EXHIBIT 14(a)
CUSTODIAL AGREEMENT
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m), except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1 following
the calendar year end in which the Depositor reaches age 701/2). By that date,
the Depositor may elect, in a manner acceptable to the Custodian, to have the
balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has begun,
the entire remaining interest will, at the election of the Depositor
or, if the Depositor has not so elected, at the election of beneficiary or
beneficiaries, either
(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries,
starting by December 31 of the year following the year of the
Depositor's death. If, however, the beneficiary is the Depositor's
surviving spouse, then this distribution is not required to begin
before December 31 of the year in which the Depositor would have turned
age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the requirements
of section 408(b)(3) and its related regulations has irrevocably commenced
distributions are treated as having begun on the Depositor's required
beginning date, even though payments may actually have been made before that
date.
(d) If the Depositor dies before his or her entire interest has been distributed
and if the beneficiary is other than the surviving spouse, no additional
cash contributions or rollover contributions may be accepted in the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Depositor's entire interest in the Custodial account as of the close
of business on December 31 of the preceding year by the life expectancy of the
Depositor (or the joint life and last survivor expectancy of the Depositor and
the Depositor's designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under paragraph
(3), determine the initial life expectancy (or joint life and last survivor
expectancy) using the attained ages of the Depositor and designated beneficiary
as of their birthdays in the year the Depositor reaches age 70 1/2. In the case
of distribution in accordance with paragraph (4) (b)(ii), determine life
expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
ARTICLE VIII
1. All assets in the Account shall be invested in such shares of one or more
Designated Investment Companies as the Depositor may from time to time specify.
The Depositor's instructions may relate to current contributions or to amounts
previously contributed (including earnings thereon) or to both. In the event
that the Custodian receives a contribution from the Depositor with respect to
which no investment direction is specifically applicable, or if any such
investment direction is, in the opinion of the Custodian, unclear, the Custodian
may hold such amounts uninvested or return any such contributions without
liability for any loss, including any loss of income or appreciation, and
without liability for interest or any tax liability incurred by Depositor
pending receipt of instructions or clarification. For all purposes of this
Agreement, the term "Designated Investment Company" shall mean USAA INVESTMENT
TRUST or USAA MUTUAL FUND, INC. and any other regulated investment company for
which USAA INVESTMENT MANAGEMENT COMPANY (or any affiliate thereof) acts as
investment advisor and which is designated by USAA INVESTMENT MANAGEMENT COMPANY
as eligible for investment under this Agreement.
2. Except as otherwise permitted in paragraph 12 below, all contributions made
under this Agreement shall be deposited in the form of cash and shall be made to
the Custodian in accordance with such rules as the Custodian may establish. Any
contribution so made with respect to a tax year of the Depositor shall be made
prior to the due date of the Depositor's tax return (not including extensions).
Unless otherwise indicated in writing by the Depositor, contributions shall be
credited to the tax year in which they are received by the Custodian. The
Custodian, upon receipt of written instructions from the Depositor, may exchange
or cause to be exchanged shares of a Designated Investment Company held by the
Custodian on behalf of the Depositor for any other shares of a Designated
Investment Company available for investment hereunder, subject to and in
accordance with the terms and conditions of the exchange privilege, as outlined
in the current prospectuses of any such Designated Investment Company and as may
be agreed upon, in writing, from time to time between the Custodian and USAA
Investment Management Company. The Depositor shall be the beneficial owner of
the assets held in the Account. All dividends and capital gains distributions
received on shares of a Designated Investment Company held in the Depositor's
Account shall, unless received in additional shares, be reinvested in shares of
the Designated Investment Company paying such dividends. If any distributions of
the shares of a Designated Investment Company may be received at the election of
the Depositor in additional shares or in cash or other property, the Custodian
shall elect to receive additional shares.
3. USAA INVESTMENT MANAGEMENT COMPANY may remove the Custodian at any time upon
thirty (30) days' notice in writing to the Custodian, and the Custodian may
resign at any time upon thirty (30) days' notice in writing to USAA INVESTMENT
MANAGEMENT COMPANY. Upon such resignation or removal, USAA INVESTMENT MANAGEMENT
COMPANY shall appoint a successor custodian, which successor custodian shall be
a "bank" as defined in Section 408(n) of the Code or another person found
qualified to act as a custodian of an Individual Retirement Account by the
Secretary of the Treasury or his delegate. Upon receipt by the Custodian of
written acceptance of such appointment by the successor custodian or trustee,
the Custodian shall transfer and pay over to such successor the assets of the
Account and all records pertaining thereto. The Custodian is authorized,
however, to reserve such sum of money as it may deem advisable for payment of
all its fees, compensation, costs, and expenses or for payment of any other
liabilities constituting a charge on or against the assets of the Account or on
or against the Custodian, with any balance of such reserve remaining after the
payment of all such items to be paid over to the successor custodian or trustee.
If within the thirty (30) day period provided for above, USAA Investment
Management Company has not appointed a successor custodian or trustee which has
accepted such appointment, the Custodian shall, unless it elects to terminate
the Custodial Account, appoint a successor custodian itself.
4. The Custodian shall deliver, or cause to be delivered, to the Depositor all
notices, prospectuses, financial statements, proxies and
proxy soliciting materials relating to Designated Investment Companies' shares
held for Depositor. The Custodian shall not vote any of the shares held
hereunder except in accordance with the written instructions of the Depositor.
5. (a) The Custodian shall, from time to time, in accordance with
instructions in writing from the Depositor (or the Depositor's
beneficiary if the Depositor is deceased), make distributions out of
the Account to the Depositor in the manner and amounts as may be
specified in such instructions. All such instructions shall be deemed
to cnstitute a certification by the Depositor (or the Depositor's
beneficiary if the Depositor is deceased) that the distribution
directed is one that the Depositor (or the Depositor's beneficiary if
the Depositor is deceased) is permitted to receive. Notwithstanding
the provision of Article IV above, the Custodian assumes (and shall
have) no responsibility to make any distribution to the Depositor (or
the Depositor's beneficiary if the Depositor is deceased) unless and
until such written instructions specify the occasion for such
distribution, the elected manner of distribution and any declaration
required by Article IV. Prior to making any such distribution from
the Account, the Custodian shall be furnished with any and all
applications, certificates, tax waivers, signature guarantees, and
other documents (including proof of any legal representative's
authority) deemed necessary or advisable by the Custodian, but the
Custodian shall not be liable for complying with written instructions
which appear on their face to be genuine, or for refusing to comply
if not satisfied such instructions are genuine, and assumes no duty
of further inquiry. Upon receipt of proper written instructions as
required above, the Custodian shall cause the assets of the Account
to be distributed in cash and/or in kind, as specified in such
written order. (b) Distribution of the assets of the Account shall be
made in accordance with the provisions of Article IV as the Depositor
(or the Depositor's beneficiary if the Depositor is deceased and has
not previously elected) shall elect by written instructions to the
Custodian; subject, however to the provisions of Sections 401(a)(9),
408(a)(6) and 408(b)(3) of the Code, the regulations promulgated
thereunder, and the following:
(i) No distribution from the Account shall be made in the form of an
annuity contract.
(ii)The recalculation of life expectancy of the Depositor and/or the
Depositor's spouse shall only be made at the written election of the
Depositor. The recalculation of life expectancy of the surviving
spouse shall only be made at the written election of the surviving
spouse.
(iii)If the Depositor dies before his/her entire interest in the Account
has been distributed, and if the designated beneficiary of the
Depositor is the Depositor's surviving spouse, the spouse may treat
the Account as his/her own individual retirement arrangement. This
election will be deemed to have been made if the surviving spouse
makes regular XXX contribution to the Account, makes a rollover to
or from such Account, or fails to receive a payment from the Account
within the appropriate time period applicable to the deceased
Depositor under Section 401(a)(9)(B) of the Code.
6. Any notice from the Custodian to the Depositor provided for in this
Agreement shall be effective if sent by regular mail to him at his last address
of record.
7. The Depositor hereby delegates to USAA Investment Management Company the
power to amend at any time and from time to time the terms and provisions of the
Agreement and hereby consents to such amendments, provided they shall comply
with all applicable provisions
of the Code, the regulations thereunder and with any other governmental law,
regulation or ruling. Any such amendments shall be effective as of the date
specified in a written notice sent by first-class mail to the address of the
Depositor indicated by the Custodian's records. Notwithstanding the foregoing,
no amendment which increases the burdens of the Custodian shall take effect
without its prior written consent. Nothing in this paragraph 7 shall be
construed to restrict the Custodian's freedom to change or substitute fee
schedules in accordance with the provisions of the adoption agreement, and no
such change or substitution shall be deemed to be an amendment to this
Agreement.
8. The Custodian shall not be bound by any certificate, notice, order,
information or other communication unless and until it shall have been received
in writing at its place of business.
9. (a) The Custodian shall have the right to rely upon any information
furnished in writing by the Depositor. The Depositor and the
Depositor's legal representatives, as appropriate, shall always fully
indemnify the Custodian and USAA Investment Management Company and
save each of them harmless from any and all liability whatsoever
which may arise in connection with this Agreement and matters which
the Agreement contemplates, except that which arises due to the
Custodian's gross negligence, willful misconduct or lack of good
faith. The Custodian shall not be obligated or expected to commence
or defend any legal action or proceeding in connection with this
Agreement or such matters unless agreed upon by the Custodian and the
Depositor or said legal representatives and unless fully indemnified
for so doing to the Custodian's satisfaction.
(b) The Custodian shall be an agent for the Depositor to perform the
duties conferredon it by the Depositor. The parties do not intend to
confer any fiduciary duties on the Custodian and none shall be
implied. The Custodian shall not be liable (and does not assume any
responsibility for) the collection of contributions, the
deductibility of any contribution or the propriety of any
contributions under this Agreement, the selection of any shares of
any Designated Investment Company for the Account, or the purpose or
propriety of any distribution ordered in accordance with Article IV
or paragraph 5 of this Article VIII, which matters are the sole
responsibility of the Depositor or the Depositor's beneficiary, as
the case may be.
(c) The Custodian and USAA Investment Management Company shall not be
responsible for any losses, penalties or other consequences to the
Depositor or to any other person arising out of the making of any
contribution or withdrawal.
10. This Agreement together with the Application and Adoption Agreement attached
hereto and by this reference made a part hereof, constitutes the entire
agreement between the parties, and it shall be construed in accordance with the
laws of the State of Texas.
11. The Depositor shall have the right by written notice to the Custodian on a
form acceptable to the Custodian, to designate or to change a beneficiary to
receive any benefit to which such Depositor may be entitled in event of his
death prior to the complete distribution of such benefit. If no such designation
is in effect at the time of the Depositor's death, or if the designated
beneficiary has predeceased the Depositor, the Depositor's beneficiary shall be
his or her estate. The last designation filed with the Custodian shall be
controlling, and, whether or not it fully disposes the Account, shall revoke all
such other designations previously filed by the Depositor.
12. (a) The Custodian shall have the right to receive rollover contributions
as described in the Code and if any property is so transferred to it
as a rollover contribution, such property shall be sold by the
Custodian and the proceeds less any expenses, fees or commissions
reinvested as provided in paragraph 1 of this Article VIII. The
Custodian reserves the right to refuse to accept any property which
is not in the form of cash.
(b) The Custodian, upon written direction of the Depositor and after
submission to the Custodian of such documents as it may reasonably
require, shall transfer the assets held under this Agreement (reduced
by any amounts referred to in paragraph 3 of this Article VIII) to a
successor individual retirement account, or individual retirement
annuity (other than an endowment contract, for the Depositor's
benefit or to an exempt employee's trust established under a plan
which satisfies the qualification requirements of Section 401(a) of
the Code. Any amounts received or transferred by the Custodian under
this paragraph 12 shall be accompanied by such records and other
documents as the Custodian deems necessary to establish the nature,
value, and extent of the assets, and of the various interests
therein.
13. The benefits provided hereunder shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such benefits to be so subjected shall not be recognized,
except to such extent as may be required by law. Any pledging of assets in the
Account by the Depositor as security for a loan, or any loan or other extension
of credit from the Account to the Depositor shall be prohibited.
14. The Custodian may perform any of its administrative duties through such
other persons or entities as may be designated by the Custodian from time to
time with the prior approval of USAA Investment Management Company, except that
the Designated Investment Company shares must be registered in the name of the
Custodian or its nominee. No such delegation or subsequent change herein shall
be considered an amendment of this agreement.
15. In addition to the reports required by Article V, the Custodian shall cause
to be mailed to the Depositor in respect of each tax year an account of all
transactions affecting the Account during such year and a statement showing the
Account as of the end of such year. If, within sixty (60) days after such
mailing, the Depositor has not given the Custodian written notice of any
exception or objection thereto, the annual accounting shall be deemed to have
been approved, and in such case, or upon the written approval of the Depositor,
the Custodian shall be released, relieved and discharged with respect to all
matters and statements set forth in such accounting as though the account had
been settled by judgment or decree of a court of competent jurisdiction.
16. (a) The Custodian may charge the Depositor reasonable fees, including an
annual maintenance fee, for services hereunder according to
standard schedules of rates which may be in effect from time to time.
Initially, the fees payable to the Custodian shall be in the schedule
amount provided with the Agreement. Upon thirty (30) days' prior
written notice, the Custodian may substitute a fee schedule differing
from that schedule initially provided.
(b) Custodian's fees,any income (includingunrelated business income tax),
gift, state and inheritance taxes and other taxes of any kind
whatsoever, including transfer taxes incurred in connection with the
investment or reinvestment of the assets of the Account, that may be
levied or incurred by the Custodian in the performance of its duties
may be charged to the Account, with the right to liquidate shares of
any Designated Investment Company for this purpose, or (at
Custodian's option) to the Depositor.
EXHIBIT 14(b)
CUSTODIAL AGREEMENT
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) of the Code or an employer contribution to a
simplified employee pension plan as described in section 408(k). Rollover
contributions before January 1, 1993, include rollovers described in section
402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund [within the meaning of
section 408(a)(5)].
2. No part of the custodial funds may be invested in collectibles [within the
meaning of section 408(m), except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1 following
the calendar year end in which the Depositor reaches age 70 1/2). By that date,
the Depositor may elect, in a manner acceptable to the Custodian, to have the
balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire
remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has begun,
the entire remaining interest will, at the election of the Depositor or, if
the Depositor has not so elected, at the election of beneficiary or
beneficiaries, either
(i) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries,
starting by December 31 of the year following the year of the
Depositor's death. If, however, the beneficiary is the Depositor's
surviving spouse, then this distribution is not required to begin
before December 31 of the year in which the Depositor would have turned
age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the requirements
of section 408(b)(3) and its related regulations has irrevocably commenced,
distributions are treated as having begun on the Depositor's required
beginning date, even though payments may actually have been made before that
date.
(d) If the Depositor dies before his or her entire interest has been distributed
and if the beneficiary is other than the surviving spouse, no additional
cash contributions or rollover contributions may be accepted in the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Depositor's entire interest in the Custodial account as of the close
of business on December 31 of the preceding year by the life expectancy of the
Depositor (or the joint life and last survivor expectancy of the Depositor and
the Depositor's designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under paragraph
(3), determine the initial life expectancy (or joint life and last survivor
expectancy) using the attained ages of the Depositor and designated beneficiary
as of their birthdays in the year the Depositor reaches age 70 1/2. In the case
of distribution in accordance with paragraph (4) (b)(ii), determine life
expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
ARTICLE VIII
1. All assets in the Account shall be invested in such shares of one or more
Designated Investment Companies as the Depositor may from time to time specify.
The Depositor's instructions may relate to current contributions or to amounts
previously contributed (including earnings thereon) or to both. In the event
that the Custodian receives a contribution from the Depositor with respect to
which no investment direction is specifically applicable, or if any such
investment direction is, in the opinion of the Custodian, unclear, the Custodian
may hold such amounts uninvested or return any such contributions without
liability for any loss, including any loss of income or appreciation, and
without liability for interest or any tax liability incurred by Depositor
pending receipt of instructions or clarification. For all purposes of this
Agreement, the term "Designated Investment Company" shall mean USAA INVESTMENT
TRUST or USAA MUTUAL FUND, INC. and any other regulated investment company for
which USAA INVESTMENT MANAGEMENT COMPANY (or any affiliate thereof) acts as
investment advisor and which is designated by USAA INVESTMENT MANAGEMENT COMPANY
as eligible for investment under this Agreement.
2. Except as otherwise permitted in paragraph 12 below, all contributions made
under this Agreement shall be deposited in the form of cash and shall be made to
the Custodian in accordance with such rules as the Custodian may establish. Any
contribution so made with respect to a tax year of the Depositor shall be made
prior to the due date of the Depositor's tax return (not including extensions).
Unless otherwise indicated in writing by the Depositor, contributions shall be
credited to the tax year in which they are received by the Custodian. The
Custodian, upon receipt of written instructions from the Depositor, may exchange
or cause to be exchanged shares of a Designated Investment Company held by the
Custodian on behalf of the Depositor for any other shares of a Designated
Investment Company available for investment hereunder, subject to and in
accordance with the terms and conditions of the exchange privilege, as outlined
in the current prospectuses of any such Designated Investment Company and as may
be agreed upon, in writing, from time to time between the Custodian and USAA
Investment Management Company. The Depositor shall be the beneficial owner of
the assets held in the Account. All dividends and capital gains distributions
received on shares of a Designated Investment Company held in the Depositor's
Account shall, unless received in additional shares, be reinvested in shares of
the Designated Investment Company paying such dividends. If any distributions of
the shares of a Designated Investment Company may be received at the election of
the Depositor in additional shares or in cash or other property, the Custodian
shall elect to receive additional shares.
3. USAA INVESTMENT MANAGEMENT COMPANY may remove the Custodian at any time upon
thirty (30) days' notice in writing to the Custodian, and the Custodian may
resign at any time upon thirty (30) days' notice in writing to USAA INVESTMENT
MANAGEMENT
COMPANY. Upon such resignation or removal, USAA INVESTMENT MANAGEMENT COMPANY
shall appoint a successor custodian, which successor custodian shall be a "bank"
as defined in Section 408(n) of the Code or another person found qualified to
act as a custodian of an Individual Retirement Account by the Secretary of the
Treasury or his delegate. Upon receipt by the Custodian of written acceptance of
such appointment by the successor custodian or trustee, the Custodian shall
transfer and pay over to such successor the assets of the Account and all
records pertaining thereto. The Custodian is authorized, however, to reserve
such sum of money as it may deem advisable for payment of all its fees,
compensation, costs, and expenses or for payment of any other liabilities
constituting a charge on or against the assets of the Account or on or against
the Custodian, with any balance of such reserve remaining after the payment of
all such items to be paid over to the successor custodian or trustee. If within
the thirty (30) day period provided for above, USAA Investment Management
Company has not appointed a successor custodian or trustee which has accepted
such appointment, the Custodian shall, unless it elects to terminate the
Custodial Account, appoint a successor custodian itself.
4. The Custodian shall deliver, or cause to be delivered, to the Depositor all
notices, prospectuses, financial statements, proxies and proxy soliciting
materials relating to Designated Investment Companies' shares held for
Depositor. The Custodian shall not vote any of the shares held hereunder except
in accordance with the written instructions of the Depositor.
5. (a) The Custodian shall, from time to time, in accordance with
instructions in writing from the Depositor (or the Depositor's
beneficiary if the Depositor is deceased), make distributions out of
the Account to the Depositor in the manner and amounts as may be
specified in such instructions. All such instructions shall be deemed
to constitute a certification by the Depositor (or the Depositor's
beneficiary if the Depositor is deceased) that the distribution
directed is one that the Depositor (or the Depositor's beneficiary if
the Depositor is deceased) is permitted to receive. Notwithstanding
the provision of Article IV above, the Custodian assumes (and shall
have) no responsibility to make any distribution to the Depositor (or
the Depositor's beneficiary if the Depositor is deceased) unless and
until such written instructions specify the occasion for such
distribution, the elected manner of distribution and any declaration
required by Article IV. Prior to making any such distribution from
the Account, the Custodian shall be furnished with any and all
applications, certificates, tax waivers, signature guarantees, and
other documents (including proof of any legal representative's
authority) deemed necessary or advisable by the Custodian, but the
Custodian shall not be liable for complying with written instructions
which appear on their face to be genuine, or for refusing to comply
if not satisfied such instructions are genuine, and assumes no duty
of further inquiry. Upon receipt of proper written instructions as
required above, the Custodian shall cause the assets of the Account
to be distributed in cash and/or in kind, as specified in such
written order.
(b) Distribution of the assets of the Account shall be made in accordance
with the provisions of Article IV as the Depositor
(or the Depositor's beneficiary if the Depositor is deceased and has
not previously elected) shall elect by written instructions to the
Custodian; subject, however to the provisions of Sections 401(a)(9),
408(a)(6) and 408(b)(3) of the Code, the regulations promulgated
thereunder, and the following:
(i) No distribution from the Account shall be made in the form of an
annuity contract.
(ii)The recalculation of life expectancy of the Depositor and/or the
Depositor's spouse shall only be made at the written election of the
Depositor. The recalculation of life expectancy of the surviving
spouse shall only be made at the written election of the surviving
spouse.
(iii)If the Depositor dies before his/her entire interest in the Account
has been distributed, and if the designated beneficiary of the
Depositor is the Depositor's surviving spouse, the spouse may treat
the Account as his/her own individual retirement arrangement. This
election will be deemed to have been made if the surviving spouse
makes regular XXX contribution to the Account, makes a rollover to
or from such Account, or fails to receive a payment from the Account
within the appropriate time period applicable to the deceased
Depositor under Section 401(a)(9)(B) of the Code.
6. Any notice from the Custodian to the Depositor provided for in this
Agreement shall be effective if sent by regular mail to him at his last address
of record.
7. The Depositor hereby delegates to USAA Investment Management Company the
power to amend at any time and from time to time the terms and provisions of the
Agreement and hereby consents to such amendments, provided they shall comply
with all applicable provisions of the Code, the regulations thereunder and with
any other governmental law, regulation or ruling. Any such amendments shall be
effective as of the date specified in a written notice sent by first-class mail
to the address of the Depositor indicated by the Custodian's records.
Notwithstanding the foregoing, no amendment which increases the burdens of the
Custodian shall take effect without its prior written consent. Nothing in this
paragraph 7 shall be construed to restrict the Custodian's freedom to change or
substitute fee schedules in accordance with the provisions of the adoption
agreement, and no such change or substitution shall be deemed to be an amendment
to this Agreement.
8. The Custodian shall not be bound by any certificate, notice, order,
information or other communication unless and until it shall have been received
in writing at its place of business.
9. (a) The Custodian shall have the right to rely upon any information
furnished in writing by the Depositor. The Depositor and the
Depositor's legal representatives, as appropriate, shall always fully
indemnify the Custodian and USAA Investment Management Company and
save each of them harmless from any and all liability whatsoever
which may arise in connection with this Agreement and matters which
the Agreement contemplates, except that which arises due to the
Custodian's gross negligence, willful misconduct or lack of good
faith. The Custodian shall not be obligated or expected to commence
or defend any legal action or proceeding in connection with this
Agreement or such matters unless agreed upon by the Custodian and the
Depositor or said legal representatives
and unless fully indemnified for so doing to the Custodian's
satisfaction.
(b) The Custodian shall be an agent for the Depositor to perform the
duties conferredon it by the Depositor. The parties do not intend to
confer any fiduciary duties on the Custodian and none shall be
implied. The Custodian shall not be liable (and does not assume any
responsibility for) the collection of contributions, the
deductibility of any contribution or the propriety of any
contributions under this Agreement, the selection of any shares of
any Designated Investment Company for the Account, or the purpose or
propriety of any distribution ordered in accordance with Article IV
or paragraph 5 of this Article VIII, which matters are the sole
responsibility of the Depositor or the Depositor's beneficiary, as
the case may be.
(c) The Custodian and USAA Investment Management Company shall not be
responsible for any losses, penalties or other consequences to the
Depositor or to any other person arising out of the making of any
contribution or withdrawal.
10. This Agreement together with the Application and Adoption Agreement attached
hereto and by this reference made a part hereof, constitutes the entire
agreement between the parties, and it shall be construed in accordance with the
laws of the State of Texas.
11. The Depositor shall have the right by written notice to the Custodian on a
form acceptable to the Custodian, to designate or to change a beneficiary to
receive any benefit to which such Depositor may be entitled in event of his
death prior to the complete distribution of such benefit. If no such designation
is in effect at the time of the Depositor's death, or if the designated
beneficiary has predeceased the Depositor, the Depositor's beneficiary shall be
his or her estate. The last designation filed with the Custodian shall be
controlling, and, whether or not it fully disposes the Account, shall revoke all
such other designations previously filed by the Depositor.
12. (a) The Custodian shall have the right to receive rollover contributions
as described in the Code and if any property is so transferred to
it as a rollover contribution, such property shall be sold by the
Custodian and the proceeds less any expenses, fees or commissions
reinvested as provided in paragraph 1 of this Article VIII. The
Custodian reserves the right to refuse to accept any property which
is not in the form of cash.
(b) The Custodian, upon written direction of the Depositor and after
submission to the Custodian of such documents as it may reasonably
require, shall transfer the assets held under this Agreement (reduced
by any amounts referred to in paragraph 3 of this Article VIII) to a
successor individual retirement account, or individual retirement
annuity (other than an endowment contract, for the Depositor's
benefit or to an exempt employee's trust established under a plan
which satisfies the qualification requirements of Section 401(a) of
the Code. Any amounts received or transferred by the Custodian under
this paragraph 12 shall be accompanied by such records and other
documents as the Custodian deems necessary to establish the nature,
value, and extent of the assets, and of the various interests
therein.
13. The benefits provided hereunder shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such benefits to be so subjected shall not be recognized,
except to such extent as may be required by law. Any pledging of assets in the
Account by the Depositor as security for a loan, or any loan or other extension
of credit from the Account to the Depositor shall be prohibited.
14. The Custodian may perform any of its administrative duties through such
other persons or entities as may be designated by the Custodian from time to
time with the prior approval of USAA Investment Management Company, except that
the Designated Investment Company shares must be registered in the name of the
Custodian or its nominee. No such delegation or subsequent change herein shall
be considered an amendment of this agreement.
15. In addition to the reports required by Article V, the Custodian shall cause
to be mailed to the Depositor in respect of each tax year an account of all
transactions affecting the Account during such year and a statement showing the
Account as of the end of such year. If, within sixty (60) days after such
mailing, the Depositor has not given the Custodian written notice of any
exception or objection thereto, the annual accounting shall be deemed to have
been approved, and in such case, or upon the written approval of the Depositor,
the Custodian shall be released, relieved and discharged with respect to all
matters and statements set forth in such accounting as though the account had
been settled by judgment or decree of a court of competent jurisdiction.
16. (a) The Custodian may charge the Depositor reasonable fees, including an
annual maintenance fee, for services hereunder according to standard
schedules of rates which may be in effect from time to time.
Initially, the fees payable to the Custodian shall be in the schedule
amount provided with the Agreement. Upon thirty (30) days' prior
written notice, the Custodian may substitute a fee schedule differing
from that schedule initially provided.
(b) Custodian's fees, any income (includingunrelated business income
tax), gift, state and inheritance taxes and other taxes of any kind
whatsoever, including transfer taxes incurred in connection with the
investment or reinvestment of the assets of the Account, that may be
levied or incurred by the Custodian in the performance of its duties
may be charged to the Account, with the right to liquidate shares of
any Designated Investment Company for this purpose, or (at
Custodian's option) to the Depositor.
EXHIBIT 14(c)
CUSTODIAL AGREEMENT
INTRODUCTION TO THE USAA MUTUAL FUNDS SECTION CUSTODIAL ACCOUNT;
The attached documents are intended to establish an arrangement that satisfies
Section 403(b) of the Internal Revenue Code of 1986, as amended from time to
time (the "Code"). However, no Internal Revenue Service ruling has been
requested with respect to the tax consequences of the attached documents and
neither USAA INVESTMENT MANAGEMENT COMPANY nor the custodian, USAA Federal
Savings Bank, makes any representation with respect to such matters.
Arrangements such as those reflected in the attached documents should not be
entered into by any Employer or Employee who has not first obtained competent
independent professional advice on the tax and other consequences.
This material is not authorized for distribution unless preceded or accompanied
by an effective prospectus containing further information about the mutual funds
in which the assets of the account are to be invested.
ELIGIBILITY
Employees of organizations qualified under Section 501(c)(3) of the Code or
employees of an educational institution (including public school systems) are
eligible to arrange for tax-sheltered contributions to a Section 403(b)(7)
Custodial Account investing in mutual funds.
CONTRIBUTIONS
Each year, approximately 20 percent of an eligible Employee's includible
compensation (up to a maximum of $9,500, which dollar amount may be adjusted
upwards in the future by the Internal Revenue Service to reflect inflation) may
be contributed to a 403(b) account for that employee. It is also possible to
make additional catch-up contributions in certain limited circumstances.
Contributions must be made by the Employer and are arranged through a "salary
reduction agreement" such as the one enclosed. If your Employer has another
standard form which is used for all employees, it may be used instead of our
form. The $9,500 limit discussed above applies to the aggregate of all
"elective" contributions made for the Employee under all 403(b) accounts plus
certain elective contributions under other tax- qualified plans. If you exceed
this limit for any year, you may be subject to serious adverse tax consequences.
Accordingly, you should take care and consult with your tax advisor to ensure
that the limit is not exceeded.
In addition to the $9,500 per year limit on 403(b) "elective" contributions, all
403(b) contributions are subject to annual contribution limits which are quite
complicated and depend on a variety of factors, including your age, your years
of service with an eligible employer, your participation in other retirement
programs, etc.
If you choose, we will make all calculations for you. Requests for this service
may be made by calling 0-000-000-0000 (in San Antonio 456-9034) and asking for a
Tax-Sheltered Annuity representative.
Eligible contributions are not taxable as current income for federal income tax
purposes, giving you the benefit of investing money which would otherwise have
been paid in federal income tax. Your employer should exclude these amounts from
your federal gross income on your W-2, and you do not have to separately deduct
them on your annual federal income tax return. Amounts distributed from a 403(b)
account will be included in taxable gross income at that time. (Contributions to
the account may be subject to social security taxes or state and local income
taxes.)
DISTRIBUTION
The IRS requirements for mutual fund custodial accounts provide for distribution
to be made under several conditions. In general, you may begin to receive assets
held in your account at the time of termination of service, death, attainment of
age 59 1/2, or if you incur a "financial hardship." A financial hardship will be
present only if the Employee is faced with immediate and heavy financial needs
and does not have other resources reasonably available to meet these needs. The
determination that a financial hardship exists and the amount needed to meet the
hardship must be made by an independent person or persons designated by the
Employer. The Custodian will not make any distribution based on financial
hardship until it has received the requisite written notice from the independent
person or persons.
If you incur a "financial hardship," you will only be able to receive from the
403(b) account the "elective" contributions which the Employer has made on your
behalf under a "salary reduction agreement" and not any of the earnings in the
403(b) account.
In general, any distribution to you from the 403(b) account where you are
employed and before you reach age 59 1/2 may be subject to a 10 percent penalty
tax in addition to regular income tax. In addition, there are other special
taxes which may apply to your distribution. Further, in certain cases, your
distribution may be subject to mandatory 20% federal income tax withholding, if
it is not rolled over directly to an XXX or another Section 403(b) arrangement.
You should consult your tax advisor in conjunction with any election you make
with regard to distributions of amounts in your account.
INTRODUCTION
The Employer, the Employee and the Custodian, by signing the Application, have
established this tax-sheltered Custodial Account under Section 403(b)(7) of the
Internal Revenue Code. The Application is hereby made a part of this Agreement.
The Employer will make an initial contribution to the Account as indicated on
the
Application. The Employer, the Employee and the Custodian agree that the terms
and conditions of the Custodial Account are as set forth in this Agreement.
This Agreement shall take effect upon acceptance by the custodian, USAA Federal
Savings Bank. As provided more fully in Article IV below, the Custodian is to
invest all contributions to the Custodial Account in shares of one or more
Designated Investment Companies.
ARTICLE I/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.
1. "Application" means the agreement between the Employer, the Employee and the
Custodian which incorporates this Agreement in order to establish a USAA Mutual
Funds Section 403(b)(7) Custodial Account for the Employee.
2. "Code" means the Internal Revenue Code of 1986, as amended from time to time,
or any successor thereto. References to the Code shall be deemed to include any
Treasury Regulations issued thereunder.
3. "Custodial Account" means the Section 403(b)(7) Custodial Account established
under this Agreement, and when the context so implies, refers to the assets, if
any, then held by the Custodian hereunder.
4. "Custodian" means USAA Federal Savings Bank, or any successor thereto as
provided in Article IX hereof.
5. "Designated Investment Company" means USAA MUTUAL FUND, INC., USAA INVESTMENT
TRUST, and any other regulated investment company (within the meaning of Section
851(a) of the Code) for which USAA INVESTMENT MANAGEMENT COMPANY (or any
affiliate thereof) acts as investment advisor and which is designated by USAA
INVESTMENT MANAGEMENT COMPANY as eligible for investment under this Agreement.
6. "Employee" means any person employed by the Employer on a full or part time
basis for whom the Employer and the Employee have agreed to execute an
Application. This term also includes any person formerly employed by the
Employer and who has assets in his Custodial Account.
7. "Employer" means the Employer named in the Application. The Employer shall be
an organization that is (i) described in Section 501(c)(3) of the Code and
exempt from tax under Section 501(a) of the Code, or (ii) an educational
organization described in Section 170(b)(1)(A)(ii) of the Code and which is a
State, political subdivision of a State, or an agency or instrumentality of one
or more of the foregoing.
8. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
9. "Excess Contribution" means the amount of any contribution made by the
Employer on behalf of the Employee for any year which is an "excess
contribution" as that term is defined in Section 4973(c) of the Code.
10. "Excess Deferral" means the amount of any contribution made by the Employer
on behalf of the Employee for any year which is an "excess deferral" as that
term is defined in Section 402(g) of the Code.
11. "Rollover Contribution" means any amount distributed from an individual
retirement account or an individual retirement annuity described in Section 408
of the Code, the entire amount of which is attributable to a tax- sheltered
annuity contract described in Section 403(b) of the Code, or directly from such
a tax-sheltered annuity contract and then transferred to the Custodial Account
in accordance with Section 403(b)(8) or 408(d)(3)(A)(iii) of the Code.
12. "Sponsor" means USAA INVESTMENT MANAGEMENT COMPANY.
ARTICLE II/ESTABLISHMENT
OF CUSTODIAL ACCOUNT
The Custodian shall open and maintain a Custodial Account for the benefit of the
Employee. The Custodian may evidence its acceptance of its appointment by
sending to the Employee a confirmation of the Custodian's receipt of the first
contribution to the Custodial Account. The Employee shall be the beneficial
owner of all Designated Investment Company shares held in his Custodial Account.
The name, address and social security number of the Employee are set forth in
the Application, and it shall be the obligation of the Employee to notify the
Custodian of any address changes. The Custodian shall notify the Employee of the
identification number of the Custodial Account maintained for his benefit
hereunder.
ARTICLE III/CONTRIBUTIONS
1. EMPLOYER CONTRIBUTIONS. The Employer shall make contributions in cash to the
Custodian either in accordance with a salary reduction agreement between the
Employer and the Employee or otherwise. The initial contribution shall be
submitted to the Custodian with the executed Application. The aggregate
contribution by the Employer on behalf of the Employee during the first 12
months following the establishment of the Custodial Account shall be at least
$250; the Custodian shall not accept any contribution to the Custodial Account
of less than $25.
2. TRANSFERS FROM AND TO OTHER ACCOUNTS. The Employer or the Employee may cause
the transfer of assets acceptable to the Custodian from an existing custodial
account established
under Section 403(b)(7) of the Code on behalf of the Employee and/or from an
existing annuity contract established under Section 403(b) of the Code on behalf
of the Employee to his Custodial Account hereunder. Such transferred assets
shall be treated as an Employer contribution for purposes of this Agreement and
shall be invested, distributed and otherwise dealt with as such; provided,
however, that such transferred amounts shall be disregarded in applying the
limitations on the amount of Employer contributions which can be made hereunder.
The Employee may cause the transfer of assets from the Employee's Custodial
Account hereunder to another custodial account established under Section
403(b)(7) of the Code and/or to an annuity contract qualified under Section
403(b) of the Code. It shall be the responsibility of the person who causes a
transfer under this Paragraph (i.e., the Employer or Employee), and not the
responsibility of the Custodian, the Sponsor, or any Designated Investment
Company, to determine and ensure that such transfer complies with all applicable
tax law requirements.
3. LIMITATIONS ON CONTRIBUTIONS. The Employee shall compute the maximum amount
that may be contributed on his behalf by the Employer for each tax year in
accordance with his "exclusion allowance" as that term is defined in Section
403(b)(2) of the Code. The Employee shall also determine the applicable
limitation(s) on contributions under Section 415 of the Code, and the Employee
shall have the right to avail himself of and make any of the elections provided
under such section.
In addition, the Employee shall determine the applicable limitation on
"elective" contributions to the Custodial Account under Section 402(g) of the
Code. Such computations and determinations shall be made at least annually, and
the Employee shall communicate the results to the Employer.
Neither the Custodian, the Sponsor nor any Designated Investment Company shall
have any duty or responsibility to determine that the amount of the initial or
any subsequent contribution made by the Employer on behalf of the Employee is
consistent with the terms of any applicable salary reduction agreement entered
into by and between the Employer and the Employee or to verify that such amount
is not in excess of the Employee's exclusion allowance under Section 403(b)(2)
of the Code or the applicable limitations under Sections 402(g) and 415 of the
Code.
4. ROLLOVER CONTRIBUTIONS. The Custodian may also accept Rollover Contributions
in cash as a deposit to the Custodial Account, provided, however, that any such
Rollover Contribution shall be held by the Custodian in a separate Custodial
Account for the benefit of the Depositor that consists only of Rollover
Contributions and the earnings thereof. Once transferred into the Employee's
Custodial Account, such assets shall be treated as an
Employer contribution for purposes of this Agreement and shall be invested,
distributed and otherwise dealt with as such; provided, however, that such
Rollover Contributions shall be disregarded in applying the limitations on the
amount of Employer contributions which can be made hereunder. The Employee shall
execute such forms and provide such information as the Custodian may require
with respect to the source of Rollover Contributions. It shall be the
responsibility of the Employee, and not the responsibility of the Custodian, the
Sponsor, or any Designated Investment Company, to determine and ensure that such
Rollover Contribution complies with all applicable tax law requirements.
A Rollover Contribution also may be made in Designated Investment Company shares
and/or in other securities, provided that the Custodian reserves the right to
refuse to accept any property which is not in the form of cash or Designated
Investment Company shares. If securities, other than Designated Investment
Company shares, are accepted by the Custodian, they shall be sold by the
Custodian and the proceeds, after deduction of all expenses and charges involved
in the sale, shall be reinvested in accordance with Article IV.
ARTICLE IV/INVESTMENT OF
ACCOUNT ASSETS
1. CONTRIBUTIONS. All contributions to the Custodial Account shall be invested
in such shares of one or more Designated Investment Companies as the Employee
may direct. Such Designated Investment Company shares shall be acquired by the
Custodian at the price and in the manner in which such shares are then being
publicly offered by such Designated Investment Company. If such investment
instructions are not received by the Custodian, or are received but are, in the
opinion of the Custodian, unclear, the Custodian may hold or return all or a
portion of the contribution uninvested without liability for loss of income or
appreciation, and without liability for interest, pending receipt of proper
instructions or clarification. The Custodian shall advise the Employee of the
form and manner in which investment instructions must be given and shall not be
required to act or be held liable for failure to act upon improperly given
instructions.
2. CHANGES IN INVESTMENT. The Employee may from time to time direct the
Custodian to redeem any or all Designated Investment Company shares acquired by
the Custodian under this Agreement and to reinvest the proceeds in such other
Designated Investment Company shares as the Employee may specify. Any such
transaction must conform with the provisions of the current prospectus(es) of
the applicable Designated Investment Company(ies).
3. DIVIDENDS. All dividends or other distributions received by the Custodian on
shares of any Designated Investment Company held in the Custodial Account shall
(unless received in additional shares of such Designated Investment Company) be
reinvested in additional shares of
the Designated Investment Company from which the distribution is made. If any
distribution on shares of a Designated Investment Company may be received at the
election of the shareholder in additional shares or cash or other property, the
Custodian shall elect to receive such distribution in additional shares.
4. REGISTRATION AND VOTING. All Designated Investment Company shares acquired by
the Custodian hereunder shall be registered in the name of the Custodian or of
its nominee. The Custodian shall deliver, or cause to be executed and delivered,
to the Employee all notices, prospectuses, financial statements, proxies, and
proxy soliciting materials relating to the Designated Investment Company shares
held in the Custodial Account. The Custodian shall not vote any of the shares
held hereunder except in accordance with written instructions received from the
Employee. Voting instructions which have not been timely received by the
Custodian shall not be voted by the Custodian.
ARTICLE V/DISTRIBUTIONS
1. TIME OF DISTRIBUTIONS.
(a) Subject to the remaining provisions of this Article V, distribution of
assets held in the Employee's Custodial Account shall begin at such
times as the Employee (or his beneficiary, if applicable) shall elect
by written notice to the Custodian at any time after the occurrence of
the earliest of these events:
(1) The Employee's
(a) separation from service with the Employer;
(b) disability (within the meaning of Section 72(m)(7) of the
Code);
(c) death;
(d) attainment of age 59 1/2.
(2) a financial hardship of the Employee, as determined by an
independent person or persons designated by the Employer.
"Financial hardship" shall include a financial need of the Employee
because of sickness, temporary disability, or any other immediate and
heavy financial need of the Employee, provided, however, that the term
financial hardship shall be limited so as to conform to the
requirements
of Section 403(b)(7) of the Code. No distribution based on financial
hardship may exceed the amount determined to be required to meet the
immediate financial need created by the hardship and not reasonably
available from other resources of the Employee.
Effective in 1989, a distribution because of financial hardship is
limited to an Employee's "elective" contributions not previously
distributed, and the earnings on such contributions will not be
distributable on account of financial hardship. Any distribution prior
to age 59 1/2 even on account of a financial hardship, may subject the
Employee to a 10 percent penalty tax on the distribution.
No distribution based on financial hardship shall be made by the
Custodian until its receipt of written notice from such independent
person (or persons) that a qualifying hardship has been determined and
stating the amount required to be distributed to meet that hardship.
(b) If, and only if, contributions have been made to the Custodial Account
under this Agreement after December 31, 1986 then, subject to the
provisions of Paragraph 2(f), the distribution to an Employee of
amounts under this Agreementshall begin no later than the April 1
following the close of the calendar year in which the Employee attains
age 70 1/2 (the "Required Distribution Date"). Notwithstanding the
foregoing, the Required Distribution Date for any Employee who attained
age 70 1/2 before January 1, 1988 shall be no earlier than the April 1
next following the calendar year in which the Employee terminates
employment.
(c) The Custodian shall not be responsible for making any distributions
until such time as it has received written instructions from the
Employee (or his beneficiary, if applicable) to begin making
distributions, and, in the case of financial hardship, it has received
the written notice of the designated independent person or persons.
(d) At any time before the commencement of distributions, the Employee (or
his beneficiary, if applicable, subject to the restrictions in
paragraph 4) shall instruct the Custodian of the method of
distribution. Upon receipt by the Custodian of any and all certificates
and other documents requested by the Custodian, the Custodian will
comply with the written instructions of the Employee (or his
beneficiary, if applicable) to make distribution in accordance with one
of the methods of distribution set forth.
In the event that the Employee (or his beneficiary, if applicable)fails
to properly elect a method of distribution of his Custodial Account,
installment payments pursuant to sub-paragraph (b) of paragraph 2 shall
be made to the Employee (or his beneficiary) on a monthly basis over a
10-year period if a systematic withdrawal plan is available for the
Designated Investment Company shares held in the Custodial Account and
if the assets in such Account are determined sufficient by the Sponsor.
If such a plan is unavailable and/or if such assets are insufficient,
the value of the shares held in the Custodial Account will be
distributed in a single lump sum in cash.
2. METHODS OF DISTRIBUTION.
(a) The value of the Custodial Account may be distributed in one of the
following ways:
(1) A single sum payment, in cash and/or in kind, consisting of the
entire balance in the Custodial Account; or a single sum payment, in
cash and/or in kind, consisting of part of the balance in the Custodial
Account with the remainder distributed pursuant to sub-paragraph (b) or
(c);
(2) In installments, in cash and/or in kind, over a period of years not
to exceed the life expectancy of the Employee or the joint life and
last survivor expectancy of the Employee and his beneficiary. The
installment payments shall be made in approximately equal amounts or
approximately equal fractions of the Employee's Custodial Account and
may be paid in monthly or other regular increments as elected by the
Employee and as agreed to by the Custodian.
(3) By the purchase and distribution of an annuity contract, utilizing
all available assets of the Custodial Account, from an insurance
company designated by the Employee, with either fixed or variable
annuity payments for the life of the Employee or, if the Employee so
elects, for the lives of the Employee and his beneficiary. Such policy
may provide for installment payments over a period measured by the life
expectancy of the Employee or the joint life expectancy of the Employee
and his beneficiary and the survivor, or over a shorter period.
If the Employee elects the method of distribution described in (3)
above, the annuity contract must satisfy the requirements of Section
401(a)(9) of the Code. If the Employee elects the
method of distribution described in (2), the annual payment required to
be made by the Employee's Required Distribution Date is for the
calendar year the Employee reached age 70 1/2. Annual payments for
subsequent years, including the year the Employee's Required
Distribution Date occurs, must be made by December 31 of that year.
(4) In the case of an Eligible Rollover Distribution, by a Direct
Rollover to an Eligible Retirement Plan, an Eligible Rollover
Distribution is any distribution of all or any portion of the balance
to the credit of the Employee, except that an Eligible Rollover
Distribution does not include: any distribution that is one of a series
of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Employee or the
joint lives (or life expectancies) of the Employee and the Employee's
designated beneficiary, or for a specified period of ten years or more;
any distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any distribution that
is not includible in gross income. An Eligible Retirement Plan is an
individual retirement account describedin Section 408(a) of the Code,
an individual retirement annuity described in Section 408(b) of the
Code, an annuity or custodial account described in Section 403(b) of
the Code. A Direct Rollover is a payment by the Custodian to the
Eligible Retirement Plan specified by the Employee.
(b) If, and only if, contributions have been made to the Custodial Account
under this Agreement after December 31, 1986, the method of
distribution
(1) may not extend the payment of such Employee's benefits beyond the
life expectancy of the Employee or the joint life and last survivor
expectancy of the Employee and his beneficiary (determined using
attained ages as of the calendar year in which payments commence under
Section 1.72-9 of the Treasury Regulations) and
(2) if someone other than the Employee's spouse is the beneficiary,
then the period of years over which installment payments are to be paid
shall be such that any period of years remaining as of the calendar
year in which the Employee attains age 70 1/2 or any subsequent
calendar year shall meet the minimum distribution
incidental benefit requirement which shall be determined in accordance
with the regulations promulgated under Section 401(a)(9) of the Code.
(c) Notwithstanding the foregoing, if the value of the Custodial Account at
the time distribution is to be made or commenced is less than $250, the
full amount in the Custodial Account shall be distributed as a
single-sum payment in cash.
(d) The Employee (or his beneficiary, if applicable) shall be responsible
for insuring that distributions are made in accordance with this
Agreement and with all requirements of applicable law. The Custodian
shall have no responsibility regarding the method and timing of
distributions other than to follow the written instructions of the
Employee (or his beneficiary, if applicable).
(e) In the case of distributions to be made over the life expectancy of the
Employee (or over the joint lives of the Employee and his beneficiary
or the life expectancy of the beneficiary) in equal or substantially
equal annual payments, to determine the minimum annual payments, to
determine the minimum annual payment for each year, divide the
Employee's entire interest in the Custodial Account as of the close of
business on December 31 of the preceding year by the life expectancy of
the Employee (or the joint life and last survivor expectancy of the
Employee and his beneficiary, or the life expectancy of the
beneficiary, whichever applies). In the case of distributions under
paragraph 2, determine the initial life expectancy (or joint life and
last survivor expectancy) using the attained ages of the Employee and
beneficiary as of their birthdays in the year the Employee reaches age
70 1/2. In the case of distributions in accordance with paragraph 4,
determine life expectancy using the attained age of the beneficiary as
of the beneficiary's birthday in the year distributions are required to
commence. The recalculation of the life expectancy of the Employee
and/or the Employee's spouse shall only be made at the written election
of the Employee. The recalculation of the life expectancy of the
Employee's surviving spouse shall only be made at the written election
of the surviving spouse. Any recalculation of the Employee's and/or
spouse's life expectancy will be done annually using their attained
ages as of their birthdays in the year for which the minimum
annual payment is being determined. The life expectancy of a
beneficiary (other than the spouse) will not be recalculated. The
minimum annual payment may be made in a series of installments (e.g.,
monthly, quarterly, etc.) as long as the total payments for the year
made by the date required are not less than the minimum amounts
required.
(f) If the Employee maintains one or more 403(b) accounts or annuities with
any institution other than the Custodian, the Employee may elect to
withdraw the minimum distribution required under sub-paragraph (e)
above from such other accounts or annuities.
(g) Within a reasonable time period before making an Eligible Rollover
Distribution, the Custodian shall provide an explanation to the
Employee of his right to elect a Direct Rollover and the income tax
withholding consequences of not electing a Direct Rollover.
3. DESIGNATION OF BENEFICIARY.
The Employee may designate and change his beneficiary or beneficiaries under
this Agreement on a form acceptable to the Custodian for such purpose. A
designation of beneficiary hereunder shall not become effective until it has
been filed with the Custodian. If no such designation is in effect at the time
of the Employee's death, the beneficiary shall be the Employee's surviving
spouse, or, if there is no surviving spouse, then the estate of the Employee.
The balance in the Custodial Account at the death of the Employee shall be
distributed to such beneficiary of beneficiaries. Such beneficiary shall have
the right to determine the timing and method of distribution, subject to any
applicable restrictions contained in this Article V.
4. DEATH BENEFITS. If the Employee dies before his entire interest is
distributed to him, the entire remaining interest will be distributed as
follows:
(a) If the Employee dies on or after his Required Distribution Date,
distribution must continue to be made in accordance with paragraph 2.
(b) If the Employee dies before his Required Distribution Date, the entire
remaining interest will, at the election of the beneficiary, either (i)
be distributed by the December 31 of the year containing the fifth
anniversary of the Employee's death, or (ii) be distributed in equal or
substantially equal payments over the life or life expectancy of the
beneficiary or (iii) by the purchase of an annuity contract. The
election of either (i), (ii) or (iii) must be made by December 31 of
the year following the year of the Employee's death. If the beneficiary
does not elect either of the distribution options described in (i),
(ii) and (iii), distribution will be made in accordance with (ii) if
the beneficiary is the Employee's surviving spouse and in accordance
with (i) if the beneficiary is anyone other than the surviving spouse.
In the case of distributions under (ii) or (iii), distributions must
commence by December 31 of the year following the year of the
EmployeeOs death. If the EmployeeOs spouse is the beneficiary,
distributions need not commence until December 31 of the year the
Employee would have attained age 70 1/2, if later.
(c) Following the death of the Employee and until distribution of the
Custodial Account has been completed, the beneficiary shall have the
right to control the investment of the assets of the Custodial Account
to the same extent as the Employee had such right under Article IV.
(d) If the beneficiary dies before receiving the entire balance of the
Custodial Account, such balance shall be paid to the executor of the
beneficiary's estate.
(e) If the Employee's spouse is the beneficiary, and is entitled to receive
an Eligible Rollover Distribution, she may direct the Custodian to make
a Direct Rollover of the Eligible Rollover Distribution to an
individual retirement account described in Section 408(a) of the Code
or an individual retirement annuity described in Section 408(b) of the
Code. Within a reasonable time period before making an Eligible
Rollover Distribution, the Custodian shall provide an explanation to
the surviving spouse of her right to elect a Direct Rollover and the
income tax consequences of not electing a Direct Rollover.
5. DISTRIBUTION OF EXCESS CONTRIBUTIONS AND EXCESS DEFERRALS.
Any provision herein to the contrary notwithstanding, if the Employee notifies
the Custodian in writing within the time prescribed by law (if any) that all or
any portion of a contribution made on behalf of the Employee was an Excess
Contribution or an Excess Deferral, then the Custodian may distribute, within
the time prescribed by law (if any), to the Employee Designated Investment
Company shares and/or cash representing the amount of
such Excess Contribution or Excess Deferral, and in either case, the net income
attributable thereto, reduced by any administrative charges allocable to the
Excess Contribution or Excess Deferral.
ARTICLES VI/PROTECTION OF EMPLOYEE BENEFITS
1. NON-FORFEITABLE. The Custodial Account has been created for the exclusive
benefit of the Employee and his beneficiaries. The interest of the Employee in
the balance in the Custodial Account shall at all times be non-forfeitable, but
shall be subject to the fees, expenses and charges described in Article VII.
2. NON-ALIENABLE. Except as provided in Article V, no interest, right or claim
in or to any part of the Custodial Account or any payment therefrom shall be
assignable, transferable, or subject to sale, mortgage, pledge, hypothecation,
commutation, anticipation, garnishment, attachment, execution, or levy of any
kind, and the Custodian shall not recognize any attempt to assign, transfer,
sell, mortgage, pledge, hypothecate, commute, anticipate, garnish, attach,
execute upon or levy upon the same, except to the extent required by law.
ARTICLE VII/REPORTING,
CUSTODIAN FEES AND
EXPENSES OF THE ACCOUNT
1. FURNISHING OF DATA. The Employee agrees to provide at such times and in such
manner as may be requested by the Custodian, such information as may be
necessary for the Custodian to prepare any reports required by the Internal
Revenue Service, the Department of Labor or any other governmental agency.
2. REPORTS BY CUSTODIAN. The Custodian agrees to submit reports to the Internal
Revenue Service, other government agencies, and the Employee at such times and
in such manner and containing such information as may be prescribed as the
responsibility of the Custodian by applicable statues and regulations
thereunder.
3. CUSTODIAN FEES AND EXPENSES OF ACCOUNT. The Custodian shall advise the
Employer and the Employee of its fee schedule at the time of the execution of
the initial Application. All fees of the Custodian in the performance of its
duties hereunder may be charged against the Custodial Account in such manner as
may be determined by the Custodian, or at the Custodian's option, may be paid by
the Employer or the Employee directly. Upon thirty (30) days' prior written
notice, the Custodian may substitute a different fee schedule. The Custodian's
fees, any income or other taxes of any kind that may be levied or assessed in
respect to the assets of the Custodial Account, and all other administrative
expenses incurred by the Custodian in the performance of its duties, including
fees for legal services rendered to the Custodian, may be reserved by the
Custodian and charged to the Custodial
Account, with the right to liquidate Designated Investment Company shares for
this purpose.
ARTICLE VIII/CONCERNING
THE CUSTODIAN
1. ANNUAL REPORT. The Custodian shall keep adequate records of transactions it
is required to perform hereunder. Not later than sixty (60) days after the close
of each calendar year or after the Custodian's resignation or removal pursuant
to Article IX, the Custodian shall render to the Employee a written report or
reports reflecting the transactions effected by it during such period and the
assets of the Custodial Account at the close of the period. Sixty (60) days
after rendering such reports(s), the Custodian shall, to the extent permitted by
applicable law, be forever released and discharged from all liability and
accountability to anyone with respect to its acts and transactions shown in or
reflected by such report(s), except with respect to those as to which the
recipient of such report(s) shall have filed written objections with the
Custodian within the later such sixty (60) day period.
2. ERISA REQUIREMENTS. Certain ERISA requirements will apply if the Custodial
Account and this Agreement are determined to constitute, or to be a part of, an
"employee pension benefit plan" subject to Title I of ERISA. This may occur if,
for example, the Employer makes any contributions on behalf of an Employee other
than the elective contributions contemplated herein. If the Custodial Account
becomes subject to Title I of ERISA, the Employer shall be responsible for
assuring that the Custodial Account complies with all requirements of the
provisions of Title I. The Custodian, the Employer and the Employee shall
furnish to one another such information relevant to the Custodial Account as may
be required in that respect.
3. DELEGATION OF AUTHORITY. The Custodian may perform any of its administrative
duties through such other persons or entities as may be designated from time to
time by the Custodian, with the prior approval of the Sponsor, except that
Designated Investment Company shares must be registered as provided in paragraph
4 of Article IV. No such delegation or subsequent change therein shall be
considered an amendment of this Agreement. The Custodian shall not be liable
(and assumes no responsibility) for the collection of contributions, the tax
exclusion of any contribution or its propriety under this Agreement, or the
purpose, propriety, or timeliness of any distribution ordered in accordance with
Article V.
4. LIABILITY OF CUSTODIAN. The Custodian's liability under this Agreement and
matters which it contemplates shall be limited to matters arising from the
Custodian's negligence or willful misconduct. The Custodian shall not be
obligated or expected to commence or defend any legal action or proceeding in
connection
with this Agreement unless agreed upon by the Custodian, the Employer and the
Employee and unless fully indemnified for so doing to the Custodian's
satisfaction.
5. RELIANCE ON DOCUMENTS. The Custodian may conclusively rely upon and shall be
protected in acting upon any written order from the Employer or the Employee or
his beneficiary or any other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been properly
executed and, so long as it acts in good faith, in taking or omitting to take
any other action in reliance thereon.
6. CASH BALANCES. The Custodian shall not be liable for interest on any cash
balances maintained in the Custodial Account.
ARTICLE IX/RESIGNATION
OR REMOVAL OF CUSTODIAN
1. WITH RESPECT TO A CUSTODIAL ACCOUNT. Except as otherwise provided in
paragraph 2 of this Article IX, the Custodian may resign at any time upon thirty
(30) days' notice in writing to the Employer and the Employee, and may be
removed by the Employee at any time upon thirty (30) days' notice in writing to
the Custodian and the Employer. Upon such resignation or removal, the Employee
shall appoint a successor custodian or trustee, which successor shall be a
"bank" as defined in Section 401(d)(1) of the Code. Upon receipt by the
Custodian of written acceptance of such appointment by the successor custodian
or trustee, the Custodian shall transfer and pay over to such successor the
assets of the Custodial Account and all records pertaining thereto. The
Custodian is authorized, however, to reserve such sum of money as it may deem
advisable for payment of all its fees, compensation, costs, and expenses or for
payment of any other liabilities constituting a charge on or against the assets
of the Custodial Account or on or against the Custodian, with any balance of
such reserve remaining after the payment of all such items to be paid over to
the successor custodian or trustee. If within the thirty (30) day period
provided for, the Employee has not appointed a successor custodian or trustee
which has accepted such appointment, the Custodian shall, unless it elects to
terminate this Agreement, appoint a successor custodian itself.
2. WITH RESPECT TO ALL CUSTODIAL ACCOUNTS. The Sponsor may remove the Custodian
at any time upon thirty (30) days' notice in writing to the Custodian and the
Custodian may resign at anytime upon thirty (30) days' notice in writing to the
Sponsor. Upon such resignation or removal, the Sponsor shall appoint a successor
custodian, which successor custodian shall be a "bank" as defined in Section
401(d)(1) of the Code and the provisions of paragraph 1 of this Article IX shall
apply with respect to the transfer of custodianship to such successor custodian.
The provisions of this paragraph 2 shall apply if,
and only if, the resignation or removal of the Custodian relates to all Section
403(b)(7) Custodial Accounts established pursuant to agreements comparable to
this Agreement.
ARTICLE X/AMENDMENT
1. BY SPONSOR. The Employee also delegates to the Sponsor the Employee's rights
so to amend, provided that the Sponsor amends in the same manner all agreements
comparable to this one under which such power has been delegated to it. Such an
amendment by the Sponsor shall be communicated in writing to the Employee, the
Employer and the Custodian.
2. CHANGES IN CUSTODIAN'S FEE SCHEDULE. This Article X shall not be construed to
restrict the Custodian's freedom to change or substitute fee schedules in the
manner provided by paragraph 3 of Article VII, and no such change or
substitution shall be deemed to be an amendment of this Agreement.
3. LIMITATIONS ON AMENDMENTS. Notwithstanding the foregoing, no amendment shall
be made which would:
(a) cause or permit any part of the assets in the Custodial Account to be
diverted to purposes other than for the exclusive benefit of the
Employee and/or his beneficiaries, or cause or permit any portion
of such assets to revert to or become the property of the Employer:
(b) increase the burdens of the Custodian without its prior written
consent; or
(c) retroactively deprive the Employee of any benefit to which he was
entitled under the Agreement by reason of contributions made by the
Employer, unless such modification or amendment is necessary to conform
the Agreement to, or satisfy the conditions of, any law, governmental
regulation or ruling, and to permit the Agreement and Custodial Account
to meet the requirements of Section 403(b) of the Code, or any similar
statute enacted in lieu thereof, and any such retroactive modification
or amendment must be pursuant to an opinion of counsel that it is
necessary or advisable to conform the Agreement to the requirements for
qualification under Section 403(b) of the Code.
ARTICLE XI/TERMINATION OF CUSTODIAL ACCOUNT
1. VOLUNTARY TERMINATION. With respect to amounts not yet earned by the Employee
the salary reduction agreement between the Employee and the Employer may be
terminated by either the Employee or the Employer by
giving written notice to the other. Copies of such notice shall be sent
forthwith to the Custodian. Unless otherwise mutually agreed upon by the
Employer and the Employee, any such termination shall take effect as of the last
day of the month next following the month in which such written notice shall
have been given, the Employee's compensation level shall be increased by the
amount by which it otherwise would be reduced pursuant to any applicable salary
reduction agreement and the obligations under this Agreement of the Employer
with respect to future pay periods shall cease.
2. NO SUCCESSOR CUSTODIAN. If, within the time specified in paragraph 1 of
Article IX after the Custodian's resignation or removal, the Employee has not
appointed a successor Custodian which has accepted such appointment, termination
of the Custodial Account may be effected by the Custodian by distributing all
assets thereof in a lump sum in kind to the Employee (or his beneficiary, if
applicable), subject to the Custodian's right to reserve funds as provided in
Article VII. Upon such termination of the Custodial Account, this Agreement
shall terminate and have no further force and effect, and the Custodian shall be
relieved from all further liability with respect to this Agreement, the
Custodial Account, and all assets thereof so distributed.
3. TERMINATION ON DISQUALIFICATION. The Agreement shall terminate as to the
Employee if the Internal Revenue Service declares that this Custodial Account
does not constitute a tax-qualified custodial account under Section 403(b)(7) of
the Code. On such termination of this Agreement, all assets in the Custodial
Account shall be distributed in kind by the Custodian to the Employee (or his
beneficiary, if applicable), subject to the Custodian's right to reserve funds
as provided in Article VII.
4. TERMINATION ON DISTRIBUTION. This Agreement shall terminate as to the
Employee when all assets held in the Custodial Account for the Employee have
been distributed.
ARTICLE XII/MISCELLANEOUS
1. APPLICABLE LAW. This Agreement shall be construed, administered and enforced
according to the laws of the Commonwealth of Massachusetts; provided, however,
that it is intended that this Agreement create a tax-qualified custodial account
under Section 403(b)(7) of the Code and this Agreement shall be so construed and
limited and the powers hereunder exercised so as to accomplish the purpose.
2. PRONOUNS. Whenever used in this Agreement, the masculine pronoun is to be
deemed to include feminine. The singular form, whenever used herein, shall mean
or include the plural form where applicable, and vice versa.
3. NOTICES. Any notices, accounting or other communication which the Custodian
may give the Employer or the Employee shall be deemed given when mailed to the
Employer or Employee at the latest address which has been furnished to the
Custodian. Any notice or other communication which the Employer or Employee may
give to the Custodian shall not become effective until actual receipt of said
notice by the Custodian.
4. SEPARABILITY. If any provision of this Agreement shall be for any reason
invalid or unenforceable, the remaining provisions shall, nevertheless, continue
in effect and shall not be invalidated thereby unless they are rendered
unconscionable, inadequate, or incapable of being interpreted as a result of the
deletion of the invalid or unenforceable portions of the Agreement.
5. SUCCESSORS. This Agreement shall be binding upon and shall inure to the
benefit of the successor in interest of the parties hereto.
6. NO EMPLOYMENT CONTRACT. This Agreement shall not be deemed to constitute a
contract of employment between the Employer and the Employee, nor shall any
provision hereof restrict the right of the Employer to discharge the Employee or
of the Employee to terminate his employment.
7. If the Custodial Account and this Agreement are determined to constitute, or
to be a part of, an "employee pension benefit plan" subject to Title I of ERISA
and, as a result, the Employer adopts a written plan document which has
provisions which are inconsistent with the provisions of this Agreement, then
provided such plan document complies with the requirements of the Code and
ERISA, the provisions of such plan document shall control, to the extent
necessary to comply with ERISA; provided, however, that nothing in such plan
document may be construed to increase the responsibilities of the Custodian or
the Sponsor, and, consistent with Paragraph 2 of Article VIII, the Employer
shall ensure compliance with applicable ERISA requirements.
EXHIBIT 14(d)
CUSTODIAL AGREEMENT
ARTICLE I
The Custodian will accept cash contributions on behalf of the participant by the
participant's employer under the terms of a SIMPLE plan described in section
408(p). In addition, the custodian will accept transfers or rollovers from other
SIMPLE-IRAs of the participant. No other contributions will be accepted by the
custodian.
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the participant's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the participant under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually.
Such election shall be irrevocable as to the participant and the surviving
spouse and shall apply to all subsequent years. The life expectancy of a
nonspouse beneficiary may not be recalculated.
3. The participant's entire interest in the custodial account must be, or begin
to be, distributed by the participant's required beginning date, (April 1
following the calendar year end in which the participant reaches age 70 1/2). By
that date, the participant may elect, in a manner acceptable to the Custodian,
to have the balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the
participant.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the participant and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a specified
period that may not be longer than the participant's life
expectancy.
(e) Equal or substantially equal annual payments over a specified
period that may not be longer than the joint life and last
survivor expectancy of the participant and his or her designated
beneficiary.
4. If the participant dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the participant dies on or after distribution of his or her
interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(b) If the participant dies before distribution of his or her interest
has begun, the entire remaining interest will, at the election of
the participant or, if the participant has not so elected, at the
election of beneficiary or beneficiaries, either
(i) Be distributed by December 31 of the year containing th
fifth anniversary of the participant's death, or
(ii) Be distributed in equal or substantially equal payments
over the life or life expectancy of the designated
beneficiary or beneficiaries, starting by December 31 of
the year following the year of the participant's death.
If, however, the beneficiary is the participant's
surviving spouse, then this distribution is not required
to begin before December 31 of the year in which the
participant would have turned age 70 1/2. (c) Except
where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related
regulations has irrevocably commenced, distributions are
treated as having begun on the participant's required
beginning date, even though payments may actually have
been made before that date. (d)If the participant dies
before his or her entire interest has been distributed
and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover
contributions may be accepted in the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the participant's entire interest in the Custodial account as of the
close of business on December 31 of the preceding year by the life expectancy of
the participant (or the joint life and last survivor expectancy of the
participant and the participant's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of distributions
under paragraph (3), determine the initial life expectancy (or joint life and
last survivor expectancy) using the attained ages of the participant and
designated beneficiary as of their birthdays in the year the participant reaches
age 70 1/2. In the case of distribution in accordance with paragraph (4)(b)(ii),
determine life expectancy using the attained age of the designated beneficiary
as of the beneficiary's birthday in the year distributions are required to
commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The participant agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
408(l)(2)and Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the participant as prescribed by the Internal Revenue Service.
3. The Custodian also agrees to provide the participant's employer the summary
description described in section 408(l)(2) unless this SIMPLE XXX is a transfer
SIMPLE XXX.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles
I through III and this sentence will be controlling. Any additional articles
that are not consistent with section 408(a) and 408(p) and the related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below.
ARTICLE VIII
1. All assets in the Account shall be invested in such shares of one or more
Designated Investment Companies as the participant may from time to time
specify. The participant's instructions may relate to current contributions or
to amounts previously contributed (including earnings thereon) or to both. In
the event that the Custodian receives a contribution from the participant's
employer with respect to which no investment direction is specifically
applicable, or if any such investment direction is, in the opinion of the
Custodian, unclear, the Custodian may hold such amounts uninvested or return any
such contributions without liability for any loss, including any loss of income
or appreciation, and without liability for interest or any tax liability
incurred by participant pending receipt of instructions or clarification. For
all purposes of this Agreement, the term "Designated Investment Company" shall
mean USAA INVESTMENT TRUST or USAA MUTUAL FUND, INC. and any other regulated
investment company for which USAA INVESTMENT MANAGEMENT COMPANY (or any
affiliate thereof) acts as investment advisor and which is designated by USAA
INVESTMENT MANAGEMENT COMPANY as eligible for investment under this Agreement.
2. Except as otherwise permitted in paragraph 12 below, all contributions made
under this Agreement shall be deposited in the form of cash and shall be made to
the Custodian in accordance with such rules as the Custodian may establish. The
Custodian, upon receipt of instructions from the participant may exchange or
cause to be exchanged shares of a Designated Investment Company held by the
Custodian on behalf of the participant for any other shares of a Designated
Investment Company available for investment hereunder, subject to and in
accordance with the terms and conditions of the exchange privilege, as outlined
in the current prospectuses of any such Designated Investment Company and as may
be agreed upon, in writing, from time to time between the Custodian and USAA
Investment Management Company. The participant shall be the beneficial owner of
the assets held in the Account. All dividends and capital gains distributions
received on shares of a Designated Investment Company held in the participantOs
Account shall, unless received in additional shares, be reinvested in shares of
the Designated Investment Company paying such dividends. If any distributions of
the shares of a Designated Investment Company may be received at the election of
the participant in additional shares or in cash or other property, the Custodian
shall elect to receive additional shares.
3. USAA INVESTMENT MANAGEMENT COMPANY may remove the Custodian at any time upon
thirty (30) days' notice in writing to the Custodian, and the Custodian may
resign at any time upon thirty (30) days' notice in writing to USAA INVESTMENT
MANAGEMENT COMPANY. Upon such resignation or removal, USAA INVESTMENT MANAGEMENT
COMPANY shall appoint a successor custodian, which successor custodian shall be
a "bank" as defined in Section 408(n) of the Code or another person found
qualified to act as a custodian of an Individual Retirement Account by the
Secretary
of the Treasury or his delegate. Upon receipt by the Custodian of written
acceptance of such appointment by the successor custodian or trustee, the
Custodian shall transfer and pay over to such successor the assets of the
Account and all records pertaining thereto. The Custodian is authorized,
however, to reserve such sum of money as it may deem advisable for payment of
all its fees, compensation, costs, and expenses or for payment of any other
liabilities constituting a charge on or against the assets of the Account or on
or against the Custodian, with any balance of such reserve remaining after the
payment of all such items to be paid over to the successor custodian or trustee.
If within the thirty (30) day period provided for above, USAA Investment
Management Company has not appointed a successor custodian or trustee which has
accepted such appointment, the Custodian shall, unless it elects to terminate
the Custodial Account, appoint a successor custodian itself.
4. The Custodian shall deliver, or cause to be delivered, to the participant all
notices, prospectuses, financial statements, proxies and proxy soliciting
materials relating to Designated Investment Companies' shares held for
participant. The Custodian shall not vote any of the shares held hereunder
except in accordance with the written instructions of the participant.
5. (a) The Custodian shall, from time to time, in accordance with
instructions in writing from the participant (or the participant's
beneficiary if the participant is deceased), make distributions
out of the Account to the participant in the manner and amounts as
may be specified in such instructions. All such instructions shall
be deemed to constitute a certification by the participant (or the
participant's beneficiary if the participant is deceased) that the
distribution directed is one that the participant (or the
participant's beneficiary if the participant is deceased) is
permitted to receive. Notwithstanding the provision of Article IV
above, the Custodian assumes (and shall have) no responsibility to
make any distribution to the participant (or the participant's
beneficiary if the participant is deceased) unless and until such
written instructions specify the occasion for such distribution,
the elected manner of distribution and any declaration required by
Article IV. Prior to making any such distribution from the
Account, the Custodian shall be furnished with any and all
applications, certificates, tax waivers, signature guarantees, and
other documents (including proof of any legal representative's
authority) deemed necessary or advisable by the Custodian, but the
Custodian shall not be liable for complying with written
instructions which appear on their face to be genuine, or for
refusing to comply if not satisfied such instructions are genuine,
and assumes no duty of further inquiry. Upon receipt of proper
written instructions as required above, the Custodian shall cause
the assets of the Account to be distributed in cash and/or in
kind, as specified in such written order.
(b) Distribution of the assets of the Account shall be made in
accordance with the provisions of Article IV as the participant
(or the participant's beneficiary if the participant is deceased
and has not previously elected) shall elect by written
instructions to the Custodian; subject, however to the provisions
of Sections 401(a)(9), 408(a)(6) and 408(b)(3) of the Code, the
regulations promulgated thereunder, and the following: (i) No
distribution from the
Account shall be made in the form of an annuity contract.
(ii) The recalculation of life expectancy of the participant and/or
the participant's spouse shall only be made at the written
election of the participant. The recalculation of life
expectancy of the surviving spouse shall only be made at the
written election of the surviving spouse.
(iii) If the participant dies before his/her entire interest in the
Account has been distributed, and if the designated beneficiary
of the participant is the participant's surviving spouse, the
spouse may treat the Account as his/her own individual
retirement arrangement. This election will be deemed to have
been made if the surviving spouse makes a regular XXX
contribution to the Account, makes a rollover to or from such
Account, or fails to receive a payment from the Account within
the appropriate time period applicable to the deceased
participant under Section 401(a)(9)(B) of the Code.
6. Any notice from the Custodian to the participant provided for in this
Agreement shall be effective if sent by regular mail to him at his last address
of record.
7. The participant hereby delegates to USAA Investment Management Company the
power to amend at any time and from time to time the terms and provisions of the
Agreement and hereby consents to such amendments, provided they shall comply
with all applicable provisions of the Code, the regulations there under and with
any other governmental law, regulation or ruling. Any such amendments shall be
effective as of the date specified in a written notice sent by first-class mail
to the address of the participant indicated by the Custodian's records.
Notwithstanding the foregoing, no amendment which increases the burdens of the
Custodian shall take effect without its prior written consent. Nothing in this
paragraph 7 shall be construed to restrict the Custodian's freedom to change or
substitute fee schedules in accordance with the provisions of the adoption
agreement, and no such change or substitution shall be deemed to be an amendment
to this Agreement.
8. The Custodian shall not be bound by any certificate, notice, order,
information or other communication unless and until it shall have been received
in writing at its place of business.
9. (a) The Custodian shall have the right to rely upon any information
furnished in writing by the participant. The participant and the
participant's legal representatives, as appropriate, shall always fully
indemnify the Custodian and USAA Investment Management Company and save
each of them harmless from any and all liability whatsoever which may
arise in connection with this Agreement and matters which the Agreement
contemplates, except that which arises due to the Custodian's gross
negligence, willful misconduct or lack of good faith. The Custodian
shall not be obligated or expected to commence or defend any legal
action or proceed-ing in connection with this Agreement or such matters
unless agreed upon by the Custodian and the participant or said legal
representatives and unless fully indemnified for so doing to the
Custodian's satisfaction.
(b) The Custodian shall be an agent for the participant to perform the
duties conferred on it by the participant. The parties do not intend to
confer any fiduciary duties on the Custodian and none shall be implied.
The Custodian
shall not be liable (and does not assume any responsibility for) the
collection of contributions, the deductibility of any contribution or
the propriety of any contributions under this Agreement, the selection
of any shares of any Designated Investment Company for the Account, or
the purpose or propriety of any distribution ordered in accordance with
Article IV or paragraph 5 of this Article VIII, which matters are the
sole responsibility of the participant or the participant's
beneficiary, as the case may be. (c) The Custodian and USAA Investment
Management Company shall not be responsible for any losses, penalties
or other consequences to the Depositor or to any other person arising
out of the making of any contribution or withdrawal.
10. This Agreement together with the Appli-cation and Adoption Agreement
attached hereto and by this reference made a part hereof, constitutes the entire
agreement between the parties, and it shall be construed in accordance with the
laws of the state of Texas.
11. The participant shall have the right by written notice to the Custodian on a
form acceptable to the Custodian, to designate or to change a beneficiary to
receive any benefit to which such participant may be entitled in event of his
death prior to the complete distribution of such benefit. If no such designation
is in effect at the time of the participant's death, or if the designated
beneficiary has predeceased the participant, the participant's beneficiary shall
be his or her estate. The last designation filed with the Custodian shall be
controlling, and, whether or not it fully disposes the Account, shall revoke all
such other designations previously filed by the participant.
12. (a) The Custodian shall have the right to receive rollover contributions
from another SIMPLE-XXX of the participant as described in the Code and
if any property is so transferred to it as a rollover contribution,
such property shall be sold by the Custodian and the proceeds less
any expenses, fees or commissions reinvested in paragrap 1 of this
Article VIII. The Custodian reserves the right to refuse to accept any
property which is not in the form of cash.
(b) The Custodian, upon written direction of the participant and after
submission to the Custodian of such documents as it may reasonably
require, shall transfer the assets held under this Agreement (reduced
by any amounts referred to in paragraph 3 of this Article VIII to a
successor SIMPLE individual retirement account, or regular or
individual retirement account. Any amounts received or transferred by
the Custodian under this paragraph 12 shall be accompanied by such
records and other documents as the Custodian deems necessary to
establish the nature, value, and extent of the assets, and of the
various interests therein.
13. The benefits provided hereunder shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such benefits to be so subjected shall not be recognized,
except to such extent as may be required by law. Any pledging of assets in the
Account by the participant as security for a loan, or any loan or other
extension of credit from the Account to the participant shall be prohibited.
14. The Custodian may perform any of its administrative duties through such
other persons or entities as may be designated by the Custodian from time to
time with the prior approval of USAA Investment Management Company, except that
the Designated Investment Company shares must be registered in the name of the
Custodian or its nominee. No such delegation or subsequent change herein shall
be considered an amendment of this agreement.
15. In addition to the reports required by Article V, the Custodian shall cause
to be mailed to the participant in respect of each tax year an account of all
transactions affecting the Account during such year and a statement showing the
Account as of the end of such year. If, within sixty (60) days after such
mailing, the participant has not given the Custodian written notice of any
exception or objection thereto, the annual accounting shall be deemed to have
been approved, and in such case, or upon the written approval of the
participant, the Custodian shall be released, relieved and discharged with
respect to all matters and statements set forth in such accounting as though the
account had been settled by judgment or decree of a court of competent
jurisdiction.
16. (a) The Custodian may charge the participant reasonable fees, including an
annual maintenance fee, for services hereunder according to standard
schedules of rates which may be in effect from time to time. Initially,
the fees payable to the Custodian shall be in the schedule amount
provided with the Agreement. Upon thirty (30) days' prior written
notice, the Custodian may substitute a fee schedule differing from that
schedule initially provided.
(b) Custodian's fees, any income (including unrelated business income tax),
gift, estate and inheritance taxes and other taxes of any kind
whatsoever, including transfer taxes incurred in connection with the
investment or reinvestment of the assets of the Account, that may be
levied or incurred by the Custodian in the performance of its duties
may be charged to the Account, with the right to liquidate shares of
any Designated Investment Company for this purpose, or (at Custodian's
option) to the participant.
