-Heavy Status 86
7.20 Inalienability of benefits 88
7.21 Bonding 88
7.22 Investment Authority 89
7.23 Procedures and Other Matters Regarding Domestic
Relations Orders 92
7.24 Indemnification of Prototype Sponsor 93
7.25 Military Service 93
|
SECTION EIGHT: TRUSTEE AND CUSTODIAN 93
8.01 Financial Organization as Custodian 93 8.02 Trustee 97 8.03 Compensation and Expenses 98 8.04 No Obligation to Question Data 99 8.05 Resignation 99 8.06 Degree of Care - Limitations of Liability 100 8.07 Indemnification of Trustee and Custodian 101 8.08 Miscellaneous 101 |
SECTION NINE: ADOPTING EMPLOYER SIGNATURE 102
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.
ACP TEST SAFE HARBOR MATCHING CONTRIBUTIONS
Means Matching Contributions described in Section 3.15(B) of the Plan.
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 to the Fund on behalf
of such Participant for 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 ADP, Employer Contributions on behalf of any
Participant shall include: (1) any Elective Deferrals made pursuant to the
Participant's salary deferral election, (including Excess Elective Deferrals
of Highly Compensated Employees), but excluding (a) Excess Elective
Deferrals of Participants who are not 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 such 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.
ADOPTING EMPLOYER
Means any corporation, sole proprietor or other entity named on the Adoption Agreement and any successor who by merger, consolidation, purchase or otherwise assumes the obligations of the Plan.
ADOPTION AGREEMENT
Means the document executed by the Adopting 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.
ADP TEST SAFE HARBOR CONTRIBUTIONS
Means any Basic Matching Contributions, Enhanced Matching Contributions and Safe Harbor Nonelective Contributions.
AGGREGATE LIMIT
Means the sum of 1) 125 percent of the greater of the ADP of the Participants who are not Highly Compensated Employees for the applicable 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 applicable Plan Year of the cash or deferred
arrangement; and 2) the lesser of 200 percent or two plus the lesser of such
ADP or ACP. Notwithstanding the foregoing, Aggregate Limit shall mean the
sum of 1) 125 percent of the lesser of the ADP 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 cash or deferred arrangement; and 2) the lesser of 200 percent or two
plus the greater of such ADP or ACP if it would result in a larger Aggregate
Limit than determined under the previous sentence. If the employer has
elected in the adoption agreement to use the Current Year Testing method,
then, in calculating the Aggregate Limit for a particular Plan Year, the
Non-highly Compensated Employees' ADP and ACP for that Plan Year, instead of
for the prior Plan Year, is used.
ALTERNATE PAYEE
Means any Spouse, former Spouse, child, or other dependent of a Participant who is recognized by a Domestic Relations Order as having a right to receive all, or a portion of, the benefits payable under the Plan with respect to such Participant.
ANNUAL ADDITIONS
Means the sum of the following amounts credited to a Participant for the Limitation Year:
a. Employer Contributions,
b. Nondeductible Employee Contributions,
c. Forfeitures,
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. 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,
e. Amounts allocated under a simplified employee pension plan,
f. Excess Contributions (including amounts recharacterized), and
g. Excess Aggregate Contributions.
For this purpose, any Excess Annual Additions applied under
Section 3.12(A)(4) or 3.12(B)(1)(f) of the Plan in the Limitation Year to
reduce Employer Contributions will be considered Annual Additions for such
Limitation Year.
ANNUITY STARTING DATE
Means the first day of the first period for which an amount is paid as an annuity or any other form.
APPLICABLE LIFE EXPECTANCY
Means 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. However, 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.
AVERAGE CONTRIBUTION PERCENTAGE (ACP)
Means the average of the Contribution Percentages of the Eligible Participants in a group of either Highly Compensated Employees or Employees who are not Highly Compensated Employees.
BASIC MATCHING CONTRIBUTIONS
Means Matching Contributions made pursuant to the formula described in
Section 3.15(A) of the Plan.
BASIC PLAN DOCUMENT
Means this prototype Plan and trust document.
BENEFICIARY
Means the individual(s) or entity(ies) designated pursuant to
Section 5.03(A) of the Plan.
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).
BREAK IN VESTING SERVICE
Means a Plan Year (or other vesting computation period described in the definition of Year of Vesting Service) 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).
CODE
Means the Internal Revenue Code of 1986 as amended from time-to-time.
COMPENSATION
A. General Definition
The following definition of Compensation shall apply.
As elected by the Adopting 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) of the Code).
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 3401(a)(2) of the Code).
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 includible in gross income (including, but not limited to,
commissions paid to salespersons, 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
Section 1.62-2(c) of the Treasury Regulations), and excluding the
following:
a. 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;
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 option; 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
Unless otherwise indicated in the Adoption Agreement, where an Employee becomes an eligible Participant on any date subsequent to the first day of the applicable Determination Period, Compensation shall include only that Compensation paid to the Employee during the portion of the Determination Period he or she was an eligible Participant, unless otherwise required by either the Code or ERISA.
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(e)(3), 402(h)(1)(B) or 403(b) of the Code. For Plan Years beginning on or after January 1, 2001, except as otherwise provided in the Adoption Agreement, Compensation shall also
include elective amounts that are not includible in the gross income of the Employee by reason of Section 132(f)(4) of the Code.
Except as otherwise provided in this Plan (e.g., in situations involving continued coverage of disabled Participants), Compensation received by an Employee during a Determination Period in which the Employee does not perform services for the Employer will be disregarded.
For purposes of applying the limitations of Section 3.12 of the Plan, Compensation for a Limitation Year is the Compensation actually paid or made available 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; for Limitation Years beginning before January 1, 1997, but not for Limitation Years beginning after December 31, 1996, 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 the Definition section of the Basic Plan Document) and contributions made on behalf of such Participant are nonforfeitable when made.
For Limitation Years beginning after December 31, 1997, for purposes of applying the limitations of Section 3.12 of the Plan Compensation paid or made available during such Limitation Year shall include any elective deferral (as defined in Section 402(g)(3) of the Code), and any amount which is contributed or deferred by the Employer at the election of the Employee and which is not includible in the gross income of the Employee by reason of Section 125 or 457 of the Code.
For Limitation Years beginning on or after January 1, 2001, for purposes of applying the limitations under Section 3.12 of the Plan, Compensation paid or made available during such Limitation Years shall include elective amounts that are not includible in the gross income of the Employee by reason of Section 132(f)(4) of the Code.
C. Limits On Compensation
For Plan Years beginning on or after January 1, 1989, and before
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 $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 Code. The
cost-of-living adjustment in effect for a calendar year applies to any
Determination Period beginning in such calendar year.
If a Determination Period consists of fewer 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 Determination Period, and the denominator of which is 12.
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, 1994, the annual Compensation limit in effect for Determination Periods beginning before that date is $150,000.
D. SIMPLE 401(k) Rules
Notwithstanding anything in this Plan to the contrary, if an Eligible
Employer has established a SIMPLE 401(k) plan, Compensation means, for
purposes of the definition of Eligible Employer and for purposes of
Sections 3.06(F)and 3.07 of the Plan, the sum of the wages, tips, and
other compensation from the Employer subject to federal income tax
withholding (as described in Section 6051(a)(3) of the Code) and the
Employee's Elective Deferral contributions made under this or any other
401(k) plan, and, if applicable, elective deferrals under a
Section 408(p) SIMPLE IRA plan, a SARSEP plan, or a Section 403(b)
annuity contract and compensation deferred under a Section 457 plan,
required to be reported by the Employer on Form W-2 (as described in
Section 6051(a)(8) of the Code). For Self-Employed Individuals,
Compensation means net earnings from self-employment determined under
Section 1402(a) of the Code prior to subtracting any contributions made
under this Plan on behalf of the individual. The provisions of the Plan
implementing the limit on Compensation under Section 401(a)(17) of the
Code apply to the Compensation under Sections 3.06(F) and 3.07 of the
Plan.
E. Safe Harbor CODA Rules
Notwithstanding anything in this Plan to the contrary if an Adopting
Employer has elected in the Adoption Agreement to apply the safe harbor
CODA provisions to this Plan, Compensation means Compensation as defined
in this Definitions Section of the Plan, except, for purposes of
Section 3.15, no dollar limit, other than the limit imposed by
Section 401(a)(17) of the Code, applies to the Compensation of a
non-Highly Compensated Employee. However, solely for purposes of
determining the Compensation subject to a Participant's salary reduction
agreement, the Employer may use an alternative definition to the one
described in the preceding sentence, provided such alternative
definition is a reasonable definition within the meaning of
Section 1.414(s)-1(d)(2) of the Income Tax Regulations and permits each
Participant to elect sufficient Elective Deferrals to receive the
maximum amount of Matching Contributions (determined using the
definition of Compensation described in the preceding sentence)
available to the Participant under the Plan.
CONTRIBUTING PARTICIPANT
Means a Participant who has enrolled as a Contributing Participant pursuant to either Section 3.06 of the Plan or Section 3.08 of the Plan and on whose behalf the Employer is contributing Elective Deferrals to the Plan (or is making Nondeductible Employee Contributions).
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).
CONTRIBUTION PERCENTAGE AMOUNTS
Means the sum of the Nondeductible Employee Contributions, Matching Contributions and Qualified Matching Contributions (to the extent not taken into account for purposes of the ADP test) 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 3.12(A)(4)(c) of the Plan.
The Employer may elect to use either Qualified Nonelective Contributions or Elective Deferrals, or both, in the Contribution Percentage Amounts. Elective Deferrals may only be included in the Contribution Percentage Amounts if the Plan passes the ADP test both prior to and following the exclusion of such Elective Deferrals.
CUSTODIAN
Means an entity specified in the Adoption Agreement as Custodian or any duly appointed successor as provided in Section 8.05 of the Plan.
DEDUCTIBLE EMPLOYEE CONTRIBUTIONS
Means any qualified voluntary employee contributions (as defined in
Section 219(e)(2) of the Code made after December 31, 1981, in a taxable
year beginning after such date and made for a taxable year beginning before
January 1, 1987, and allowable as a deduction under Section 219(a) of the
Code for such taxable year.
DEFINED BENEFIT FRACTION
Means 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 percent of the dollar limitation determined for the
Limitation Year under Section 415(b) and (d) of the Code or 140 percent 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 percent 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.
DEFINED CONTRIBUTION DOLLAR LIMITATION
Means $30,000, as adjusted under Section 415(d) of the Code.
DEFINED CONTRIBUTION FRACTION
Means 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 pension plans, 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 percent of the dollar limitation determined under Sections 415(b) and (d) of the Code in effect under Section 415(c)(1)(A) of the Code or 35 percent 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.
DETERMINATION DATE
Means 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, Determination Date means the last day of that year.
DETERMINATION PERIOD
Means, except as provided elsewhere in this Plan, the Plan Year unless the Adopting Employer has selected another period in the Adoption Agreement.
DIRECT ROLLOVER
Means a payment by the Plan to the Eligible Retirement Plan specified by the
Recipient (or, if necessary pursuant to Section 5.02(A) of the Plan, an
individual retirement account (IRA) under either Section 408(a) or
Section 408(b) of the Code, selected by the Plan Administrator).
DIRECTED TRUSTEE
Means a Trustee that is designated as a Directed Trustee on the Adoption Agreement. A Directed Trustee shall be responsible for investing the Fund and performing the responsibilities set forth in Section Eight of the Plan in accordance with specific instructions provided by the Adopting Employer or Plan Administrator (or Participant or Beneficiary if applicable).
DISABILITY
Unless the Adopting 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.
DISCRETIONARY TRUSTEE
Means a Trustee which is designated as a Discretionary Trustee on the Adoption Agreement and enters into an agreement with the Adopting Employer whereby the Trustee and not the Adopting Employer will select the appropriate investments for the Fund in accordance with the Plan's funding policy statement or will perform such other tasks identified in such agreement between the Trustee and Adopting Employer.
DISTRIBUTION CALENDAR YEAR
Means 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 5.05(E) of the Plan.
DOMESTIC RELATIONS ORDER
Means any judgment, decree or order (including approval of a property settlement agreement) that:
a. Relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a Participant, and
b. Is made pursuant to state domestic relations law (including a community property law).
EARLIEST RETIREMENT AGE
Means, for purposes of the Qualified Joint and Survivor Annuity provisions of the Plan, the earliest date on which, under the Plan, the Participant could elect to receive retirement benefits.
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.
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.
EFFECTIVE DATE
Means the date the Plan becomes effective as indicated in the Adoption Agreement. Notwithstanding the foregoing, unless otherwise provided in this Basic Plan Document, the Effective Date of Plan provisions attributable to The Uruguay Round Agreements Act of 1994 (GATT), The Uniform Services Employment and Reemployment Rights act of 1994 (USER-RA), The Small Business Job Protection Act of 1996 (SBJPA), the Taxpayer Relief Act of 1997 (TRA-97) and The Tax Technical Corrections Act of 1998 (TTCA-98) shall be the later of the first day of the Employer's 1997 Plan Year or the original Effective Date of the Plan.
ELECTION PERIOD
Means 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.
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 contributions made on behalf of such Participant
pursuant to an election to defer under any qualified cash or deferred
arrangement as described in Section 401(k) of the Code, any simplified
employee pension plan cash or deferred arrangement as described in
Section 402(h)(1)(B) of the Code, any SIMPLE IRA Plan described in
Section 408(p) of the Code, any eligible deferred compensation plan under
Section 457 of the Code, any plan as described under Section 501(c)(18) of
the Code, any Employer contributions made on the behalf of a Participant for
the purchase of an annuity contract under Section 403(b) of the Code
pursuant to a salary reduction agreement and any elective Employer
contribution under Section 408(p)(2)(A)(i) of the Code. 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.
ELIGIBLE EMPLOYEE
Means, if the Employer has adopted a SIMPLE 401(k) Plan, any Employee who is entitled to make Elective Deferrals under the terms of the Plan. Notwithstanding the foregoing, if the Employer has elected to apply the safe harbor CODA provisions of Section 3.15 of the Plan, means an Employee eligible to make Elective Deferrals under the Plan for any part of the Plan Year or who would be eligible to make Elective Deferrals but for a suspension due to a hardship distribution described in Section 5.01(A)(6) of the Plan or to statutory limitations, such as Sections 402(g) and 415 of the Code.
ELIGIBLE EMPLOYER
Means, with respect to any Year, an Employer that had no more than 100
Employees who received at least $5,000 of Compensation from the Employer for
the preceding Year and is therefore eligible to establish a SIMPLE 401(k)
Plan. In applying the preceding sentence, all Employees of controlled groups
of corporations under Section 414(b) of the Code, all Employees of trades or
businesses (whether incorporated or not) under common control under
Section 414(c) of the Code, all Employees of affiliated service groups under
Section 414(m) of the Code, and Leased Employees required to be treated as
the Employer's Employees under Section 414(n) of the Code, are taken into
account.
An Eligible Employer that adopts a SIMPLE 401(k) and that fails to be an Eligible Employer for any subsequent Year, is treated as an Eligible Employer for the two Years following the last Year the Employer was an Eligible Employer. If the failure is due to any acquisition, disposition, or similar transaction involving an Eligible Employer, the preceding sentence applies only if the provisions of Section 410(b)(6)(C)(i) of the Code are satisfied.
ELIGIBLE PARTICIPANT
Means any Employee who is eligible to make a Nondeductible Employee Contribution or an Elective Deferral, 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.
ELIGIBLE RETIREMENT PLAN
Means 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 Recipient'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.
ELIGIBLE ROLLOVER DISTRIBUTION
Means any distribution of all or any portion of the balance to the credit of the Recipient, 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 Recipient or the joint lives (or joint life expectancies) of the Recipient and the Recipient'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);
d. Any hardship distribution described in Section 5.01(A)(6) of the Plan received after December 31, 1998; and
e. Any other distribution(s) that is reasonably expected to total less than $200 during a year.
ELIGIBILITY COMPUTATION PERIOD
Means, with respect to an Employee's initial Eligibility Computation Period, the 12 consecutive month period commencing on the Employee's Employment Commencement Date. Unless otherwise specified in the Adoption Agreement, 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. An Employee is not credited with 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.
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 Sections 414(n) or (o) of the Code.
EMPLOYER
Means the Adopting Employer, and, unless otherwise provided in the Adoption
Agreement, all members of a controlled group of corporations (as defined in
Section 414(b) of the Code as modified by Section 415(h) of the Code), all
commonly controlled trades or businesses (as defined in Section 414(c) of
the Code as modified by Section 415(h) of the Code) or affiliated service
groups (as defined in Section 414(m) of the Code) 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. 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.
EMPLOYER CONTRIBUTION
Means the amount contributed by the Employer each year as determined under this Plan. The term Employer Contribution shall include Elective Deferrals made to the Plan unless such contributions are intended to be excluded for purposes of any act under the Code, ERISA or any additional rules, regulations or other pronouncements promulgated by either the Internal Revenue Service (IRS) or the Department of Labor.
EMPLOYER MONEY PURCHASE PENSION CONTRIBUTION
Means an Employer Contribution made pursuant to the section of the Adoption Agreement titled, "Employer Money Purchase Pension Contributions." The Employer must make Employer Money Purchase Pension Contributions without regard to current or accumulated earnings or profits.
EMPLOYER TARGET BENEFIT PENSION CONTRIBUTION
Means an Employer Contribution made pursuant to the section of the Adoption Agreement titled, "Employer Target Benefit Pension Contributions." The Employer must make Employer Target Benefit Pension Contributions without regard to current or accumulated earnings or profits.
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.
EMPLOYMENT COMMENCEMENT DATE
Means, with respect to an Employee, the date such Employee first performs an Hour of Service for the Employer.
ENHANCED MATCHING CONTRIBUTIONS
Means Matching Contributions described in Section 401(k)(12)(B)(iii) of the Code and made pursuant to the formula elected by the Employer in the Adoption Agreement.
ENTRY DATES
Means the first day of the Plan Year and the first day of the seventh month of the Plan Year, unless the Adopting Employer has specified different dates in the Adoption Agreement.
ERISA
Means the Employee Retirement Income Security Act of 1974 as amended from time-to-time.
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 hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of their Contribution Percentages beginning with the highest of such percentages).
Such determination shall be made after first determining Excess Elective Deferrals pursuant to the definition provided herein and then determining Excess Contributions pursuant to the definition provided herein.
EXCESS ANNUAL ADDITIONS
Means the excess of the Participant's Annual Additions for the Limitation Year over the Maximum Permissible Amount.
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 hypothetically reducing contributions made on behalf of Highly Compensated Employees in order of the ADPs, beginning with the highest of such percentages).
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.
FIDUCIARY
Means a person who exercises any discretionary authority or control
respecting management of the Plan, renders investment advice as defined in
Section 3(21) of ERISA or has any discretionary authority or responsibility
regarding the administration of the Plan. The Employer and such other
individuals either appointed by the Employer or deemed to be fiduciaries as
a result of their actions shall serve as Fiduciaries under this Plan and
fulfill the fiduciary responsibilities described in Part 4, Title I of ERISA.
FISCAL YEAR
Means the 12-month period coinciding with the Adopting Employer's tax year.
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).
FUND
Means the Plan assets held by the Trustee (or Custodian, if applicable) for the Participants' exclusive benefit.
HIGHEST AVERAGE COMPENSATION
Means the average compensation for the three consecutive years of service with the Employer that produces the highest average.
HIGHLY COMPENSATED EMPLOYEE
Means, effective for years beginning after December 31, 1996, any Employee
who 1) was a five-percent owner at any time during the year or the preceding
year, or 2) for the preceding year had Compensation from the Employer in
excess of $80,000 and, if elected by the Adopting Employer in the Adoption
Agreement, was in the top-paid group for the preceding year. The $80,000
amount is adjusted at the same time and in the same manner as under
Section 415(d) of the Code, except that the base period is the calendar
quarter ending September 30, 1996.
For this purpose the applicable year of the Plan for which a determination is being made is called a determination year and the preceding 12-month period is called a look-back year. Unless otherwise elected by the Adopting Employer in the Adoption Agreement, however, the Employer shall be deemed to have made a calendar year data election. If a calendar year data election is made or is deemed to be made, the look-back year shall be the calendar year ending within the Plan Year for purposes of determining who is a Highly Compensated Employee (other than as a five-percent owner).
A highly compensated former employee is based on the rules applicable to determining Highly Compensated Employee status as in effect for that determination year, in accordance with Section 1.414(q)-1T, A-4 of the Treasury Regulations, Notice 97-45 and any subsequent guidance issued by the IRS.
In determining whether a Participant is a Highly Compensated Employee for years beginning in 1997, the definition of Highly Compensated Employee provided herein shall be deemed to have been in effect for years beginning in 1996.
The determination of who is a Highly Compensated Employee, including, but not limited to, the determinations of the number and identity of Employees in the top-paid group and the Compensation that is considered, will be made in accordance with Section 414(q) of the Code and the regulations thereunder.
HOURS OF SERVICE -- Means:
A. General Rules For Crediting Hours of Service
1. 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
2. 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 Labor Regulations which is incorporated herein by this reference; and
3. 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 (1) or paragraph
(2), as the case may be, and under this paragraph (3). 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.
4. 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 or other
vesting computation period described in the definition of a Year of
Vesting Service), an individual who is absent from work for maternity
or paternity reasons shall receive credit for the Hours of Service
which would otherwise have been credited to such individual but for
such absence, or in any case in which such hours cannot be
determined, eight 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 vesting computation period
described in the definition of a Year of Service 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 the definition of a Year of Service.
5. 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 Sections 414(n) or 414(o) of the Code and the regulations thereunder.
6. Where the Employer maintains the plan of a predecessor employer, service for such predecessor employer shall be treated as service for the Employer.
7. The above method for determining Hours of Service may be altered as specified in the Adoption Agreement.
B. Special Rules Where Elapsed Time Method is Being Used
This paragraph (B) shall apply where the Adopting Employer has indicated in the Adoption Agreement that the elapsed time method of determining service will be used. When this paragraph applies, the definitions of break in service and hour of service in this paragraph will replace the definitions of Break in Eligibility Service, Break in Vesting Service and Hours of Service found in the Definitions Section of the Plan.
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 "rule of parity" described in the definition of a Year of Vesting Service and in Section 2.04 of the Plan) 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 months or days.
For purposes of this paragraph (B), 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 (B), 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.
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) of the Code to be considered an Employee of any Employer
aggregated under Section 414(b), (c), or (m) of the Code.
C. Changes In Methods of Crediting Service
A plan may be amended to change the method of crediting service between the general rules discussed in paragraph (A) and the elapsed time method discussed in paragraph (B) provided each Employee with respect to whom the method of crediting service is changed is afforded the protection described in Section 1.410(a)-7(g) of the Treasury Regulations and other applicable rules promulgated by the IRS.
INDIVIDUAL ACCOUNT
Means the account established and maintained under this Plan for each Participant in accordance with Section 7.02(A) of the Plan.
INVESTMENT FIDUCIARY
Means the Employer, a Trustee with full trust powers, any Individual Trustee(s) and/or any investment manager, as applicable, which under the terms of the Plan is vested with the responsibility and authority to select investment options for the Plan and to direct the investment of the assets of the Fund. In no event shall a Custodian or a Directed Trustee be an Investment Fiduciary for any purpose whatsoever.
INVESTMENT FUND
Means a subdivision of the Fund established pursuant to Section 7.01(B) of the Plan.
KEY EMPLOYEE
Means any Employee or former Employee (and the Beneficiaries of such
Employee) who at any time during the determination period was an officer of
the Employer if such individual's annual compensation exceeds 50 percent of
the dollar limitation under 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
percent of the dollar limitation under Section 415(c)(1)(A) of the Code, a
five percent owner of the Employer, or a one percent owner of the Employer
who has 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 four preceding Plan Years. For Plan Years beginning on or after
January 1, 2001, except as otherwise provided in the Adoption Agreement,
Compensation shall also include elective amounts that are not includible in
the gross income of the Employee by reason of Section 132(f)(4) of the Code.
The determination of who is a Key Employee will be made in accordance with
Section 416(i)(1) of the Code and the Income Tax Regulations thereunder.
LEASED EMPLOYEE
Means, effective for Plan Years beginning on or after January 1, 1997, any
person (other than an Employee of the recipient Employer) who pursuant to an
agreement between the recipient Employer and any other person ("leasing
organization") has performed services for the recipient Employer (or for the
recipient Employer 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 performed under primary
direction or control by 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 Leased Employee is covered by a money purchase pension plan providing
a) a nonintegrated employer contribution rate of at least 10 percent 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 Leased 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 percent of the recipient's
nonhighly compensated work force. For Plan Years beginning on or after
January 1, 2001, except as otherwise provided in the Adoption Agreement,
Compensation shall also include elective amounts that are not includible in
the gross income of the Employee by reason of Section 132(f)(4) of the Code.
LIFE EXPECTANCY
Means life expectancy or joint and last survivor expectancy as computed using 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 5.05(E)(2)(b) of the Plan) 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 non-Spouse Beneficiary may not be recalculated.
LIMITATION YEAR
Means the Plan 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.
MASTER OR PROTOTYPE PLAN
Means a plan, the form of which is the subject of a favorable opinion letter from the IRS.
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. Notwithstanding the foregoing, if the Adopting Employer has elected to apply the Safe Harbor CODA provisions of Section 3.15 of the Plan, Matching Contribution means contributions made by the Employer on account of an Eligible Employee's Elective Deferrals. For Plan Years beginning on or after January 1, 1998, Matching Contributions made by self-employed Participants (as defined in Section 401(c) of the Code) shall not be treated as Elective Deferrals.
MAXIMUM PERMISSIBLE AMOUNT
Means the maximum Annual Addition that may be contributed or allocated to a Participant's Individual Account under the Plan for any Limitation Year which shall not exceed the lesser of:
a. The Defined Contribution Dollar Limitation, or
b. 25 percent 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:
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.
NORMAL RETIREMENT AGE
Means the age specified in the Adoption Agreement. If the Employer enforces a mandatory retirement age, the Normal Retirement Age is the lesser of that mandatory age or the age specified in the Adoption Agreement. If no age is specified in the Adoption Agreement, the Normal Retirement Age shall be age 59 1/2.
OWNER - EMPLOYEE
Means an individual who is a sole proprietor, or who is a partner owning more than 10 percent of either the capital or profits interest of the partnership.
PARTICIPANT
Means any Employee or former Employee of the Employer who has met the Plan's age and service 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.
PARTICIPANT'S BENEFIT
A. General Definition:
Means the Individual Account 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.
PERMISSIVE AGGREGATION GROUP
Means the Required Aggregation Group of plans plus any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
PLAN
Means the prototype defined contribution plan adopted by the Employer that is intended to satisfy the requirements of Sections 401 and 501 of the Code and ERISA respectively. The Plan consists of this Basic Plan Document plus the corresponding Adoption Agreement as completed and signed by the Adopting Employer.
PLAN ADMINISTRATOR
The Adopting Employer shall be the Plan Administrator unless the managing body of the Adopting Employer designates a person or persons other than the Adopting Employer as the
Plan Administrator and so notifies the Trustee (or Custodian, if applicable). The Adopting Employer shall also be the Plan Administrator if the person or persons so designated ceases to be the Plan Administrator. The Adopting 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. If the managing body of the Adopting Employer designates a person or persons other than the Adopting Employer as Plan Administrator, such person or persons shall serve at the pleasure of the Adopting 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.
PLAN SEQUENCE NUMBER
Means the three digit number the Adopting Employer assigned to the Plan on the Adoption Agreement. The Plan Sequence Number identifies the number of qualified retirement plans the Employer maintains or has maintained. The Plan Sequence Number is 001 for the Employers first qualified retirement plan, 002 for the second, etc.
PLAN YEAR
Means the 12 consecutive month period which coincides with the Adopting Employer's Fiscal Year or such other 12 consecutive month period as is designated in the Adoption Agreement. Notwithstanding the foregoing, a Plan Year may be a 52 to 53 week period as defined in the Adoption Agreement.
PRE-AGE 35 WAIVER
A Participant who will not yet attain age 35 as of the end of any current
Plan Year may make a 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 an explanation of the Qualified Preretirement Survivor
Annuity in such terms as are comparable to the explanation required under
Section 5.13(D)(1) of the Plan. 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 Section 5.13 of the
Plan.
PRESENT VALUE
Unless otherwise indicated in the Adoption Agreement, 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.
PRIOR PLAN
Means a plan which was replaced by adoption of this Plan document as indicated in the Adoption Agreement.
PROJECTED ANNUAL BENEFIT
Means 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.
PROTOTYPE SPONSOR
Means the entity specified in the Adoption Agreement that makes this prototype Plan available to employers for adoption.
QUALIFIED DOMESTIC RELATIONS ORDER
A. In General
Means a Domestic Relations Order:
a. Which creates or recognizes the existence of an Alternate Payee's rights to, or assigns to an Alternate Payee the right to receive all or a portion of the benefits payable with respect to a Participant under the Plan, and
b. With respect to which the requirements described in the remainder of this section are met.
B. Specification of Facts
A Domestic Relations Order shall be a Qualified Domestic Relations Order only if the order clearly specifies:
a. The name and last known mailing address (if any) of the Participant and the name and mailing address of each Alternate Payee covered by the order,
b. The amount or percentage of the Participant's benefits to be paid by the Plan to each such Alternate Payee, or the manner in which such amount or percentage is to be determined,
c. The number of payments or period to which such order applies, and
d. Each plan to which such order applies.
C. Additional Requirements
In addition to paragraph (B) above, a Domestic Relations Order shall be considered a Qualified Domestic Relations Order only if such order:
a. Does not require the Plan to provide any type or form of benefit, or any option not otherwise provided under the Plan,
b. Does not require the Plan to provide increased benefits, and
c. Does not require payment of benefits to an Alternate Payee which is required to be paid to another Alternate Payee under another order previously determined to be a Qualified Domestic Relations Order.
D. Exception for Certain Payments
A Domestic Relations Order shall not be treated as failing to meet the requirements above solely because such order requires that payment of benefits be made to an Alternate Payee:
a. On or after the date on which the Participant attains (or would have
attained) the earliest retirement age as defined in
Section 414(p)(4)(B) of the Code,
b. As if the Participant had retired on the date on which such payment is to begin under such order, and
c. In any form in which such benefits may be paid under the Plan to the Participant (other than in a Qualified Joint and Survivor Annuity) with respect to the Alternate Payee and his or her subsequent spouse.
QUALIFIED ELECTION
Means 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 to the election (either in writing or in any other form permitted under rules promulgated by the IRS and DOL), 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. In addition, if the Spouse is legally incompetent to give consent, the Spouse's legal guardian, even if the guardian is the Participant, may give consent. If the Participant is legally separated or the Participant has been abandoned (within the meaning of local law) and the Participant has a court order to such effect, spousal consent is not required unless a Qualified Domestic Relations Order provides otherwise.
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 5.13(D) of the Plan.
QUALIFIED JOINT AND SURVIVOR ANNUITY
Means 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 percent and not more than 100 percent 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 percent (unless a different percentage is elected by the Adopting Employer in the Adoption Agreement).
QUALIFIED MATCHING CONTRIBUTIONS
Means Matching Contributions which are subject to the distribution and nonforfeitability requirements under Section 401(k) of the Code when made.
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 non-forfeitable when made; and that are distributable only in accordance with the distribution provisions that are applicable to Elective Deferrals and Qualified Matching Contributions.
QUALIFIED PRERETIREMENT SURVIVOR ANNUITY
Means a survivor annuity for the life of the surviving Spouse of the Participant if the payments are not less than the amounts which would be payable as a survivor annuity under the Qualified Joint and Survivor Annuity under the Plan in accordance with Section 417(c) of the Code.
QUALIFYING CONTRIBUTING PARTICIPANT
Means a Contributing Participant who satisfies the requirements described in
Section 3.07 of the Plan to be entitled to receive a Matching Contribution
(and Forfeitures, if applicable) for a Plan Year.
QUALIFYING PARTICIPANT
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 be a Qualifying Participant for a Plan Year if he or she either completes more than 500 Hours of Service (three consecutive calendar months if the elapsed time method of determining service applies) during the Plan Year or is employed 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. If the elapsed time method of determining service applies, 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.
RECIPIENT
A Recipient 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 Recipients with regard to the interest of the Spouse or former Spouse.
RELATED EMPLOYER
Means an employer that shares common ownership or control with the Employer but that is not required to be aggregated with the Employer for certain qualification requirements under Sections 414(b), (c), (m) or (o) of the Code. Unless the Adoption Agreement prohibits participation by a Related Employer, a Related Employer may participate in this Plan only if such Related Employer executes a Related Employer Participation Agreement. If one or more Related Employers participate, the Plan shall constitute a multiple employer plan as defined in Section 413(c) of the Code.
RELATED EMPLOYER PARTICIPATION AGREEMENT
Means the agreement under this prototype Plan that a Related Employer must execute to participate in this Plan.
REQUIRED AGGREGATION GROUP
Means (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.
REQUIRED BEGINNING DATE
Means April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2 or retires, whichever is later, except that benefit distributions to a five-percent owner must commence by the April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2. Any Participant attaining age 70 1/2 in years after 1995 may elect by the April 1 of the calendar year following the year in which the Participant attained age 70 1/2, (or by December 31, 1997, in the case of a Participant attaining age 70 1/2 in 1996) to defer distributions until the calendar year following the calendar year in which the Participant retires. If no such election is made, the Participant will begin receiving distributions by the April 1 of the calendar year following the year in which the Participant attained age 70 1/2 (or by December 31, 1997, in the case of a Participant attaining age 70 1/2 in 1996). Any Participant attaining age 70 1/2 in years prior to 1997 may elect to stop distributions and recommence by the April 1 of the calendar year following the year in which the Participant retires. There is no new annuity starting date upon recommencement. The preretirement age 70 1/2 distribution option is only eliminated with respect to Employees who reach age 70 1/2 in or after a calendar year that begins after the later of December 31, 1998, or the adoption date of the amendment. The preretire-ment age 70 1/2 distribution option is an optional form of benefit under which benefits payable in a particular distribution form (including any modifications that may be elected after benefit commencement) commence at a time during the period that begins on or after January 1 of the calendar year in which an Employee attains age 70 1/2 and ends April 1 of the immediately following calendar year.
Notwithstanding the foregoing, the Required Beginning Date may be one of the following if so selected by the Adopting Employer in the Adoption Agreement;
a. The Required Beginning Date of a Participant is the April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2; or;
b. The Required Beginning Date of a Participant is the April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2, except that benefit distributions to a Participant (other than a five-percent owner) with respect to benefits accrued after the later of the adoption or effective date of the amendment to the Plan must commence by the later of the April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2 or retires;
c. The Required Beginning Date of a Participant is the later of the April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2 or retires except that benefit distributions to a five-percent owner must commence by the April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2;
(1) Any Participant attaining age 70 1/2 in years after 1995 may elect by the April 1 of the calendar year following the year in which the Participant attained age 70 1/2, (or by December 31, 1997, in the case of a Participant attaining age 70 1/2 in 1996) to defer distributions until the calendar year following the calendar year in which the Participant retires. If no such election is made the Participant will begin receiving distributions by the April 1 of the calendar year following the year in which the Participant attained age 70 1/2 (or by December 31, 1997, in the case of a Participant attaining age 70 1/2 in 1996);
(2) Any Participant attaining age 70 1/2 in years prior to 1997 may elect to stop distributions and recommence by the April 1 of the calendar year following the year in which the Participant retires. There is either:
1) A new annuity starting date upon recommencement or
2) No new annuity starting date upon recommencement; or
(3) The preretirement age 70 1/2 distribution option is only eliminated with respect to Employees who reach age 70 1/2 in or after a calendar year that begins after the later of December 31, 1998, or the adoption date of the amendment. The preretirement age 70 1/2 distribution option is an optional form of benefit under which benefits payable in a particular distribution form (including any modifications that may be elected after benefit commencement) commence at a time during the period that begins on or after January 1 of the calendar year in which an Employee attains age 70 1/2 and ends April 1 of the immediately following calendar year.
A Participant is treated as a five-percent owner for purposes of this
section if such Participant is a five-percent owner as defined in
Section 416 of the Code at any time during the Plan Year ending with or
within the calendar year in which such owner attains age 70 1/2.
Once distributions have begun to a five-percent owner under this section, they must continue to be distributed, even if the Participant ceases to be a five-percent owner in a subsequent year.
SAFE HARBOR NONELECTIVE CONTRIBUTIONS
Means Employer Contributions made in an amount equal to at least three percent of each Participants Compensation on behalf of each Participant who is not a Highly Compensated Employee. Such contributions shall be made without regard to whether a Participant makes an Elective Deferral or a Nondeductible Employee Contribution.
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, including 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.
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 7.22(B) of the Plan.
SPOUSE
Means 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.
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.
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.
TOP-HEAVY PLAN
This Plan is a Top-Heavy Plan for any Plan Year if it is determined to be such pursuant to Section 7.19 of the Plan.
TRUSTEE
Means, if applicable, an individual, individuals or corporation specified in the Adoption Agreement as Trustee or any duly appointed successor as provided in Section 8.05 of the Plan.
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 nondiscrimina-tory manner when the assets of the Fund are valued at their then fair market value. Notwithstanding the foregoing, for purposes of calculating the top heavy ratio, the Valuation Date shall be the last day of the initial Plan Year of the Plan and the last day of the preceding Plan Year for each subsequent Plan Year.
VESTED
Means nonforfeitable, that is, an unconditional and legally enforceable claim against the Plan which is 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.
VESTED ACCOUNT BALANCE
Means 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.
YEAR
Means the calendar year and is applicable only if the Employer has adopted a SIMPLE 401(k) Plan.
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.
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 Adopting 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 five 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 pre-break 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 pre-break and postbreak portions of his or her Individual Account derived from Employer Contributions. Both subac-counts 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. However, if an Employee becomes ineligible to participate in the Plan because he or she is no longer a member of an eligible class of Employees, but has not incurred a break in service, such Employee shall continue to accumulate Years of Vesting Service.
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 ONE: EFFECTIVE DATES
Pursuant to the Definitions section of the Plan, the Effective Date means the date the Plan becomes effective as indicated in the Adoption Agreement. However, certain provisions of the Plan may have an effective date different from the Plan Effective Date, if, for example, the Plan is amended subsequent to the Effective Date.
SECTION TWO: ELIGIBILITY REQUIREMENTS
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.
Notwithstanding the preceding sentence, where the Adoption Agreement does not permit Employer designation with respect to participation of classes of Employees, the following Employees will be excluded from participation in the Plan
A. Union Employees
Employees included in a unit of Employees covered by a collective bargaining agreement between the Employer and Employee representatives, if retirement benefits were the
subject of good faith bargaining and if two percent or less of the Employees who are covered pursuant to that agreement are professionals as defined in Section 1.410(b)-9 of the regulations. For this purpose, the term "Employee representatives" does not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Employer.
B. Non-resident Aliens
Employees who are non-resident aliens (within the meaning of
Section 7701(b)(1)(B) of the Code) who received no earned income (within
the meaning of Section 911(d)(2) of the Code) from the Employer which
constitutes income from sources within the United States (within the
meaning of Section 861(a)(3) of the Code).
C. Acquired Employees
Employees who became Employees as the result of a transaction under
Section 410(b)(6)(C) of the Code. Such Employees will be excluded during
the period beginning on the date of the transaction and ending on the
last day of the first Plan Year beginning after the date of the
transaction. A transaction under Section 410(b)(6)(C) of the Code is an
asset or stock acquisition, merger, or similar transaction involving a
change in the employer of the employees of a trade or business.
2.02 PLAN ENTRY
A. Plan Restatement
If this Plan is a replacement of a Prior Plan by 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. Effective Date
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 of the Plan as of such date. After the Effective Date, each
Employee shall become a Participant on the first Entry Date coincident
with or following the date the Employee satisfies the eligibility
requirements of Section 2.01 of the Plan unless otherwise indicated in
the Adoption Agreement.
C. Notification
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. Such notification shall be in writing (or any other form permitted under rules promulgated by the IRS or DOL).
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 of the Plan.
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 coincident with or following the date he or she satisfies those requirements unless otherwise indicated in the Adoption Agreement.
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 five 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 on the first Entry Date coincident with or following the date of 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 on the first Entry Date coincident with or following the date of 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
Except as otherwise indicated in the Adoption Agreement, the Employer will contribute an amount to be determined from year to year. If this Plan is a profit sharing plan, the Employer may, 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 -- Except as otherwise indicated in the Adoption Agreement, Employer Profit Sharing Contributions shall be allocated to all Qualifying Participants pursuant to a pro rata allocation formula. Under the pro rata allocation formula, Employer Contributions shall be allocated to the Individual Accounts of Qualifying Participants in the ratio that each Qualifying Participant's Compensation for the Plan Year bears to the total Compensation of all Qualifying Participants for the Plan Year. 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. Notwithstanding the foregoing, Employer Profit Sharing Contributions, Employer Money Purchase Pension Contributions and Employer Target Benefit Pension Contributions shall be allocated to the Plan on behalf of each Participant who has incurred a Disability and who is not a Highly Compensated Employee if so specified in the Adoption Agreement.
Any Employer Contribution for a Plan Year must satisfy Section 401(a)(4) of the Code and the Income Tax Regulations thereunder for such Plan Year.
2. Special Rules for Integrated Plans -- In the event the Adopting Employer has selected an integrated allocation formula in the Adoption Agreement, subject to the overall permitted disparity limits, Employer Profit Sharing Contributions shall be allocated as follows (the Employer may start with Step 3 if this Plan is not top-heavy).
Step 1. Employer Profit Sharing Contributions shall first be allocated
pro rata to Qualifying Participants in the manner described in
Section 3.01(B)(1) of the Plan. The percent so allocated shall
not exceed three percent of each Qualifying Participant's
Compensation.
Step 2. Any Employer Profit Sharing Contributions remaining after the allocation in Step 1 shall be allocated to each Qualifying Participant's Individual Account in the ratio that each Qualifying Participant's Compensation for the Plan Year in excess of the integration level bears to all Qualifying Participants' Compensation in excess of the integration level, but not in excess of three percent of each Qualifying Participant's Compensation.
Step 3. Any Employer Profit Sharing Contributions remaining after the allocation in Step 2 shall be allocated to each Qualifying Participant's Individual Account in the ratio that the sum of each Qualifying Participant's total Compensation and Compensation in excess of the integration level bears to the sum of all Qualifying Participants' total Compensation and Compensation in excess of the integration level, but not in excess of the profit sharing maximum disparity rate as described in this Section 3.01(B)(2) of the Plan.
Step 4. Any Employer Profit Sharing Contributions remaining after the allocation in Step 3 shall be allocated pro rata to Qualifying Participants in the manner described in this Section 3.01(B)(1) of the Plan.
If the Adopting Employer has selected the integrated contribution or allocation formula in the Adoption Agreement, the integration level shall be defined in the Adoption Agreement. The maximum disparity rate shall be determined in accordance with the following table.
MAXIMUM DISPARITY RATE
Nonstandardized
Money Top-Heavy and Non-Top-Heavy
Integration Level Purchase Profit Sharing Profit Sharing
-------------------------------------------------------------- -------- -------------- -----------------
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not morethan 20 percent of TWB 5.7% 2.7% 5.7%
More than 20 percent of TWB butnot more than 80 percent of TWB 4.3% 1.3% 4.3%
More than 80 percent of TWBbut not more than TWB 5.4% 2.4% 5.4%
|
Annual overall permitted disparity limit: Notwithstanding the preceding paragraphs, for any Plan Year this Plan benefits any Participant who benefits under another qualified plan or simplified employee pension, as defined in Section 408(k) of the Code, maintained by the Employer that provides for permitted disparity (or imputes disparity), if this is a profit sharing plan, Employer Profit Sharing Contributions and forfeitures shall be allocated to the account of each Qualifying Participant in the ratio that such Qualifying Participant's total Compensation bears to the total Compensation of all Qualifying Participants. If this Plan is a money purchase pension plan, Employer Money Purchase Pension Contributions shall be made to the account of each Qualifying Participant in an amount equal to the excess contribution percentage multiplied by the Participant's total Compensation.
Cumulative permitted disparity limit: Effective for Plan Years beginning on or after January 1, 1995, the cumulative permitted disparity limit for a Participant is 35 total cumulative permitted disparity years. Total cumulative permitted years means the number of years credited to the Participant for allocation or accrual purposes under this Plan, any other qualified plan or simplified employee pension plan (whether or not terminated) ever maintained by the Employer. For purposes of determining the Participant's cumulative permitted disparity limit, all years ending in the same calendar year are treated as the same year. If the Participant has not benefited under a defined benefit or target benefit plan for any year beginning on or after January 1, 1994, the Participant has no cumulative disparity limit.
Compensation shall mean compensation as defined in Definition section of the Plan.
3. Special Rules for Government Contract Plans -- If this is a nonstandardized plan and the Employer so indicates on the Adoption Agreement, for each Hour of Service of covered employment under a government contract, the Employer shall contribute to the Plan such amounts for each Qualifying Participant as determined by the hourly rate designated for each Qualifying Participant's work classification on the wage determination sheet, or part thereof, as determined by the Employer pursuant to the terms of the contracts to which the Employer is a party and which are subject to the provisions of any federal, state or municipal prevailing wage law to which the Employer is a party.
4. Minimum Coverage Test -- Unless otherwise specified by the Adopting Employer in the Adoption Agreement, this paragraph shall apply to any nonstandardized Plan if, for any Plan Year, the Plan fails to satisfy the ratio percentage test described in Section 410(b)(1) of the Codes as of the last day of any such Plan Year. The ratio percentage test is satisfied if on the last day of the Plan Year, taking into account all employees, or former employees who were employed by the Employer on any day during the Plan Year, either the Plan benefits at least 70 percent of Employees who are not Highly
Compensated Employees or the Plan benefits a percentage of Employees who are not Highly Compensated Employees which is at least 70 percent of the percentage of Highly Compensated Employees benefiting under the Plan. If the Plan fails the ratio percentage test, the Employer Contribution for the Plan Year will be allocated to Participants in the first class of Participants set forth below. If the Plan still fails, then the Employer Contribution will also be allocated to Participants in the next class and each succeeding class until the Plan satisfies the minimum coverage requirements. A class shall be covered only if necessary to satisfy those requirements. The classes, in order of priority, are as follows:
a. Participants who are still employed on the last day of the Plan year who have completed 90 percent of the number of Hours of Service to otherwise be a Qualifying Participant or Qualifying Contributing Participant, if applicable;
b. Participants who are still employed on the last day of the Plan Year who have completed 80 percent of the number of Hours of Service to otherwise be a Qualifying Participant or Qualifying Contributing Participant, if applicable;
c. Participants who are still employed on the last day of the Plan Year who have completed 70 percent of the number of Hours of Service to otherwise be a Qualifying Participant or Qualifying Contributing Participant, if applicable;
d. Participants who are still employed on the last day of the Plan Year who have completed 60 percent of the number of Hours of Service to otherwise be a Qualifying Participant or Qualifying Contributing Participant, if applicable;
e. Participants who are still employed on the last day of the Plan year who have completed 50 percent of the number of Hours of Service to otherwise be a Qualifying Participant or Qualifying Contributing Participant, if applicable;
f. Any Participant still employed on the last day of the Plan Year;
g. Participants who are not employed on the last day of the Plan Year because the Participant has died, incurred a Disability or attained Normal Retirement Age;
h. Participants who are not employed on the last day of the Plan Year who have completed at least 1,000 Hours of Service during the Plan Year;
i. Participants who are not employed on the last day of the Plan Year who have completed at least 750 Hours of Service for the Plan Year;
j. Participants who are not employed on the last day of the Plan Year who have completed at least 500 Hours of Service for the Plan Year.
If the minimum coverage test is performed after any Employer
Contribution has been allocated and the Plan fails the minimum coverage
test, the Employer shall make an additional contribution to the Plan on
behalf of those Participants that are entitled thereto pursuant to items
a through j above. The amount of the contribution for such Participants
shall be determined pursuant to the Plan's allocation formula.
Notwithstanding the foregoing, if the Adopting Employer so provides in
the Adoption Agreement, the ADP Test Safe Harbor Contributions will be
made to the defined contribution plan indicated in the Adoption
Agreement. However, such contributions will be made to this Plan unless
(i) each Eligible Employee under this Plan is also eligible under the
other plan and (ii) the other plan has the same Plan Year as this Plan.
5. Special Rule for Owner-Employees -- If this Plan provides contributions or benefits for one or more Owner-Employees, contributions on behalf of any Owner-Employee may be made only with respect to the Earned Income of such Owner-Employee which is derived from the trade or business with respect to which the Plan is established.
C. Allocation of Forfeitures
Forfeitures for a Plan Year which arise as a result of the application
of Sections 4.01(C) or 4.01(D) of the Plan may be, at the Employer's
discretion, applied first to the payment of the Plan's administrative
expenses in accordance with Section 7.04 of the Plan or applied to the
restoration of Participant's Individual Accounts pursuant to
Section 4.01(C)(3) of the Plan. Any remaining Forfeitures shall be
allocated as follows:
1. Profit Sharing Plan -- If this is a profit sharing plan, unless the Adoption Agreement indicates otherwise, Forfeitures shall be used to reduce Employer Contributions.
2. 401(k) Profit Sharing Plan -- If this is a 401(k) profit sharing plan, unless the Adoption Agreement indicates otherwise, Forfeitures of Employer Profit Sharing Contributions, Matching Contributions and Excess Aggregate Contributions shall be used to reduce Employer Contributions.
3. Money Purchase Pension Plan and Target Benefit Pension Plan -- If this Plan is a money purchase pension plan or a target benefit pension plan, unless the Adoption Agreement indicates otherwise, Forfeitures shall be applied toward the reduction of Employer Money Purchase Pension Contributions or Employer Target Benefit Pension Contributions to the Plan.
Forfeitures must be applied as of the last day of the Plan Year in which the Forfeitures arose or, if necessary, the last day of the Plan Year following the Plan Year in which the Forfeiture arose. Notwithstanding the foregoing, Forfeitures must be applied in a uniform and nondiscriminatory manner if applied either to the payment of the Plan's administrative expenses or to the restoration of a Participants Individual Accounts pursuant to Section 4.01(C)(3) of the Plan.
D. Timing of Employer Contribution
Unless otherwise specified in the Plan, 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. Notwithstanding the foregoing, Employer Contributions made by an Employer that is exempt from Federal income tax under Section 501(a) of the Code, shall be delivered to the Trustee (or Custodian, if applicable) no later than the 15th day of the sixth calendar month following the close of the taxable year (or fiscal year, if no taxable year) with or within which the particular Limitation Year ends.
E. Minimum Allocation for Top-Heavy Plans
The contribution and allocation provisions of this Section 3.01(E) of the Plan 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 three percent 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 Key Employee's Compensation, as limited by
Section 401(a)(17) of the Code, allocated on behalf of any Key Employee for that year. The minimum allocation is determined without regard to any Social Security contribution. The Adopting Employer may, in the Adoption Agreement, limit the Participants who are entitled to receive the minimum allocation to those Employees who are not Key Employees. Notwithstanding the foregoing, if the Employer maintains a defined benefit plan in addition to this Plan and specifies in the Adoption Agreement that the minimum allocation will be made to this Plan, then except as provided in (3) and (4) below, Employer Contributions and Forfeitures allocated on behalf of any Participant who is not a Key Employee shall not be less than 5 percent of such Participant's Compensation. For purposes of the preceding sentences, the largest percentage of Employer Contributions and Forfeitures as a percentage of each Key Employee's Compensation shall be determined by Elective Deferrals as Employer Contributions. 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 provided in the Definitions Section of the Plan
as limited by Section 401(a)(17) of the Code and, for Limitation
Years beginning after December 31, 1997, shall include any amounts
contributed by the Employer pursuant to a salary reduction agreement
and which is not includible in gross income under Sections 402(g),
125, 132(f)(4) or 457 of the Code. For purposes of this
Section 3.01(E)(2), such amounts were excluded for Limitation Years
beginning prior to January 1, 1998.
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 Adopting 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
Section 416(b) of the Code) may not be forfeited under
Section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
6. Neither Elective Deferrals, nor Matching Contributions may be taken
into account for purposes of satisfying the minimum allocation
requirement applicable to Top-Heavy Plans described in
Section 3.01(E) of the Plan. Qualified Nonelective Contributions may,
however, be taken into account for such purposes.
F. Special Requirements for Paired Plans
The Employer maintains paired plans if the Employer has adopted 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.
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 of the Income Tax Regulations.
2. Only One Plan Can Be Integrated -- If the Employer maintains paired plans, only one of the Plans may provide for the disparity in contributions which is permitted under Section 401(l) of the Code. In the event that both Adoption Agreements provide for such integration, only the money purchase pension plan shall be deemed to be integrated.
G. Return of the Employer Contribution to the Employer Under Special Circumstances
Any contribution made by the Employer because of a mistake of fact must be returned to the Employer within one year of the contribution.
In the event that the Commissioner of Internal Revenue determines that the Plan is not initially qualified under the Code, any contributions made incident to that initial qualification by the Employer must be returned to the Employer within one year after the date the initial qualification is denied, but only if the application for qualification is made by the time prescribed by law for filing the Employer's return for the taxable year in which the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe.
In the event that a contribution made by the Employer under this Plan is conditioned on deductibility and is not deductible under Section 404 of the Code, the contribution, to the extent of the amount disallowed, must be returned to the Employer within one year after the deduction is disallowed.
If applicable, no contract will be purchased under the Plan unless such contract or a separate definite written agreement between the Employer and the insurer provides that no value under contracts providing benefits under the Plan or credits determined by the insurer (on account of dividends, earnings, or other experience rating credits, or surrender or cancellation credits) with respect to such contracts may be paid or returned to the Employer or diverted to or used for other than the exclusive benefit of the Participants or their Beneficiaries. However, any contribution made by the Employer because of a mistake of fact must be returned to the Employer within one year of the contribution.
3.02 CERTAIN ONE-TIME IRREVOCABLE ELECTIONS
This Section 3.02 of the Plan applies where the Adopting Employer has indicated in the nonstandardized Adoption Agreement that an Employee may make a one-time 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 potential 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 3.02 are not treated as made pursuant to a cash or deferred election, are not Elective Deferrals and are not includible in an Employee's Compensation. Such contributions shall be treated as Employer Profit Sharing Contributions.
The Plan Administrator shall establish such uniform and nondiscriminatory procedures as it deems necessary or advisable to administer this provision.
3.03 ROLLOVER CONTRIBUTIONS
Unless otherwise indicated in the Adoption Agreement, an Employee may contribute a rollover contribution to the Plan. The Plan Administrator may require the Employee to certify, either in writing or in any other form permitted under rules promulgated by the IRS and DOL, 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 contributed to the Plan, the Plan Administrator shall direct that any ineligible amounts, plus earnings or losses attributable thereto (determined in the manner described in Section 7.02(B) of the Plan) 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 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 7.02(B) of the Plan. Where the Adoption Agreement does not permit Employer designation with respect to rollover contributions, 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
Unless otherwise indicated in the Adoption Agreement, the Trustee (or Custodian, if applicable) may receive any amounts transferred to it in the name of an Employee from the trustee or custodian of another plan qualified under Section 401(a) of the Code. 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 or losses attributable thereto (determined in the manner described in Section 7.02(B) of the Plan) 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, if applicable, 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 7.02(B) of the Plan. Where the Adoption Agreement does not permit Employer designation with respect to transfer contributions, the Employer may, in a uniform and nondiscriminato-ry manner, only allow Employees who have become Participants in the Plan to make transfer contributions. Notwithstanding the foregoing, an Employee's separate account established solely on account of an event described in Section 414(l) of the Code shall continue to be subject to the Plan's vesting schedule except as otherwise provided therein. If transfers occurring on or after January 1, 2002, are associated with distributable events and the Employees are eligible to receive single sum distributions consisting entirely of Eligible Rollover Contributions, the transfers will be considered Direct Rollovers.
3.05 DEDUCTIBLE EMPLOYEE CONTRIBUTIONS
The Plan Administrator will not accept Deductible Employee Contributions that are made for a taxable year beginning after December 31, 1986. Contributions made prior to that date will be maintained in a separate account. The account will share in the gains and losses of the Fund in the same manner as described in Section 7.02(B) of the Plan.
3.06 ELECTIVE DEFERRALS
Each Employee who satisfies the eligibility requirements specified in the Adoption Agreement for Elective Deferrals may begin making Elective Deferrals to the Plan by enrolling as a Contributing Participant.
A. Requirements To Enroll As A Contributing Participant
Each Employee who satisfies the eligibility requirements specified in
the Adoption Agreement for Elective Deferrals may enroll as a
Contributing Participant on the first Entry Date coincident with or
following the date the Employee satisfies the eligibility requirements,
or if applicable, the first Entry Date following the date on which the
Employee returns to the eligible class of Employees pursuant to
Section 2.03 of the Plan. A Participant who wishes to enroll as a
Contributing Participant must deliver (either in writing or in any other
form permitted by the IRS and the DOL) a salary reduction agreement (or
agreement to make Nondeductible Employee Contributions) with the Plan
Administrator except as set forth in Section 3.06(E) of the Plan below.
Notwithstanding the times set forth in Section 3.06(A) of the Plan 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 Adopting Employer has indicated in the Adoption Agreement that Participants may make separate deferral elections with respect to bonuses, Participants shall be afforded a reasonable period of time prior to the issuance of such bonuses to elect to defer all or part of them into the Plan. Such an election to defer all or part of a bonus shall be independent of any other salary reduction agreement and shall not constitute a modification to any pre-existing salary reduction agreement.
Notwithstanding anything in this Plan to the contrary, the Employer shall deliver Elective Deferrals to the Trustee (or Custodian, if applicable) as soon as such contributions can reasonably be segregated from the general assets of the Employer. In no event, however, shall Elective Deferrals be delivered to the Trustee (or Custodian, if applicable) later than the 15th business day of the month following the month in which the Elective Deferrals would otherwise have been payable to a Participant in cash or such other period determined under rules promulgated by the DOL.
B. 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. Except as otherwise provided in the Adoption Agreement, such modification may only be made as of the first day of the Plan Year and the first day of the seventh month of the Plan Year, or as of any other more frequent date(s) if the Plan Administrator so permits in a uniform and nondis-criminatory manner. A Contributing Participant who desires to make such a modification shall complete and deliver (either in writing or in any other form permitted by the IRS and the DOL) a new salary reduction agreement (or agreement to make Nondeductible Employee Contributions to the Plan Administrator). The Plan Administrator may prescribe such uniform and nondiscriminatory rules it deems appropriate to carry out the terms of this Section 3.06(B) of the Plan.
C. Ceasing Elective Deferrals
Except as otherwise provided in the Adoption Agreement, a Participant may cease Elective Deferrals (or Nondeductible Employee Contributions) and thus withdraw as a Contributing
Participant as of the first day of the Plan Year and the first day of the seventh month of the Plan Year 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 notice of withdrawal to the Plan Administrator at least 30 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 on account of termination of the Plan. Notwithstanding anything in this Plan to the contrary, each Employee who has entered into a salary reduction agreement under a SIMPLE 401(k) Plan may terminate such agreement at any time during the Year.
D. Return As A Contributing Participant After Ceasing Elective Deferrals
Except as otherwise provided in the Adoption Agreement, a Participant who has withdrawn as a Contributing Participant under Section 3.06(C) of the Plan (or because the Participant has taken a hardship withdrawal pursuant to Section 5.01(A)(6) of the Plan) may not again become a Contributing Participant until the first day of the Plan Year and the first day of the seventh month of the Plan Year following such withdrawal, unless the Plan Administrator, in a uniform and nondiscriminatory manner, permits withdrawing Participants to resume their status as Contributing Participants sooner (provided that Participants who take withdrawals pursuant to Section 5.01(A)(6) of the Plan shall be subject to the conditions of that Section).
E. Automatic Elective Deferrals
Each Employee who satisfies the eligibility requirements specified in the Adoption Agreement for Elective Deferrals will be given a reasonable opportunity to enroll as a Contributing Participant. Notwithstanding the foregoing, if the Adopting Employer has so indicated in the Adoption Agreement, eligible Employees who fail to provide the Employer a salary reduction agreement indicating either (1) their desire not to make Elective Deferrals, or (2) the amount or percentage of Compensation to be deferred, will automatically have the amount or percentage of Compensation listed in the Adoption Agreement withheld from their Compensation and contributed as an Elective Deferral. Elective Deferrals for such Contributing Participant shall continue at the rate specified in the Adoption Agreement until the Contributing Participant provides the Employer a salary reduction agreement (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) to the contrary or unless the Employer reduces or ceases deferrals for such Participant pursuant to Section 3.13(B)(8) of the Plan. Contributions made pursuant to this Section 3.06(E) of the Plan shall be characterized as Elective Deferrals and not as Nondeductible Employee Contributions.
An Employer who chooses to utilize the automatic Elective Deferral feature described in this Section 3.06(E) of the Plan shall establish uniform and nondiscriminatory procedures designed to insure that each eligible Employee is provided the effective opportunity to make a salary deferral election. Such procedures shall include, but not be limited to, the means by which notice will be provided to each eligible Employee of his or her right to complete a salary reduction agreement specifying a different amount or percentage of Compensation (including no Compensation) to be contributed to the Plan and a reasonable period for completing such a salary reduction agreement.
F. Elective Deferrals to a SIMPLE 401(k) Plan
Notwithstanding anything to the contrary, if the Employer is an Eligible Employer and has established a SIMPLE 401(k) Plan, each Eligible Employee may deliver (either in writing or in any other form permitted by the IRS and the DOL) a salary reduction election and have
his or her Compensation reduced for the Year in any amount selected by the Employee subject to the limitation described below. The Employer will make Elective Deferral contributions to this Plan in the amount by which the Employee's Compensation has been reduced.
The total Elective Deferral contribution for the Year under this
Section 3.06(F) of the Plan cannot exceed $6,000 for any Employee. To
the extent permitted by law, this amount will be adjusted to reflect any
annual cost-of-living increases announced by the IRS. In addition to any
other election periods provided under the Plan, each Eligible Employee
in a SIMPLE 401(k) Plan may make or modify a salary reduction agreement
during the 60-day period immediately preceding each January 1.
For the Year an Employee becomes eligible to make Elective Deferral contributions under a SIMPLE 401(k) Plan, the 60-day election period requirement described above is deemed satisfied if the Employee may make or modify a salary reduction agreement during a 60-day period that includes either the date the Employee becomes eligible or the day before.
G. SIMPLE 401(k) Notice Requirements
The Employer will notify each Eligible Employee prior to the 60-day
election period described in Section 3.06(F) of the Plan that he or she
can complete a salary reduction agreement or modify a prior salary
reduction agreement during that period. The notification must indicate
whether the Employer will provide the three-percent Matching
Contribution or a two-percent nonelective contribution described in
Section 3.07 of the Plan.
H. ADP Test Safe Harbor Election Periods
In addition to any other election periods provided under the Plan, each Eligible Employee may make or modify a deferral election during the 30-day period immediately following receipt of the notice described in section 3.06(I). Notwithstanding the foregoing, the Employer may change the election periods described above pursuant to rules promulgated by the IRS.
I. ADP Test Safe Harbor Notice Requirement
At least 30 days, but not more than 90 days, before the beginning of the Plan Year, the Employer will provide each Eligible Employee a comprehensive notice of the Employee's rights and obligations under the Plan, written in a manner calculated to be understood by the average Eligible Employee. If an Employee becomes eligible after the 90th day before the beginning of the Plan Year and does not receive the notice for that reason, the notice must be provided no more than 90 days before the Employee becomes eligible but not later than the date the Employee becomes eligible. Notwithstanding the foregoing, the Employer may change this notice requirement pursuant to rules promulgated by the IRS.
3.07 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 and other 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. The Employer may make Matching Contributions at the same time as it contributes Elective Deferrals or at any other time as permitted by law and regulation. The proper Matching Contribution amount may be determined by the Employer at any time during a Plan Year, including, but not limited to, such time as Matching Contributions are delivered to the Trustee (or Custodian, if applicable).
Notwithstanding the foregoing, if an Eligible Employer has established a SIMPLE 401(k) Plan, the Employer will contribute a Matching Contribution to the plan on behalf of each Employee who makes an Elective Deferral contribution under Section 3.06(F) of the Plan. The amount of the Matching Contribution will be equal to the Employee's Elective Deferral contribution up to a limit of three percent of the Employee's Compensation for the full Year. In lieu of a Matching Contribution to a SIMPLE 401(k) Plan, however, the Employer may elect to contribute a nonelective contribution of two percent of Compensation for the full Year for each Eligible Employee who received at least $5,000 of Compensation (or such lesser amount as elected by the Employer in the Adoption Agreement) for the Year.
3.08 NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS
This Plan will not accept Nondeductible Employee Contributions and Matching Contributions thereon for Plan Years beginning after the Plan Year in which this Plan is adopted by the 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.
Notwithstanding the foregoing, if this Plan is subject to Section 401(k) of the Code and the Adopting Employer so allows in the Adoption Agreement, a Participant may contribute Nondeductible Employee Contributions to the Plan by enrolling as a Contributing Participant pursuant to the applicable provisions of Section 3.06 of the Plan. 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 any 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 of each Participant.
3.09 QUALIFIED NONELECTIVE CONTRIBUTIONS
The Employer may elect to make Qualified Nonelective Contributions under the Plan. The amount of such contribution to the Plan for each Plan Year, if any, shall be in an amount determined by the Employer. Unless another allocation formula is specified in the Adoption Agreement, Qualified Nonelective Contributions will be allocated to the Individual Accounts of non-Highly Compensated Employees who are Eligible Employees, in order of each Participant's Compensation, beginning with the Participant with the least amount of Compensation, until such Participant has reached his or her Maximum Permissible Amount. Notwithstanding the foregoing, no allocation shall be required in excess of the amount required to satisfy the Actual Deferral Percentage test, the Actual Contribution Percentage test or both.
If the current year testing rules apply to the Plan, in lieu of distributing Excess Contributions or Excess Aggregate Contributions as provided in Sections 5.16 and 5.17 of the Plan, the Employer may, if permitted in the Adoption Agreement, use all or any portion of the Qualified Nonelective Contributions to satisfy either the Actual Deferral Percentage test or the Actual Contribution Percentage test, or both, pursuant to regulations under the Code. If the prior year testing rules apply to the Plan and the Employer uses Qualified Nonelective Contributions to satisfy either the Actual Deferral Percentage test or the Actual Contribution Percentage test, or both, all Qualified Nonelective Contributions must be used for purposes of such tests.
3.10 QUALIFIED MATCHING CONTRIBUTIONS
The Employer may elect to make Qualified Matching Contributions under the Plan. Unless specified otherwise in the Adoption Agreement, the amount of such contribution to the Plan for each Plan Year, if any, shall be in an amount determined by the Employer. In addition, in
lieu of distributing Excess Contributions or Excess Aggregate Contributions as provided in Sections 5.16 and 5.17 of the Plan, the Employer may use Qualified Matching Contributions to satisfy either the Actual Deferral Percentage test or the Actual Contribution Percentage test, or both, pursuant to regulations under the Code.
Unless another allocation formula is specified in the Adoption Agreement, Qualified Matching Contributions, if made, shall be in an amount equal to that percentage of the Elective Deferrals of each non-Highly Compensated Employee which would be sufficient to cause the Plan to satisfy the Actual Contribution Percentage test and/or the Actual Deferral Percentage test, as applicable.
Notwithstanding anything in this Section to the contrary, all or any portion of the Qualified Matching Contributions may be included in the ADP and ACP tests if the Employer has elected to use the current year testing rules. If the prior year testing rules apply to the Plan and the Employer uses Qualified Matching Contributions to satisfy either the ADP or ACP test, or both, all Qualified Matching Contributions must be used for purposes of such tests.
3.11 OTHER LIMITATIONS ON SIMPLE 401(K) CONTRIBUTIONS
If the Employer has established a SIMPLE 401(k) Plan, no Employer or Employee contributions may be made to this Plan for the Year other than Elective Deferrals described in Section 3.06(F) of the Plan, Matching or nonelective contributions described in Section 3.07 of the Plan and rollover contributions described in Section 3.03 of the Plan.
3.12 LIMITATION ON ALLOCATIONS
A. If the Participant does not participate in, and has never participated
in another qualified plan maintained by the Employer, a welfare benefit
fund (as defined in Section 419(e) of the Code) maintained by the
Employer, an individual medical account (as defined in Section 415(l)(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 the Definitions Section of the Plan,
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 estimate 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 3.12(A)(3) of the Plan or as a result of the allocation of Forfeitures or a reasonable error in determining a Participant's maximum Elective Deferral or any other circumstance permitted under rules promulgated by the IRS, there is an Excess Annual Additions, the excess will be disposed of as follows.
a. Profit Sharing Plan -- If this Plan is a profit sharing plan, the Excess Annual Additions shall be deemed Forfeitures and shall be allocated in accordance with Section 3.01(C) of the Plan to all Qualifying Participants that have not reached their Annual Additions limit. If all Qualifying Participants have reached their Annual Additions limit before all Excess Annual Additions have been allocated, the remaining 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.
b. Money Purchase Pension Plan or Target Benefit Plan -- If this Plan is either a money purchase pension plan or a target benefit plan, Excess Annual Additions shall be held, unallocated, in a suspense account. The suspense account shall be used to offset future Employer Contributions made to Qualifying Participants in the next Limitation Year and succeeding Limitation Years if necessary.
c. 401(k) Profit Sharing Plan -- If this Plan is a 401(k) profit sharing plan, any Nondeductible Employee Contributions and Elective Deferrals, plus any income allocable thereto, shall be distributed to the Participant to the extent they would reduce the Excess Annual Additions. Income allocable to such Excess Annual Additions shall be computed in a manner consistent with the manner described in Section 7.02(B) of the Plan (i.e., the usual manner used by the Plan Administrator for allocating income or loss to Participants' Individual Accounts);
If, after distributing Nondeductible Employee Contributions (including any earnings thereon) and Elective Deferrals (including any earnings thereon), Excess Annual Additions still exist, the Excess Annual Additions attributable to Employer Profit Sharing Contributions shall be deemed Forfeitures and shall be allocated in accordance with Section 3.01(C) of the Plan to all Qualifying Participants that have not reached their Annual Additions limit. If all Qualifying Participants have reached their Annual Additions limit before all Excess Annual Additions have been allocated, the remaining 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.
If a suspense account is in existence at any time during a Limitation Year pursuant to this Section 3.12 of the Plan, it will 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 Annual Additions may not be distributed to Participants or former Participants.
B. This section applies if the Employer maintains or ever maintained another qualified plan (other than a paired standardized money purchase pension plan using the same Basic Plan Document as this Plan) in which any Participant in this Plan is (or was) a Participant or could become a Participant. This section also applies if the Employer maintains a welfare benefit fund (as defined in Section 419(e) of the Code), or an individual medical account (as defined in Section 415(l)(2) of the Code), under which amounts are treated as Annual Additions with respect to any Participant in this Plan.
1. 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 plan maintained by the Employer that provides an Annual Addition as defined in the Definitions Section of the Plan during any Limitation Year, the following rules apply.
a. 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 under the other qualified Master or Prototype Plans, welfare benefit funds, individual medical accounts and simplified employee pension plans 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 pension plans 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 pension plans 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.
b. 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 3.12(A)(2) of the Plan.
c. 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.
d. If, pursuant to Section 3.12(B)(1)(c) of the Plan or as a result of the allocation of Forfeitures or a reasonable error in determining a Participant's Elective Deferral or any other circumstance permitted under rules promulgated by the IRS a Participant's Annual Additions under this Plan and such other plans would result in an Excess Annual Additions for a Limitation Year, the Excess Annual Additions will be deemed to consist of the Annual Additions last allocated, except that Annual Additions attributable to a simplified employee pension plan 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.
e. If Excess Annual Additions were allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the Excess Annual Additions attributed to this Plan will be the product of:
(i) The total Excess Annual Additions allocated as of such date, times
(ii) 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 prototype defined contribution plans.
f. Any Excess Annual Additions attributed to this Plan will be disposed of in the manner described in Section 3.12(A)(4) of the Plan.
2. If the Participant is covered under another qualified defined contribution plan maintained by the Employer, other than a Master or Prototype Plan, the provisions of Section 3.12(B)(1)(a) through 3.12(B)(1)(f) of the Plan will apply as if the other plan were a Master or Prototype Plan. In the event this method is unadministerable due to conflicting language in the other plan, the Employer must provide, via a written addendum to the Plan, the method under which the plans will limit total Annual Additions to the Maximum Permissible Amount, and will properly reduce any Excess Annual Additions, in a manner that precludes Employer discretion.
3. For Limitation Years beginning before January 1, 2000, if the
Participant is or has ever been a participant in a defined benefit
plan maintained by the Employer, the following rule shall apply with
respect to satisfying the 1.0 limitation of Section 415(e) of the
Code. If the projected Annual Addition to this Plan to the account of
a Participant for any Limitation Year would cause the 1.0 limitation
of Section 415(e) of the Code to be exceeded, the annual benefit of
the defined benefit plan for such Limitation Year shall be reduced so
that the 1.0 limitation shall be satisfied. If it is not possible to
reduce the annual benefit of the defined benefit plan and the
projected Annual Addition to this Plan to the account of a
Participant for a Limitation Year would cause the 1.0 limitation to
be exceeded, the Employer shall reduce the Employer Contribution
which is to be allocated to this Plan on behalf of such Participant
so that the 1.0 limitation will be satisfied. (The provisions of
Section 415(e) of the Code are incorporated herein by reference under
the authority of Section 1106(h) of the Tax Reform Act of 1986.) As
an alternative, the Employer may provide, in the Adoption Agreement,
alternative language which will satisfy the 1.0 limitation. Such
alternative language must preclude Employer discretion.
Notwithstanding the foregoing, this Section 3.12(B)(3) of the Plan shall not apply to Plan Years beginning or after January 1, 2000.
C. The provisions of this Section 3.12 of the Plan shall apply to SIMPLE 401(k) contributions made pursuant to Sections 3.06(F) and 3.07 of the Plan.
3.13 ACTUAL DEFERRAL PERCENTAGE TEST (ADP)
A. Limits on Highly Compensated Employees
The Actual Deferral Percentage (hereinafter "ADP") for Participants who are Highly Compensated Employees for each Plan Year and the ADP for Participants who are non-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 ADP for Participants who are non-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 non-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 non-Highly Compensated Employees by more than two percentage points.
Effective for Plan Years beginning on or after January 1, 1997, the Plan must satisfy the ADP test using either the prior year testing or current year testing requirements described below. Notwithstanding the foregoing, the prior year testing method described below will apply to this Plan unless otherwise elected by the Employer.
3. Prior Year Testing -- The ADP for a Plan Year for Participants who are Highly Compensated Employees for each Plan Year and the prior year's ADP for Participants who were non-Highly Compensated Employees for the prior Plan Year must satisfy one of the following tests.
a. The ADP for a Plan Year for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the prior year's ADP for Participants who were non-Highly Compensated Employees for the prior Plan Year multiplied by 1.25; or
b. The ADP for a Plan Year for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the prior year's ADP for Participants who were non-Highly Compensated Employees for the prior 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 were non-Highly Compensated Employees in the prior Plan Year by more than two percentage points.
For the first Plan Year the Plan permits any Participant to make Elective Deferrals and this is not a successor Plan, for purposes of the foregoing tests, the prior year's non-Highly Compensated Employees' ADP shall be three percent unless the Adopting Employer has elected in the Adoption Agreement to use the actual Plan Year's ADP for these Participants.
4. Current Year Testing -- If the Plan is amended by the Employer to implement current year testing, the ADP tests in (a) and (b) above will be applied by comparing the current Plan Year's ADP for Participants who are Highly Compensated Employees with the current Plan Year's ADP for Participants who are non-Highly Compensated Employees. Once made, this election can only be changed if the Plan meets the requirements for changing to prior year testing set forth in IRS Notice 98-1 (or subsequent guidance provided by the IRS).
Notwithstanding the foregoing, the Plan shall be treated as meeting the ADP test if, within a reasonable period before any Plan Year, each Participant eligible to participate is given a notice (either in writing or in any other form permitted by Treasury regulations or other rules promulgated by the IRS) which satisfies the requirements of Section 401(k)(12)(D) of the Code and the Employer makes Matching Contributions or nonelective contributions pursuant to Sections 401(k)(12)(B) and (C) of the Code respectively.
B. Special Rules
1. A Participant is a Highly Compensated Employee for a particular Plan Year if he or she meets the definition of a Highly Compensated Employee in effect for that Plan Year. Similarly, a Participant is a non-Highly Compensated Employee for a particular Plan Year if he or she does not meet the definition of a Highly Compensated Employee in effect for that Plan Year.
2. 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 disaggregated under regulations under Section 401(k) of the Code.
3. 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 3.13(B)(3) of the Plan shall be applied
by determining the ADP of Participants as if all such Plans were a
single Plan. Any adjustments to the non-Highly Compensated Employee
ADP for the prior year will be made in accordance with IRS Notice
98-1 and any subsequent guidance provided by the IRS, unless the
Adopting Employer has elected in the Adoption Agreement to use the
current year testing method. Plans may be aggregated in order to
satisfy Section 401(k) of the Code only if they have the same Plan
Year and use the same ADP testing method.
4. For purposes of determining the ADP test, Elective Deferrals, Qualified Nonelective Contributions and Qualified Matching Contributions must be made before the end 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) the Employer may elect, in a uniform and nondiscriminatory manner, to either include all Qualified Matching Contributions in the ADP test or to include only the amount of such Qualified Matching Contributions that are needed to meet the ADP test.
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 or cease future 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. If the Plan Administrator requires Contributing Participants to reduce or cease making Elective Deferrals under this paragraph, the reduction or cessation shall begin with the Highly Compensated Employee with the largest amount of Elective Deferrals for the Plan Year on the date on which it is determined that the ADP test will not likely be satisfied. All remaining Highly Compensated Employees' Elective Deferrals for the Plan Year shall be limited to such amount. Notwithstanding the foregoing, if it is later determined that the ADP test for the Plan Year will be satisfied, Highly Compensated Employees shall be permitted to enroll as Contributing Participants in accordance with the terms of the Plan.
C. Notwithstanding the foregoing, the ADP test described above is treated as satisfied for any Year in which an Eligible Employer maintains this Plan as a SIMPLE 401(k) Plan.
3.14 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 non-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 non-Highly Compensated Employees for the 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 non-Highly Compensated Employees for the same Plan Year multiplied by 2.0, provided that the ACP for the Participants who are Highly Compensated Employees does not exceed the ACP for Participants who are non-Highly Compensated Employees by more than two percentage points.
Effective for Plan Years beginning on or after January 1, 1997, the Plan must satisfy the ACP test using either the prior year testing or current year testing requirements described below. Notwithstanding the foregoing, the prior year testing method described below will apply to this Plan unless otherwise elected in the Adoption Agreement by the Adopting Employer.
Prior Year Testing
The ACP for a Plan Year for Participants who are Highly Compensated Employees for each Plan Year and the prior year's ACP for Participants who were non-Highly Compensated Employees for the prior Plan Year must satisfy one of the following tests.
a. The ACP for a Plan Year for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the prior year's ACP for Participants who were non-Highly Compensated Employees for the prior Plan Year multiplied by 1.25; or
b. The ACP for a Plan Year for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the prior year's ACP for Participants who were non-Highly Compensated Employees for the prior Plan Year multiplied by 2.0, provided that the ACP for Participants who are Highly Compensated Employees does not exceed the ACP for Participants who were non-Highly Compensated Employees in the prior Plan Year by more than two percentage points.
For the first Plan Year, if this Plan permits any Participant to make Nondeductible Employee Contributions, provides for Matching Contributions or both, and this is not a successor Plan, for purposes of the foregoing tests, the prior year's non-Highly Compensated Employees' ACP shall be three percent unless the Employer has elected to use the Plan Year's ACP for these Participants.
Current Year Testing
If the Plan is amended by the Adopting Employer to implement current year testing, the ACP tests in (a) and (b), above, will be applied by comparing the current Plan Year's ACP for Participants who are Highly Compensated Employees for each Plan Year with the current Plan Year's ACP for Participants who are non-Highly Compensated Employees. Once made, this election can only be changed if the Plan meets the requirements for changing to prior year testing set forth in Notice 98-1 (or additional guidance provided by the IRS).
B. Special Rules
1. A Participant is a Highly Compensated Employee for a particular Plan Year if he or she meets the definition of a Highly Compensated Employee in effect for that Plan Year. Similarly, a Participant is a non-Highly Compensated Employee for a particular Plan Year if he or she does not meet the definition of a Highly Compensated Employee in effect for that Plan Year.
2. Multiple Use: Effective for Plan Years beginning on or after January 1, 1997, if one or more Highly Compensated Employees participate in both a cash or deferred arrangement (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 the ACP of those Highly Compensated Employees who also participate in a CODA will be reduced in the manner described in Section Five of the Plan so that the limit is not exceeded. The amount by which each Highly Compensated Employee's Contribution Percentage Amounts is reduced shall be treated as an Excess Aggregate Contribution. The ADP and ACP of the Highly Compensated Employees are determined after any corrections required to meet the ADP and ACP tests and are deemed to be the maximum permitted under such tests for the Plan Year. Multiple use does not occur if either the ADP and ACP of the Highly Compensated Employees does not exceed 1.25 multiplied by the ADP and ACP of the non-Highly Compensated Employees.
3. For purposes of this Section 3.14 of the Plan, 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 disaggregated under regulations
under Section 401(m) of the Code.
4. 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. Any adjustments to the non-Highly Compensated Employee
ACP for the prior year will be made in accordance with IRS Notice
98-1 and any additional guidance issued by the IRS, unless the
Employer has elected to use the current year testing method. Plans
may be aggregated in order to satisfy Section 401(m) of the Code only
if they have the same Plan Year and use the same ACP testing method.
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) the Employer may elect, in a uniform and nondiscriminatory manner, to either include all Qualified Nonelective Contributions in the ACP test or to include only the amount of such Qualified Nonelective Contributions that are needed to meet the ACP test.
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 may be prescribed by the Secretary of the Treasury) the Employer may elect, in a uniform and nondiscriminatory manner, to either include all Elective Deferrals in the ACP test or to include only the amount of such Elective Deferrals that are needed to meet the ACP test.
C. Notwithstanding the foregoing, the ACP test described above is treated as satisfied for any Year in which an Eligible Employer maintains this Plan as a SIMPLE 401(k) Plan.
3.15 SAFE HARBOR CODA
The provisions of this Section 3.15 may only be applied to Plan Years beginning on or after January 1, 1999.
A. ADP Test Safe Harbor Contributions
Unless the Adopting Employer elects in the Adoption Agreement to make
Enhanced Matching Contributions or Safe Harbor Nonelective
Contributions, the Employer will contribute for the Plan Year a Safe
Harbor Matching Contribution to the Plan on behalf of each Eligible
Employee equal to (i) 100 percent of the amount of the Employee's
Elective Deferrals that do not exceed three percent of the Employee's
Compensation for the Plan Year, plus (ii) 50 percent of the amount of
the Employee's Elective Deferrals that exceed three percent of the
Employee's Compensation but that do not exceed five percent of the
Employee's Compensation ("Basic Matching Contributions").
Notwithstanding the foregoing, if the Adopting Employer so provides in
the Adoption Agreement, the ADP Test Safe Harbor Contributions will be
made to the defined contribution plan indicated in the Adoption
Agreement. However, such contributions will be made to this Plan unless
(i) each Eligible Employee under this Plan is also eligible under the
other plan and (ii) the other plan has the same Plan Year as this Plan.
In addition, such contributions cannot be made with regard to permitted disparity under Section 401(1) of the Code.
B. ACP Test Safe Harbor Matching Contributions
In addition to the ADP Test Safe Harbor Contributions described in the Definition Section of the Plan, the Employer will make the ACP Test Safe Harbor Matching Contributions, if any, indicated in the Adoption Agreement for the Plan Year.
SECTION FOUR: VESTING AND FORFEITURES
4.01 DISTRIBUTIONS TO PARTICIPANTS
A. 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 4.01(B) of the Plan if the Plan is a Top-Heavy Plan). In the event that there is not a vesting schedule option provided in the Adoption Agreement, a Participant shall be fully Vested in his or her Individual Account at all times.
2. Other Contributions -- A Participant is fully Vested in his or her rollover contributions and transfer contributions, Deductible Employee Contributions and Nondeductible Employee Contributions and any earnings thereon. No Forfeiture will occur solely as a result of an Employee's withdrawal of such 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 as defined by rules promulgated by the IRS; 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). Notwithstanding the foregoing, the portion of a Participant's Individual Account attributable to Employer Profit Sharing Contributions, Employer Money Purchase Pension Contributions or Employer Target Benefit Pension Contributions which are made based on his or her imputed Compensation on account of incurring a Disability shall be fully Vested at all times. In the case of a partial termination, only those Participants who are affected by the partial termination of the Plan shall become fully Vested.
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.
5. SIMPLE 401(k) Exception -- Notwithstanding anything in this Plan to
the contrary, all benefits attributable to contributions described in
Section 3.06(F) and 3.07 of the Plan are nonforfeitable at all times,
and all previous contributions made under the Plan are
non-forfeitable as of the beginning of the Year in which the SIMPLE
401(k) Plan is adopted.
6. ADP Test Safe Harbor Contribution Exception -- Notwithstanding anything in this Plan to the contrary, all benefits attributable to ADP Test Safe Harbor Contributions shall be nonforfeitable at all times.
7. ACP Test Safe Harbor Matching Contributions -- Notwithstanding anything in this Plan to the contrary, ACP Safe Harbor Matching Contributions will be Vested as indicated in the Adoption Agreement, but, in any event, such contributions shall be fully Vested at Normal Retirement Age, upon the complete or partial termination of the Plan, or upon the complete discontinuance of Employer Contributions. Forfeitures of non-Vested ACP Test Safe Harbor Matching Contributions will be used to reduce the Employer's Contribution.
8. Government Contract Contributions -- Notwithstanding anything in this
Plan to the contrary, contributions made by an Employer pursuant to
Section 3.01(B)(3) of the Plan shall be nonforfeitable at all times.
A Participant shall not be fully Vested in his or her Individual
Account solely on account of a transaction described in
Section 414(l) of the Code except as otherwise provided therein.
B. 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 4.01 of the Plan or the non-top heavy vesting schedule selected (either affirmatively or by default) in the Adoption Agreement (unless those provisions or that schedule provide for more rapid vesting), unless elected otherwise in the Adoption Agreement, a Participant's Vested portion of his or her Individual Account attributable to Employer Contributions and Forfeitures shall be determined in accordance with the vesting schedule described below, provided that if the Adopting Employer elected a graded non-top-heavy vesting schedule in the Adoption Agreement, the six year graded schedule described below shall apply, and if the Adopting Employer elected a cliff non-top-heavy vesting schedule in the Adoption Agreement, the three year cliff schedule described below shall apply.
SIX YEAR GRADED THREE YEAR CLIFF
--------------------------------------------------- ---------------------------------------------------
Years of Years of
Vesting Service Vested Percentage Vesting Service Vested Percentage
------------------------ ------------------------ ------------------------ ------------------------
1 0 1 0
2 20 2 0
3 40 3 100
4 60
5 80
6 100
|
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 4.01(B) of the Plan 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 4.01(B) of the Plan.
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 7.06(D) of the Plan applies.
C. Termination of Employment
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 7.02(B) of the Plan. The disposition of such suspense account shall be as follows.
1. Cash-out of Certain Terminated Participants -- If the value of the Vested portion of such terminated Participant's Individual Account does not exceed $5,000, the Participant shall receive a distribution of the entire Vested portion of such Individual Account. For Plan Years beginning on or before August 5, 1997, $3,500 shall be substituted for $5,000 in the preceding sentence. The portion which is not Vested shall be
treated as a Forfeiture and applied in accordance with Section 3.01(C) of the Plan. 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.
2. Terminated Participants Who Elect to Receive Distributions -- If such
terminated Participant elects to receive a distribution of the Vested
portion of his or her Individual Account in accordance with
Section 5.02(B) of the Plan, the portion which is not Vested shall be
treated as a Forfeiture. Such Forfeiture shall be applied in
accordance with Section 3.01(C) of the Plan.
3. Re-employed Participants Who Received Distributions -- If such Participant receives or is deemed to receive a distribution pursuant to Section 4.01(C)(1) or (2) of the Plan and the Participant subsequently resumes employment, the Participant's Employer-derived Individual Account balance will be restored to the amount on the date of distribution if the Participant repays to the Plan the full amount of the distribution attributable to Employer Contributions before the earlier of:
a. Five years after the first date on which the Participant is subsequently re-employed by the Employer, or
b. The date the Participant incurs five consecutive Breaks in Vesting Service following the date of the distribution.
Any restoration of a Participant's Individual Account pursuant to
Section 4.01(C)(3) of the Plan shall be made from other Forfeitures,
income or gain to the Fund or contributions made by the Employer.
4. Re-employed Participants Who Did Not Receive Distributions -- If such Participant neither receives nor is deemed to receive a distribution pursuant to Section 4.01(C)(1) nor (2) of the Plan and the Participant returns to the service of the Employer before incurring five consecutive Breaks in Vesting Service, there shall be no Forfeiture. Rather, the amount in such suspense account shall be recredited to such Participant's Individual Account.
D. Forfeitures Following Five Consecutive Breaks in Vesting Service
If a Participant who has neither received a distribution nor has been deemed to receive a distribution incurs five consecutive Breaks in Vesting Service, the portion of the Participant's Individual Account which is not Vested shall be treated as a Forfeiture and applied in accordance with Section 3.01(C) of the Plan.
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 in accordance with the standard formula described below unless the Employer chooses, in a uniform and nondiscriminatory manner, to apply the alternative formula.
Standard Formula: X = P(AB + (R x D)) - (R x D) Alternative Formula: X = P(AB+D) - D
For purposes of the standard and alternative formulas described above, "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.
4.02 100 PERCENT VESTING OF 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 will be maintained for each Participant. Each account will be credited with the applicable contributions and earnings thereon.
4.03 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 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 3.12(A)(4)(c) of the Plan. Such Forfeitures shall be allocated in
accordance with Section 3.01(C) of the Plan.
When a Participant incurs a Termination of Employment, whether a Forfeiture arises with respect to Matching Contributions shall be determined in accordance with Section 4.01(C) of the Plan.
SECTION FIVE: DISTRIBUTIONS AND LOANS TO PARTICIPANTS
5.01 DISTRIBUTIONS
A. Distributable Events
1. Entitlement to Distribution -- The Vested portion of a Participant's
Individual Account attributable to Employer Contributions other than
those described in Section 5.01(A)(2) of the Plan 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. With respect to item
(1) above, if the Adoption Agreement does not allow an Employer to
specify distributable events, the Vested portion of a Participant's
Individual Account shall be distributable to the Participant upon the
Participant's Termination of Employment; the Participant's attainment of
Normal Retirement Age; the Participant's Disability; or the termination
of the Plan.
Notwithstanding the foregoing, the following rules shall apply with
respect to entitlement to distribution of rollover and transfer
contributions and Nondeductible Employee Contributions. Except as
otherwise provided in the Adoption Agreement, rollover and transfer
contributions and earnings thereon shall be subject to the Plan's
provisions governing distributions of either Employer Profit Sharing
Contributions (if this Plan is a profit sharing plan), Employer Money
Purchase Pension Contributions (if this Plan is a money purchase pension
plan) or Employer Target Benefit Pension Contributions (if this Plan is
a target benefit pension plan). However, to the extent that any optional
form of benefit under this Plan permits a distribution prior to the
Employee's retirement, death, Disability, attainment of Normal
Retirement Age 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 Code, to this Plan from a money purchase pension
plan or a target benefit pension plan qualified under Section 401(a) of
the Code (other than any portion of those assets and liabilities
attributable to voluntary employee contributions).
A Participant may, at any time and upon a request (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) submitted to the Plan Administrator withdraw an amount from his or her Individual Account attributable to Nondeductible Employee Contributions (including earnings thereon). In the event the portion of a Participant's Individual Account attributable to Nondeductible Employee Contributions experiences a loss such that the amount remaining in such subaccount is less than the amount of Nondeductible Employee Contributions made by the Participant, the maximum amount which the Participant may withdraw is an amount equal to the remaining Nondeductible Employee Contributions. Subject to Section 5.13 of the Plan, Joint and Survivor Annuity Requirements (if applicable), the Participant may withdraw any part of the Deductible Employee Contribution account by delivering an application (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) to the Plan Administrator.
2. Special Requirements For Certain 401(k) Contributions
Elective Deferrals, Qualified Nonelective Contributions, 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), a simplified employee pension plan (as defined in Section 408(k) of the Code), or a SIMPLE IRA Plan (as defined in Section 408(p) of the Code);
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 Code) 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 if so permitted in the Adoption Agreement; or
e. If the Adopting Employer has so elected in the Adoption Agreement, the hardship of the Participant as described in Section 5.01(A)(6) of the Plan.
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, which are triggered by either a, b or c above must be
made in a lump sum.
Notwithstanding the foregoing, ADP Test Safe Harbor Contributions may not be distributed earlier than separation from service, death, Disability, an event described in Section 401(k)(10) of the Code, or, in the case of a profit sharing plan, the attainment of age 59 1/2.
3. Withdrawal Request: When Distributed -- A Participant entitled to a distribution who wishes to receive a distribution must submit a request (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) to the Plan Administrator. If required in writing, 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 in the Adoption Agreement, then 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 a distribution; or
b. The close of the Plan Year in which the request is received.
Distributions will be made based on the value of the Vested portion of the Individual Account available at the time of actual distribution. To the extent the distribution request is for an amount greater than the Individual Account, the Trustee (or Custodian, if applicable) shall be entitled to distribute the entire Vested portion of the Individual Account.
4. Special Rules for Withdrawals During Service -- If this is a profit sharing plan, unless the Adoption Agreement provides otherwise, a Participant who is not otherwise eligible to receive a distribution of his or her Individual Account may elect to receive an in-service distribution of all or part of the Vested portion of his or her Individual Account attributable to Employer Contributions other than those described in Section 5.01(A)(2) of the Plan, subject to the requirements of Section 5.13 of the Plan and further subject to the following limits.
a. Participant for five or more years. An Employee who has been a Participant in the Plan for five or more years may withdraw up to the entire Vested portion of his or her Individual Account.
b. Participant for less than five years. Except as otherwise provided in the Adoption Agreement, an Employee who has been a Participant in the Plan for less than five years may withdraw only the amount which has been in his or her Individual Account attributable to Employer Contributions for at least two full Plan Years, measured from the date such contributions were allocated.
5. Special Rules for Hardship Withdrawals -- If this is a profit sharing
plan and the Adoption Agreement so provides, then notwithstanding
Section 5.01(A)(4) of the Plan, a Participant may elect to receive a
hardship distribution of all or part of the Vested portion of his or her
Individual Account attributable to Employer Contributions other than
those described in Section 5.01(A)(2) of the Plan, subject to the
requirements of Section 5.13 of the Plan.
For purposes of this Section 5.01(A)(5), hardship is defined as an immediate and heavy financial need of the Participant where such Participant lacks other available resources. Except as otherwise provided in the Adoption Agreement, financial needs considered immediate and heavy include, but are not limited to 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; the need to prevent the eviction of the Employee from, or a foreclosure on the mortgage of, the Employee's principal residence; or funeral expenses of a member of the Participant's family.
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 available 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).
6. Hardship Distribution of Elective Deferrals
a. General -- If the Adopting Employer has so elected in the Adoption
Agreement, distribution of Elective Deferrals including Qualified
Nonelective Contributions and Qualified Matching Contributions that
are treated as Elective Deferrals and any earnings credited to a
Participant's account as of the later of December 31, 1988, and 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 5.01(A)(6), 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
For purposes of determining whether a Participant has a hardship, rules similar to those described in Section 5.01(A)(5) of the Plan shall apply except that only the listed financial needs shall be considered, other than funeral expenses for a member of the Participant's family, which shall not be included. In addition, a distribution will be considered as necessary to satisfy an immediate and heavy financial need of the Employee only if:
1. 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;
2. 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.
7. One-Time In-Service Withdrawal Option -- If this is a profit sharing plan and the Adopting Employer has elected the one-time in-service withdrawal option in the Adoption
Agreement, then a Participant will be permitted only one in-service
withdrawal during the course of such Participant's 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 5.01(A)(4) of the Plan or the percentage of the Participant's
Individual Account specified by the Adopting Employer in the Adoption
Agreement. Distributions under this Section 5.01(A)(7) will be subject
to the requirements of Section 5.13 of the Plan.
8. 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, if applicable, to consent to a distribution while a benefit is immediately distributable, within the meaning of Section 5.02(B) of the Plan, shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy this Section 5.01(A)(8) of the Plan.
5.02 FORM OF DISTRIBUTION TO A PARTICIPANT
A. Value of Individual Account Does Not Exceed $5,000 - If the value of the Vested portion of a Participant's Individual Account does not qualify as an Eligible Rollover Distribution, 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. Except as otherwise provided in the Adoption Agreement, if the value of the Vested portion of a Participant's Individual Account qualifies as an Eligible Rollover Distribution, exceeds $1,000 but does not exceed $5,000, and the Participant fails to elect to receive his or her distribution from the Plan in either a single lump sum or a Direct Rollover to an Eligible Retirement Plan, payment shall be made in the form of a Direct Rollover to an individual retirement account within the meaning of either Section 408(a) or Section 408(b) of the Code. For purposes of the preceding sentence, the Plan Administrator will select an IRA trustee, custodian or issuer that is unrelated to the Employer, establish the individual retirement account with such trustee in accordance with rules promulgated by the IRS and make the initial investment choices for the such account. Notwithstanding the foregoing, if the Participant is re-employed by the Employer prior to the occurrence of the distribution, no distribution will be made under this paragraph.
B. Value of Individual Account Exceeds $5,000
1. If distribution in the form of a Qualified Joint and Survivor Annuity is required with respect to a Participant, either the value of the Participant's Vested Individual Account exceeds $5,000 or there are remaining payments to be made with respect to a particular distribution option that previously commenced, and the Individual Account is immediately distributable, the Participant must consent to any distribution of such Individual Account.
If distribution in the form of a Qualified Joint and Survivor Annuity is not required with respect to a Participant, the value of such Participant's Vested Individual Account exceeds $5,000, and the Individual Account is immediately distributable, the Participant and the Participant's Spouse (or where either the Participant or the Spouse has 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 (either in writing or in any other form permitted under
rules promulgated by the IRS and DOL) within the 90-day period ending
on the Annuity Starting Date. 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 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 which is either made in the form
of a Qualified Joint and Survivor Annuity or is made from a Plan
which meets the Retirement Equity Act safe harbor rules of
Section 5.13(E) of the Plan, 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.
3. General Rule -- This Section 5.02(B)(3) provides transitional rules with regard to the cash out limits for distributions made prior to the 90th day after publication of the Income Tax Regulations in the Federal Register.
a. Distributions Subject to Section 417 of the Code. If distribution
in the form of a Qualified Joint and Survivor Annuity is required
with regard to a Participant, the rule in this paragraph (a) is
substituted for the rule in the first sentence of
Section 5.02(B)(1). If the value of a Participant's Vested
Individual Account exceeds (or at the time of any prior
distribution (1) in Plan Years beginning before August 6, 1997,
exceeded $3,500 or (2) in Plan Years beginning after August 5,
1997, exceeded)
$5,000, and the Individual Account is immediately distributable, the Participant and the Participant's Spouse (or where either the Participant or the Spouse has died, the survivor) must consent to any distribution of such Individual Account.
b. Not subject to Section 417 of the Code. If distribution in the
form of a Qualified Joint and Survivor Annuity is not required
with respect to a Participant, the rule in this paragraph (b) is
substituted for the rule in the second sentence of
Section 5.02(B)(1).
If the value of a Participant's Vested Individual Account:
(1) For Plan Years beginning before August 6, 1997, exceeds $3,500 (or exceeded $3,500 at the time of any prior distribution),
(2) For Plan Years beginning after August 5, 1997, and for a distribution made prior to March 22, 1999, exceeds $5,000 (or exceeded $5,000 at the time of any prior distribution),
(3) And for Plan Years beginning after August 5, 1997 and for a distribution made after March 21, 1999, that either exceeds $5,000 or is a remaining payment under a selected optional form of payment that exceeded $5,000 at the time the selected payment began, and the Individual Account is immediately distributable, the Participant and the Participant's Spouse (or where either the Participant or the Spouse has died, the survivor) must consent to any distribution of such Individual Account.
C. Other Forms of Distribution to Participant
If the value of the Vested portion of a Participant's Individual Account exceeds $5,000 and the Participant has properly waived the Qualified Joint and Survivor Annuity, as described in Section 5.13 of the Plan, the Participant may request (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) 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 unless specified otherwise in the Adoption Agreement: (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 5.02 of the Plan to the
contrary, a Participant cannot elect payments in the form of a life
annuity if the Retirement Equity Act safe harbor rules of
Section 5.13(E) of the Plan apply.
5.03 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.
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 (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) 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 consent may not be obtained because there is no Spouse or the Spouse cannot be located, no consent shall be required. In addition, if the Spouse is legally incompetent to give consent, the Spouse's legal guardian, even if the guardian is the Participant, may give consent. If the Participant is legally separated or the Participant has been abandoned (within the meaning of local law) and the Participant has a court order to such effect, spousal consent is not required unless a Qualified Domestic Relations Order provides otherwise. 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 Spouse, or, where no Spouse exists, to the Participant's estate. If the Beneficiary is a minor, distribution will be deemed to have been made to such Beneficiary if the portion of the Participant's Individual Account to which the Beneficiary is entitled is paid to his or her legal guardian or, if applicable, to his or her custodian under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act.
C. Withdrawal Request: When Distributed
A Beneficiary of a deceased Participant entitled to a distribution who wishes to receive a distribution must submit a request (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) to the Plan Administrator. If required in writing, 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 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.
5.04 FORM OF DISTRIBUTION TO BENEFICIARIES
A. Value of Individual Account Does Not Exceed $5,000
If the value of the Vested portion of a Participant's Individual Account
does not qualify as an Eligible Rollover Distribution, 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. Except as otherwise
provided in the Adoption Agreement, if the value of the Vested portion
of a Participant's Individual Account qualifies as an Eligible Rollover
Distribution, exceeds $1,000 but does not exceed $5,000, and the
Beneficiary(ies) fails to elect to receive his or her distribution from
the Plan in either a single lump sum or a Direct Rollover to an Eligible
Retirement Plan, payment shall be made in the form of a Direct Rollover
to an individual retirement account within the meaning of either
Section 408(a) or Section 408(b) of the Code if the Beneficiary
qualifies as a Recipient under the Plan. For purposes of the preceding
sentence, the Plan Administrator will select an IRA trustee, custodian
or issuer that is unrelated to the Employer, establish the individual
retirement account with such trustee in accordance with rules
promulgated by the IRS and make the initial investment choices for the
such account.
B. Value of Individual Account Exceeds $5,000
If the value of the Vested portion of a Participant's Individual Account exceeds $5,000, the
preretirement survivor annuity requirements of Section 5.13 of the Plan
shall apply unless waived in accordance with that Section 5.13 of the
Plan or unless the Retirement Equity Act safe harbor rules of
Section 5.13(E) of the Plan apply. However, a surviving Spouse
Beneficiary may elect any form of payment allowable under the Plan in
lieu of the prere-tirement survivor annuity. Any such payment to the
surviving Spouse must meet the requirements of Section 5.05 of the Plan.
C. Other Forms of Distribution to Beneficiary
If the value of a Participant's Individual Account exceeds $5,000, and the Participant has properly waived the preretirement survivor annuity, as described in Section 5.13 of the Plan (if applicable), or if the Beneficiary is the Participant's surviving Spouse, the Beneficiary may, subject to the requirements of Section 5.05 of the Plan, request (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) that the Participant's Individual Account be paid in any form of distribution permitted to be taken by the Participant under this Plan other than applying the Individual Account toward the purchase of an annuity contract. Notwithstanding the foregoing, installment payments to a Beneficiary cannot be made over a period exceeding the Life Expectancy of such Beneficiary.
5.05 DISTRIBUTION REQUIREMENTS
A. General Rules
1. Subject to Section 5.13 of the Plan, 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 Section 5.13 of the Plan apply to calendar years beginning after December 31, 1984.
2. All distributions required under this Section 5.05 of the Plan shall
be determined and made in accordance with the Proposed Income Tax
Regulations under Section 1.401(a)(9), including the minimum
distribution incidental benefit requirement of Section 1.401(a)(9)-2
of such regulations. Unless otherwise indicated in the Adoption
Agreement, with respect to distributions under the Plan made in
calendar years beginning on or after January 1, 2001, the Plan will
apply the minimum distribution requirements of Section 401(a)(9) of
the Code in accordance with the regulations under Section 401(a)(9)
that were proposed in January 2001, notwithstanding any provision of
the Plan to the contrary. The January 1, 2001 proposed regulations
shall continue in effect until the end of the last calendar year
beginning before the effective date of final regulations under
Section 401(a)(9) or such other date specified in guidance published
by the Internal Revenue Service.
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 percent 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 5.05(D)(1)(a) of the Plan above as the relevant divisor
without regard to Section 1.401(a)(9)-2 of the Proposed Income
Tax Regulations.
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.
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 5.05(E)(2) of the Plan 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 5.05(E)(2) of the Plan, 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 5.05(E)(2) of the Plan above, if the surviving Spouse dies after the Participant, but before payments to such Spouse begin, the provisions of Section 5.05(E)(2) of the Plan, with the exception of paragraph (b) therein, shall be applied as if the surviving Spouse were the Participant.
4. For purposes of this Section 5.05(E) of the Plan, 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 5.05(E) of the Plan, distribution of a Participant's interest is considered to begin on the Participant's Required Beginning Date (or, if Section 5.05(E)(3) of the Plan above is applicable, the date distribution is required to begin to the surviving Spouse pursuant to Section 5.05(E)(2) of the Plan 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. Transitional Rule
1. Notwithstanding the other requirements of this Section 5.05 of the Plan and subject to the requirements of Section 5.13 of the Plan, Joint and Survivor Annuity Requirements, distribution on behalf of any Employee, including a five-percent 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.
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 5.05(F)(1)(a) and (e) of the Plan.
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
an election made under Section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act of 1982. 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 Section 1.401(a)(9), Q&A J-2 and
Q&A J-3 of the Proposed Income Tax Regulations shall apply.
5.06 ANNUITY CONTRACTS
Any annuity contract distributed under the Plan (if permitted or required by this Section Five) 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.
5.07 DISTRIBUTIONS IN KIND
The Plan Administrator may, but need not, 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.
5.08 DIRECT ROLLOVERS OF ELIGIBLE ROLLOVER DISTRIBUTIONS
Notwithstanding any provision of the Plan to the contrary that would otherwise limit a
Recipient's election under this Section 5.08 of the Plan, a Recipient 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 (or such lesser amount if the Plan Administrator permits in a
uniform and nondiscriminatory manner) paid directly to an Eligible
Retirement Plan (including an individual retirement account described in
Section 408(a) or 408(b)of the Code provided by the Prototype Sponsor)
specified by the Recipient in a Direct Rollover.
5.09 PROCEDURE FOR MISSING PARTICIPANTS OR BENEFICIARIES
If a benefit is forfeited because the participant or beneficiary cannot be found, such benefit will be reinstated if a claim is made by the participant or beneficiary.
In the event the Plan is terminated, payments must be made in a manner that protects the benefit rights of a Participant or Beneficiary. Benefit rights shall be deemed to be protected if the amount in a Participant's or Beneficiary's Individual Account is placed into an individual retirement account, used to purchase an annuity contract, or transferred to another qualified retirement plan. Benefit rights need not, however, be protected if an Individual Account becomes subject to state escheat laws or if a payment is made to satisfy Section 401(a)(9) of the Code.
5.10 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 request (either in writing or in any other form permitted under rules promulgated by the IRS and DOL and acceptable to the Plan Administrator) with the Plan Administrator. If such request is required in writing, such request must be made on a form 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.
5.11 DENIAL OF A 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 notice (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) of the denial within 90 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.
5.12 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 (or in any other form permitted by the IRS or DOL). 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 5.11 of the Plan. 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.
5.13 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 Service with the Employer on or after
August 23, 1984, and such other Participants as provided in
Section 5.13(F) of the Plan.
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. 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 an explanation (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) 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.
Effective for distributions made on or after January 1, 1997, the Annuity Starting Date for a distribution in a form other than a Qualified Joint and Survivor Annuity may be less than 30 days after receipt of the explanation described in the preceding paragraph provided (a) the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider whether to waive the Qualified Joint and Survivor Annuity and elect (with spousal consent) a form of distribution other than a Qualified Joint and Survivor Annuity; (b) the Participant is permitted to revoke any affirmative distribution election at least until the annuity starting date or, if later, at any time prior to the expiration of the seven-day period that begins the day after the explanation of the Qualified Joint and Survivor Annuity is provided to the Participant; and (c) the annuity starting date is a date after the date that the explanation was provided to the Participant.
2. In the case of a Qualified Preretirement Survivor Annuity as described in Section 5.13(C) of the Plan, the Plan Administrator shall provide each Participant within the applicable period for such Participant an explanation (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) 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 5.13(D)(1) of the Plan 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 5.13(D)(3) of the Plan
ceases to apply to the Participant; and (d) a reasonable period
ending after this Section 5.13 of the Plan 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 5.13(D) of the Plan, the respective notices prescribed by this Section 5.13(D) of the Plan, 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 non-Spouse Beneficiary. For purposes of this Section 5.13(D)(3) of the Plan, 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.
E. Retirement Equity Act Safe Harbor Rules
1. Except as provided otherwise in the Adoption Agreement, the safe harbor provisions of this Section 5.13(E) 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 pension 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 5.13(E) of the Plan 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 pension plan, a target benefit pension 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 5.13(E) of the Plan is operative, then the
provisions of this Section 5.13 of the Plan other than
Section 5.13(F) of the Plan shall be inoperative.
2. The Participant may waive the spousal death benefit described in this
Section 5.13(E) of the Plan at any time provided that no such waiver
shall be effective unless it satisfies the conditions of
Section 5.13(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 5.13(E) of the Plan, Vested Account Balance shall mean, in the case of a money purchase pension plan or a target benefit pension 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 the Definitions Section of this Plan.
4. In the event this Plan is a direct or indirect transferee of or a
restatement of a plan previously subject to the survivor annuity
requirements of Section 401(a)(11) and 401(a)(17) of the Code and the
Employer has selected to have this Section 5.13(E) of the Plan apply,
the provisions of this Section 5.13(E) of the Plan shall not apply to
any benefits accrued (including subsequent adjustments for earnings
and losses) prior to the adoption of these provisions. Such amounts
shall be separately accounted for in a manner consistent with
Section 7.02 of the Plan and administered in accordance with the
general survivor annuity requirements of Section 5.13 of the Plan.
F. 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 5.13 of the Plan must be given the
opportunity to elect to have the prior subsections of this
Section 5.13 of the Plan 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 5.13(F)(4) of the Plan.
3. The respective opportunities to elect (as described in
Section 5.13(F)(1) and (2) of the Plan 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 5.13(F)(2) of the Plan and any Participant who does not elect under Section 5.13(F)(1) of the Plan or who meets the requirements of Section 5.13(F)(1) of the Plan 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 six 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 (or any other form permitted by the IRS and DOL) 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 (or any other form permitted by the IRS and DOL) 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 5.13(F)(4) of the Plan,
(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 the Definitions Section of this Plan.
The provisions of this Section 5.13 of the Plan 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.
5.14 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, if applicable) or other payor 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, if applicable) or other payor such payor may need to do withholding and reporting.
5.15 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 of the amount of the Excess Elective Deferrals to be assigned to the Plan. Unless specified otherwise in the Adoption Agreement, Participants who claim Excess Elective Deferrals for the preceding calendar year must submit their claims (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) to the Plan Administrator by March 1.
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 15th 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 last day of the Plan Year. The income or loss allocable to Excess Elective Deferrals is equal to the 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. Notwithstanding the preceding sentence, the Plan Administrator may compute the income or loss allocable to Excess Elective Deferrals in the manner described in Section 7.02(B) of the Plan (i.e., the usual manner used by the Plan for allocating income or loss to Participants' Individual Accounts or any reasonable method), provided such method is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year.
5.16 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. Excess Contributions are allocated to the Highly Compensated Employees with the largest amounts of Employer Contributions taken into account in calculating the ADP test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such Employer Contributions and continuing in descending order until all the Excess Contributions have been allocated. For purposes of the preceding sentence, the "largest amount" is determined after distribution of any Excess Deferrals. If such Excess Contributions are distributed more than 2 1/2 months after the last day of the Plan Year in which such Contributions arose, a 10 percent excise tax will be imposed on the Employer maintaining the Plan with respect to such amounts.
B. Determination of Income or Loss -- Excess Contributions shall be adjusted for any income or loss up to the last day of the Plan Year. The income or loss allocable to Excess Contributions allocated to each Participant is equal to the income or loss allocable to Participant's 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. Notwithstanding the preceding sentence, the Plan Administrator may compute the income or loss allocable to Excess Contributions in the manner described in Section 7.02(B) of the Plan (i.e., the usual manner used by the Plan for allocating income or loss to Participants' Individual Accounts or any reasonable method), 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 allocated to a Participant 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 Participant's 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.
5.17 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 than the last day of each Plan Year to Participants to whose accounts such Excess Aggregate Contributions were allocated for the preceding Plan Year. Excess Aggregate Contributions are allocated to the Highly Compensated Employee with the largest Contribution Percentage Amounts taken into account in calculating the ACP test for the year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such Contribution Percentage Amounts and continuing in descending order until all the Excess Aggregate Contributions have been allocated. For purposes of the preceding sentence, the "largest amount" is determined after distribution of any Excess Aggregate Contributions. 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 Aggregate Contributions arose, a 10 percent excise tax will be imposed on the Employer maintaining the Plan with respect to those amounts.
B. Determination of Income or Loss -- Excess Aggregate Contributions shall be adjusted for any income or loss up to the last day of the Plan Year. The income or loss allocable to Excess Aggregate Contributions allocated to each Participant is equal to the 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 test) 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. Notwithstanding the preceding sentence, the Plan Administrator may compute the income or loss allocable to Excess Aggregate Contributions in the manner described in Section 7.02(B) of the Plan (i.e., the usual manner used by the Plan for allocating income or loss to Participants' Individual Accounts or any reasonable method), 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 Aggregate Contributions -- Excess Aggregate Contributions allocated to a Participant 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).
5.18 RECHARACTERIZATION
Provided the Plan allows Participants to make Nondeductible Employee Contributions, a Participant may elect to treat all or a portion of an Excess Contribution allocated to him or her as an amount distributed to the Participant and then contributed by the Participant to the Plan. Recharacterized amounts will remain nonforfeitable and subject to the same distribution requirements as Elective Deferrals. Amounts may not be recharacterized by a Highly Compensated Employee to the extent that such amount in combination with other 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 2 1/2 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 (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) 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.
5.19 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. Notwithstanding the foregoing, loans shall not be
available to Participants who cease to be employed by the Employer,
unless such Participants are parties-in-interest as defined under
Section 3(14) of ERISA.
B. Loans shall not be made available to Highly Compensated Employees in an amount greater than the amount made available to other Employees.
C. Loans must be adequately secured and bear a reasonable interest rate.
D. No Participant loan shall exceed 50 percent of 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 (or any other form permitted by the IRS and DOL), 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 Individual Account 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) of the Code. In addition, spousal consent is not required if the Plan or the Participant is not subject to Section 401(a)(11) of the Code 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 $5,000.
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 five percent of the outstanding stock of the corporation.
If a valid spousal consent has been obtained in accordance with
Section 5.13(E) of the Plan, 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 Individual Account payable at the time
of death or distribution, but only if the reduction is used as repayment
of the loan. If less than 100 percent of the Participant's Vested
Individual Account (determined without regard to the preceding sentence)
is payable to the surviving Spouse, then the Individual Account 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.
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 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 percent of the Present Value of the
nonforfeitable Individual Account of the Participant. 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 five 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. Notwithstanding the foregoing, a
Participant will suspend his or her loan repayments under this Plan as
permitted under Section 414(u)(4) of the Code. 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 specific rules that are documented either in writing or in such other format as permitted by the IRS and the DOL. Such rules shall include, at a minimum, the following 1. the identity of the person or positions authorized to administer the Participant loan program; 2. the procedure for applying for loans; 3. the basis on which loans will be approved or denied; 4. limitations (if any) on the types and amounts of loans offered; 5. the procedure under the program for determining a reasonable rate of interest; 6. the types of collateral which may secure a Participant loan; and 7. the events constituting default and the steps that will be taken to preserve Plan assets in the event of such default.
SECTION SIX: DEFINITIONS
Unless modified in Section Six of the Adoption Agreement, words and phrases used in the Plan with initial capital letters shall, for the purpose of this Plan, have the meanings set forth in the portion of the Basic Plan Document titled "Definitions" unless the context indicates that other meanings are intended.
SECTION SEVEN: MISCELLANEOUS
7.01 THE FUND
A. Establishment and Maintenance
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 Section Eight. 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 assets. 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. The Fund will be valued each Valuation Date at fair market value.
B. Division Of Fund Into Investment Funds
The Employer may direct the Trustee (or Custodian, if applicable) 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 7.22(C) of the Plan and Investment Funds representing investment options available for individual direction by Participants pursuant to Section 7.22(B) of the Plan. 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.
7.02 INDIVIDUAL ACCOUNTS
A. Establishment and Maintenance
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 (including but not limited to Employer Contributions and earnings thereon). 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 Elective Deferrals.
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 4.01(C) or (D) of the Plan.
If this Plan is funded by individual contracts that provide a Participant's benefit under the Plan, such individual contracts shall constitute the Participant's Individual Account. If this Plan is funded by group contracts, under the group annuity or group insurance contract, premiums or other consideration received by the insurance company must be allocated to Participants' Individual Accounts under the Plan.
B. Valuation Of Individual Accounts
1. 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.
2. The fair market value of the remainder of each Individual Account is determined in the following manner:
a. Separate Fund -- 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 4.01(C) or (D) of the Plan, 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.
b. No Separate Fund -- Second, 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.
c. Allocations -- Third, any contributions to the Plan and Forfeitures are allocated in accordance with the appropriate allocation provisions of Section Three of the Plan. For purposes of Section Seven of the Plan, 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.
d. Aggregation of Portions -- Finally, the portions of the Individual Account invested in each Investment Fund (determined in accordance with (a), (b) and (c) above) are added together.
C. 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 including, but not limited to, valuation on a daily basis pursuant to the number of shares of each permissible investment held on behalf of a Participant.
7.03 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, if applicable), to furnish the Trustee (or Custodian, if applicable) with instructions, in writing, on matters pertaining to the Plan and the Trustee (or Custodian, if applicable) 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 disclosures and tax forms as may be required from time-to-time by the Secretary of Labor or the Secretary of the Treasury;
7. To furnish each Employee, Participant or Beneficiary such notices, information and reports under such circumstances as may be required by law;
8. To periodically review the performance of each Fiduciary and all other relevant parties to ensure such individuals' obligations under the Plan are performed in a manner that is acceptable under the Plan and applicable law; and
9. To furnish a statement to each Participant or Beneficiary no later than 270 days after the close of each Plan Year, indicating the Individual Account balances of such Participant as of the last Valuation Date in such Plan Year.
10.To be responsible for determining the valuation of accounts in accordance with Section 7.02 of the Plan.
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 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.
7. If the Plan permits a form of distribution other than a lump sum, and a Participant elects such form of distribution, the Plan Administrator may place that Participant's Individual Account into a segregated Investment Fund for the purpose of maintaining the necessary liquidity to provide benefit installments on a periodic basis.
7.04 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 (subject to rules promulgated by the IRS and the DOL) 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.
7.05 INFORMATION FROM EMPLOYER
To enable the Plan Administrator to perform his or her duties, the Employer shall supply complete, accurate 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.
7.06 PLAN AMENDMENTS
A. Right Of Prototype Sponsor To Amend The Plan Or Terminate Sponsorship
1. 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 either necessary for the purpose of adjusting the Plan to comply with all laws and regulations governing pension or profit sharing plans or desirable to the extent consistent with such laws and regulations. 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 and will be considered an individually designed plan.
2. An amendment by the Prototype Sponsor shall be accomplished by giving notice (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) to the Adopting 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 Adopting 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.
3. In addition to the amendment rights described above, the Prototype Sponsor shall have the right to terminate its sponsorship of this Plan by providing notice (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) to the Adopting Employer of such termination. Such termination of sponsorship 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 Prototype Sponsor shall have the right to terminate its sponsorship of this Plan regardless of whether the Prototype Sponsor has terminated sponsorship with respect to other employers adopting its prototype Plan.
A. Right Of Adopting Employer To Amend The Plan
The Adopting Employer may 1. change options previously selected 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 IRS which specifically provide that their adoption will not cause the Plan to be treated as individually designed. An Adopting 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 Adopting Employer who wishes to amend the Plan shall document the amendment in writing, executed by a duly authorized officer of the Adopting Employer. If the amendment is in the form of a restated Adoption Agreement, the amendment shall become effective on the date provided on the Adoption Agreement. Any other amendment shall become effective as described therein upon execution by the Adopting Employer and, if appropriate, the Trustee (or Custodian, if applicable). A copy of a restated Adoption Agreement or other amendment must be provided to the Prototype Sponsor and the Trustee (or Custodian, if applicable) prior to the effective date of the amendment.
The Adopting Employer further reserves the right to replace the Plan in its entirety by adopting another retirement plan which the Adopting Employer designates as a replacement plan.
B. 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 decreas-
ing a Participant's Individual Account with respect to benefits attributable to service before the amendment shall be treated as reducing an accrued benefit. Where this Plan document is being adopted to amend another plan that 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.
No amendment to the Plan shall be effective to eliminate or restrict an
optional form of benefit. The preceding sentence shall not apply to a
Plan amendment that eliminates or restricts the ability of a Participant
to receive payment of his or her Individual Account under a particular
optional form of benefit if the amendment satisfies the conditions in
(1) and (2) below:
(1)The amendment provides a single-sum distribution form that is otherwise identical to the optional form of benefit eliminated or restricted. For purposes of this condition (1), a single-sum distribution form is otherwise identical only if it is identical in all respects to the eliminated or restricted optional form of benefit (or would be identical except that it provides greater rights to the Participant) except with respect to the timing of payments after commencement.
(2)The amendment is not effective unless the amendment provides that the amendment shall not apply to any distribution with an annuity starting date earlier than the earlier of; (i) the 90th day after the date the Participant receiving the distribution has been furnished a summary that reflects the amendment and that satisfies the ERISA requirements at Section 2520.104b-3 of the DOL Regulations relating a summary of material modifications or (ii) the first day of the second Plan Year following the Plan Year in which the amendment is adopted.
C. Amendment Of Vesting Schedule
If the vesting schedule of the 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 as of that date without regard to such amendment. Furthermore, 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 three 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 one Hour of Service in any Plan Year beginning after December 31, 1988, the preceding sentence shall be applied by substituting "five Years of Vesting Service" for "three 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:
1. 60 days after the amendment is adopted;
2. 60 days after the amendment becomes effective; or
3. 60 days after the Participant is issued a notice (either in writing or in any other form permitted under rules promulgated by the IRS and DOL) of the amendment by the Employer or Plan Administrator.
D. Amendment of Trust Provisions
Notwithstanding anything in this Plan to the contrary, the trust provisions of this Plan may be amended in accordance with Section 5.11 of IRS Revenue Procedure 2000-20 or any subsequent guidance provided by the IRS, so as not to be considered an individually designed plan. Amendments to the trust provisions shall be agreed upon, in writing, by the Trustee and the Adopting Employer.
7.07 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 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, if applicable) 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 or such other plans permitted by laws or regulations.
7.08 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.
7.09 METHOD AND PROCEDURE FOR TERMINATION
The Plan may be terminated by the Adopting Employer at any time by appropriate action of its managing body. Such termination shall be effective on the date specified by the Adopting Employer. The Plan shall terminate, if required by either the IRS or the DOL, if the Adopting Employer shall be dissolved or terminated. Written notice of the termination and effective date thereof shall be given to the Trustee (or Custodian, if applicable), 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 IRS and any other regulatory body as required by current laws and regulations. Until all of the assets have been distributed from the Fund, the Adopting 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.
7.10 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER
Notwithstanding the preceding Section 7.09 of the Plan, a successor of the Adopting Employer may continue the Plan and be substituted in the place of the present Adopting Employer. The successor and the present Adopting Employer (or, if deceased, the executor of the estate of a deceased Self-Employed Individual who was the Adopting Employer) must execute a written instrument authorizing such substitution and the successor shall amend the Plan in accordance with Section 7.06 of the Plan.
7.11 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.
7.12 GOVERNING LAWS AND PROVISIONS
To the extent such laws are not preempted by federal law, the terms and conditions of this Plan shall be governed by the laws of the state in which the Prototype Sponsor is located, unless otherwise agreed to in writing by the Prototype Sponsor and the Employer.
In the event of any conflict between the provisions of this Basic Plan Document and provisions of the Adoption Agreement, the summary plan description, or any related documents, the Basic Plan Document will control.
7.13 STATE COMMUNITY PROPERTY LAWS
The terms and conditions of this Plan shall be applicable without regard to the community property laws of any state.
7.14 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.
7.15 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.
7.16 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 either the Code or ERISA.
7.17 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.
7.18 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.
7.19 DETERMINATION OF TOP-HEAVY STATUS
A. In General
Except as provided in Section 7.19(B) of the Plan, 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 percent 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 percent;
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 percent.
B. 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 five-year
period ending on the Determination Date(s) has or has had accrued
benefits, the top-heavy ratio for this Plan alone or for the Required
or Permissive Aggregation Group as appropriate is a fraction, the
numerator of which is the sum of the account balances of all Key
Employees as of the Determination Date(s) (including any part of any
account balance distributed in the five-year period ending on the
Determination Date(s)), and the denominator of which is the sum of
all account balances (including any part of any account balance
distributed in the five-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 five-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 five-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 five-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.
C. SIMPLE 401(k) Plan Exception
Notwithstanding Section 7.19(A) of the Plan above, the Plan is not treated as a Top-Heavy Plan under Section 416 of the Code for any Year for which an Eligible Employer maintains this Plan as a SIMPLE 401(k) Plan.
7.20 INALIENABILITY OF BENEFITS
No benefit or interest available hereunder will be subject to assignment or
alienation, either voluntarily or involuntarily. The preceding sentence
shall not apply to judgements and settlements described in
Section 401(a)(13)(C) of the Code and Section 206(d)(4) of ERISA. Such
sentence shall 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 the Definitions Section of the Plan.
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 the earliest retirement age as defined in Section 414(p) of the Code.
7.21 BONDING
Every Fiduciary and every person who handles funds or other property of the Plan shall be bonded in accordance with Section 412 of ERISA and the regulations thereunder for purposes of protecting the Plan against loss by reason of acts of fraud or dishonesty on the part of the person, group or class, alone or in connivance with others, to be covered by such bond. The amount of the bond shall be fixed at the beginning of each Plan Year and shall not be less than 10 percent of the amount of funds handled. The amount of funds handled shall be determined by the funds handled the previous Plan Year or, if none, the amount of funds estimated, in accordance with rules provided by the Secretary of Labor, to be handled during the current Plan Year. Notwithstanding the foregoing, no bond shall be less than $1,000 nor more than $500,000 except that the Secretary of Labor shall have the right to prescribe an amount in excess of $500,000.
7.22 INVESTMENT AUTHORITY
A. Plan Investments
Except as provided in Section 7.22(B) of the Plan (relating to individual direction of investments by Participants), the Adopting Employer, not the Trustee (or Custodian, if applicable), shall have exclusive management and control over the investment of the Fund into any permitted investment. The Adopting Employer shall be responsible for establishing a funding policy statement on behalf of the Plan and shall provide a copy of such funding policy statement to the Trustee (or Custodian, if applicable). Notwithstanding the foregoing, if the Trustee is designated as a Discretionary Trustee on the Adoption Agreement, the Trustee may enter into an agreement with the Adopting 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 Discretionary Trustee deems necessary or desirable
B. Direction Of Investments By Participants
Unless otherwise indicated in the Adoption Agreement, each Participant
shall have the responsibility for directing the Trustee (or Custodian,
if applicable) regarding the investment of all or part of his or her
Individual Account. If all of the requirements of Section 404 of ERISA
are satisfied, then to the extent so directed, the Adopting Employer,
Plan Administrator, Trustee (or Custodian, if applicable) and all other
Fiduciaries are relieved of their Fiduciary responsibility under
Section 404 of ERISA, provided that it shall be the Adopting Employer's
responsibility to direct the Trustee (or Custodian, if applicable) as to
permissible investments into which Participants may direct their
individual investments.
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 that 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 Participants' Individual Accounts 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 nondis-criminatory manner, a Beneficiary of a deceased Participant or the Alternate Payee under a Qualified Domestic Relations Order to individually direct in accordance with this Section 7.22(B) of the Plan.
C. Investment Managers
1. Definition of Investment Manager -- The Adopting 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.
2. 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 7.22(D) of the Plan.
3. Written Agreement -- The appointment of any investment manager shall be by written agreement between the Adopting 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, if applicable). The agreement shall set forth, among other matters, the effective date of the investment manager's appointment and an acknowledgment by the investment manager that it is a Fiduciary of the Plan under ERISA.
4. Concerning the Trustee (or Custodian, if applicable) -- Written notice of each appointment of an investment manager shall be given to the Trustee (or Custodian, if applicable) 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, if applicable) 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.
D. Permissible Investments
The Trustee or Custodian may, subject to the funding policy statement provided by the Adopting Employer, 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, certificates of deposit, demand or 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 Adopting Employer, limit the types of property in which the assets of the Plan may be invested. The list of permissible investment options shall be further limited in accordance with any applicable law, regulations or other restrictions applicable to the Trustee or Custodian. If the Trustee (or Custodian, if applicable) invests all or any portion of the Fund pursuant to written instructions provided by the Adopting Employer (including an investment manager appointed by the Adopting Employer pursuant to Section 7.22(C) of the Plan) or any Participant pursuant to Section 7.22(B) of the Plan, the Trustee (or Custodian, if applicable) will be deemed to have invested pursuant to the Adopting Employer's funding policy statement.
E. Matters Relating To Insurance
1. Unless prohibited by the Plan Sponsor pursuant to Section 7.22(D) of the Plan, a life insurance contract may be purchased on behalf of a Participant. No life insurance con-
tract may be purchased unless the insured under the contract is the Participant or, where this Plan is a profit sharing or 401(k) plan, the Participant's Spouse or another individual in whom the Participant has an insurable interest. If a life insurance contract 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.
a. 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 percent of the aggregate Employer Contributions and Forfeitures allocated to any Participant's Individual Account will be used to pay the premiums attributable to them.
b. Term and Universal Life Insurance -- No more than 25 percent 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.
c. Combination -- The sum of 50 percent of the ordinary life insurance premiums and all other life insurance premiums will not exceed 25 percent 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 by an Employee who has been a Participant in the Plan for five or more years or purchased with Employer Contributions and Forfeitures that have been in the Participant's Individual Account for at least two full Plan Years, measured from the date such contributions were allocated. For purposes of this Section 7.22(E)(1) of the Plan, rollover and transfer contributions shall be considered Employer Contributions, and therefore may be used to pay contract premiums. No part of the Deductible Employee Contribution account will be used to purchase life insurance.
2. Any dividends or credits earned on insurance contracts for a Participant shall be allocated to such Participant's Individual Account derived from Employer Contributions for whose benefit the contract is held.
3. Subject to Section 5.13 of the Plan, the contracts on a Participant's life will be converted to cash or an annuity or distributed to the Participant upon separation from service with the Employer. In addition, contracts on the joint lives of a Participant and another person may not be maintained under this Plan if such Participant ceases to have an insurable interest in such other person.
4. 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 con-tract(s) must provide that proceeds will be payable to the Trustee (or Custodian, if applicable). However, the Trustee (or Custodian, if applicable) 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 5.13 of the Plan. 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.
5. The Plan Administrator may direct the Trustee (or Custodian, if applicable) 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.
6. Notwithstanding any other provision herein, and except as may be otherwise provided by ERISA, the Employer shall indemnify and hold harmless the insurer, its officers, directors, employees, agents, 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 insurer from any liability, claim or expense (including legal expense) which the insurer shall incur by reason of or which results, in whole or in part, from the reliance of the insurer on the facts and other directions and elections the Employer communicates or fails to communicate.
7.23 PROCEDURES AND OTHER MATTERS REGARDING DOMESTIC RELATIONS ORDERS
A. To the extent provided in any Qualified Domestic Relations Order, the former Spouse of a Participant shall be treated as a surviving Spouse of such Participant for purposes of any benefit payable in the form of either a Qualified Joint and Survivor Annuity or Qualified Preretirement Survivor Annuity.
B. The Plan shall not be treated as failing to meet the requirements of the Code which prohibit payment of benefits before the Participant's Termination of Employment with the Employer solely by reason of payments to an Alternate Payee pursuant to a Qualified Domestic Relations Order.
C. In the case of any Domestic Relations Order received by the Plan:
1. The Plan Administrator shall promptly notify the Participant and any other Alternate Payee of the receipt of such order and the Plan's procedure for determining the qualified status of Domestic Relations Orders, and
2. Within a reasonable period after receipt of such order, the Plan Administrator shall determine whether such order is a Qualified Domestic Relations Order and notify the Participant and each Alternate Payee of such determination.
The Plan Administrator shall establish reasonable procedures to determine the qualified status of Domestic Relations Orders and to administer distributions under such qualified orders.
D. During any period in which the issue of whether a Domestic Relations Order is a Qualified Domestic Relations Order is being determined by the Plan Administrator, by a court of competent jurisdiction, or otherwise, the Plan Administrator shall segregate in a separate account in the Plan or in an escrow account the amounts which would have been payable to the Alternate Payee during such period if the order had been determined to be a Qualified Domestic Relations Order. If within 18 months the order or modification thereof is determined to be a Qualified Domestic Relations Order, the Plan Administrator shall pay the segregated amounts (plus any interest thereon) to the person or persons entitled thereto. If within 18 months either 1. it is determined that the order is not a Qualified Domestic Relations Order, or 2. the issue as to whether such order is a Qualified Domestic
Relations Order is not resolved, then the Plan Administrator shall pay the segregated amounts (plus any interest thereon) to the person or persons who would have been entitled to such amounts if there had been no order. Any determination that an order is a Qualified Domestic Relations Order which is made after the close of the 18-month period shall be applied prospectively only.
7.24 INDEMNIFICATION OF PROTOTYPE SPONSOR
Notwithstanding any other provision herein, and except as may be otherwise provided by ERISA, the Employer shall indemnify and hold harmless the Prototype Sponsor, its officers, directors, employees, agents, 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 Prototype Sponsor from any liability, claim or expense (including legal expense) which the Prototype Sponsor shall incur by reason of or which results, in whole or in part, from the reliance of the Prototype Sponsor on the facts and other directions and elections the Employer communicates or fails to communicate.
7.25 MILITARY SERVICE
Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code effective December 12, 1994.
SECTION EIGHT: TRUSTEE AND CUSTODIAN
8.01 FINANCIAL ORGANIZATION AS CUSTODIAN
This Section 8.01 applies where the Employer, by execution of the Adoption Agreement, appoints the entity named therein as Custodian for the Plan, and the entity accepts such appointment, all subject to the terms of the Basic Plan Document. The Employer, Plan Administrator, any Trustee, any other Investment Fiduciary and the entity shall be bound by all the terms of this Basic Plan Document and Adoption Agreement. The Employer represents and warrants to the entity that it has all requisite right, power and authority and has taken all required actions necessary under the Plan and applicable law to designate the financial organization as Custodian of the Plan pursuant to the terms of the Basic Plan Document. The Custodian shall have no discretionary authority with respect to the management of the Plan or the Fund and will act only as directed by the entity or individual who has such authority.
A. Responsibilities of the Custodian
The responsibilities of the Custodian shall be limited to the following. The Custodian's responsibilities may be further limited by the Plan Trustee(s).
1. To receive Plan contributions and to hold, invest and reinvest the Fund as authorized by the Adopting Employer or its designee 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.
4. To furnish to the Plan Administrator a statement which reflects the value of the investments in the custody of the Custodian as of the end of each Plan Year and as of any other times as the Custodian and Plan Administrator may agree.
5. To invest the Fund only in investment options selected by the Investment Fiduciary. Such selection shall be made from among the types of property which the Prototype Sponsor makes available under Section 7.22(D) of the Plan. Notwithstanding the first sentence of Section 7.22(D), the Prototype Sponsor and not the Custodian is responsible for choosing to make such investments available for investment and for determining the fair market value of each such investment, and the Custodian has determined only that it is functionally and operationally willing and able to provide its services hereunder with respect thereto. The Investment Fiduciary shall be responsible for ensuring compliance with all conditions, limitations and restrictions concerning investment in any investment option. The Custodian shall place monies or other property received by it in such permitted investments as the Custodian shall be directed from time to time by instructions of the Investment Fiduciary (or Participant, if applicable) provided to it. If Participant direction under Section 7.22(B) of the Plan has been selected, the investment instructions of the Participants shall be aggregated and delivered to the Custodian by the Plan Administrator or its agent. In the absence of Participant direction, the investment instructions of the appropriate Investment Fiduciary shall be delivered to the Custodian by the Plan Administrator or its agent. The Custodian may hold the assets attributable to the Fund in omnibus accounts with assets of other retirement plans for which the Custodian serves as custodian or trustee. Nothing herein shall preclude the Investment Fiduciary from otherwise investing any Plan assets as permitted by the Plan, but the Custodian shall not be Custodian or Trustee thereof or have any duties or responsibilities with respect thereto.
6. The Custodian is not obligated to place orders for the investment of the Fund if sufficient cash is not available in the Fund for use in placing such orders. The Custodian is authorized, but is not obligated, to advance funds or to arrange for another financial organization (which may be an affiliate of the Custodian) to advance funds from time to time for the purchase of investment assets, for distributions from the Fund and for other purposes prior to receipt of sufficient funds (whether contributions or proceeds of the liquidation of other investments). All such advances shall be made subject to the requirements of ERISA and the rules, regulations, rulings and interpretations thereunder, including but not limited to the U.S. Department of Labor's Prohibited Transaction Class Exemption 80-26, as amended from time to time. If sufficient funds to repay any such advance are not received by the following business day, the Custodian may, in its discretion, then or at any time thereafter prior to such repayment, sell, redeem or otherwise liquidate any assets of the Fund in order to repay such advance. Any gain realized upon such liquidation, after payment of any related costs and expenses, shall belong to the Plan. The Employer shall reimburse the Custodian on demand for any portion of any such advance and the related costs and expenses not repaid from the proceeds of the liquidation.
7. The Custodian shall keep such portion of the Fund in cash or cash balances as may be directed from time to time by the applicable Investment Fiduciary. The Custodian shall not be liable for any interest on any cash balances so maintained nor for interest on any cash or cash balances maintained in the Fund pending investment in accordance with appropriate directions. Monies being transferred to and disbursed by the Custodian may be held in non-interest bearing transaction accounts in financial organizations selected by the Custodian (which may be affiliates of the Custodian) for purposes of collections and processing transfers and disbursements. The Custodian may transfer monies from the Fund
to such accounts prior to issuance of wire transfer orders or checks, drafts or other instruments payable from such accounts. The Custodian's and, as applicable, its affiliated financial organization's ability to earn income on amounts held in non-interest bearing accounts has been taken into consideration in establishing the Custodian's fees hereunder. The Custodian and any such affiliated financial organization shall be entitled to retain any such income earned on such non-interest bearing accounts, and such income shall not be or become a part of the Fund. The Custodian shall not exercise its powers under Section 8.01(B)(1) of the Plan except pursuant to the instructions of the Investment Fiduciary transmitted to the Custodian.
8. Should the Investment Fiduciary's instructions to the Custodian to utilize the services of any broker, dealer, employee or representative of either, or any other person ("Broker") to render services to the Fund, or should the Custodian require the services of such persons in order to fulfill its obligations pursuant to the Plan, the applicable Investment Fiduciary shall be solely responsible for the selection or designation of such Broker and shall be solely responsible for the acts of such Broker. The Custodian shall fully comply with the written instructions, if of a continuing nature, until revoked.
9. In connection with payments and disbursements made from the Fund for any purpose, the Custodian shall be responsible for issuing checks or drafts to such parties and for such amounts as the Plan Administrator shall instruct. The Custodian shall be fully protected in making such payments pursuant to such instructions from time to time and shall be charged with no responsibility whatsoever respecting the purposes or propriety of such payments or the application of such monies.
10.The Custodian shall provide any materials received by it relating to
voting securities to the applicable Investment Fiduciary, which shall be
responsible for voting securities or arranging for such securities to be
voted in accordance with the Plan and applicable law. It is understood
that the Custodian shall exercise the powers described in
Section 8.01(B)(2) of the Plan only pursuant to instructions of the
Investment Fiduciary transmitted to the Custodian.
11.The Custodian shall keep accurate and detailed accounts of all investments, receipts, disbursements and other transactions of the Fund hereunder, and all accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by any person designated by the Employer. The Custodian shall reconcile periodically all Plan-related transactions and Plan balances. After the close of each Plan Year, or upon the removal or resignation of the Custodian, the Custodian shall provide information relating to all investments, receipts, disbursements, and other transactions effected during the past Plan Year or during the period from the close of the preceding Plan Year to the date of such removal or resignation, including a description of all securities and investment purchases and sales with the cost or net proceeds of such purchases or sales and showing all cash, securities and other property held at the close of such Plan Year or other period, valued currently, and such other information as may reasonably be required of the Custodian; provided however, that the Custodian shall not be obligated to provide any information that it is not otherwise maintaining in the course of its discharge of duties hereunder. Neither the Employer, Plan Administrator, other Plan fiduciary, Participant, Beneficiary or any other person shall have the right to demand or be entitled to any further or different reporting or accounting by the Custodian, other than those to which they may be entitled under the law. Nothing contained herein will be construed or interpreted to deny the Custodian the right to have its account judicially determined.
12.The Custodian shall determine or have determined the value of the Fund as of each Valuation Date. The Custodian shall rely exclusively upon, and shall not be responsible for, share and unit values established by third parties or by the Custodian in its capacity as a mutual fund recordkeeper, transfer agent or custodian, including but not limited to:
(a)In connection with mutual funds, the net asset value reported to the Custodian by such mutual funds or the transfer or other agents of such mutual funds or any generally recognized pricing service;
(b)In connection with bank collective funds, the unit value as reported by the trustee of such funds or its agent;
(c)In connection with policies and contracts with insurance companies or other financial institutions, the book value or other value ascribed to such policies or contracts by the insurance company or its agent or other financial organization or its agent; and
(d)In connection with publicly traded securities, the market price of such securities as reported to the public in a generally available form.
The Custodian shall have no liability from the failure or delay of any pricing source to provide a valuation as of any Valuation Date. If values for any investment of the Fund are not generally available, the Custodian shall rely upon instructions provided to it by the applicable Investment Fiduciary as to valuation procedures.
13.All records maintained by the Custodian with respect to the Fund shall be held for such period as may be required under applicable law. Upon the expiration of any such required retention period, the Custodian shall have the right to destroy such records. The Custodian shall have the right to preserve all records and accounts in original form, electronically, or on microfilm, magnetic tape, or any other similar process pursuant to applicable federal law and subsequent rules promulgated by the IRS or DOL.
14.Except as provided below, the Custodian shall conclusively presume that the Employer, Trustee, Plan Administrator or other responsible party has made all filings required by law as of the date required. Should the Custodian incur any liability by reason of any party's failure to timely file, the Employer shall indemnify and hold the Custodian harmless for any and all liabilities, costs, expenses (including reasonable attorney's fees) and other obligations, including penalties and interest, incurred by the Custodian.
Notwithstanding the provisions of Section 5.14 of the Plan, in connection with the disbursement of assets from the Fund to a Participant, the Custodian shall withhold and remit to the IRS and other applicable taxing authorities the amount of any income tax withholding required by law pursuant to instructions provided by the Plan Administrator.
15.Except for the disbursement of loan proceeds and re-investment of loan payments pursuant to instructions received hereunder, under no circumstances shall the Custodian have or be allocated any responsibility for the administration of any Participant loan program under Section 5.19 of the Plan.
B. Powers of the Custodian
Except as otherwise provided in this Plan, the Custodian shall have the power, but not the duty, to take any action with respect to the Fund which it deems necessary or advisable to discharge its responsibilities under this Plan including, but not limited to, the following powers:
1. To invest all or a portion of the Fund (including idle cash balances) in time deposits, savings accounts, money market accounts or similar investments bearing a reasonable rate of interest in the Custodian's own savings department or the savings department of another financial organization;
2. To vote upon any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges or subscription rights and to make any payments incidental thereto; to oppose, or to
consent to, or otherwise participate in, corporate reorganizations or other changes affecting corporate securities, and to pay any assessment or charges in connection therewith; and generally to exercise any of the powers of an owner with respect to stocks, bonds, securities or other property;
3. To hold securities or other property of the Fund in its own name, in the name of its nominee or in bearer form; and
4. To make, execute, acknowledge, and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted.
8.02 TRUSTEE
This Section 8.02 applies where either a financial organization or one or more individuals has indicated in the Adoption Agreement that it will serve as Trustee with respect to all or a portion of the assets of the Fund. The responsibilities and powers of the Trustee may not be expanded except with its prior written consent.
A. Responsibilities of the Trustee
The responsibilities of the Trustee shall be limited to the following duties:
1. To receive Plan contributions and to hold, invest and reinvest the portion of the Fund for which it serves as Trustee, as authorized by the Employer or its designee, 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 portion of the Fund for which it serves as Trustee 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 custody 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.
B. Powers of the Trustee
Except as otherwise provided in this Plan, the Trustee shall have the power, but not the duty, to take any action with respect to the portion of the Fund for which it serves as Trustee 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;
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 (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.
8.03 COMPENSATION AND EXPENSES
The Trustee (or Custodian, if applicable) shall receive such reasonable compensation as may be agreed upon by the Trustee (or Custodian, if applicable) and the Adopting Employer. The Trustee (or Custodian, if applicable) 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. Notwithstanding the foregoing, a Participant shall not be entitled to compensation even if he or she serves in the capacity as a Trustee (or Custodian, if applicable).
The Trustee (or Custodian, if applicable) shall not be responsible for the validity or effect or the qualification under the Code of the Plan. The Trustee (or Custodian, if applicable) shall not be required to take any action upon receipt of any notice from the IRS or other taxing authority (unless such notice relates to the performance of the Trustee (or Custodian, if applicable) responsibilities under Sections 8.01(A) or 8.02(A) of the Plan) except to promptly forward a copy thereof to the Employer.
The Trustee (or Custodian, if applicable) shall be reimbursed by the Employer or from the Fund for all taxes of any kind whatsoever that may be levied or assessed under existing or future laws of any jurisdiction upon or in respect of the Fund. The Trustee (or Custodian, if applicable) shall promptly notify the Employer with regard to any levies or tax assessments which it receives on any income or property maintained in the Fund and, unless notified to the contrary by the Employer within ninety (90) days, shall pay any such levies or assessments. If the Employer notifies the Trustee (or Custodian, if applicable) within said period that it is its opinion or the opinion of counsel that such levies or assessments are invalid or that they should be contested, then the Trustee (or Custodian, if applicable) shall take whatever action concerning payment of the levy or assessment as is indicated in the notice received by the Trustee (or Custodian, if applicable) provided however, that the Employer, and not the Trustee (or Custodian, if applicable), shall be responsible for contesting any such levies or assessments or litigating any such claims.
8.04 NO OBLIGATION 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, if applicable) 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.
8.05 RESIGNATION
Any person serving as Trustee or Custodian may resign at any time by giving 30 days advance written notice to the Adopting Employer. The resignation shall become effective 30 days after receipt of such notice unless a shorter period is agreed upon.
The Adopting Employer may remove any Trustee (or Custodian, if applicable) at any time by giving written notice to such Trustee (or Custodian, if applicable) and such removal shall be effective 30 days after receipt of such notice unless a shorter period is agreed upon. The Adopting Employer shall have the power to appoint a successor Trustee (or Custodian, if applicable). In the event the Trustee (or Custodian, if applicable) is removed, resigns, dies or becomes incapacitated and the Adopting Employer will not or cannot appoint a successor Trustee (or Custodian, if applicable) within a reasonable period of time thereafter, a majority of Participants in the Plan shall have the authority to appoint a successor Trustee (or Custodian, if applicable). If a majority of Participants either do not appoint a new Trustee (or Custodian, if applicable) within a reasonable period of time (determined by the Prototype Sponsor in its complete and sole discretion) or request the Prototype Sponsor to appoint a new Trustee (or Custodian, if applicable), the Prototype Sponsor shall have the authority to appoint a successor Trustee (or Custodian, if applicable).
Upon such resignation or removal, if the resigning or removed Trustee (or Custodian, if applicable) is the sole Trustee (or Custodian, if applicable), he or she shall transfer all of the assets
of the Fund then held by such Trustee (or Custodian, if applicable) as expeditiously as possible to the successor Trustee (or Custodian, if applicable) 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, if applicable) out of the assets in the successor Trustee's (or Custodian's, if applicable) hands under this Plan. If the amount reserved shall be in excess of the amount actually needed, the former Trustee (or Custodian, if applicable) shall return such excess to the successor Trustee (or Custodian, if applicable).
Upon receipt of the transferred assets, the successor Trustee (or Custodian, if applicable) shall thereupon succeed to all of the powers and responsibilities given to the Trustee (or Custodian, if applicable) by this Plan.
Where a financial organization is serving as Trustee (or Custodian, if applicable) 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, if applicable) 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 1.408-2(e) of the Income Tax Regulations, the Adopting Employer will appoint a successor Trustee (or Custodian, if applicable) upon notification by the Commissioner of Internal Revenue that such substitution is required because the Trustee (or Custodian, if applicable) has failed to comply with the requirements of Section 1.408-2(e) of the Income Tax Regulations or is not keeping such records or making such returns or rendering such statements as are required by forms or regulations.
8.06 DEGREE OF CARE -- LIMITATIONS OF LIABILITY
The Trustee (or Custodian, if applicable) shall be under no duty to take any action other than its express responsibilities under this Plan unless the responsible party under the terms of the Plan shall furnish the Trustee (or Custodian, if applicable) with written instructions; provided that in no event may the Trustee's (or Custodian's, if applicable) responsibilities be expanded except with its prior written consent. Any instructions hereunder may be delivered to the Trustee (or Custodian, if applicable) directly by the responsible party or by other mutually agreed upon parties. The Trustee (or Custodian, if applicable) shall not be liable for any action taken or omitted by it in good faith in reliance upon any instructions received hereunder or any other notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to have been properly executed. A Directed Trustee (or Custodian, if applicable) shall have no duty to inquire into the purpose or propriety of any order, instruction or other communication received hereunder and may conclusively presume that any such order, instruction or other communication is accurate and complete. The Trustee (or Custodian, if applicable) shall not be responsible for determining that all instructions provided to the Trustee (or Custodian, if applicable) are being given by the appropriate party and are in proper form under the provisions of the Plan and applicable law. The Trustee (or Custodian, if applicable) may conclusively presume that any instructions received have been duly authorized by the Employer, Investment Fiduciary, Plan Administrator, Trustee, or Participant, as applicable, pursuant to the terms of the Plan and applicable law.
It is specifically understood that the Trustee (or Custodian, if applicable) 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.
8.07 INDEMNIFICATION OF TRUSTEE AND CUSTODIAN
The Employer shall, at all times, fully indemnify and save harmless the Trustee (or Custodian, if applicable), its successors and assigns, and its directors, officers, employees, agents and contractors from and against any and all losses, damages, claims, penalties, costs and expenses (including but not limited to reasonable attorney's fees) incurred by the Trustee (or Custodian, if applicable) in connection with its service except to the extent any such loss, damage, claim, penalty, cost or expense arises directly or indirectly from the fraud, gross negligence or willful misconduct of the Trustee (or Custodian, if applicable) or any of its directors, officers, employees, agents or contractors. The Trustee (or Custodian, if applicable) shall be accountable only for monies or property actually received by it. If any portion of the Fund is held by another Custodian or Trustee, the term "Fund" herein and in the Basic Plan Document shall mean only that portion of the Fund from time to time held by the applicable Custodian or Trustee. The Trustee (or Custodian, if applicable) shall not be deemed accountable, responsible or liable for the acts or omissions of any other Custodian or Trustee of the Plan. The Custodian shall have no duty or responsibility for the determination of the accuracy or sufficiency of the contributions to be made under the Plan, the collection thereof, the transmittal of the same to the Trustee (or Custodian, if applicable) or compliance with any statute, regulation or rule applicable to such contributions. A directed Trustee (or Custodian, if applicable) shall have no discretion as to investment of the Fund or administration of the Plan and shall not be deemed a "fiduciary" as that term is used in ERISA. The Trustee (or Custodian, if applicable) is signing the Adoption Agreement solely to signify its acceptance of appointment as Trustee (or Custodian, if applicable) and the Employer shall have sole responsibility for the accuracy, completeness, legal sufficiency and due execution thereof, including consulting with legal counsel and tax advisors as the Employer deems appropriate in connection therewith.
8.08 MISCELLANEOUS
A. Governing Law
To the extent not pre-empted by ERISA, Sections 8.01 and 8.02 of the Plan shall be construed and enforced, to the extent possible, according to the laws of the State in which the Custodian or Trustee maintains its principle place of business and all provisions hereof shall be administered according to the laws of said State and any Federal laws, regulations or rules which may from time to time be applicable.
B. Necessary Parties
To the extent permitted by law, only the Employer and the Trustee (or Custodian, if applicable) shall be necessary parties in any application to the courts for an interpretation of Section 8.01 or 8.02 or for an accounting by the Trustee (or Custodian, if applicable), and no other Plan fiduciary, Participant, Beneficiary or other person having an interest in the Fund shall be entitled to any notice or service of process. Any final judgment entered in such an action or proceeding shall, to the extent permitted by law, be conclusive upon all persons claiming under Section 8.01 or 8.02 of the Plan.
C. Force Majeure
The Trustee (or Custodian, if applicable) shall not be responsible or liable for the failure or delay in performance of its obligations arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation: any interruption, loss
or malfunction of any utility, transportation, computer or communication service; inability to obtain labor, material, equipment or transportation, or a delay in mails; governmental or exchange action, statute, ordinance, rulings, regulations or direction; war, strike, riot, emergency, civil disturbance, terrorism, vandalism, explosions, labor disputes, freezes, floods, fires, tornadoes, acts of God or public enemy, revolutions, or insurrection.
D. Agents
In performing its obligations under this Plan, the Custodian shall be entitled to employ suitable agents, counsel, sub-custodians and other service providers.
SECTION NINE: ADOPTING EMPLOYER SIGNATURE
This Section Nine of the Plan Adoption Agreement must contain the signature of an authorized representative of the Adopting Employer evidencing the Employer's agreement to be bound by the terms of the Basic Plan Document, Adoption Agreement and, if applicable, separate trust agreement.
SELIGMAN ADVISORS, INC.
an affiliate of
[GRAPHIC APPEARS HERE]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
R-DOC 8/02
Exhibit (25)(2)(q)(5)
Seligman
Profit Sharing Plan Forms
[GRAPHIC]
Super Simplified Standardized Profit Sharing Plan
Adoption Agreement Seligman
EMPLOYER INFORMATION
Name of Adopting Employer________________________________________________________________________________________ Address__________________________________________________________________________________________________________ City______________________________ State____________________________________ Zip_________________________________ Telephone_________________________ Adopting Employer's Federal Tax Identification #______________________________ Name of Plan_____________________________________________________________________________________________________ Plan Sequence #___________________________ (Enter 001 if this is the first qualified plan the employer has ever maintained, enter 002 if it is the second, etc.) Adopting Employer's Fiscal Year End (specify month and day)____________________Account # (Optional)______________ |
Section One: Effective Dates Complete Part A or B
PART A. EFFECTIVE DATE: This is the initial adoption of a profit sharing plan by the Employer.
The Effective Date of this Plan is _________________________.
NOTE: The Effective Date is usually the first day of the Plan Year in which this Adoption Agreement is signed.
PART B. RESTATEMENT DATE: This is an amendment and restatement of an existing qualified plan (a Prior Plan).
The Prior Plan was initially effective on _________________________.
The Effective Date of this amendment and restatement is _____________________.
NOTE: The Effective Date is usually the first day of the Plan Year in which this Adoption Agreement is signed.
Section Two: Eligibility Complete Parts A through C
PART A. AGE REQUIREMENT: An Employee will be eligible to become a Participant in the Plan after attaining age __________ (no more than 21).
PART B. YEARS OF ELIGIBILITY SERVICE REQUIREMENT: An Employee will be eligible to become a Participant in the Plan after completing __________ (enter 0, 1, 2, or any fraction less than 2) Years of Eligibility Service.
NOTE: If either Part A or Part B is left blank, it shall be deemed that there are no age and Years of Eligibility Service requirements. If more than one year is selected by the Employer, all contributions shall be 100% vested.
Section Three: Contributions and Section Four: Vesting and Forfeitures
There are no elections required for Sections 3 and 4. Refer to the Basic Plan Document for information regarding these sections.
Section Five: Distributions and Loans
May a Participant request a loan pursuant to Section 5.19 of the Plan?
Option 1: [_] Yes Option 2: [_] No
NOTE: If no option is selected, Option 2 shall be deemed to be selected.
Section Six: Definitions and Section Seven: Miscellaneous
There are no elections required for Sections 6 and 7. Refer to the Basic Plan Document for information regarding these sections.
Section Eight: Trustee and Custodian Complete Parts A and B (as applicable)
PART A. CUSTODIAN (This Part A must be completed unless a Trustee is named in Part B, below.)
Financial Organization______________________________________________________________________________________ Address_____________________________________________________________________________________________________ Signature___________________________________________________________________________________________________ Print Name___________________________________________________________________Title__________________________ |
PART B. TRUSTEE (This Part B must generally be completed unless the Plan covers one or more Self-Employed Individuals or satisfies another exception under Section 403(b) of ERISA.)
Option 1: [_] Financial Organization as Trustee Option 2:
[_] Individual Trustee(s)
The Trustee of this Plan shall be a: [_] Directed Trustee
[_] Discretionary Trustee
Name of Trustee ____________________________________________________________________________________________ Address_____________________________________________________________________________________________________ Telephone___________________________________________________________________________________________________ Signature___________________________________________________________________Title___________________________ |
Section Nine: Employer Signature Important: Please read before signing
PROTOTYPE SPONSOR Seligman Advisors, Inc.
100 Park Avenue . New York, NY 10017
800-221-2783
|
[_] Check here if there is an attachment(s) that applies to this Plan. (If the box is checked, please describe the attachment(s) below.)
I am an authorized representative of the Adopting Employer named above and I state the following:
1. I acknowledge that I have relied upon my own advisors regarding the completion of this Adoption Agreement and the legal tax implications of adopting this Plan;
2. I understand that my failure to properly complete this Adoption Agreement may result in disqualification of the Plan;
3. I understand that the Prototype Sponsor will inform me of any amendments made to the Plan and will notify me should it discontinue or abandon the Plan; and
4. I have received a copy of this Adoption Agreement, the corresponding Basic Plan Document and, if applicable, any separate trust agreement used in lieu of the trust agreement contained in the Basic Plan Document.
Signature of Adopting Employer__________________ Date Signed_________________________ Print Name______________________________________ Title_______________________________ |
NOTE: The Adopting Employer may rely on an opinion letter issued by the
Internal Revenue Service as evidence that the Plan is qualified under
Section 401 of the Code except to the extent provided in Revenue Procedure
2000-20, 2000-6 I.R.B. 553 and Announcement 2001-77, 2001-30 I.R.B. An Employer
who has ever maintained or who later adopts any Plan (including a welfare
benefit fund, as defined in Section 419(e) of the Code, which provides
post-retirement medical benefits allocated to separate accounts for key
employees, as defined in Section 419A(d)(3) of the Code, or an individual
medical account, as defined in Section 415(l)(2) of the Code) in addition to
this Plan may not rely on the opinion letter issued by the Internal Revenue
Service with respect to the requirements of Sections 415 and 416 of the Code.
If the Employer who adopts or maintains multiple plans wishes to obtain
reliance with respect to the requirements of Sections 415 and 416 of the Code,
application for a determination letter must be made to Employee Plans
Determinations of the Internal Revenue Service. The Employer may not rely on
the opinion letter in certain other circumstances, which are specified in the
opinion letter issued with respect to the Plan or in Revenue Procedure 2000-20
and Announcement 2001-77. This Adoption Agreement may be used only in
conjunction with Basic Plan Document #01. The signature of the Adopting
Employer in this Section Nine shall apply to Section 10 of this Adoption
Agreement if the Employer is restating its Plan to comply with Revenue
Procedure 2000-20.
Section Ten: Remedial Amendment Period Plan Administration
Complete Section 10 only if the Plan is being restated to comply with GUST.
PART A. HIGHLY COMPENSATED EMPLOYEE
1. Top Paid Group. For purposes of determining who was a Highly Compensated Employee, did the Employer make the top-paid group election for the following Plan Years?
1997 [_] Yes [_] No [_] Not Applicable 2001 [_] Yes [_] No [_] Not Applicable 1998 [_] Yes [_] No [_] Not Applicable 2002 [_] Yes [_] No [_] Not Applicable 1999 [_] Yes [_] No [_] Not Applicable 2003 [_] Yes [_] No [_] Not Applicable 2000 [_] Yes [_] No [_] Not Applicable 2004 [_] Yes [_] No [_] Not Applicable |
NOTE: If a box is not selected for a year, "No" shall be deemed to be selected for such year.
2. Calendar Year Data Election. For purposes of determining who was a Highly Compensated Employee (other than as a five-percent owner), did the Employer make a calendar year data election for the following Plan
Years?
1997 [_] Yes [_] No [_] Not Applicable 2001 [_] Yes [_] No [_] Not Applicable
1998 [_] Yes [_] No [_] Not Applicable 2002 [_] Yes [_] No [_] Not Applicable
1999 [_] Yes [_] No [_] Not Applicable 2003 [_] Yes [_] No [_] Not Applicable
2000 [_] Yes [_] No [_] Not Applicable 2004 [_] Yes [_] No [_] Not Applicable
|
NOTE: If a box is not selected for a year, "Yes" shall be deemed to be selected for such year.
PART B. REQUIRED MINIMUM DISTRIBUTION
1. Required Beginning Date. Effective the first day of the __________(enter year) Plan Year, the definition of Required Beginning Date with respect to this Plan was amended to (select one):
Option 1: [_] The April 1 of the calendar year following the calendar year in which a Participant attains age 701/2.
Option 2: [_] The April 1 of the calendar year following the calendar year in which a Participant attains age 701/2, except that distributions to a Participant (other than a five-percent owner) with respect to benefits accrued after the later of the adoption or effective date of this amendment to the Plan must commence by the later of the April 1 of the calendar year following the calendar year in which the Participant attains age 701/2 or retires.
Option 3: [_] The later of the April 1 of the calendar year following the calendar year in which the Participant attains age 701/2 or retires except that distributions to a five-percent owner must commence by the April 1 of the calendar year following the calendar year in which the Participant attains age 701/2.
NOTE: If no Option is selected, Option 3 shall be deemed to be selected. If Option 3 is selected, complete item 2 below. If either item 1 or item 2 above is selected, skip item 2 below and proceed to Part E below.
2. Transition Rules. To facilitate the amendment to the definition of Required Beginning Date, one or more of the following options must be selected if Option 3, item 1, above was selected. Option 3, below, must be selected to the extent that there would have been an elimination of a preretirement age 701/2 distribution option for Employees older than those listed in item 1 above.
Option 1: [_] Any Participant who attained age 701/2 in years after 1995 was permitted to defer distributions until the calendar year following the calendar year in which the Participant retired.
Option 2: [_] Any Participant attaining age 701/2 in years prior to 1997 was permitted to stop distributions and recommence by the April 1 of the calendar year following the year in which the Participant retires. With respect to such Participants, there is (select one):
Suboption (a): [_] A new annuity starting date upon recommencement, or
Suboption (b): [_] No new annuity starting date upon recommencement.
Option 3: [_] The preretirement age 701/2 distribution option was only eliminated with respect to Employees who reached age 701/2 in or after a calendar year that begins after the later of December 31, 1998, or the adoption date of this amendment.
NOTE: If no option is selected, Options 1, 2 and 3 shall be deemed to be selected. If Option 2 is selected or deemed selected and neither Suboption (a) nor Suboption (b) is selected, Suboption (b) shall be deemed to be selected.
3. Calculations. For purposes of determining a Participant's required
minimum distribution, in what calendar year did the Employer adopt the
2001 proposed regulations under Section 401(a)(9) of the Code?
[_] 2001 [_] 2002 [_] Not Applicable
NOTE: If a box is not selected under item 3 above, 2001 shall be deemed to be selected.
PART C. ANNUAL ADDITIONS TESTING: The 1.0 test described in Section 415(e) of the Code did not apply for Plan Years beginning on or after January 1, 2000. In addition, the Plan did not apply the rule requiring adjustment of the $30,000 annual additions limit to one-fourth of the defined benefit limit for Plan Years beginning on or after January 1, 1995.
PART D. FAMILY AGGREGATION: The family aggregation rules with respect to coverage and nondiscrimination tests and allocations of Employer Contributions to the Plan did not apply for Plan Years beginning on or after January 1, 1997.
PART E. COMPENSATION: The definition of Compensation with respect to annual additions testing under Section 415 of the Code was amended to gross Compensation for Plan Years beginning on or after January 1, 1998.
Internal Revenue Service Department of the Treasury
Plan Description: Prototype
Standardized Profit Sharing Plan
FFN: 502A7852701-001 Case: 200100660
EIN: 13-3043478
Letter Serial No: K269412a Washington, DC 20224
Contact Person: MS. Arrington
50-00197
SELIGMAN ADVISORS INC Telephone Number: (202) 283-8811
100 PARK AVENUE 3RD FLOOR In Reference to: T:EP:RA:T3
NEW YORK, NY 10017 Date: 11/26/2001
|
Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under section 401 of the Internal Revenue Code for use by employers for the benefit of their employees. This opinion relates only to the acceptability of the form of the plan under the Internal Revenue Code. It is not an opinion of the effect of other Federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan. You are also required to send a copy of the approved form of the plan, any approved amendments and related documents to Employee plans Determinations in Cincinnati at the address specified in section 9.11 of Rev. Proc. 2000-20, 2000-6 I.R.B 553.
This letter considers the changes in qualifications requirements made by the Uruguay Round Agreements Act (GATT), Pub. L. 103-465, the Small Business job Protection Act of 1996, Pub. L. 104-188, the Uniformed Services Employment and Reemployment Rights Act of 1994. Pub. L. 103-353, the Taxpayer Relief Act of 1997. Pub. L.105-34, the Internal Revenue Service Restructuring and Reform Act of 1998. Pub. L. 105-206 and the Community renewal Tax Relief Act of 2000. Pub. L. 106-554. These laws are referred to collectively as GUST.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). However, an employer that adopts this plan may rely on this letter with
respect to the qualification of its plan under Code section 401(a), except as
provided below, provided the eligibility requirements and contribution or
benefit provisions are not more favorable for highly compensated employees than
for other employees. The terms of the plan must be followed in operation.
Except as stated below, Employee Plans Determinations will not issue a
determination letter with respect to this plan.
Our opinion does not apply for purposes of Code section 401(a) (10) (B) and section 401(a) (16) if an employer ever maintained another qualified plan for one or more employees who are covered by this plan, other than a specified paired plan within the meaning of section 4.13 of Rev. Proc. 2000-20, 2000-6 I.R.B. 553. For this purpose, the employer will not be considered to have maintained another plan merely because the employer has maintained another defined contribution plan(s), provided such other plan(s) has been terminated prior to the effective date of this plan and no annual additions have been credited to the account of any participant under such other plan(s), as of any date within the limitation year of this plan. Like-wise, if this plan is first effective on or after the effective date of the repeal of Code section 415(e), the employer will not be considered to have maintained another plan merely because the employer has maintained a defined benefit plan(s), provided the defined benefit plan(s) has been terminated prior to the effective date of this plan. Our opinion also does not apply for purposes of Code section 401(a) (16) if, after December 31, 1985, the employer maintains a welfare benefit fund defined in Code section 419(e), which provides postretirement medical benefits allocated to separate accounts for key employees as defined in Code section 419A(d) (3).
An employer that adopts this plan may not rely on this opinion letter with respect to: (1) whether any amendment or series of amendments to the plan satisfies the nondiscrimination requirements of section 1.401(a) (4)-5(a) of the regulations, except with respect to plan amendments granting past service that meet the safe harbor described in section 1.401(a) (4)-5(a) (5) and are not part of a pattern of amendments that significantly discriminates in favor of highly compensated employees; or (2) whether the plan satisfies the effective availability requirement of section 1.401(a) (4)-4(c) of the regulation with respect to any benefit, right or feature.
SELIGMAN ADVISORS, INC.
FFN: 502A7852701-001
An employer that adopts this plan as an amendment to a plan other than a standardized plan may not rely on this opinion letter with respect to whether a benefit, right or other feature that is prospectively eliminated satisfies the current availability requirements of section 1.401(a)-4 of the regulations.
An employer that elects to continue to apply the pre-GUST family aggregation rules in years beginning after December 31, 1996, or the combined plan limit of section 415(e) in years beginning after December 31, 1999, will not be able to rely on the opinion letter without a determination letter.
The employer may request a determination (1) as to whether the plan, considered with all related qualified plans and, if appropriate, welfare benefit funds, satisfies the requirements of Code section 401(a) (16) as to limitations on benefits and contributions in Code section 415 and the requirements of Code section 401(a) (10) (B) as to the top-heavy plan requirements in Code section 416; (2) regarding the nondiscriminatory effect of grants of past service; (3) with respect to whether a prospectively eliminated benefit, right or feature satisfies the current availability requirements, and (4) with respect to the continued application of the pre-GUST family aggregation rules in years beginning after December 31, 1996, or the combined plan limit of section 415(e) in years beginning after December 31, 1999. The employer may request a determination letter by filing an application with Employee Plans Determinations on Form 5307. Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans.
If you, the master or prototype sponsor, have any questions concerning the IRS processing this case, please call the above telephone number. This number is only for use of the sponsor. Individual participants and/or adopting employers with questions concerning the plan should contact the master or prototype sponsor. The plan's adoption agreement must include the sponsor's address and telephone number for inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your telephone number and the most convenient time for us to call in case we need more information. Whether you call or write, please refer to the Letter Serial Number and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you modify or discontinue sponsorship of this plan.
Sincerely yours,
[GRAPHIC]
Director
Employee Plans Rulings &
Agreements
Super Simplified Standardized Profit Sharing Plan
Summary Plan Description Seligman
GENERAL INFORMATION SHEET
EMPLOYER INFORMATION
Definitions of terms referenced with capitalization in this document can be found in the Definitions portion of the Summary Plan Description Booklet provided by your Employer.
Your Employer has adopted a Profit Sharing Plan for the benefit of you and your co-workers. This Plan is designed to help you meet your financial needs during your retirement years. Your Employer must follow certain rules and requirements to maintain this Plan. This General Information Sheet provides you with some of the details of the Plan. Use this information in conjunction with the Summary Plan Description (SPD) Booklet which accompanies this General Information Sheet.
Name of Plan _____________________________________________________________________________________________ Plan Name of Adopting Employer ____________________________________________________________________________ Address _________________________________________________________________________________________________ Telephone _____________________________________ Employer's Federal Tax Identification # ___________________ Plan Sequence # ________________________________ Employer's Fiscal Year End _______________________________ |
Section One: Effective Dates
The Effective Date of this Plan is ______________. If this is an amendment and restatement of a prior existing qualified plan (a Prior Plan), the effective date of the Prior Plan was initially effective on ______________. The Effective Date of this restatement is ______________.
Section Two: Eligibility See Section titled Eligibility and Participation of the SPD Booklet.
ELIGIBLE EMPLOYEES You will generally be eligible to become a Participant in the Plan after having satisfied the age and service requirements. However, you are not eligible to become a Participant in the Plan if you are covered by a collective bargaining agreement (e.g., union agreement) unless the agreement requires you to be covered by the Plan, or if you are a nonresident alien and receive no earned income from the Employer within the United States. In addition, you are not eligible if you become an Employee as a result of an asset or stock acquisition, merger, or similar transaction involving a change in the employer of the employees of a trade or business (during the transition period only).
You will become eligible to participate in the Plan after satisfying the age and service requirements.
The age required for you to become a Participant is ________________.
The Year(s) of Eligibility Service required for you to become a Participant are/is ____________________.
All Employees will be considered to have met the age and service requirements described above if employed on the Effective Date of this Plan. [_] Yes [_] No
The age required for you to become a Participant is ____________________.
HOURS REQUIRED FOR ELIGIBILITY The number of Hours of Service you must be employed to complete a Year of Eligibility Service is 1,000.
The number of Hours of Service you must exceed to avoid a Break in Eligibility Service is 500.
Employees shall be given credit for eligibility purposes for Hours of Service with predecessor employer(s) (only applies if your Employer has experienced a previous change of ownership through stock or asset acquisitions, mergers and/or similar transactions).
ENTRY DATES The Entry Dates upon which you can begin Plan participation are the first day of the Plan Year and the first day of the seventh month of the Plan Year.
Section Three: Contributions See Section titled Contributions to the Plan of the SPD Booklet.
EMPLOYER PROFIT SHARING CONTRIBUTIONS The Employer may, as determined from year to year, make an Employer Profit Sharing Contribution. The Employer Profit Sharing Contribution will be allocated to each Participant's Individual Account under a pro rata formula. Under this formula, each Qualifying Participant's Individual Account will receive a pro rata allocation. This allocation is based on the Qualifying Participant's Compensation in relation to the total Compensation of all Qualifying Participants.
QUALIFYING PARTICIPANT For any Plan Year that an Employer Profit Sharing Contribution is made, you will be entitled to share in that contribution (and, thus, be a Qualifying Participant) if you satisfy the following conditions:
1. You are a Participant, and
2. If you terminate employment, you work at least 500 Hours of Service during the Plan Year.
OTHER CONTRIBUTIONS Rollover and transfer contributions may be made to this Plan.
Section Four: Vesting See Section titled Vesting and Forfeitures of the SPD Booklet.
You will be 100% vested in your Individual Account at all times.
The number of Hours of Service you must be employed to complete a Year of Vesting Service is 1,000.
The number of Hours of Service you must exceed to avoid a Break in Vesting Service is 500.
Employees shall be given credit for vesting purposes for Hours of Service with predecessor Employer(s) (only applies if your Employer has experienced a previous change of ownership through stock or asset acquisitions, mergers and/or similar transactions).
Section Five: Distributions and Loans See Section titled Distribution of Benefits, Claims Procedure and Loans of the SPD Booklet.
DISTRIBUTIONS You may withdraw your Individual Account if you terminate employment, attain Normal Retirement Age, become disabled or if your Employer terminates this Plan. In addition, you may take distributions during your service with the Employer. (See your Plan Administrator for further information on in-service withdrawals.)
LOANS Can you receive loans from the Plan? (If "yes," see attached Loan Disclosure.) [_] Yes [_] No REA SAFE HARBOR The REA Safe Harbor provisions apply to this Plan.
Section Six: Definitions See Section titled Definitions of the SPD Booklet.
PLAN YEAR The Plan Year end is the Employer's fiscal year end.
HOURS OF SERVICE Hours of Service is based on the actual hours you are paid or entitled to payment.
COMPENSATION Compensation is the Compensation paid to you after you become a Participant. Compensation includes Elective Deferrals made pursuant to a Salary Reduction Agreement.
NORMAL RETIREMENT AGE Normal Retirement Age under the Plan is 591/2.
Section Seven: Miscellaneous See Section titled Miscellaneous of the SPD Booklet.
INVESTMENT DIRECTION You will direct the investment of all or part of your Individual Account. (See your Plan Administrator for rules and procedures that will apply.)
PLAN ADMINISTRATOR The Employer is usually the Plan Administrator. This section will be completed only if the Employer is not the Plan Administrator.
Name (If Not Employer) _____________________________________________
Address ___________________________________________________________
Business Telephone _________________________________________________
AGENT FOR SERVICE OF LEGAL PROCESS
Name (If Not Employer) _____________________________________________
Address ___________________________________________________________
NOTE: The Agent for Service of Legal Process is the person upon whom any legal papers can be served. Service of legal process may be made upon a Plan Trustee or the Employer/Plan Administrator.
Section Eight: Trustee(s)
Name (If Not Employer) _____________________________________________
Title _____________________________________________________________
Business Address ___________________________________________________
Name (If Not Employer) _____________________________________________
Title _____________________________________________________________
Business Address ___________________________________________________
Simplified Profit Sharing Plan
Adoption Agreement Seligman
EMPLOYER INFORMATION
Name of Adopting Employer________________________________________________________________________________________ Address__________________________________________________________________________________________________________ City______________________________ State____________________________________ Zip_________________________________ Telephone_________________________ Adopting Employer's Federal Tax Identification #______________________________ Name of Plan_____________________________________________________________________________________________________ Plan Sequence #___________________________ (Enter 001 if this is the first qualified plan the employer has ever maintained, enter 002 if it is the second, etc.) Adopting Employer's Fiscal Year End (specify month and day)____________________Account # (Optional)______________ Type of Business (select one):[_] Sole Proprietorship [_] Partnership [_] C Corporation [_] S Corporation [_] Other (specify) |
Section One: Effective Dates Complete Part A or B
PART A. EFFECTIVE DATE: This is the initial adoption of a profit sharing plan
by the Employer. The Effective Date of this Plan is ____________________. NOTE:
The Effective Date is usually the first day of the Plan Year in which this
Adoption Agreement is signed.
PART B. RESTATEMENT DATE: This is a restatement of an existing qualified plan (a Prior Plan). The Prior Plan was initially effective on ____________________. The Effective Date of this restatement is ____________________. NOTE: The Effective Date is usually the first day of the Plan Year in which this Adoption Agreement is signed.
Section Two: Eligibility Complete Parts A through D
PART A. AGE AND YEARS OF ELIGIBILITY SERVICE REQUIREMENT: 1. Age Requirement.
An Employee will be eligible to become a Participant in the Plan for purposes
of receiving an allocation of any Employer Profit Sharing Contribution made
pursuant to Section Three of the Adoption Agreement after attaining age
__________ (no more than 21). 2. Years of Eligibility Service Requirement. An
Employee will be eligible to become a Participant in the Plan for purposes of
receiving an allocation of any Employer Profit Sharing Contribution made
pursuant to Section Three of the Adoption Agreement after completing __________
(enter 0, 1, 2 or any fraction less than 2) Years of Eligibility Service. NOTE:
If either item 1 or item 2 is left blank, it shall be deemed that there are no
Age and Years of Eligibility Service requirements. If a fraction is selected,
an Employee will not be required to complete any specified number of Hours of
Service to receive credit for a fractional year. If more than one year is
selected by the Employer, all contributions shall be 100% Vested.
PART B. HOURS REQUIRED FOR ELIGIBILITY PURPOSES: 1. ____________ Hours of
Service (no more than 1,000) shall be required to constitute a Year of Eligibility Service. 2. ____________ Hours of Service (no more than 500 but less than the number specified in Section Two, Part B, item 1, above) must be exceeded to avoid a Break in Eligibility Service. 3. For purposes of determining Years of Eligibility Service, an Employee shall be given credit for Hours of Service with the following predecessor employer(s). (complete if applicable) ____________________________________________________________.
PART C. ENTRY DATES: The Entry Dates for participation shall be (select one):
Option 1: [_] The first day of the Plan Year and the first day of the seventh
month of the Plan Year. Option 2: [_] Other (specify) ____________________.
NOTE: If no option is selected, Option 1 shall be deemed to be selected. Option
2 can be selected only if the eligibility requirements and Entry Dates are
coordinated such that each Employee will become a Participant in the Plan no
later than the earlier of: (1) the first day of the Plan Year beginning after
the date the Employee satisfies the age and service requirements of
Section 410(a) of the Code; or (2) six months after the date the Employee
satisfies such requirements.
PART D. EMPLOYEES EMPLOYED AS OF EFFECTIVE DATE: Will an Employee employed as of the Effective Date of this Plan who has not otherwise met the requirements of Part A above be considered to have met those requirements as of the Effective Date? Option 1: [_] Yes Option 2: [_] No NOTE: If no option is selected, Option 2 shall be deemed to be selected.
Section Three: Contributions Complete Parts A and B
PART A. EMPLOYER PROFIT SHARING CONTRIBUTIONS: 1. Contribution Formula For each
Plan Year the Employer will contribute an amount to be determined from year to year. 2. Allocation Formula (select one): Option 1: [_] Pro Rata Formula. Employer Profit Sharing Contributions shall be allocated to the Individual Accounts of Qualifying Participants in the ratio that each Qualifying Participant's Compensation for the Plan Year bears to the total Compensation of all Qualifying Participants for the Plan Year. Option 2: [_] Integrated Formula. Employer Profit Sharing Contributions shall be allocated pursuant to the integrated allocation formula provided in Section 3.01(B)(2) of the Plan.
The integration level shall be (select one): Suboption (a): [_] The Taxable Wage Base. Suboption (b): [_] $ ________ (a dollar amount less than the Taxable Wage Base). Suboption (c): [_] ________ percent (not more than 100 percent) of the Taxable Wage Base. NOTE: If no suboption is selected, Suboption (a) shall be deemed to be selected. NOTE: If no option is selected, Option 1 shall be deemed to be selected.
PART B. QUALIFYING PARTICIPANTS: A Participant will be a Qualifying Participant
and thus entitled to share in the Employer Profit Sharing Contribution for any
Plan Year only if the Participant is a Participant who has satisfied all of the
eligibility requirements of Section Two of this Adoption Agreement on at least
one day of such Plan Year and, if such Participant has incurred a Termination
of Employment, satisfies the following Hours of Service requirement (select
one): Option I: [_] The Participant completes at least 500 Hours of Service
during the Plan Year. Option 2: [_] The Participant completes at least
______________ (not more than 500) Hours of Service during the Plan Year. NOTE:
If no option is selected, Option 1 shall be deemed to be selected.
Section Four: Vesting and Forfeitures Complete Parts A through C
PART A. VESTING SCHEDULE FOR EMPLOYER PROFIT SHARING CONTRIBUTIONS: A
Participant shall become Vested in his or her Individual Account derived from Employer Profit Sharing Contributions made pursuant to Section Three of the Adoption Agreement as follows (select one):
1. Current Vesting Schedule
VESTED PERCENTAGE
---------------------------------------------------------------
YEARS OF VESTING
SERVICE Option 1 [_] Option 2 [_] Option 3 [_] Option 4 [_] Option 5 [_] (Complete if Chosen)
---------------- ------------ ------------ ------------ ------------ ------------ --------------------
Less than One....... 0% 0% 100% 0% _______ %
1................... 0% 0% 100% 0% _______ %
2................... 0% 20% 100% 0% _______ %
3................... 0% 40% 100% 20% _______ % (not less than 20%)
4................... 0% 60% 100% 40% _______ % (not less than 40%)
5................... 100% 80% 100% 60% _______ % (not less than 60%)
6................... 100% 100% 100% 80% _______ % (not less than 80%)
7................... 100% 100% 100% 100% _______ % (not less than 100%)
|
NOTE: If no option is selected, Option 3 shall be deemed to be selected.
2. Prior Vesting Schedule (Complete this Part A, item 2 only if the Plan has been amended to include a less favorable vesting schedule.)
VESTED PERCENTAGE
---------------------------------------------------------------
YEARS
OF
VESTING
SERVICE Option 1 [_] Option 2 [_] Option 3 [_] Option 4 [_] Option 5 [_] (Complete if Chosen)
------- ------------ ------------ ------------ ------------ ------------ --------------------
Less
than
One.. 0% 0% 100% 0% _________ %
1...... 0% 0% 100% 0% _________ %
2...... 0% 20% 100% 0% _________ %
3...... 0% 40% 100% 20% _________ % (not less than 20%)
4...... 0% 60% 100% 40% _________ % (not less than 40%)
5...... 100% 80% 100% 60% _________ % (not less than 60%)
6...... 100% 100% 100% 80% _________ % (not less than 80%)
7...... 100% 100% 100% 100% _________ % (not less than 100%)
|
PART B. HOURS REQUIRED FOR VESTING PURPOSES:
1. ______________ Hours of Service (no more than 1,000) shall be required to constitute a Year of Vesting Service.
2. ______________ Hours of Service (no more than 500 but less than the number specified in this Section 4, Part B, item 1, above) must be exceeded to avoid a Break in Vesting Service. __________________________________________________
3. For purposes of determining Years of Vesting Service, an Employee shall be given credit for Hours of Service with the following predecessor employer(s) (complete if applicable).
PART C. EXCLUSION OF CERTAIN YEARS OF VESTING SERVICE: All of an Employee's
Years of Vesting Service with the Employer are counted to determine the Vested percentage in the Participant's Individual Account except (select any that apply):
[_] Years of Vesting Service before the Employee reaches age 18. [_] Years of Vesting Service before the Employer maintained this Plan or a predecessor plan.
Section Five: Distributions and Loans Complete Parts A and B
PART A. IN-SERVICE WITHDRAWALS OF EMPLOYER PROFIT SHARING CONTRIBUTIONS: May a
Participant request a distribution from the Plan of that portion of the
Participant's Individual Account attributable to Employer Profit Sharing
Contributions pursuant to Section 5.01(A)(4) of the Plan (select one) ? Option
1: [_] Yes. Option 2: [_] Yes, but only with respect to a Participant who is
100% Vested in his or her Individual Account attributable to Employer Profit
Sharing Contributions. Option 3: [_] No. NOTE: If no option is selected, Option
1 shall be deemed to be selected. If either Option 1 or Option 2 is selected,
will such distributions be permitted only on account of hardship pursuant to
Section 5.01(A)(5) of the Plan?
Suboption 1: [_] Yes. Suboption 2: [_]No. NOTE: If no option is selected, Suboption 2 will be deemed to be selected.
PART B. LOANS: May a Participant request a loan pursuant to Section 5.19 of the Plan? Option 1: [_] Yes. Option 2: [_] No. NOTE: If no option is selected, Option 2 shall be deemed to be selected.
Section Six: Definitions Complete Parts A through E
PART A. PLAN YEAR MEANS: Option 1: [_] The 12-consecutive month period which coincides with the Adopting Employer's Fiscal Year. Option 2: [_] The calendar year. Option 3: [_] Other 12-consecutive month period (Specify a 12-consecutive month period selected in a uniform and nondiscriminatory manner.)
NOTE: If no option is selected, Option 1 shall be deemed to be selected. If the initial Plan Year is less than 12 months (a short Plan Year) specify such Plan Year's beginning and ending dates
PART B. HOURS OF SERVICE EQUIVALENCIES: Service will be determined on the basis
of (select one): Option 1: [_] Actual hours for which an Employee is paid or
entitled to payment. Option 2: [_] Days worked. An Employee will be credited
with 10 Hours of Service if under the definition of Hours of Service Section
such Employee would be credited with at least one Hours of Service during the
day. Option 3: [_] Weeks worked. An Employee will be credited with 45 Hours of
Service if under the definition of Hours of Service Section such Employee would
be credited with at least one Hours of Service during the week. Option 4: [_]
Semi-Monthly payroll periods worked. An Employee will be credited with 95 Hours
of Service if under the definition of Hours of Service such Employee would be
credited with at least one Hours of Service during the semi-monthly payroll
period. Option 5: [_] Months worked. An Employee will be credited with 190
Hours of Service if under the definition of Hours of Service Section such
Employee would be credited with at least one Hours of Service during the month.
NOTE: If no option is selected, Option 1 shall be deemed to be selected. This
Section Six, Part B will not apply if the elapsed time method of Section Six,
Part C is selected.
PART C. ELAPSED TIME METHOD: In lieu of tracking Hours of Service of Employees, will the elapsed time method described under the definition of Hours of Service be used (select one)? Option 1: [_] Yes Option 2: [_] No NOTE: If no option is selected, Option 1 shall be deemed to be selected.
PART D. EARLY RETIREMENT AGE: The Early Retirement Age under the Plan shall be
(select one): Option 1: [_] An Early Retirement Age is not applicable under the Plan. Option 2: [_] A Participant satisfies the Plan's Early Retirement Age conditions by attaining age ___________ and completing ____________ Years of Vesting Service. NOTE: If no option is selected, Option 1 shall be deemed to be selected.
PART E. ELIGIBILITY COMPUTATION PERIOD: An Employee's Eligibility Computation
Periods subsequent to his or her initial Eligibility Computation Period shall be (select one): Option 1: [_] The 12-consecutive month periods commencing on the anniversaries of his or her Employment Commencement Date. Option 2: [_] The Plan Year commencing with the Plan Year beginning during his or her initial Eligibility Computation Period. NOTE: If no option is selected, Option 1 shall be deemed to be selected.
Section Seven: Miscellaneous Complete Parts A and B
PART A. PARTICIPANT DIRECTION: Will a Participant be responsible for directing the investment of his or her Plan assets pursuant to Section 7.22(B) of the Plan? Option 1: [_] Yes Option 2: [_] No NOTE: If no option is selected, Option 1 shall be deemed to be selected.
Section Eight: Trustee and Custodian Complete Parts A and B (as applicable)
PART A. CUSTODIAN (This Part A must be completed unless a Trustee is named in Part B, below.)
Financial Organization______________________________________________________________________________________ Address_____________________________________________________________________________________________________ Signature___________________________________________________________________________________________________ Type Name___________________________________________________________________Title__________________________ |
PART B. TRUSTEE (This Part B must generally be completed unless the Plan covers
one or more Self-Employed Individuals or satisfies another exception under
Section 403(b) of ERISA. Select one:) Option 1: [_] Financial Organization as
Trustee Option 2: [_] Individual Trustee(s)
The Trustee of this Plan shall be a: [_] Directed Trustee [_] Discretionary Trustee
Name of Trustee ____________________________________________________________________________________________ Address_____________________________________________________________________________________________________ Telephone___________________________________________________________________________________________________ Signature___________________________________________________________________ Title___________________________ |
Name of Trustee ____________________________________________________________________________________________ Address_____________________________________________________________________________________________________ Telephone___________________________________________________________________________________________________ Signature___________________________________________________________________ Title___________________________ |
Section Nine: Employee Signature Important: Please read before signing
PROTOTYPE SPONSOR Seligman Advisors, Inc.
100 Park Avenue . New York, NY 10017
800-221-2783
|
[_] Check here if there is an attachment(s) that applies to this Plan. (If the box is checked, please describe the attachment(s) below.)
I am an authorized representative of the Adopting Employer named above and I state the following: 1. I acknowledge that I have relied upon my own advisors regarding the completion of this Adoption Agreement and the legal tax implications of adopting this Plan; 2. I understand that my failure to properly complete
this Adoption Agreement may result in disqualification of the Plan; 3. I understand that the Prototype Sponsor will inform me of any amendments made to the Plan and will notify me should it discontinue or abandon the Plan; and 4. I have received a copy of this Adoption Agreement, the corresponding Basic Plan Document and, if applicable, any separate trust agreement used in lieu of the trust agreement contained in the Basic Plan Document.
Signature of Adopting Employer__________________ Date Signed_________________________ Type Name______________________________________ Title_______________________________ |
NOTE: The Adopting Employer may rely on an opinion letter issued by the
Internal Revenue Service as evidence that the Plan is qualified under
Section 401 of the Code except to the extent provided in Revenue Procedure
2000-20, 2000-6 I.R.B. 553 and Announcement 2001-77, 2001-30 I.R.B. An Employer
who has ever maintained or who later adopts any Plan (including a welfare
benefit fund, as defined in Section 419(e) of the Code, which provides
post-retirement medical benefits allocated to separate accounts for key
employees, as defined in Section 419A(d)(3) of the Code, or an individual
medical account, as defined in Section 415(l)(2) of the Code) in addition to
this Plan may not rely on the opinion letter issued by the Internal Revenue
Service with respect to the requirements of Sections 415 and 416 of the Code.
If the Employer who adopts or maintains multiple plans wishes to obtain
reliance with respect to the requirements of Sections 415 and 416 of the Code,
application for a determination letter must be made to Employee Plans
Determinations of the Internal Revenue Service. The Employer may not rely on
the opinion letter in certain other circumstances, which are specified in the
opinion letter issued with respect to the Plan or in Revenue Procedure 2000-20
and Announcement 2001-77. This Adoption Agreement may be used only in
conjunction with Basic Plan Document #01. The signature of the Adopting
Employer in this Section Nine shall apply to Section 10 of this Adoption
Agreement if the Employer is restating its Plan to comply with Revenue
Procedure 2000-20.
Section Ten: Remedial Amendment Period Plan Administration Complete Section 10 only if the Plan is being restated to comply with GUST
PART A. HIGHLY COMPENSATED EMPLOYEE
1. Top Paid Group. For purposes of determining who was a Highly Compensated Employee, did the Employer make the top-paid group election for the following Plan Years?
1997 [_] Yes [_] No [_] Not Applicable 2000 [_] Yes [_] No [_] Not Applicable 2003 [_] Yes [_] No [_] Not Applicable
1998 [_] [_] [_] Not [_] [_] [_] Not [_] [_] Not
Yes No Applicable 2001 Yes No Applicable 2004 [_] Yes No Applicable
1999 [_] [_] [_] Not [_] [_] [_] Not
Yes No Applicable 2002 Yes No Applicable
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NOTE: If a box is not selected for a year, "No" shall be deemed to be selected for such year.
2. Calendar Year Data Election. For purposes of determining who was a Highly Compensated Employee (other than as a five-percent owner) did the Employer make a calendar year data election for the following Plan Years?
1997 [_] Yes [_] No [_] Not Applicable 2000 [_] Yes [_] No [_] Not Applicable 2003 [_] Yes [_] No [_] Not Applicable
1998 [_] [_] [_] Not [_] [_] [_] [_] [_] Not
Yes No Applicable 2001 Yes No [_] Not Applicable 2004 Yes No Applicable
1999 [_] [_] [_] Not [_] [_] [_] Not
Yes No Applicable 2002 Yes No Applicable
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NOTE: If a box is not selected for a year, "Yes" shall be deemed to be selected for such year.
PART B. REQUIRED MINIMUM DISTRIBUTION
1. Beginning Date. Effective the first day of the __________ (enter year) Plan
Year, the definition of Required Beginning Date with respect to this Plan was
amended to (select one): Option 1: [_] The April 1 of the calendar year
following the calendar year in which a Participant attains age 70 1/2. Option
2: [_] The April 1 of the calendar year following the calendar year in which a
Participant attains age 70 1/2, except that distributions to a Participant
(other than a five-percent owner) with respect to benefits accrued after the
later of the adoption or effective date of this amendment to the Plan must
commence by the later of the April 1 of the calendar year following the
calendar year in which the Participant attains age 70 1/2 or retires. Option 3:
[_] The later of the April 1 of the calendar year following the calendar year
in which the Participant attains age 70 1/2 or retires except that
distributions to a five-percent owner must commence by the April 1 of the
calendar year following the calendar year in which the Participant attains age
70 1/2. NOTE: If no Option is selected, Option 3 shall be deemed to be
selected. If Option 3 is selected, complete item 2 below. If either item 1 or
item 2 above is selected, skip item 2 below and proceed to Part E below.
2. Transition Rules. To facilitate the amendment to the definition of Required
Beginning Date, one or more of the following options must be selected if Option
3, item 1, above was selected. Option 3, below, must be selected to the extent
that there would have been an elimination of a preretirement age 70 1/2
distribution option for Employees older than those listed in item 1 above.
Option 1: [_] Any Participant who attained age 70 1/2 in years after 1995 was
permitted to defer distributions until the calendar year following the calendar
year in which the Participant retired. Option 2: [_] Any Participant attaining
age 70 1/2 in years prior to 1997 was permitted to stop distributions and
recommence by the April 1 of the calendar year following the year in which the
Participant retires. With respect to such Participants, there is (select one):
Suboption (a): [_] a new annuity starting date upon recommencement, or
Suboption (b): [_] no new annuity starting date upon recommencement. Option 3:
[_] The preretirement age 70 1/2 distribution option was only eliminated with
respect to Employees who reached age 70_ in or after a calendar year that
begins after the later of December 31, 1998, or the adoption date of this
amendment. NOTE: If no option is selected, Options 1, 2 and 3 shall be deemed
to be selected. If Option 2 is selected or deemed selected and neither
Suboption (a) nor Suboption (b) is selected, Suboption (b) shall be deemed to
be selected.
3. Calculations. For purposes of determining a Participant's required minimum distribution, in what calendar year did the Employer adopt the 2001 proposed regulations under Section 401(a)(9) of the Code? [_] 2001 [_] 2002 [_] Not Applicable NOTE: If a box is not selected under item 3 above, 2001 shall be deemed to be selected.
PART C. ANNUAL ADDITIONS TESTING: The 1.0 test described in Section 415(e) of the Code did not apply for Plan Years beginning on or after January 1, 2000. In addition, the Plan did not apply the rule requiring adjustment of the $30,000 annual additions limit to one-fourth of the defined benefit limit for Plan Years beginning on or after January 1, 1995.
PART D. FAMILY AGGREGATION: The family aggregation rules with respect to coverage and nondiscrimination tests and allocations of Employer Contributions to the Plan did not apply for Plan Years beginning on or after January 1, 1997.
PART E. COMPENSATION: The definition of Compensation with respect to annual additions testing under Section 415 of the Code was amended to gross Compensation for Plan Years beginning on or after January 1, 1998.
Internal Revenue Service Department of the Treasury
Plan Description: Prototype
Standardized Profit Sharing Plan
FFN: 502A7852701-003 Case: 200100662
EIN: 13-3043478
Letter Serial No: K269414a Washington, DC 20224
Contact Person: Ms. Arrington
50-00197
SELIGMAN ADVISORS INC. Telephone Number:(202) 283-5811
100 PARK AVENUE 3RD FLOOR In Reference to:T:EP:RA:T3
NEW YORK, NY 10017 Date: 11/26/2001
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Dear Applicant:
In our opinion, the form of the plan identified above is acceptable under section 401 of the Internal Revenue Code for use by employers for the benefit of their employees. This opinion relates only to the acceptability of the form of the plan under the Internal Revenue Code. It is not an opinion of the effect of other federal or local statutes.
You must furnish a copy of this letter to each employer who adopts this plan. You are also required to send a copy of the approved form of the plan, any approved amendments and related documents to Employee plans Determinations in Cincinnati at the address specified in section 9:11 of Rev. Proc. 2000-20 2000-6 I.R.B. 553.
This letter considers the changes in qualifications requirements made by the Uruguay Round Agreements Act (GATT), Pub. L. 103-465, the Small Business Job Protection Act of 1996, Pub. L. 104-188, the Uniformed Services Employment and Reemployment right Act of 1994. Pub. L. 103-353, the Taxpayer Relief Act of 1997. Pub. L.105-34, the Internal Revenue Service Restructuring and Reform Act of 1998. Pub. L. 105-206 and the Community Renewal Tax Relief Act of 2000. Pub. L. 106-554. These laws are referred to collectively as GUST.
Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). However, an employer that adopts this plan may rely on this letter with
respect to the qualification of its plan under Code section 401(a), except as
provided below, provided the eligibility requirements and contribution or
benefit provisions are not more favorable for highly compensated employees than
for other employees. The terms of the plan must be followed in operation.
Except as stated below. Employee Plans Determinations will not issue a
determination letter with respect to this plan.
Our opinion does not apply for purposes of Code section 401(a) (10) (B) and section 401(a) (16) if an employer ever maintained another qualified plan for one or more employees who are covered by this plan, other than a specified paired plan within the meaning of the section 4.13 of Rev. Proc. 2000-20, 2000-6 I.R.B. 553. For this purpose, the employer will not be considered to have maintained another plan merely because the employer has maintained another defined contribution plan(s), provided such other plan(s) has been terminated prior to the effective date of this plan and no annual additions have been credited to the account of any participant under such other plan(s) as of any date within the limitation year of this plan. Like-wise, if this plan is first effective on or after the effective date of the repeal of Code section 415(e), the employer will not be considered to have maintained another plan merely because the employer has maintained a defined benefit plan(s), provided the defined benefit plan(s) has been terminated prior to the effective date of this plan. Our opinion also does not apply for purposes of Code section 401(a) (16) if, after December 31, 1965, the employer maintains a welfare benefit fund defined in Code section 419(e), which provides postretirement medical benefits allocated to separate accounts for key employees as defined in Code section 419A(d) (3).
An employer that adopts this plan may not rely on this opinion letter with respect to: (1) whether any amendment or series of amendments to the plan satisfies the nondiscrimination requirements of section 1.401(a) (4)-5(a) of the regulations, except with respect to plan amendments granting past service that meet the safe harbor described in section 1.401(a) (4)-5(a) (5) and are part of a pattern of amendments that significantly discriminates in favor of highly compensated employees; or (2) whether the plan satisfies the effective availability requirement of section 1.401(a) (4)-4(c) of the regulation with respect to any benefit, right or feature.
SELIGMAN ADVISORS, INC.
FFN: 502A7852701-003
An employer that adopts this plan as an amendment to a plan other than a standardized plan may not rely on this opinion letter with respect to whether a benefit, right or other feature that is prospectively eliminated satisfies the current availability requirements of section 1.401(a)-4 of the regulation.
An employer that elects to continue to apply the pre-GUST family aggregation rules in years beginning after December 31, 1996, or the combined plan limit of section 415(e) in years beginning after December 31, 1999, will not be able to rely on the opinion letter without a determination letter.
The employer may request a determination (1) as to whether the plan, considered with all related qualified plans and, if appropriate, welfare benefit funds, satisfies the requirements of Code section 401(a) (16) as to limitations on benefits and contributions in Code section 415 and the requirements of Code section 401(a) (10) (B) as to the top-heavy plan requirements in Code section 416; (2) regarding the nondiscriminatory effects of grants of past service; (3) with respect to whether a prospectively eliminated benefit, right or feature satisfies the current availability requirements, and (4) with respect to the continued application of the pre-GUST family aggregation rules in years beginning after December 31, 1996, or the combined plan limit of section 415(e) in years beginning after December 31, 1999. The employer may request a determination letter by filing an application with Employee Plans Determinations on Form 5307. Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans.
If you, the master or prototype sponsor, have any questions concerning the IRS processing this case, please call the above telephone number. This number is only for the use of the sponsor. Individual participants and/or adopting employers with questions concerning the plan should contact the master or prototype sponsor. The plan's adoption agreement must include the sponsor's address and telephone number for inquiries by adopting employers.
If you write to the IRS regarding this plan, please provide your telephone number and the most convenient time for us to call in case we need more information. Whether you call or write, please refer to the Letter Serial Number and File Folder Number shown in the heading of this letter.
You should keep this letter as a permanent record. Please notify us if you modify or discontinue sponsorship of this plan.
Sincerely yours,
[GRAPHIC]
Director
Employee Plans Rulings and
Agreements
Simplified Standardized Profit Sharing Plan Seligman Summary Plan Description
GENERAL INFORMATION SHEET
EMPLOYER INFORMATION Definitions of terms referenced with capitalization in this document can be found in the Definitions portion of the Summary Plan Description Booklet provided by your Employer. Your Employer has adopted a Profit Sharing Plan for the benefit of you and your co-workers. This Plan is designed to help you meet your financial needs during your retirement years. Your Employer must follow certain rules and requirements to maintain this Plan. This General Information Sheet provides some of the details of the Plan. Use this information in conjunction with the Summary Plan Description (SPD) Booklet which accompanies this General Information Sheet.
Name of Plan ____________________ Name of Adopting Employer______________________________ Address ____________________________________________________________________________________ Telephone _______________________ Employer's Federal Tax Identification # _________________ Plan Sequence # __________________ Employer's Fiscal Year End ______________________________ |
Section One: Effective Dates
The Effective Date of this Plan is ________________. If this is a restatement of an existing qualified plan (a Prior Plan), the Prior Plan was initially effective on ________________. The Effective Date of this restatement is ________________.
Section Two: Eligibility See Section titled Eligibility and Participation of the SPD Booklet.
ELIGIBLE EMPLOYEES You will generally be eligible to become a Participant in the Plan after having satisfied the age and service requirements. However, you are not eligible to become a Participant in the Plan if you are covered by a collective bargaining agreement (e.g., union agreement) unless the agreement requires you to be covered by the Plan or you are a nonresident alien and receive no earned income from the Employer within the United States. In addition, you are not eligible if you become an Employee as a result of an asset or stock acquisition, merger, or similar transaction involving a change in the employer of a trade or business (during the transition period only).
The age required for you to become a Participant is ________________. The Year(s) of Eligibility Service required for you to become a Participant is ______________. All Employees will be considered to have met the age and service requirements described above if employed on the Effective Date of this Plan. [_] Yes [_] No
HOURS REQUIRED FOR ELIGIBILITY The number of Hours of Service you must be
employed to complete a Year of Eligibility Service is ______________. The
number of Hours of Service you must exceed to avoid a Break in Eligibility
Service is ____________. Employees shall be given credit for eligibility
purposes for Hours of Service with the following predecessor employer(s):
____________________________________________.
ENTRY DATES The Entry Dates upon which you can begin Plan participation are __________.
Section Three: Contributions See Section titled Contributions to the Plan of the SPD Booklet
EMPLOYER PROFIT SHARING CONTRIBUTIONS The Employer may, as determined from year to year, make an Employer Profit Sharing Contribution. The Employer Profit Sharing Contribution will be allocated to each Participant's Individual Account under the formula checked below.
[_] Pro Rata Formula. Under this formula, each Qualifying Participant's Individual Account will receive a pro rata allocation. This allocation is based on the Qualifying Participant's Compensation in relation to the total Compensation of all Qualifying Participants.
[_] Integrated Formula. Under this formula, each Qualifying Participant's Individual Account will receive a base contribution. In addition, Qualifying Participants will receive an additional allocation (called an excess contribution) based on their Compensation above the integration level. The integration level is __________________.
QUALIFYING PARTICIPANT For any Plan Year that an Employer Profit Sharing Contribution is made, you will be entitled to share in that contribution (and, thus, be a Qualifying Participant) if you satisfy the following conditions. 1. You are a Participant, and 2. If you terminate employment, you work at least __________ Hour(s) of Service during the Plan Year.
OTHER CONTRIBUTIONS Rollover and transfer contributions may be made to this Plan.
Section Four: Vesting and Forfeitures See Section titled Vesting and Forfeitures of the SPD Booklet.
Your rollover and transfer contributions are 100% vested immediately. The vesting schedule applies to your Employer Profit Sharing Contributions.
YEARS OF
VESTING
SERVICE VESTED PERCENTAGE
------- -----------------------------------------------------------------------------------
Option 1 [_] Option 2 [_] Option 3 [_] Option 4 [_] Option 5 [_] (Complete if Chosen)
------------ ------------ ------------ ------------ ------------ --------------------
Less than One 0% 0% 100% 0% _______ %
1............ 0% 0% 100% 0% _______ %
2............ 0% 20% 100% 0% _______ %
3............ (not
less
than
0% 40% 100% 20% _______ % 20%)
4............ (not
less
than
0% 60% 100% 40% _______ % 40%)
5............ (not
less
than
100% 80% 100% 60% _______ % 60%)
6............ (not
less
than
100% 100% 100% 80% _______ % 80%)
7............ (not
less
than
100% 100% 100% 100% _______ % 100%)
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NOTE: If no option is selected, Option 3 shall be deemed to be selected.
HOURS REQUIRED FOR VESTING The number of Hours of Service you must be employed to complete a Year of Vesting Service is ______________. The number of Hours of Service you must exceed to avoid a Break in Vesting Service is ______________. Employees shall be given credit for vesting purposes for Hours of Service with the following predecessor employer(s): ____________________________________.
EXCLUSION OF CERTAIN YEARS OF VESTING SERVICE All of your years of service will be counted for vesting of your Individual Account except the following (if checked). [_] Years of Vesting Service before you reach age 18. [_] Years of Vesting Service before the Employer maintained this Plan or a predecessor plan as cited above.
VESTING SCHEDULE FOR TOP-HEAVY PLANS A Top-Heavy Plan is one in which more than 60% of the value of the plan assets is credited to the accounts of certain officers, shareholders and highly paid Participants. The following vesting schedule will apply if the Plan is top-heavy.
YEARS OF
VESTING SERVICE Option 1 [_] Option 2 [_]
--------------- ------------ ------------ 1.............. 0% 100% 2.............. 20% 100% 3.............. 40% 100% 4.............. 60% 100% 5.............. 80% 100% 6.............. 100% 100% |
FORFEITURES Forfeitures of Employer Profit Sharing Contributions will be used to reduce Employer Profit Sharing Contributions.
Section Five: Distributions and Loans See Section titled Distribution of Benefits, Claims Procedure and Loans of the SPD Booklet.
DISTRIBUTIONS You may withdraw your Individual Account if you terminate employment, attain Normal Retirement Age, become disabled or if your Employer terminates this Plan. In addition, you may make distributions under the circumstances described below. Can you withdraw Employer Contributions during service? [_] Yes. [_] Yes, but only if you are 100% vested. [_] Yes, but only on account of hardship. [_] No.
LOANS Can you receive loans from the Plan? (If "yes," see attached Loan Disclosure.) [_] Yes [_] No
REA SAFE HARBOR The REA Safe Harbor provisions apply to this plan.
Section Six: Definitions See Section titled Definitions of the SPD Booklet.
PLAN YEAR The Plan Year end is __________________.
HOURS OF SERVICE EQUIVALENCIES Service will be determined on the basis of: [_] Actual hours you are paid or entitled to payment. [_] Days worked. You will receive credit for 10 Hours of Service for each day you are credited with at least one Hour of Service. [_] Weeks worked. You will receive credit for 45 Hours of Service for each week you are credited with at least one Hour of Service. [_] Semi-Monthly payroll periods worked. You will receive credit for 95 Hours of Service for each semi-monthly payroll period you are credited with at least one Hour of Service. [_] Months worked. You will receive credit for 190 Hours of Service for each month you are credited with at least one Hour of Service. [_] Elapsed time. You will receive credit for the period of time during which you are paid or entitled to pay from your Employer.
COMPENSATION Compensation is the Compensation paid to you after you become a Participant. Compensation includes Elective Deferrals made pursuant to a Salary Reduction Agreement.
EARLY RETIREMENT AGE Early Retirement Age [_] does [_] does not apply to this Plan. You will satisfy the Early Retirement Age conditions when you Attain age ________ and complete ________ Years of Vesting Service.
NORMAL RETIREMENT AGE Normal Retirement Age under the Plan is 591/2.
Section Seven: Miscellaneous See Section titled Miscellaneous of the SPD Booklet.
INVESTMENT DIRECTION Can you direct the investment of your Individual Account?
[_] Yes [_] No (If "yes," see your Plan Administrator for rules and procedures
that will apply.)
PLAN ADMINISTRATOR The Employer is usually the Plan Administrator. This section will be completed only if the Employer is not the Plan Administrator.
Name (If Not Employer) __________________________ Business Telephone ______________________________
Address ________________________________________________________________________________________________
AGENT FOR SERVICE OF LEGAL PROCESS
Name _________________________________________
Address
NOTE: The Agent for Service of Legal Process is the person upon whom any
legal papers can be served. Service of legal process may be made upon a Plan
Trustee or the Employer/Plan Administrator.
Section Eight: Trustee(s)
Name __________________________________________
Title __________________________________________
Business Address ________________________________________________________________________________________
Name __________________________________________
Title __________________________________________
Business Address ________________________________________________________________________________________
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Profit Sharing Plan
Plan Profile Seligman
Section One: Company Information
Company Name _______________________________________________________________________________________________ Contact Person ____________________________________________________________________ Telephone _______________ Based on your plan's eligibility requirements, number of employees eligible to participate __________________ Section Two: Financial Advisor Information Name of your Financial Advisor ______________________________________________________________________________ Telephone ________________________________________________________________________ E-Mail ____________________ Broker/Dealer Firm _______________________________ Office ______________________ Rep ID ____________________ |
Class of Fund Shares Selected [_] A Shares [_] B Shares [_] C Shares [_] D Shares*
[_] NAV A Shares (for plans with 50 or more eligible employees or $500,000 transferred into the
Seligman Funds)
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NOTE: Default will be A Shares.
* Investments in D Shares are limited to current D Shareholders and certain broker/dealers who do not offer C Shares. Please see prospectus for complete details.
Section Three: Plan Information
Plan Status: [_] New Plan [_] Transfer Plan
Approximate Assets to be Transferred $ ____________________________
If this is a transfer plan and you wish to transfer the assets of another Qualified Plan into a Seligman Prototype Profit Sharing Plan, please take the following steps:
1. Complete the information requested in the accompanying Transfer of Assets letter.
. If you will be using State Street Bank and Trust Company (State Street) as the Accepting Custodian, please return the Transfer of Assets letter to Seligman.
. If you will be using another Trustee or Custodian, please forward the Transfer of Assets letter to that individual or entity.
2. Contact the Resigning Trustee or Custodian to determine if there are requirements in addition to the Transfer of Assets letter to facilitate the transfer.
3. The new Trustee or Custodian, whether it be State Street or another individual/entity, will forward the completed Transfer of Assets letter to your current Custodian or Trustee indicating that they will accept the transfer of assets from your current plan. You will receive confirmation when the transfer has been effected.
Profit Sharing Plan
Enrollment Form Seligman
Instructions: When you have completed this form, please keep a copy for yourself and return the original to your employer. You may request additional forms in the future to change Personal Information or Beneficiary Designation.
Participant's Name _________________________________________________ Social Security # ______________________ |
Check all that apply:
[_] To Enroll: Complete Sections 1, 2, 3, and 4
[_] To Change Personal Information or Beneficiary: Complete appropriate parts of Section 1 and/or 3, and 4
[_] To Change Investment Elections: Complete Sections 1, 2, and 4
1. Personal Information (Please print)
Date of Birth _________________________ Rehire? [_] Yes [_] No Marital Status [_] Married [_] Single Date of Hire _________________________ Original Date of Hire ______________________________________________ Telephone Number ____________________________________________________________________________________________ Mailing Address _____________________________________________________________________________________________ City _______________________________________________________________ State _______________ Zip ____________ |
2. Investment Selection
Select the Funds in which you would like to invest all future employer contributions. Do not use a fixed dollar amount; use whole number percentages only (e.g., 30%, not 331/3 or 33.3%). Percentages must total 100%.
SELIGMAN FUNDS
%
-
Capital Fund
Cash Management Fund
Common Stock Fund
Communications and Information Fund
Emerging Markets Fund
Frontier Fund
Growth Fund
Global Growth Fund
Global Smaller Companies Fund
Global Technology Fund
International Growth Fund
High-Yield Bond Series
Investment Grade Fixed Income Fund
Income Fund
Large-Cap Value Fund
Small-Cap Value Fund
U.S. Government Securities Series
Time Horizon Series
Time Horizon 30 Fund
Time Horizon 20 Fund
Time Horizon 10 Fund
Harvester Fund
Other
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TOTAL OF ALL ELECTIONS MUST EQUAL 100%
***If an investment election is not selected, all deposits will default to the Seligman Cash Management Fund***
3. Beneficiary Designation
I designate the individual(s) named below the Beneficiary(ies) of my vested Profit Sharing account balance. I revoke all prior Beneficiary Designation(s), if any, made by me for these assets. I understand that I may change or add Beneficiaries at any time by submitting a new Designation to the Plan Administrator using this form. Any interest in this account that is not effectively disposed of below will be paid to my surviving spouse. If I have no surviving spouse, it will be paid to my estate.
If necessary, please attach an additional sheet and provide the requested information.
IF YOU ARE MARRIED AND LIVE IN A COMMUNITY PROPERTY STATE, AND YOUR SPOUSE IS NOT DESIGNATED AS THE ONLY BENEFICIARY, YOUR SPOUSE MUST SIGN PART D BELOW.
A. PRIMARY BENEFICIARY DESIGNATION: I designate the following individual(s) as Primary Beneficiary(ies) of the assets in this account.
Individual's % of Date of Social Security Contingent
Name Distribution Relationship Birth Number Beneficiary Code*
------------ ------------ ------------ ------- --------------- -----------------
1.
2.
3.
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* B(3) will apply unless another Code is selected.
B. CONTINGENT BENEFICIARY CODES: If this Primary Beneficiary does not survive me, pay his or her share of my assets as follows:
1. To his or her estate
2. To the other Primary Beneficiaries who survive me, in equal shares
3. To the other Primary Beneficiaries who survive me, in proportion to their then-respective shares of my assets
4. To the Contingent Beneficiary named for such Primary Beneficiary in Part C below, if he or she survives me
5. To the Trust named for such Primary Beneficiary in Part C below
C. CONTINGENT BENEFICIARY DESIGNATION
Relationship to
Individual's Name % of Distribution Primary Beneficiary Date of Birth Social Security Number
----------------- ----------------- ------------------- ------------- ----------------------
For
Primary
Beneficiary
#1
For
Primary
Beneficiary
#2
For
Primary
Beneficiary
#3
|
D. SPOUSAL CONSENT:
If the account holder is married and lives in a community property state, and his/her spouse is not designated as the only beneficiary, the spouse must sign below:
I am the spouse of the above-named account holder. I acknowledge that I have received a full disclosure of my spouse's property and financial obligation. Due to possible consequences of giving up my community property interest in this Profit Sharing account, I have been advised to see a tax professional or legal advisor. I assume full responsibility for any adverse consequences that may result. I hereby consent to the designation of the Beneficiaries stated above.
Signature of Spouse____________________________________________ Date _________
4. Signatures
I understand that the value of composite fund investments may fluctuate over time and I understand the risks associated with investing in the above fund(s) as described in the fund(s) prospectus(es). Furthermore, I authorize the Plan Administrator to execute my directions as set forth above. I understand these directions will be in effect until they are replaced by a new form, or required by law or the plan.
When making changes, I will review my statements to confirm accuracy of the changes. I will report all discrepancies to my Employer within 90 days following the end of the quarter. I understand that my employer and Seligman Data Corp. will attempt, in good faith, to implement these changes as soon as administratively feasible.
Signature of Participant _______________________________________ Date _________ Employer's Signature ___________________________________________ Date _________ |
Profit Sharing Plan
Transfer of Assets Letter Seligman
Date ____________________________________________
Employer's Name _________________________________
Employer's Address ______________________________
TO:
_____________________________________________________
_____________________________________________________
|
Enter Name and Address of Prior Trustee/Custodian
Dear Sir or Madam:
We have established a prototype Profit Sharing Plan with Seligman Funds and the following Trustee/Custodian listed below (check one):
I. [_] State Street Bank and Trust Company If this box is selected,
(State Street) c/o Seligman Data Corp. please make check
100 Park Avenue, 2nd Floor New York, NY payable to State Street Bank
10017 and Trust Company.
II. [_] Specify Trustee/Custodian Name and
Address
___________________________________________ If this box is selected,
___________________________________________ please make check
___________________________________________ payable to Seligman Group of
Funds.
|
Please [_] liquidate all assets and transfer cash [_] transfer shares of the Seligman Funds in-kind* from the participant accounts listed below directly to
Seligman, at 100 Park Avenue, New York, NY 10017, Attention: Retirement Plan Services.
Employee Name Current Account Number ------------------------------------ ----------------------------------- ------------------------------------ ----------------------------------- ------------------------------------ ----------------------------------- |
List accounts and account numbers for each employee, as applicable. You may attach an additional sheet if necessary.
Sincerely,
Employer's Signature _____________ Employer's Name (please print)
________ Date___________________
|
* In-kind transfers are available only for existing assets currently invested in Seligman Funds.
Trustee/Custodian Acceptance (to be completed by accepting Trustee/Custodian)
We accept appointment as Trustee/Custodian in accordance with the terms and conditions of the Plan Document.
State Street Bank and Trust Company, Other Trustee/Custodian
Custodian
By: By:
---------------------------------- ---------------------------------
Date: Date:
---------------------------------- ---------------------------------
|
Profit Sharing Plan
Contribution Plan Seligman
Employer: Please use the information from your employees' Enrollment Forms to complete this form, converting the investment percentages to dollar amounts. Include account numbers (or Social Security numbers) if known. Attach a check made payable to State Street Bank and Trust Company for the grand total amount and send to (attach additional copies of this form if necessary):
Retirement Plan Services c/o Seligman Data Corp.
100 Park Avenue . New York, NY 10017
Employer _______________________________________________ Contribution Date ____________________________ Contact Name ___________________________________________ Authorized Signature _________________________ |
Class of Shares: [_] Class A [_] Class B [_] Class C [_] Class D* [_] NAV A Shares (for plans with 50 or more eligible employees or $500,000 transferred into Seligman Funds)
FUND NAME
Elective Employer High-Yield International
Name Account # Deferral Contribution Total Growth Bond Growth
-------------- -------- ------------ ----- ------ ---------- -------------
James Smith
8304585458....... $120 $50 $170 $70 $50 $50
Total $
|
* Class D shares are available only if you already own Class D shares or if your Financial Advisor or Broker/Dealer maintains an omnibus account at Seligman Data Corp.
Profit Sharing Plan
Loan Promissory Note Seligman
To apply for a loan, complete this form and forward to your Plan Administrator for approval. After approval has been granted, the Plan Administrator should send this form to:
Retirement Plan Services c/o Seligman Data Corp.
100 Park Avenue . New York, NY 10017
THE LOAN PROVISION WORKS AS FOLLOWS:
. You must be currently employed with your employer to obtain a loan.
. You can borrow as much as 50% of your vested account balance up to $50,000. There is a $1,000 minimum.
. Payments must be made at least quarterly.
. Payments are made with after-tax, not pre-tax, dollars.
. You will receive an amortization schedule from your Plan Administrator detailing each payment amount due.
. All loan payments - principal and interest - are deposited back into the Seligman Funds in your account.
. If you are married and live in a community property state, your spouse must sign this form in Section 3B.
. Seligman will provide you with a check for the loan amount approved by your Plan Administrator.
1. Participant Information (Please Print)
Participant Name (First Name) _________________________________ (MI)_____ (Last Name) ______ Social Security # ___________ Address ____________________________________________________ City _______________________ State _____ Zip Code _____ Name of Employer __________________________________________________ Seligman Account # (Custodial Account)________ |
2. Loan Information
A. AMOUNT OF LOAN REQUESTED
$ _______________
Minimum loan amount is $1,000; maximum loan amount is $50,000. Loan cannot exceed 50% of your vested account value.
B. FUNDS TO BE LIQUIDATED
Please liquidate the following Seligman Funds to issue my loan:
Seligman ________________ Fund $__________________ Seligman ________________ Fund $___________________ |
C. REPAYMENT
Frequency of Payment: [_] Monthly [_] Quarterly
Number of Years: [_] 1 year [_]2 years [_] 3 years [_] 4 years [_] 5 years
[_] More than 5 years* ______(insert whole number)
* Available only if loan proceeds are used to acquire a principal residence.
D. FUNDS TO BE CREDITED
Please deposit loan repayments into the following Seligman Funds:
Seligman_________________ Fund $ __________________ Seligman ________________ Fund $ ________________ |
E. OUTSTANDING LOANS
If you have had any outstanding loans from your employer within the last 12
months, enter your highest loan balance in the last 12 months:
$ __________________
Enter the total balance of those loans now outstanding: $ ____________
3. Signatures
A. PARTICIPANT SIGNATURE
For the value received, the participant named above ("Borrower") promises to pay to the order of his or her Seligman Profit Sharing Account (the "Account"), the Principal amount with stated interest thereon, as follows:
The Principal amount of this Note shall be paid in equal installments on the first day of each payment period. Payments of interest accrued on the outstanding Principal amount of this Note shall be payable on each such date together with the Principal payment on such date. Interest is fixed at prime rate as published in The Wall Street Journal on the business day prior to the date the loan is approved.
The entire Principal amount secured by this Note, together with interest accrued to the date of payment, shall become immediately due and payable at the option of the holder if (i) Borrower becomes entitled to a distribution (including termination of employment); (ii) any payment required shall remain unpaid and owing for at least 60 days following the due date of such payment; or (iii) any other default shall occur under the terms of any collateral assignment given by the Borrower to secure the amounts payable under this Note which shall continue for at least 15 days.
This Note shall be construed and enforced in accordance with the laws of the State of New York, except as preempted by the Employee Retirement Income Security Act of 1974, as amended from time to time, or other federal law. At the Maturity Date or, if earlier, upon the payment in full of the Principal, interest, and all other amounts under the Note in accordance with its terms, the Note shall terminate.
I agree to the above terms and certify that the information on this form is correct.
Participant's Signature _______________________________________________________________ Date _________ |
B. SPOUSAL CONSENT
If the account holder is married and lives in a community property state, the spouse must sign the Spousal Consent below. This Spousal Consent must be notarized.
I, the undersigned, am the spouse of the above-named account-holder and Borrower. I hereby consent to the assignment and acknowledge that the account is hereby assigned to the Plan as security for the loan evidenced by this Note.
Signature of Borrower's Spouse__________________ Name of Borrower's Spouse (Please Print) __________ Date ____________ Sworn to and subscribed before me on this _____________ day of _____________________________ ,20 ___________ Notary Public __________________________________________________ Date __________ |
C. EMPLOYER SIGNATURE
Your employer may be required to sign below. Contact your Employer Representative.
Signature of Employer Representative __________________________________________
Profit Sharing Plan
Distribution Form Seligman
Complete this form if you are requesting a distribution from a Seligman Profit Sharing plan. Contact Retirement Plan Services at 800-445-1777 if you have any questions. Please return this form to: Retirement Plan Services, c/o Seligman Data Corp., 100 Park Avenue, New York, NY 10017
1. Investor Information (Please Print)
First Name _______________ MI_______________ Last Name_________________________________ Birth Date (MM-DD-YYYY) ______ Social Security Daytime Phone __________ Seligman Account # ________ #_________ |
2. Reason for Distribution (Choose One Only)
[_] Normal Retirement Age. I am age 591/2 or older; my distribution will be taxed as ordinary income.
[_] Required Minimum Distribution (RMD). I am age 701/2 or older.* Complete the box in Section 3, below.
[_] Separation from Service - Under Age 55. I understand that my distribution may be subject to an additional 10% penalty imposed by the IRS.
[_] Separation from Service - Over Age 55. I understand my distribution will be taxable but penalty-free.
[_] Disability Distribution. I certify that I am disabled within the meaning of IRC Section 72(m)(7).
[_] Death Distribution. Contact Retirement Plan Services at 800-445-1777 for instructions.
[_] Other. (Note: Distributions prior to age 591/2 may be subject to a 10% penalty; exceptions apply. Please consult your tax advisor for details.)
* An exception may apply for certain employees with pre-1987 accruals. These employees need not begin receiving a distribution of these accruals until age 75. Please consult a qualified tax advisor for details.
3. Method of Distribution
If no election of the method of distribution is made within 30 days of receipt by the Custodian of the written request for distribution, the Custodian shall make such distribution to the Account Holder in a lump sum payment of cash.
If you are age 70 1/2 or older and taking a Required Minimum Distribution, please complete the box below. All other investors, choose one of the following:
a. [_] A lump sum distribution, closing my Seligman Profit Sharing account.
b. [_] A partial distribution of $______, or ______ (number) shares from Seligman ______ Fund.
c. [_] Systematic withdrawals based on a fixed amount of $______, or ______ (number) shares from Seligman ______ Fund.
If you wish to have this fixed systematic withdrawal over a number of years, please specify: ______(number) years.
Systematic withdrawals* are to be paid: [_] Monthly [_] Quarterly [_] Semi-Annually [_] Annually Beginning the month of ______.
FOR ACCOUNT HOLDERS OVER AGE 70 1/2 AND OVER ONLY: Seligman will perform RMD calculations as you instruct below. Any portion of your RMD that you fail to withdraw may be subject to a 50% penalty.
[_] Calculate my RMD using the Uniform Life Table.
[_] Calculate my RMD using the Joint Life and Last Survivor Expectancy Table.
My spouse is my sole designated beneficiary, and my spouse is more than 10
years younger than me. Spouse's date of birth: ____/____/______. I
understand that the joint life expectancy will be recalculated each year.
RMDs are to be paid:
[_]Monthly [_] Quarterly [_] Semi-Annually [_] Annually Beginning the month of __________.
If you elect to take your first RMD by April 1 in the year after you turn age 701/2, you must take the second RMD by December 31 of that same year.
Systematic withdrawals* for subsequent RMDs are to be paid beginning the month of ____________.
* All systematic withdrawals, including RMDs, are processed on the 15th calendar day of the month or prior business day, unless otherwise specified.
4. Payee Information
NOTE: Required Minimum Distributions may not be transferred to an IRA.
[_] Payment to be made to me, the Shareholder, using the current name and address on file.
-- OR --
[_] I wish to credit my distribution, in kind, from the above Profit Sharing account to my:
[_] New Seligman account (Please include the appropriate Account Application.)
[_] Existing Seligman account # .
[_] I wish to have the distribution:
[_] Mailed to the below-named payee or payee bank. (Signature guarantee may be required; see below.)
[_] Transferred via Automated Clearing House (ACH) to the below-named payee bank. (Attach a voided check.)
Name of Payee or Payee Bank ____________________________________________________________________________ Bank Account # (if applicable)________________________________________________________________________________ Street Address_____________________________________________________________________________________________ City___________________________________________________________________State ____________Zip ___________ |
5. Income Tax Withholding Information
A. ELIGIBLE ROLLOVER DISTRIBUTION
I acknowledge that unless I elect to have a higher percentage withheld from my distributions, Seligman Data Corp., on behalf of the Custodian, will withhold a fixed 20% of the eligible rollover amounts to be paid to me and not paid to an eligible retirement plan via direct transfer. I understand that Seligman Data Corp. will immediately remit the amount withheld to the IRS as a pre-payment of tax liability. I am responsible for paying any additional taxes or penalties. I further understand that I may, with respect to future distributions, revoke or change my withholding election by submitting written instructions to Seligman Data Corp.
[_]I elect to have an additional __________% withheld from my distributions.
(This is an optional amount to be withheld in addition to the mandatory 20%
withholding required by the IRS.)
B. DISTRIBUTION NOT ELIGIBLE FOR ROLLOVER (including Required Minimum Distributions, and Return of Excess Contributions)
I understand that unless I elect one of the choices below, Seligman Data Corp., on behalf of the Custodian, will withhold a fixed 10% of the amounts to be paid to me and immediately remit the amount withheld to the IRS.
[_] I do not want any federal income tax withheld on my distribution(s). I understand that I will be responsible to pay any income tax which may be due as a result of my distribution.
[_] Please withhold federal income tax on my distribution(s) at a rate of __________%. I understand that Seligman will remit to the IRS on my behalf any amount which has been withheld.
6. Signature
I hereby elect that the assets held by the Custodian in the above Profit Sharing account(s) be paid according to the instructions on this form. Although these distributions are made in accordance with the law, they are revocable and another plan may be substituted that is also in accordance with the law. Additional amounts may be distributed from time to time upon presentation to Seligman Data Corp. of written instructions in good order. I hereby release Seligman Data Corp. and the Custodian and indemnify them from any and all claims arising from Seligman Data Corp.'s or the Custodian's actions hereunder.
Your Signature (or Beneficiary, if applicable) _______________________________________________________ Date ______ Signature Guarantee ___________________________________________________________________________________ |
Signature Guarantee Requirement: In case of death or any redemption amount request for more than $50,000, or if the payee is someone other than the account holder, the signature of the Shareholder/Beneficiary on this form must be guaranteed by a bank, a trust company, a member of a domestic stock exchange, or any other eligible guarantor institution. Notarization is not acceptable.
SUPPLEMENTAL TRUST/CUSTODY AGREEMENT
If STATE STREET BANK AND TRUST COMPANY, as successor in merger to Investors Fiduciary Trust Company, is named as the Plan's Custodian or as a directed Trustee without full trust powers in the Adoption Agreement, the terms of this Supplemental Trust/Custody Agreement, which shall be a part of the Plan, shall apply. In no event may State Street be appointed, nor will State Street accept appointment, as a Trustee with full trust powers for the Plan.
SECTION ONE DEFINITIONS
Terms defined in the Basic Plan Document shall have the same meanings in this Supplemental Trust/Custody Agreement, except as otherwise expressly provided herein. In addition, the following words and phrases when used in this Agreement with initial capital letters shall, for the purpose of this Agreement, have the meanings set forth below unless the context indicates that other meanings are intended:
1.02 STATE STREET
Means State Street Bank and Trust Company, a trust company chartered by the Commonwealth of Massachusetts with offices in Kansas City, Missouri.
1.03 INVESTMENT FIDUCIARY
Means the Employer, a Trustee with full trust powers, any individual Trustee(s) and/or any investment manager, as applicable, which under the terms of the Plan is vested with the responsibility and authority to select investment options for the Plan and to direct the investment of the assets of the Fund. In no event shall State Street be an Investment Fiduciary for any purpose whatsoever.
1.04 IRS
Means the Internal Revenue Service.
1.05 RECORDKEEPER
Means the entity responsible for establishing and maintaining participant records and account balances.
SECTION TWO APPOINTMENT OF STATE STREET
2.01 The Employer, by execution of the Adoption Agreement, appoints State Street as a limited-purpose Custodian or directed Trustee without full trust powers (as indicated in the Adoption Agreement) for the Plan, and State Street accepts such appointment, all subject to the terms of the Basic Plan Document as supplemented by this Agreement. The Employer, Plan Administrator, any Trustee other than State Street, Recordkeeper, any other Investment Fiduciary and State Street shall be bound by all the terms of this Agreement. The Employer represents and warrants to State Street that it has all requisite right, power and authority and has taken all required actions necessary under the Plan and applicable law to designate State Street as custodian or Trustee without full trust powers (as applicable) of the Plan pursuant to the terms of the Basic Plan Document as supplemented by this Agreement.
SECTION THREE RESPONSIBILITIES OF STATE STREET
3.01 INVESTMENTS
The Fund shall be invested only in investment options selected by the Investment Fiduciary. Such selection shall be made from among the types of property which the Prototype Sponsor makes available Section 7.22(D) of the Basic Plan Document. Notwithstanding anything to the contrary in said Section 7.22(D), the Prototype Sponsor and not State Street is responsible for choosing to make such investments available for investment, and State Street has determined only that it is functionally and operationally willing and able to provide its services hereunder with respect thereto. The Investment Fiduciary shall be responsible for ensuring compliance with all conditions, limitations and restrictions concerning investment in any investment option. State Street shall place monies or other property received by it in such permitted investments as State Street shall be directed from time to time by instructions of the Investment Fiduciary (or Participant, if applicable) provided to it through the Recordkeeper. If Participant direction under Section 7.22(B) of the Basic Plan Document has been selected, the Recordkeeper shall receive, aggregate and deliver to State Street the investment instructions of the Participants. In the absence of Participant direction, the Recordkeeper shall deliver to State Street the investment instructions of the appropriate Investment Fiduciary. State Street may hold the assets attributable to the Fund in omnibus accounts with assets of other retirement plans for which State Street serves as custodian or trustee. Nothing herein shall preclude the Investment Fiduciary from otherwise investing any Plan assets as permitted by the Plan, but State Street shall not be Custodian or Trustee thereof or have any duties or responsibilities with respect thereto.
3.02 ADVANCES
The parties acknowledge that State Street is not obligated to place orders for the investment of the Fund if sufficient cash is not available in the Fund for use in placing such orders. State Street is authorized, but is not obligated, to advance funds or to arrange for another financial institution (which may be an affiliate of State Street) to advance funds from time to time for the purchase of investment assets, for distributions from the Fund and for other purposes prior to receipt of sufficient funds (whether contributions or proceeds of the liquidation of other investments). All such advances shall be made subject to the requirements of ERISA and the rules, regulations, rulings and interpretations thereunder, including but not limited to the U.S. Department of Labor's Prohibited Transaction Class Exemption 80-26, as amended from time to time. If sufficient funds to repay any such advance are not received by the following business day, State Street may, in its discretion, then or at any time thereafter prior to such repayment, sell, redeem or otherwise liquidate any assets of the Fund in order to repay such advance. Any gain realized upon such liquidation, after payment of any related costs and expenses, shall belong to the Plan. The Employer shall reimburse State Street on demand for any portion of any such advance and the related costs and expenses not repaid from the proceeds of the liquidation.
3.03 FUND LIQUIDITY; DEPOSIT ACCOUNTS
State Street shall keep such portion of the Fund in cash or cash balances as may be directed from time to time by the applicable Investment Fiduciary, through the Recordkeeper. State Street shall not be liable for any interest on any cash balances so maintained nor for interest on any cash or cash balances maintained in the Fund pending investment in accordance with appropriate directions. Monies being transferred to and disbursed by State Street may be held in non-interest bearing transaction accounts in financial institutions selected by State Street (which may be affiliates of State Street) for purposes of collections and processing transfers and disbursements. State Street may transfer monies from the Fund to such accounts prior to issuance of wire transfer orders or checks, drafts or other instruments payable from such accounts. State Street's and, as applicable, its affiliated financial institution's ability to earn income on amounts held in non-interest bearing accounts has been taken into consideration in establishing State Street's fees hereunder. State Street and any such affiliated financial institution shall be entitled to retain any such income as a part of the agreed compensation hereunder, and such income shall not be or become a part of the Fund. State Street shall not exercise its powers under Section 8.01(C)(1) of the Basic Plan Document except pursuant to the instructions of the Investment Fiduciary transmitted to State Street by the Recordkeeper.
3.04 BROKER SELECTION
Should the Recordkeeper transmit the Investment Fiduciary's instructions to State Street to utilize the services of any broker, dealer, employee or representative of either, or any other person ("Broker") to render services to the Fund, or should State Street require the services of such persons in order to fulfill its obligations pursuant to this Agreement, the applicable Investment Fiduciary shall be solely responsible for the selection or designation of such Broker and shall be solely responsible for the acts of such Broker. State Street shall fully comply with the written instructions, if of a continuing nature, until revoked.
3.05 PAYMENTS AND DISBURSEMENTS
In connection with payments and disbursements made from the Fund for any purpose, State Street shall be responsible for issuing checks or drafts to such parties and for such amounts as the Plan Administrator, through the Recordkeeper, shall instruct. State Street shall be fully protected in making such payments pursuant to such instructions from time to time and shall be charged with no responsibility whatsoever respecting the purposes or propriety of such payments or the application of such monies.
3.06 VOTING OF SHARES
State Street shall provide any materials received by it relating to voting securities to the Recordkeeper, which shall provide the same to the applicable Investment Fiduciary, which shall be responsible for voting securities or arranging for such securities to be voted in accordance with the Plan and applicable law. It is understood that State Street shall exercise the powers described in Section 8.01(B)(2) of the Basic Plan Document only pursuant to instructions of the Investment Fiduciary transmitted to State Street by the Recordkeeper.
3.07 BOOKS AND RECORDS
State Street shall keep accurate and detailed accounts of all investments, receipts, disbursements and other transactions of the Fund hereunder, and all accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by any person designated by the Employer. State Street may rely on the Recordkeeper for the maintenance and provision of any or all of the records specified herein. The Recordkeeper shall be responsible for maintaining the records of any Individual Account or Separate Fund of a Participant. State Street shall reconcile periodically with the Recordkeeper all Plan-related transactions and Plan balances. After the close of each Plan Year, or upon the removal or resignation of State Street, State Street shall provide information relating to all investments, receipts, disbursements, and other transactions effected during the past Plan Year or during the period from the close of the preceding Plan Year to the date of such removal or resignation, including a description of all securities and investment purchases and sales with the cost or net proceeds of such purchases or sales and showing all cash, securities and other property held at the close of such Plan Year or other period, valued currently, and such other information as may reasonably be required of State Street; provided however, that State Street shall not be obligated to provide any information that it is not otherwise maintaining in the course of its discharge of duties hereunder. Neither the Employer, Plan Administrator, other Plan fiduciary, Participant, Beneficiary or any other person shall have the right to demand or be entitled to any further or different reporting or accounting by State Street, other than those to which they may be entitled under the law. Nothing contained herein will be construed or interpreted to deny State Street the right to have its account judicially determined.
3.08 PRICING
State Street shall determine or have determined the value of the Fund as of each Valuation Date. State Street shall report such values to the Recordkeeper, which shall use such values in establishing the value of each Participant's Individual Account or Separate Fund. State Street shall rely exclusively upon, and shall not be responsible for, share and unit values established by third parties or by State Street in its capacity as a mutual fund recordkeeper, transfer agent or custodian, including but not limited to:
(a)in connection with mutual funds, the net asset value reported to State Street by such mutual funds or the transfer or other agents of such mutual funds or any generally recognized pricing service;
(b)in connection with bank collective funds, the unit value as reported by the trustee of such funds or its agent;
(c)in connection with policies and contracts with insurance companies or other financial institutions, the book value or other value ascribed to such policies or contracts by the insurance company or its agent or other financial institution or its agent; and
(d)in connection with publicly traded securities, the market price of such securities as reported to the public in a generally available form.
State Street shall have no liability from the failure or delay of any pricing source to provide a valuation as of any Valuation Date. If values for any investment of the Fund are not generally available, State Street shall rely upon instructions provided to it by the applicable Investment Fiduciary, through the Recordkeeper, as to valuation procedures.
3.09 RECORD RETENTION
All records maintained by State Street with respect to the Fund shall be held for such period as may be required under applicable law. Upon the expiration of any such required retention period, State Street shall have the right to destroy such records. State Street shall have the right to preserve all records and accounts in original form, or on microfilm, magnetic tape, or any other similar process.
3.10 FILINGS
Except as provided below, State Street shall conclusively presume that the Employer, Trustee other than State Street, Plan Administrator or other responsible party has made all filings required by law as of the date required. Should State Street incur any liability by reason of any party's failure to timely file, the Employer shall indemnify and hold State Street harmless for any and all liabilities, costs, expenses (including reasonable attorney's fees) and other obligations, including penalties and interest, incurred by State Street.
Notwithstanding the provisions of Section 5.14 of the Basic Plan Document, in connection with the disbursement of funds from the Fund to a Participant, State Street shall withhold and remit to the IRS and other applicable taxing authorities the amount of any income tax withholding required by law; provided, however, State Street shall rely exclusively on instructions from the Recordkeeper as to the amount of withholding to remit to the IRS and other applicable taxing authorities. Accordingly, the Recordkeeper shall maintain income tax withholding information for each Participant as required by the IRS and other applicable taxing authorities and all other information required to be filed with the IRS and other applicable authorities and shall provide in a timely fashion to State Street all information that the IRS and other applicable taxing authorities may require State Street to report. Furthermore, the Recordkeeper shall be responsible for reporting to each Participant the income tax withheld and remitted to the IRS and other applicable taxing authorities and such other information as may be required to be provided to Participants by the IRS and other applicable taxing authorities. The Recordkeeper shall provide such tax information to State Street in a form acceptable to State Street.
3.11 INSTRUCTIONS
State Street shall be under no duty to take any action other than its express responsibilities hereunder unless the responsible party under the terms of the Plan shall furnish State Street with written instructions; provided that in no event may State Street's responsibilities be expanded except with its prior written consent. Any instructions hereunder may be delivered to State Street directly by the responsible party or through the Recordkeeper. State Street shall not be liable for any action taken or omitted by it in good faith in reliance upon any instructions received hereunder or any other notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to have been properly executed. State Street shall have no duty to inquire into the purpose or propriety of any order, instruction or other communication received hereunder and may conclusively presume that any such order, instruction or other communication is accurate and complete. The Recordkeeper and not State Street shall be responsible for determining that all instructions provided to State Street through the Recordkeeper are being given by the appropriate party and are in proper form under the provisions of the Plan and applicable law. State Street may conclusively presume that any instructions received through the Recordkeeper have been duly authorized by the Employer, Investment Fiduciary, Plan Administrator, Trustee other than State Street, or Participant, as applicable, pursuant to the terms of the Plan and applicable law The Recordkeeper shall serve as the agent and authorized representative of the Employer, Investment Fiduciary, Plan Administrator and any Trustee other than State Street for purposes of providing orders, instructions and other communications to State Street and shall also be responsible for receiving and communicating to State Street Participant directions under Section 5.14 of the Basic Plan Document.
3.12 TAX ISSUES
State Street shall not be responsible for the validity or effect or the qualification under the Code of the Plan. State Street shall not be required to take any action upon receipt of any notice from the IRS or other taxing authority (unless such notice relates to the performance of State Street's responsibilities under Section 3.10 hereof except to promptly forward a copy thereof to the Employer, through the Recordkeeper. State Street shall be reimbursed by the Employer or from the Fund for all taxes of any kind whatsoever that may be levied or assessed under existing or future laws of any jurisdiction upon or in respect of the Fund. State Street shall promptly notify the Employer, through the Recordkeeper, with regard to any tax assessments which it receives on any income or property maintained in the Fund and, unless notified to the contrary by the Employer, through the Recordkeeper, within ninety (90) days, shall pay any such assessments. If the Employer, through the Recordkeeper, notifies State Street within said period that it is its opinion or the opinion of counsel that such assessments are invalid or that they should be contested, then State Street shall take whatever action concerning payment of the assessment as is indicated in the notice received by State Street; provided however, that the Employer, and not State Street, shall be responsible for contesting any such assessments or litigating any such claims.
3.13 LOANS TO PARTICIPANTS
Except for the disbursement of loan proceeds and re-investment of loan payments pursuant to instructions received hereunder, under no circumstances shall State Street have or be allocated any responsibility for the administration of any Participant loan program under Section 5.19 of the Basic Plan Document.
3.14 INDEMNIFICATION; LIMITATIONS OF RESPONSIBILITY
The Employer shall, at all times, fully indemnify and save harmless State Street, its successors and assigns, and its directors, officers, employees, agents and contractors from and against any and all losses, damages, claims, penalties, costs and expenses (including but not limited to reasonable attorney's fees) incurred by State Street in connection with its service as Custodian or Trustee without full trust powers, as applicable, except to the extent any such loss, damage, claim, penalty, cost or expense arises directly or indirectly from the fraud, gross negligence or willful misconduct of State Street or any of its directors, officers, employees, agents or contractors. State Street shall be accountable only for monies or property actually received by it. If any portion of the Fund is held by another Custodian or Trustee, the term "Fund" herein and in the Basic Plan Document shall mean only that portion of the Fund from time to time held by State Street. State Street shall not be deemed accountable, responsible or liable for the acts or omissions of any other Custodian or Trustee of the Plan. State Street shall have no duty or responsibility for the determination of the accuracy or sufficiency of the contributions to be made under the Plan, the collection thereof, the transmittal of the same to State Street or compliance with any statute, regulation or rule applicable to such contributions. State Street shall have no discretion as to investment of the Fund or administration of the Plan and shall not be deemed a "fiduciary" as that term is used in ERISA.
SECTION FOUR MISCELLANEOUS
4.01 AMENDMENT This Agreement may be modified or amended in whole or in part only by an agreement in writing signed by the Employer and State Street. No amendment of the Basic Plan Document may enlarge the duties or responsibilities of State Street without its prior written consent.
4.02 GOVERNING LAW This Agreement shall be construed and enforced, to the extent possible, according to the laws of the Commonwealth of Massachusetts, and all provisions hereof shall be administered according to the laws of said State and any Federal laws, regulations or rules which may from time to time be applicable.
4.03 NECESSARY PARTIES To the extent permitted by law, only the Employer and State Street shall be necessary parties in any application to the courts for an interpretation of this Agreement or for an accounting by State Street, and no other Plan fiduciary, Participant, Beneficiary or other person having an interest in the Fund shall be entitled to any notice or service of process. Any final judgment entered in such an action or proceeding shall, to the extent permitted by law, be conclusive upon all persons claiming under this Agreement or the Plan.
4.04 FORCE MAJEURE State Street shall not be responsible or liable for the failure or delay in performance of its obligations arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation: any interruption, loss or malfunction of any utility, transportation, computer or communication service; inability to obtain labor, material, equipment or transportation, or a delay in mails; governmental or exchange 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.
4.05 AGENTS In performing its obligations under this Agreement, State Street shall be entitled to employ suitable agents, counsel, sub-custodians and other service providers.
For More Information
If you have questions about setting up your Seligman Profit Sharing Plan, or need additional information, please contact Seligman Retirement Plan Services at 800-445-1777.
SELIGMAN ADVISORS, INC.
an affiliate of
[GRAPHIC]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
RPS-Forms 11/02