WATERHOUSE NATIONAL BANK
INDIVIDUAL RETIREMENT ACCOUNT
CUSTODIAL ACCOUNT AGREEMENT
& DISCLOSURE STATEMENT
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Article I Introduction
This Agreement is established pursuant to which Waterhouse National Bank, will
act as a custodian of individual retirement accounts. All such accounts are
intended to qualify as "individual retirement accounts" within the meaning of
section 408 of the Internal Revenue Code of 1986, as amended and are established
and maintained for the exclusive benefit of individuals (and their
beneficiaries) for whom the accounts are held.
Article II Definitions
As used in this Agreement, the following terms shall have the meaning
hereinafter set forth, unless a different meaning is plainly required by the
context.
2.1 "Adoption Agreement" shall mean the application by which this Agreement, as
may be amended from time to time, is adopted by the Participant. The statements
contained in the Adoption Agreement shall be part of this Agreement as fully set
forth herein.
2.2 "Beneficiary" shall mean the person or persons designated by the
Participant.
2.3 "Broker" shall mean Waterhouse Securities, Inc.
2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.5 "Compensation" shall mean, wages, salaries, professional fees, or other
amounts derived from or received for personal services actually rendered
(including, but not limited to commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses) and includes earned income, as defined in Code
section 401(c) (2) (reduced by the deduction the self-employed individual takes
for contributions made to a self-employed retirement plan). For purposes of this
definition, Code section 401 (c) (2) shall be applied as if the term trade or
business for purposes of Code section 1402 included service described in
subsection (c) (6). Compensation does not include amounts derived from or
received as earnings or profits from property (including but not limited to
interest and dividends) or amounts not includable in gross income. Compensation
also does not include any amount received as a pension or annuity or as deferred
compensation. The term "compensation" shall include any amount includable in the
individual's gross income under Code section 71 with respect to a divorce or
separation instrument described in subparagraph (A) of Code section 71 (b) (2).
2.6 "Custodial Account" shall mean the account which the Custodian shall
establish under this Agreement, as amended from time to time, on behalf of the
Participant and which will consist of any and all contributions made by or for
the Participant under this Agreement and any earnings thereon.
2.7 "Custodial Account Year" shall mean the calendar year from January 1 to
December 31 each year.
2.8 "Custodian" shall mean Waterhouse National Bank, and any successor
custodians under this Agreement.
2.9 "Disabled" or "Disability" shall mean the Participant's inability to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or to be
long-continued and indefinite in duration.
2.10 "ERISA" shall mean the Employee Retirement Income Security Act of 1974.
2.11 "Participant" shall mean an individual who adopts the Agreement and who
makes contributions or on whose behalf contributions are made to a Custodial
Account under this Agreement. If a Spousal IRA, it shall also mean the spouse
who establishes the Custodial Account.
2.12 "Simplified Employee Pension" or "SEP" shall mean a Custodial Account
established by an individual whose employer has adopted a simplified employee
pension plan under Code section 408(k) where such plan permits the establishment
of such accounts.
2.13 "Spousal IRA" shall mean a Custodial Account established by, or for the
benefit of, an individual who is a nonemployed spouse or a divorced or legally
separated spouse of an individual.
Article III Eligibility
3.1 General Rules. Any person who receives compensation during the taxable year
is an eligible individual. An individual who is a divorced or legally separated
spouse for whom a Spousal IRA was established by such individual's former or
separated spouse is an eligible individual. An individual making a rollover
contribution as described in Code section 402(c), 403(a)(4), 403(b)(8), or
408(d)(3), or a contribution made in accordance with the terms of a Simplified
Employee Pension as described in Code section 408 (k) is also an eligible
individual.
3.2 Consent to Participate. As a condition of participation, the Participant
shall consent to the terms and conditions of this Agreement, as may be amended
from time to time.
Article IV Contributions
4.1 Contribution Limits. Except in the case of a rollover contribution (as
permitted by Code section 402 (c), 403 (a) (4), 403 (b) (8), or 408 (d) (3)) or
a contribution made in accordance with the terms of a Simplified Employee
Pension as described in Code section 408 (k), no contributions will be accepted
unless they are in cash, and the total of such contributions shall not exceed
$2,000 for any taxable year. If a Spousal IRA
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has been established for a Participant's spouse, a higher amount shall be used
in lieu of $2,000. For taxable years beginning before January 1, 1997, the
amount shall be $2,250. For taxable years beginning on or after January 1, 1997,
the amount shall be $4,000.
4.2 Deductible Contributions.
A. The participant's contribution may be fully deductible if (i) in the case of
an individual who is not married, the individual either has adjusted gross
income ("AGI") that does not exceed the Applicable Dollar Amount or is not an
active participant in an employer-maintained retirement plan for any part of the
plan year ending with or within the taxable year; (ii) in the case of married
taxpayers filing a joint return, either the couple has AGI that does not exceed
the Applicable Dollar Amount or neither spouse is an active participant in an
employer-maintained retirement plan for any part of the plan year ending with or
within the taxable year; or (iii) in the case of a married taxpayer filing
separately, either the taxpayer has AGI that does not exceed the Applicable
Dollar Amount or neither spouse is an active participant in an
employer-maintained retirement plan for any part of the plan year ending with or
within the taxable year.
B. Each taxable year, an individual who (a) is a participant in an
employer-maintained retirement plan or (b) is married and whose spouse is a
participant in an employer-maintained retirement plan, may deduct an amount not
to exceed the lesser of 100% of the individual's compensation or an amount that
bears the same ratio to $2,000 as the taxpayer's AGI in excess of the Applicable
Dollar Amount (or, in the case of a married couple filing a joint return, the
couple's AGI in excess of the Applicable Dollar Amount) bears to $10,000. If a
Spousal IRA has been established for a Participant's spouse, a higher amount
shall be used in lieu of $2,000. For taxable years beginning before January 1,
1997, the amount shall be $2,250. For taxable years beginning on or after
January 1, 1997, the amount shall be $4,000.
C. The Applicable Dollar Amount is (1) $25,000 in the case of an unmarried
individual, (2) $40,000 in the case of a married couple filing a joint return,
and (3) $0 in the case of a married individual filing separately. The dollar
limit is rounded to the next highest $10 in the case of a limit that is not a
multiple of $10. The IRA dollar limit for individuals whose AGI is not above the
phaseout range shall not be less than $200. AGI shall be calculated without
regard to any deductible IRA contributions made for the taxable year and without
regard to the exclusion provided for certain foreign earned income, but with
regard to any taxable social security benefits and with regard to any passive
loss limitations. For purposes of this Section, an individual is an active
participant in an employer-maintained retirement plan with respect to the
individual's taxable year if the individual is an active participant for any
part of the plan year ending with or within the individual's taxable year. An
employer maintained retirement plan means (i) a qualified pension,
profit-sharing, or stock bonus plan; (ii) a qualified annuity plan described in
Code section 403(a); (iii) a plan established for its employees by the United
States, by a State or political subdivision, or by an agency or instrumentality
of the United States or a State or political subdivision (other than an unfunded
deferred compensation plan of a State or local government); (iv) an annuity
contract described in Code section 403(b); (v) a simplified employee pension
described in Code section 408(k); or (vi) a plan described in Code section
501(c)(18).
4.3 Non-Deductible Contributions. Each taxable year an individual may contribute
under this Agreement, in addition to any amounts which may be deducted under
Section 4.2, an amount equal to the amount of the contribution which is not
deductible by the phase-out rule in Section 4.2.B. Moreover, an individual may
elect to have a contribution under Section 4.2 treated as a contribution under
this Section. Any individual who elects to have a contribution under Section 4.2
treated as a contribution under this Section or who makes a contribution under
this Section 4.3 shall designate such contribution as a non-deductible
contribution on the individual's tax return for the year to which the
designation relates.
4.4 Time and Xxxxxx of Making Contributions. Contributions made under this
Agreement shall be in cash. Contributions made under this Agreement by the
Participant shall be made to, or for the account of, the Custodian no later than
the due date (without regard to extensions) for filing the Participant's tax
return. Contributions by an Employer to a SEP must be made no later than the due
date (including extensions) for filing the Employer's tax return. All
contributions so received together with the income therefrom and any other
increment thereon shall be held, managed and administered by the Custodian
pursuant to the terms of this Agreement without distinction between principal
and income and without liability for the payment of interest thereon. The
Custodian shall not be responsible for the computation and collection of any
contributions under the Agreement and shall be under no duty to determine
whether the amount of any contribution is in accordance with the Agreement.
4.5 Custodian's Acceptance of Contributions. Except in the case of a rollover
contribution as that term is described in Article VII, the Custodian will accept
only cash and will not accept contributions on behalf of the Participant in
excess of the limits referred to in Section 4.2 and 4.3.
4.6 Nonforfeitability of Contributions. Contributions made under this Agreement
by or for a Participant shall be fully vested and nonforfeitable at all times.
4.7 Investment of Contributions. The Participant shall direct the Custodian with
respect to the investment of all contributions and the earnings therefrom under
the Agreement. Such direction shall be limited to securities obtainable through
the Custodian "over-the-counter" or on a recognized exchange without any duty to
diversify. The Custodian may leave earnings on any securities so obtained with
the Custodian for reinvestment in accordance with the instructions of the
Participant. Notwithstanding the above, the Participant may direct contributions
and earnings to be placed in a savings account or a Certificate of Deposit with
an institution approved by the Custodian. Contributions may not be invested in
collectibles.
4.8 Maximum Age for Contributions. A Participant shall not make contributions
under this Agreement on or after the taxable year during which the Participant
attains age 70 1/2.
4.9 Withdrawal of Excess Contributions. If a Participant makes a contribution
under this Agreement which exceeds the limits set forth in Section 4.1 or such
limits as may be prescribed by law, then the excess portion may be withdrawn by
the Participant. Such withdrawal must be made prior to the date, including any
extension thereof, on which the Participant is required to file a Federal income
tax return. Any income allocable to the excess amount of such contribution must
be withdrawn by the Participant at the same time.
Article V Disability Benefits
A Participant shall, immediately upon becoming disabled (within the meaning of
Code section 72(m)(7)), be entitled to receive the entire interest in such
Participant's Custodial Account.
Article VI Distribution
6.1 General Rule. Subject to the provisions of this Article VI, the Custodian
shall, on the written directions of the Participant in accordance with the
provisions of the Agreement, make distributions out of the Custodial Account to
such individuals, in such manner, in such amounts and for such purposes as may
be specified in such directions. Notwithstanding any provisions of the Agreement
to the contrary, the distribution of a Participant's interest in the Custodial
Account shall be made in accordance with the minimum distribution requirements
of
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Code section 408(a)(6) or Code section 408(b)(3) and the regulations thereunder,
including the incidental death benefit provisions of section 1.401(a)(9)-2 of
the proposed Income Tax regulations and any subsequent final regulations, all of
which are herein incorporated by reference.
6.2 Premature Distributions. No part of a Participant's interest in the
Custodial Account shall be distributed to such Participant prior to attaining
the age of 59 1/2, except on account of disability, death of the Participant or
rollover, unless such distribution is a part of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the Participant or the joint lives (or joint life expectancies)
of the Participant and his/her designated beneficiary. If a distribution is made
prior to age 59 1/2, the Participant must notify the Custodian in writing of the
intended disposition of such distribution.
6.3 Commencement of Distribution of Benefits. A Participant's interest in the
Custodial Account must commence to be paid to the Participant in a manner
specified in Section 6.5 not later than April 1 of the year following the year
in which such Participant attains age 70 1/2.
6.4 Scope of Custodian's Liability. The Custodian shall not be liable for the
proper application of any part of the Agreement if distributions are made in
accordance with the written directions of the Participant as herein provided,
nor shall the Custodian be responsible for the adequacy of the Custodial Account
to meet and discharge any and all distributions and liabilities.
6.5 Methods of Distribution. The Participant may direct in writing to the
Custodian, subject to the provisions of this Agreement, to have the balance in
the Custodial Account distributed during any taxable year in the form of:
(a) a single payment, or
(b) equal or substantially equal monthly, quarterly, semiannual or annual
payments commencing at the close of such taxable year over the life of the
Participant, or
(c) equal or substantially equal monthly, quarterly, semiannual or annual
payments commencing at the close of such taxable year over the joint lives of
the Participant and the Participant's designated beneficiary, or
(d) equal or substantially equal monthly, quarterly, semiannual or annual
payments commencing at the close of such taxable year over a period certain not
extending beyond the life expectancy of the Participant, or
(e) equal or substantially equal monthly, quarterly, semiannual or annual
payments commencing at the close of such taxable year over a period certain not
extending beyond the joint life and last survivor expectancy of the Participant
and the Participant's designated beneficiary.
Notwithstanding that distributions may have commenced pursuant to one of the
above options, the Participant may receive a distribution of the balance in the
Custodial Account at any time upon written notice to the Custodian.
6.6 Required Distributions. The Participant's entire interest in the Custodial
Account must be distributed, or begin to be distributed, by the Participant's
required beginning date, which is the April 1st following the calendar year in
which the Participant reaches age 70 1/2. For each succeeding year, a
distribution must be made on or before December 31st. A Participant may satisfy
the minimum distribution requirements under Code sections 408 (a)(6) and 408
(b)(3) by receiving a distribution from one individual retirement account that
is equal to the amount required to satisfy the minimum distribution requirements
for two or more individual retirement accounts. For this purpose, the owner of
two or more individual retirement accounts may use the "alternative method"
described in Notice 88-38, 1988-1 C.B. 524, to satisfy the minimum distribution
requirements described above.
6.7 Computation of Periodic Payments. If the Participant elects a mode of
distribution under Sections 6.5(b), (c), (d) or (e) above, the minimum amount of
each payment will be determined by dividing the Participant's entire interest in
the Custodial Account at the beginning of each year by the lesser of the life
expectancy of the Participant (or the joint life and last survivor expectancy of
the Participant and the Participant's designated beneficiary) and the applicable
divisor from the table in Q&A-4 of section 1.401 (a)(9)-2 of the proposed Income
Tax regulations or in the final Income Tax regulations. If the amount of payment
actually made is less than this minimum amount, a fifty percent (50%)
nondeductible Federal excise tax, payable by the individual, shall be imposed on
the amount by which the minimum amount required to be distributed during such
year exceeds the amount actually distributed during the year.
6.8 Death Benefits. If the Participant dies before the entire interest is
distributed, the following distribution provisions shall apply:
(a) Distributions Beginning Before Death. If the Participant dies after
distribution of his/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.
(b) Distributions Beginning After Death. If the Participant dies before
distribution of his/her interest begins, the Participant's entire interest will
be distributed in accordance with one of the following four provisions:
(1) The Participant's entire interest will be paid by December 31st of the year
containing the fifth anniversary of the Participant's death; or
(2) If the Participant's interest is payable to a Beneficiary designated by the
Participant and the Participant has not elected (1) above, then the entire
interest will be distributed in substantially equal installments over the life
or life expectancy of the designated Beneficiary commencing no later than the
December 31st of the year after the year of the Participant's death. The
designated Beneficiary may elect at any time to receive greater payments; or
(3) If the designated Beneficiary of the Participant is the Participant's
surviving spouse, the spouse may elect within the five year period commencing
with the Participant's date of death to receive equal or substantially equal
payments over the life or life expectancy of the surviving spouse commencing at
any date prior to the December 31st of the year in which the deceased
Participant would have attained age 70 1/2. The surviving spouse may accelerate
these payments at any time, i.e., increase the frequency or amount of such
payments; or
(4) If the designated Beneficiary is the Participant's surviving spouse, the
spouse may treat the account as his or her own individual retirement
arrangement. This election will be deemed to have been made if such surviving
spouse makes a regular IRA contribution to the account, makes a rollover to or
from such account, or fails to elect any of the above three provisions.
6.9 Recalculation of Life Expectancies. Unless otherwise elected by the
Participant prior to the commencement of distributions under Section 6.5 or, if
applicable, by the Participant's surviving spouse where the Participant dies
before distributions have commenced, the life expectancies of the Participant or
spouse Beneficiary shall be recalculated annually for purposes of distributions
under Sections 6.5 and 6.8. An election not to recalculate shall be irrevocable
and shall apply to all subsequent years. Such election must be made no later
than the April 1st following the year in which the participant attains the age
of 70 1/2. The life expectancy of a nonspouse Beneficiary shall not be
recalculated. In the case of a nonspouse Beneficiary, life expectancy will be
calculated at the time payment first commences and payments for any 12
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consecutive month period will be based upon such life expectancy minus
the number of whole years passed since distribution first commenced.
Life expectancies for purposes of determining the required distributions
must be computed by use of the expected return multiples in section
1.72-9 of the Income Tax regulations.
Article VII Rollover Contributions
7.1 General Rule. Rollovers meeting the requirements of Section 4.1 may be
accepted.
7.2 Timing of Rollover. A rollover must be completed within 60 days after the
day on which the Participant receives the payment or distribution.
7.3 Transfers from Custodial Account. An individual may direct the Custodian to
transfer all or part of the individual's entire interest in the Custodial
Account to an individual retirement trust meeting the requirements of Code
section 408(a), or to an annuity contract meeting the requirements of Code
section 408(b).
7.4 Direct Rollovers. Effective January 1, 1993, an individual who will receive
an "eligible rollover distribution", as defined in Code section 402 (f)(2)(A),
may request the Custodian to accept a direct rollover of such distribution in
accordance with the provisions of Code section 401 (a)(31) and the applicable
regulations.
Article VIII Designation of Beneficiary
8.1 General Rule. The Participant shall designate a Beneficiary in the Adoption
Agreement and may change the Beneficiary designation by filing a written notice
with the Custodian. Such Beneficiary shall be entitled to the Participant's
entire interest in the event of death of the Participant prior to the complete
distribution of the entire interest.
8.2 Failure to Designate Beneficiary. If the designation of a Beneficiary has
not been made by a Participant at the time of the death of the Participant, the
Beneficiary shall be the spouse of the Participant, or if there is no spouse
living at the time of the Participant's death, the Beneficiary shall be the
estate of the Participant.
8.3 Where Beneficiary is a Minor. If the Beneficiary designated to receive
payments hereunder is a minor or person of unsound mind, whether so formally
adjudicated or not, the Custodian, in its discretion, may make such payment to
such person as may be acting as parent, guardian, committee, conservator,
trustee, or legal representative of such minor or incompetent and the receipt by
any such person as selected by the Custodian shall be a full and complete
discharge of the Custodian for any sums so paid.
8.4 Custodian Unable to Pay Benefits. If the Custodian is unable to make a
payment to a Beneficiary hereunder within six months after any such payment is
due, because the Custodian cannot ascertain the whereabouts or the identity of
the Beneficiary by mailing to the last known address shown on the Custodian's
records, and such Beneficiary has not submitted a written claim for such payment
before the expiration of said six-month period, then the Custodian may deposit
the Beneficiary's funds in a special savings account established in the name of
the Custodian for such Beneficiary.
Article IX Investment and Administration
9.1 General Rules. The Custodian shall have the power and authority in the
administration of this Agreement to do all acts, including by way of
illustration, but not in limitation of the powers conferred by law, the
following:
(a) Pursuant to the directions of the Participant or the Participant's agent, to
invest and reinvest all or any part of the Custodial Account in securities
obtainable through the Broker, and to invest in any lawful investment which is
administratively acceptable to the Custodian without any duty to diversify and
without regard to whether such property is authorized by the laws of any
jurisdiction for investment by a custodian;
(b) To hold part or all of the Custodial Account uninvested or, pursuant to
directions of the Participant, to place the same in a savings account approved
by the Participant or purchase a Certificate of Deposit with an institution
approved by the Custodian;
(c) To employ suitable agents and counsel and to pay their reasonable expenses
and compensation;
(d) Pursuant to the directions of the Participant or the Participant's agent, to
vote in person or by proxy upon securities held by the Custodian and to delegate
its discretionary power;
(e) Pursuant to the directions of the Participant or the Participant's agent, to
write covered listed call options against existing positions and to liquidate or
close such option contracts and the purchase of put options on existing long
positions (the same securities cannot be used to simultaneously cover more than
one position), to exercise conversion privileges or rights to subscribe for
additional securities, and to make payments therefore;
(f) To consent to or participate in dissolutions, reorganizations,
consolidations, mergers, sales, leases, mortgages and transfers or other changes
affecting securities held by the Custodian;
(g) To leave any securities or cash for safekeeping or on deposit, with or
without interest, with such banks, brokers and other custodians as the Custodian
may select, and to hold any securities in bearer form or in the name of the
banks, brokers and other custodians or in the name of the Custodian without
qualification or description or in the name of any nominee; and
(h) Prior to the entry of any orders to purchase or sell securities in the
Participant's account, the Participant shall approve beforehand all such orders
and direct the Broker, to implement the Participant's instructions. Selling
short and executing purchases in an amount greater than available cash are
prohibited transactions. All investments outside of the cash account shall be
accompanied by additional written instructions.
9.2 Prohibition Against Commingling and Life Insurance. No investments shall be
made in life insurance contracts nor shall any assets be commingled.
9.3 Custodian Not Required to Review Investments. The Custodian shall be under
no duty to question any such direction of the individual, to review any
securities or other property held in the Custodial Account, or to make
suggestions to the individual with respect to the investment, retention or
disposition of any assets held in the Custodial Account. Similarly, the
Custodian shall not make any investment or dispose of any investment held in the
Custodial Account, except upon the direction of the Participant or the
Participant's agent.
9.4 Participant Not a Fiduciary. In accordance with section 404(c) of ERISA and
being that the Participant exercises control over the assets in such
Participant's Custodial Account, such Participant or beneficiary shall not be
deemed to be a fiduciary by reason of such exercise, and no person who is
otherwise a fiduciary shall be liable under this Agreement for any loss, or by
reason of any breach, which results from such Participant's exercise of control.
9.5 Appointment of Investment Manager. The Participant may appoint in writing an
investment manager or managers to manage (including power to acquire and dispose
of) any assets in the Custodial Account.
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Any such investment manager shall be registered as an investment advisor under
the Investment Advisors Act of 1940. If investment of the Custodial Account is
to be directed by an investment manager, the Participant shall deliver to the
Custodian a copy of the instruments appointing the investment manager and
evidencing the investment manager's acceptance of such appointment, and
acknowledgement by the investment manager that it is a fiduciary, and a
certificate evidencing the investment manager's current registration under said
Act. The Custodian shall be fully protected in relying upon such instruments and
certificate until otherwise notified in writing by the Participant.
The Custodian shall follow the directions of the investment manager regarding
the investment and reinvestment of amounts in the Custodial Account, or such
portion thereof as shall be under management by the investment manager. The
Custodian shall be under no duty or obligation to review any investment to be
acquired, held or disposed of pursuant to such directions nor to make any
recommendations with respect to the disposition or continued retention of any
such investment or the exercise or nonexercise of the powers. Therefore, and in
accordance with section 405(d)(1) of ERISA, the Custodian shall have no
liability or responsibility for acting or not acting pursuant to the direction
of, or failing to act in the absence of any direction from the investment
manager, unless the Custodian knows that by such action or failure to act it
would be itself committing or participating in a breach of fiduciary duty by the
investment manager. The Participant hereby agrees to indemnify the Custodian and
hold it harmless from and against any claim or liability which may be asserted
against the Custodian by reason of its acting or not acting pursuant to any
direction from the investment manager or failing to act in the absence of any
such direction.
The investment manager at any time and from time to time may issue orders for
the purchase or sale of securities directly to the Broker; and in order to
facilitate such transaction, the Custodian upon request shall execute and
deliver appropriate trading authorizations. Written notification of the issuance
of each such order shall be given promptly to the Custodian by the investment
manager, and the execution of each such order shall be confirmed by written
advice via confirms or otherwise to the Custodian by the Broker.
The Custodian shall be under no duty to question any direction of the
Participant or investment manager to review any securities or other property
held under the Custodial Account or to make suggestions to the Participant, or
investment manager with respect to the investment, retention or disposition of
any assets held in the Custodial Account.
9.6 Prohibition Against Loans and Compensation to Related Parties.
Notwithstanding anything herein contained to the contrary, the Custodian shall
not (a) lend any part of the corpus or income of the Custodial Account to, (b)
pay any compensation for personal services rendered in connection with the
Custodial Account to, (c) make any part of its services available on a
preferential basis to, or (d) acquire for the Custodial Account any property
(other than cash) from or sell any property to, the Participant (or to any
member of the Participant's family) or to a corporation controlled by the
Participant (through the ownership, directly or indirectly, of 50% or more of
the total combined voting power of all classes of stock entitled to vote or 50%
or more of the total value of shares of all classes of stock of such
corporation).
9.7 Custodial Account. All contributions made by the Participant and all
investments made with such contributions and the earnings thereon shall be
credited to the Custodial Account maintained for the Participant by the
Custodian. Such account shall reflect the amounts contributed by the individual.
9.8 Accounting. Within 90 days from the close of each Custodial Account Year,
the Custodian shall render an accounting valuing the assets at fair market value
to the individual which accounting may consist of copies of regularly issued
broker-dealer statements of the Custodian. In the absence of the filing in
writing with the Custodian by the Participant of exceptions or objections to any
such account within 60 days after the mailing of such accounting, the
Participant shall be deemed to have approved such account. In such case, or upon
the written approval of the Participant of any such account, the Custodian shall
be released, relieved and discharged with respect to all matters and things set
forth in such account as though such account had been settled by the decree of a
court of competent jurisdiction. No person other than the Participant may
require an accounting or bring any action against the Custodian with respect to
the Custodial Account or its actions as Custodian.
The Custodian shall have the right at any time to apply to a court of competent
jurisdiction for judicial settlement of its accounts for determination of any
questions of construction which may arise or for instructions. The only
necessary party defendant to such action shall be the Participant except that
the Custodian may, if it so elects, bring in as party defendant any other person
or persons.
9.9 Scope of Custodian's Liability. The Custodian shall be fully protected in
acting upon any instrument, certificate, or paper believed by it to be genuine
and to be signed or presented by the proper person or persons, and the Custodian
shall be under no duty to make any investigation or inquiry as to any statement
contained in any such writing but may accept the same as conclusive evidence of
the truth and accuracy of the statements therein contained.
The Custodian shall be under no duty to (a) question any direction of a
Participant or the Participant's agent with respect to investments, (b) review
any securities or other property held in the Custodial Account or (c) make
suggestions to the Participant or the Participant's agent with respect to
investments, and the Custodian shall not be liable for any loss which may result
by reason of investments made by it in accordance with the directions of a
Participant or the Participant's agent.
9.10 Obligations of Surviving Spouse and Beneficiary. The surviving spouse
and/or Beneficiary shall be bound by Article IX regarding investments and
administration of their interest. However, should the Beneficiary be a minor or
in the discretion of the Custodian of unsound mind, the Custodian will liquidate
the interest of such Beneficiary and hold such interest in an interest-bearing
account or money market account until distributed.
9.11 Reporting. The Participant agrees to provide the Custodian with information
necessary for the Custodian to prepare any reports required under Code section
408 (i) and related regulations. The Custodian agrees to submit reports to the
Internal Revenue Service and the Participant as prescribed by the Internal
Revenue Service. The Custodian shall furnish annual calendar year reports
concerning the status of the Custodial Account.
Article X Compensation, Taxes and Expenses
10.1 Compensation of Custodian. The Custodian shall be paid such reasonable
compensation as shall from time to time be agreed upon by the Participant and
the Custodian, and such compensation shall be chargeable to the Participant.
10.2 Taxes and Administration Expenses. The Custodian shall charge against the
Participant any taxes paid by it which may be imposed upon the income of the
Custodial Account or upon which the Custodian is required to pay, as well as all
expenses of administration of the Custodian.
10.3 Failure to Pay Compensation, Taxes and Expenses. In the event the
participant shall at any time fail to pay the Custodian's compensation, taxes or
expenses, within a reasonable time after demand for such payment has been made
by the Custodian on the Participant, the Custodian will charge the Custodial
Account such fees, taxes and expenses and may liquidate such of the assets in
the Custodial Account for such pur-
26
poses as in its sole discretion it shall determine. If the Custodial Account is
not sufficient to satisfy these fees, taxes and expenses, then the Custodian
will charge the Participant for such unpaid fees, taxes and expenses.
Article XI Amendment and Termination
11.1 Amendment. Each Participant who adopts this Agreement delegates to the
Custodian the power to amend this Agreement, including any retroactive
amendments, by submitting a copy of such amendments to each Participant, but
only after receiving a favorable ruling or determination letter from the
Commissioner of Internal Revenue that the Custodial Agreement as amended,
continues to meet the requirements of Code section 408. Each individual shall be
deemed to have consented to any and all such amendments. However, no amendment
shall deprive any Participant or Beneficiary of any benefit to which he or she
may be entitled under this Agreement by reason of contributions made prior to
the modification or amendment, unless such amendment is necessary to conform
this Agreement to, or satisfy the conditions of, any law, governmental
regulations or ruling or to permit this Agreement to meet the requirements of
Code section 408.
The Participant shall be permitted to revoke this Agreement in writing within a
period not to exceed seven days after the date that this Agreement is adopted by
the Participant. In the event of such revocation, the Custodian will return the
full amount of the account plus any Custodian fees as soon as practical.
11.2 Termination. An individual shall have the right to terminate or partially
terminate this Agreement at any time, and from time to time, by delivering to
the Custodian a signed copy of a statement of termination. This Agreement will
be terminated in the case of complete distribution of the Custodial Account.
11.3 Resignation and Removal of Custodian. The Custodian may resign at any time
upon 30 days' notice to the Participant. The Custodian may elect to appoint a
successor Custodian to be effective as of the date specified in such instrument
and upon acceptance by the successor custodian, provided, however, that any
successor custodian so appointed shall be an entity authorized to act as
Custodian of custodial accounts established under individual retirement
accounts, organized under the laws of the United States or any state of the
United States, and subject to supervision and examination by governmental
authority.
The Custodian may be removed at any time by the Participant upon 30 days'
written notice to the Custodian. Upon resignation or removal of the Custodian,
the Participant shall appoint a successor Custodian which shall have the same
powers and duties as are conferred upon the Custodian hereunder, and in default
thereof, such successor Custodian may be appointed by a court of competent
jurisdiction.
The Participant shall substitute a trustee or another custodian upon
notification by the Commissioner of Internal Revenue that such substitution is
required because the Custodian has failed to comply with Treasury Regulation
1.401-12(n) or is not keeping records, or is not making such returns, or is not
rendering such statements as are required by the applicable forms and
regulations.
Upon the delivery by the resigning or removed Custodian to its successor
Custodian of all property of the Custodial Account, less such reasonable amount
as it shall deem necessary to provide for its expenses, compensation and any
taxes or advances chargeable or payable out of the Custodial Account, the
successor Custodian shall thereupon have the same powers and duties as are
conferred upon the Custodian.
11.4 Liability of Successor Custodian. No successor Custodian shall have any
obligation or liability with respect to the acts or omissions of its
predecessors. The actual appointment and qualification of a successor Xxxxxxxxx
to whom the assets in the Custodial Account may be transferred are conditions
which must be fulfilled before the resignation or removal of the Custodian shall
become effective. The transfer of the assets shall be made coincidentally with
an accounting by the resigned or removed Xxxxxxxxx and such resigned or removed
Custodian shall endorse, transfer, convey and deliver to the successor Custodian
all of the funds, securities or other property then held by it under this
Agreement, together with such records as may be reasonably required in order
that the successor Custodian may properly administer the Agreement.
Article XII Miscellaneous
12.1 Prohibition Against Assignment of Benefits. Notwithstanding anything to the
contrary contained in this Agreement or in any amendment thereto, no part of the
Custodial Account other than such part as is required to pay taxes and
administration expenses, shall be used for, or diverted to, purposes other than
for the exclusive benefit of the Participant, the Participant's Beneficiary(ies)
or estate. No Participant shall have the right to sell, assign, discount or
pledge as collateral for a loan any asset of this Agreement.
12.2 Scope of Liability of Custodian. The Custodian shall not be liable for any
act or omission made in connection with the Agreement except for its intentional
misconduct or negligence.
12.3 Word Construction. Words used in the masculine shall apply to the feminine
where applicable, and wherever the context of this Agreement indicates the
plural shall be read as the singular, and the singular as the plural.
12.4 Captions Have No Effect. The Captions of Articles in this Agreement are
included for convenience only and shall not be considered a part of, or an aid
to, the construction of this Agreement.
12.5 Governing Law. This Agreement created hereby shall be construed, regulated
and administered under the laws of the State of New York, and any court
accounting shall be in the courts of New York.
12.6 Arbitration. The Participant agrees that all controversies which may arise
under this Agreement or in connection with the Participant's account shall be
governed by the Participant's Customer Agreement with the Broker.
Notwithstanding any other provision in the document, any arbitration provision
shall be subject to the interpretation of the Code and regulations thereunder.
12.7 Inquiries. The Participant authorizes Custodian to furnish upon request (i)
to the Broker all information relating to the Participant's individual
retirement account and (ii) to the issuer of securities the Participant's name,
address and securities positions relating to the securities of such issuer.
27
DISCLOSURE STATEMENT
This Disclosure Statement, which is provided you in compliance with Treasury
Regulation section 1.408-6(d)(4) explains what you should know about your
individual retirement account (IRA), and is a general review of the federal
income tax law applicable to it.
A. Revocation.
You may revoke your account within seven days from the date you enter into the
Custodial Agreement by mailing or delivering a written request for revocation to
Waterhouse National Bank c/o, Waterhouse Securities, Inc., ATTN: Retirement
Plans Customer Service Dept., 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000.
Upon revocation, the entire account will be returned to you. If you have
questions regarding this procedure please call 0-000-000-0000.
If you mail the written notification, it will be deemed to be mailed on the date
of the postmark. If you send the notification by certified or registered mail,
it will be deemed to be mailed as of the date of certification or registration.
If mailed, the written notice of revocation must be mailed in the United States
in an envelope, or other appropriate wrapper, first class mail with the postage
prepaid.
B. IRS Approval.
The Waterhouse National Bank Individual Retirement Plan has been approved by the
IRS as to form. IRS approval is a determination as to form only and does not
represent a determination of the merits of the IRA or account.
C. Statutory Requirements.
The Statutory requirements with respect to your account as described in section
408(a) of the Internal Revenue Code (the "Code") are as follows:
1. Except for rollover contributions, contributions must be in cash, and may not
be in excess of the lesser of $2,000 or 100% of your compensation for any
taxable year.
2. No part of the custodial account funds may be invested in life insurance.
3. Your entire account balance is non-forfeitable.
4. The assets of your account may not be commingled and for that reason you have
a separate individual account.
5. The entire balance in your IRA must be distributed either (i) not later than
April 1 of the year following the year in which you attain age 70 1/2 (the
"Required Beginning Date") or (ii) commencing not later than the Required
Beginning Date, over your life or the lives of you and your designated
beneficiary or a period of time not extending beyond the life expectancy of you
or the joint life expectancy of you and your designated beneficiary.
Distributions to you or your beneficiary are taxed as ordinary income. If the
method of distribution selected does not result in a distribution which is at
least as rapid as either of the methods referred to above, a non-deductible
excise tax of 50% will be imposed on the difference between the amount required
to be distributed and the amount actually distributed.
6. Death Benefits. If you die before your entire interest is distributed, the
following distribution provisions shall apply.
a. If you die after your Required Beginning Date, the remaining portion
of such interest will continue to be distributed at least as rapidly
as under the method of distribution being used as of the date of your
death.
b. If you die before your Required Beginning Date, your entire interest
will be distributed in accordance with one of the following four
provisions:
(i) Your entire interest will be paid within five years after the date of
your death; or
(ii) If your interest is payable to a beneficiary designated by you and
you have not elected (i) above, the entire interest will be
distributed in substantially equal installments over the life or life
expectancy of your designated beneficiary commencing no later than
the end of the year after the year of your death. The designated
beneficiary may elect at any time to receive greater payments; or
(iii) If your designated beneficiary is your surviving spouse, your spouse
may elect within the five-year period commencing with your date of
death to receive equal or substantially equal payments over the life
or life expectancy of your surviving spouse commencing at any date
prior to the end of the year in which you would have attained age
70 1/2. Your surviving spouse may accelerate these payments at any
time, i.e., increase the frequency or amount of such payments.
(iv) If the designated beneficiary is your surviving spouse, your spouse
may treat the account as his or her own individual retirement
arrangement. This election will be deemed to have been made if such
surviving spouse makes a regular IRA contribution to the account,
makes a rollover to or from such account, or fails to elect any of
the above three provisions. If the distribution or your benefits upon
death is not as rapid as the applicable method of distribution
referred to above, a nondeductible excise tax of 50% will be imposed
on the difference between the amount required to be distributed and
the amount actually distributed.
D. Deductible Contributions.
The limitations and restrictions on the deduction for contributions are as
follows:
1. The maximum deductible contribution is the lesser of 100% of compensation
or $2,000 (subject to the reduction described in paragraph D.3).
2. The maximum deduction is computed separately for each individual and is
applied without regard to any community property law. However, if your
spouse is not employed you may establish separate individual accounts for
you and your spouse (an IRA established for your spouse is referred to as a
"Spousal IRA"), and each year you may contribute to both accounts a total
not to exceed the lesser of $2,250 or 100% of your compensation. For
taxable years beginning on or after January 1, 1997, the $2,250 limitation
shall be increased to $4,000. This contribution need not be divided equally
between the two accounts, but not more than $2,000 may be contributed to
one account.
3. The $2,000 (or the higher limitation set forth in paragraph D. 2 if there
is also a Spousal IRA) deduction limit will be reduced if your federal
adjusted gross income exceeds a certain amount ($40,000 for married
individuals filing a joint return, $0 for married individuals filing
separate returns, and $25,000 for single individuals) and you or your
spouse is a participant in an employer maintained retirement plan. In such
case, the $2,000 (or the higher limitation set forth in paragraph D. 2 if
there is also a Spousal IRA) deduction limit will be reduced to an amount
which bears the same ratio to $2,000 (or the
28
higher limitation set forth in paragraph D. 2 if there is also a Spousal
IRA) as your AGI in excess of the applicable dollar amount (described
above) bears to $10,000. The dollar limit is rounded up to the next $10,
and will not be less than $200 unless the limit is reduced to zero. The
higher limitation set forth in paragraph D. 2 is $2,250 for taxable years
beginning before January 1, 1997 and $4,000 for taxable years beginning on
or after January 1, 1997.
4. No contribution is allowed for an individual during the taxable year in
which he attains 701/2 or for a subsequent year.
5. No deduction is allowed with respect to a rollover contribution.
6. A divorced or legally separated spouse is allowed a deduction for
contributions to an IRA. For this purpose, money received as alimony or
separate maintenance pursuant to a decree of divorce or separation is
considered compensation.
E. Nondeductible Contributions.
A contribution may also be made on a nondeductible basis, in an amount equal to
the amount that the $2,000 limit is reduced as a result of you or your spouse
being covered under an employer maintained retirement plan. Moreover, you may
elect to have your deductible contribution treated as a nondeductible
contribution. If you make a non-deductible contribution, you must designate such
contribution as being nondeductible on your tax return.
F. Rollover IRA.
1. Permissible Tax-Free Rollovers.
a. From a qualified plan to an IRA.
b. From a qualified plan to another through an IRA.
c. From a tax sheltered annuity to an IRA.
d. From a tax sheltered annuity to another through an IRA.
e. The redemption proceeds from a qualified bond purchase plan to an
IRA.
f. Distribution received by a spouse due to participant's death.
g. From an IRA to another IRA.
2. General Requirements for a Rollover.
a. Must be received by the Custodian within 60 days after distribution
is received by the Participant.
b. Only one tax-free rollover per year between IRAs.
c. Must be a lump sum distribution, a partial distribution (as defined
in Code section 402) or a qualified total distribution resulting
from a plan termination. (An individual need not be a plan
participant for 5 years to qualify for a rollover).
d. Must include only amounts otherwise reportable as taxable income.
e. If the rollover includes property such as company stock and the
property has been sold, the proceeds may still be rolled over. If
the rollover is for the entire amount allowable, the gain or loss
on the sale of the property is not recognized.
f. Rollovers to a "new" qualified plan can include only assets
received from the "old" qualified plan.
Therefore, a rollover to an IRA should be made to a separate account
and should not include contributions made by an eligible person for his
retirement to his IRA.
3. Limits on Amount of Rollovers.
a. No dollar limit.
b. All or any portion of the distribution minus non-taxable amounts.
c. No endowment or life insurance contracts.
4. Amounts distributed from an IRA are taxed as ordinary income in the year
received. Distributions from IRA's are not eligible for the special tax
treatment applicable to lump sum distributions from qualified retirement plans.
G. Prohibited Transactions.
Should an individual or his beneficiary engage directly or indirectly in any
transaction prohibited by Code section 4975(c), the IRA will lose its exemption
from tax and the owner of the account must include in his gross income the fair
market value of his account. Prohibited transactions include:
1. Sale, exchange or leasing of any property between the IRA and a
party-in-interest.
2. Lending of money or any other extension of credit to a
party-in-interest.
3. Furnishing of goods, services or facilities between the IRA and a
party-in-interest.
4. Transfer to, or use by or for the benefit of, a party-in-interest of
the income or assets of the IRA.
5. Act by a party-in-interest who is a fiduciary whereby he deals with the
income or assets of the IRA in his own interest or for his own account;
or
6. Receipt of any consideration for his own personal account by any
party-in-interest who is a fiduciary dealing with the IRA in connection
with the transaction involving the income or assets of the IRA.
H. Other Prohibited Transactions.
1. Should a benefited individual pledge an IRA as security for a loan, the
portion so pledged will be treated as a distribution to that
individual.
2. Consult with your Account Officer regarding administrative restrictions
that are imposed by the Custodian. For example, permissible investments
include investments in stocks, bonds, government obligations, savings
accounts and certificates of deposit with a bank approved by the
Custodian.
3. These prohibited transactions and certain exemptions are further
described in Code section 4975.
I. Penalty Tax.
A 10% nondeductible penalty tax is imposed on certain distributions made before
you attain the age of 59 1/2 unless the distribution is made on account of death
or disability or a rollover contribution is made with such distribution, or as
part of substantially equal distributions over the Participant's life or over
the joint life expectancy of the participant and the designated beneficiary for
a period of 5 years and the attainment of age 59 1/2.
29
J. Excess Contributions.
You will be considered to have made an excess contribution for any year if
either (a) you contributed to your IRA an amount in excess of the lesser of 100%
of compensation or $2,000 (reduced as described in paragraph D.3) or (b) you
contributed to your IRA and a Spousal IRA (see paragraph D.2) a total amount in
excess of the lesser of the higher limitation set forth in paragraph D.2
(reduced as described in paragraph D.3) or 100% of compensation, or more than
$2,000 was paid to a single IRA for you or your spouse. A contribution for any
year which (1) is returned to you prior to your tax return due date (including
extensions) for such year, (2) is not deductible, and (3) is accompanied by the
amount of net income attributable to such contribution is not treated as an
excess contribution. If you make an excess contribution for any year, you will
be liable for a nondeductible 6% excise tax each year until the excess is
eliminated. The excess can be eliminated (i) by a distribution of the excess
(and any income earned on the excess) to you or (ii) by your making reduced
contributions in a future year.
Since an excess contribution is not deductible when made, it is not included in
your income when returned and it is not subject to the 10% tax on premature
distribution. Xxxxxx earned with respect to an excess contribution, however,
must be reported on your individual income tax return. An exception to this rule
is that a distribution to you of an excess contribution will be included in your
income if a deduction was allowed for the excess contribution or your total
contribution (including the excess contribution) for the year exceeds $2,250.
Excess rollover contributions can be corrected without subjecting the correction
to the double taxation clause if a participant reasonably relied on information
supplied to him as required by law for determining the amount of the rollover
contribution, and the information was erroneous.
K. Financial Disclosure.
1. The amount of money that will be available at any period of time will
depend on the following:
a. Amount of contributions.
b. Total years of participation.
c. Earnings from such account including interest, dividends,
realized and unrealized gains and losses.
d. Expenses incurred for brokerage commissions and Xxxxxxxxx's fees
if applicable.
e. Due to the numerous modes of investment that you may choose,
neither a guaranteed return or a projected amount can be
practically furnished.
2. There is no annual maintenance fee charged by the Custodian. There
is, however, a $25 fee for the termination or transfer of an existing
IRA.
Brokerage commissions are considered a cost of the security and are
not billed separately. Brokerage commissions are in addition to the
above. Questions relative to brokerage commission should be discussed
with your Account Officer prior to executing any orders.
3. In order to compute and allocate annual earnings, simply compare
year-end market value plus interest earned for your total account.
L. Investments.
It is the responsibility of the individual to select and direct the investment
of his Custodial Account either in person or through an investment manager.
Selection of investments must conform to the Custodial Agreement. For example,
investments may be made in common stocks, government and corporate bonds, the
purchase of put options and writing of covered listed call options, and other
lawful investments which are administratively acceptable to the Custodian.
Investments not generating confirmations must be accompanied by additional
written instructions. Although brokerage firms may provide investment
information to your account, they do not intend that any information given by
them will serve as a primary basis for investment decisions. Furthermore, it is
our understanding that you will exercise independent judgement in making your
investment decisions.
M. Form 5329
Generally, form 5329 (Return for Individual Retirement Savings Arrangement) must
accompany your tax return (Form 1040) only if you owe excess contribution taxes,
premature distribution taxes, or taxes on certain accumulations.
N. Additional Information.
1. Additional information on Waterhouse National Bank's "Self Directed
Individual Retirement Custodial Agreement" can be found in this
booklet.
2. Further information can be obtained from any district office of the
Internal Revenue Service.
O. Simplified Employee Pension (SEP)
Additional information regarding SEPs can be found in this booklet. If a SEP is
adopted, the Employer must provide the Employee with a copy of the appropriate
SEP form or similar information as may be required by law. Under a Simplified
Employee Pension ("SEP"), an individual's employer may contribute under this
Agreement on behalf of such individual an amount not in excess of the sum of (1)
the lesser of 15% of such individual's Compensation under Code section 402(h)
and $30,000, as adjusted for cost-of-living adjustments under Code section
415(d), and (2) the lesser of 100% of such individual's Compensation or $2,000.
Contributions under a salary reduction SEP are limited to $9,240 per year for
contributions made for tax year 1995. Contributions under a salary reduction SEP
are limited to $9,500 per year for contributions made for tax year 1996 and
subsequent years or if greater the Code section 402(g) limit then in effect. No
Employer may establish a salary reduction SEP on or after January 1, 1997.
However, Employees may continue to elect to have the Employer make salary
reduction contributions if the terms of the salary reduction SEP on December 31,
1996 provide for salary reduction elections. Employees hired after 1996 may also
participate in such a salary reduction SEP.
P. Estate and Gift Tax Exemptions.
Generally, there is no specific exclusion for IRAs under the Estate Tax rules.
Therefore, in the event of your death, your IRA will be includable in your gross
estate for federal tax purposes. However, if your surviving spouse is the
beneficiary of your IRA, the amount in your IRA may qualify for the marital
deduction under Section 2056 of the Internal Revenue Code. A transfer of
property for federal gift tax purposes does not include an amount which a
beneficiary receives from an IRA plan.
30
CUSTOMER AGREEMENT
In consideration of Waterhouse Securities, Inc. (WSI) and National Investor
Services Corp. (NISC)(Collectively "you") accepting and carrying for me one or
more accounts, I hereby understand and agree that:
1. Legal Capacity to Enter Into Agreements - I am at least the age of 18 years
and am of full legal age in the state in which I reside. If I am an employee,
member or partner of any security exchange or member firm thereof, of any
corporation a majority of the stock of which is owned by any exchange or a
broker/dealer I have so indicated on the account application. I also agree to
notify you promptly if I should later become employed in any of the capacities
cited above.
2. Definitions - Applicable Rules and Regulations - The terms "securities",
"options", or "other property", as used herein, shall include money, securities
and commodities of every kind and nature and all contracts and options relating
thereto. All transactions shall be subject to the rules, customs and usages of
the exchange, market or clearing house where executed, and to all applicable
federal and state laws and regulations.
3. Orders, Executions and Statements - Reports of the execution of orders and
statements of my account shall be deemed accepted by me if you have not received
written objections from me within five days with respect to the former and ten
days with respect to the latter after transmitted by you to me. You may execute
any transaction authorized by me on any exchange or other market where such
business is then transacted. You may reject any order I place with you in your
sole discretion. I understand that you reserve the right to refuse, and assume
no responsibility for, orders sent through the mail for the purchase or sale of
securities or other investments. I also understand that if I request the
transfer or registration of foreign securities, I may be responsible for any
transfer fees charged to you.
I understand that you direct customer orders in equity securities to exchanges
and market makers based on an analysis of their ability to provide rapid and
quality executions. These market participants guarantee that all customer orders
are executed at a price equal to or better than the displayed national best
bid/best offer. Your policy also assures that these market participants provide
your customer orders with price improvement and limit order protection. I
further understand that you may receive remuneration for directing customer
orders to these market participants, the source and amount of which is available
upon written request.
4. Deposit of Equity - Consent to Recording - I understand that you reserve the
right to require full payment or an acceptable equity deposit prior to the
acceptance of any order. I understand that you may tape record telephone
conversations with customers in order to permit you to verify data concerning
securities transactions.
5. Payment of Indebtedness Upon Demand - I shall at all times be liable for the
payment upon demand of any debit balance or other obligations owing in any of my
accounts with you; and, I shall be liable to you for any deficiency remaining in
any such accounts in the event of the liquidation thereof, in whole or in part,
by you or by me, and, I shall make payments of such obligations and indebtedness
upon demand.
6. Security for Indebtedness - All securities and other property whatsoever
which you may hold, carry or maintain for any purpose, in or for any of my
accounts, whether individually or jointly held with others, are subject to a
lien in your favor for the discharge of all the indebtedness of me to you, and I
hereby grant to you a continuing lien, security interest and right of set-off in
all such property and securities whether now owned by me or hereafter acquired.
You may hold securities and other property as security for the payment of any
liability or indebtedness of me to you, and you shall have the right to transfer
such securities and other property in any of my accounts from or to any other of
my accounts, when in your judgement such transfer may be necessary for your
protection. In enforcing your lien you shall have the right to sell, assign, and
deliver all or any part of the securities or other property in any of my
accounts when you deem it necessary for your protection. You reserve the right
to close transactions in my account if you believe there is inadequate security
for my obligation or upon an event which in your opinion jeopardizes my account.
You shall have all rights of a secured party under the Uniform Commercial Code.
7. Costs of Collection - The reasonable costs of collection of the debit balance
and any unpaid deficiency in my accounts, including attorney's fees incurred by
you, shall be paid or reimbursed by me to you.
8. The Laws of New York Govern - This agreement and its enforcement shall be
governed BY THE LAWS OF THE STATE OF NEW YORK; shall cover individually and
collectively all accounts (Cash, Margin, Option or other) which I may open or
reopen with you; and shall inure to the benefit of your successors, whether by
merger, consolidation or otherwise, and assigns and you may transfer my accounts
and my agreements to your successors and assigns, and this Agreement shall be
binding upon my heirs, executors, administrators, successors and assigns.
9. Agreement To Arbitrate Controversies -
o Arbitration is final and binding on the parties.
o The parties are waiving their right to seek remedies in court, including
the right to jury trial.
o Pre-arbitration discovery is generally more limited than and different
from court proceedings.
o The arbitrators' award is not required to include factual findings or
legal reasoning and any party's right to appeal or to seek modification
of rulings by the arbitrators is strictly limited.
o The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities industry.
I agree that any controversy relating to any of my accounts or any agreement
that I have with you will be submitted to arbitration conducted only under the
provisions of the Constitution and Rules of the New York Stock Exchange, Inc. or
pursuant to the code of the Arbitration of the National Association of
Securities Dealers, Inc. Arbitration must be initiated by service upon the other
party of a written demand for arbitration or notice of intention to arbitrate.
Judgement, upon any award rendered by the arbitrator, may be entered in any
court having jurisdiction. No person shall bring a putative or certified class
action to arbitration, nor seek to enforce any pre-dispute arbitration agreement
against any person who has initiated in court a putative class action; or who is
a member of a putative class who has not opted out of the class with respect to
any claims encompassed by the putative class action until: (i) the class
certification is denied; or (ii) the class is decertified; or (iii) the customer
is excluded from the class by the court. Such forbearance to enforce an
agreement to arbitrate shall not constitute a waiver of any rights under this
agreement except to the extent stated herein.
10. Losses Due to Extraordinary Events - You shall not be liable for loss caused
directly or indirectly by war, natural disasters, government restrictions,
exchange or market rulings or other conditions beyond your control.
11. Joint and Several Liability - If there is more than one owner of the
account, then obligations under this agreement shall be joint and several.
12. Separation of Provisions - If any provision or condition of this agreement
shall be held to be invalid or unenforceable by any court, or regulatory or
self-regulating agency or body, such invalidity or unenforceability shall attach
only to such provisions or condition. The validity of the remaining provisions
and conditions shall not be affected thereby, and this agreement shall be
carried out as if such invalid or unenforceable provision or condition were not
contained herein.
13. Presumption of Receipt of Communications - Communications may be sent to me
at my address given in the New Account Application as a mailing address, or at
such other address as I may hereafter give you in writing and all communication
so sent, whether by mail, telegraph, messenger, or otherwise, shall be
considered delivered to me personally, whether actually received or not.
14. SEC Rule 14b - 1(c) - Communication Between Companies and Shareholders - You
will release my name, address, and security positions to requesting companies in
which I own shares that are held in my account, unless I notify you in writing
that I object.
15. Credit Information - I authorize you to make inquiries for the purpose of
verifying my creditworthiness and to provide information regarding my
performance under this agreement to credit reporting agencies and to your
affiliates. I understand that, upon my request, you will tell me whether a
credit report was requested and provide the name and address of the agency
that furnished it.
I understand that any alteration to this Agreement will be ineffective to
relieve me of my obligations hereunder.
