-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DdC3acP5ORnEok9n22mGTYoey0VsyS8IGWMHYRWWIgoYu9u2NukJm2cB/Mw5aIj9 Oew8SDvRgvDSiK0m/5+1ZQ== 0000081259-96-000027.txt : 19960930 0000081259-96-000027.hdr.sgml : 19960930 ACCESSION NUMBER: 0000081259-96-000027 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19960927 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEORGE PUTNAM FUND OF BOSTON CENTRAL INDEX KEY: 0000081259 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046407893 STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-10816 FILM NUMBER: 96635852 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ STREET 2: MAILSTOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 8002252581 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM EQUITY INCOME FUND/NEW DATE OF NAME CHANGE: 19940302 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM GEORGE FUND OF BOSTON DATE OF NAME CHANGE: 19920703 485APOS 1 As filed with the Securities and Exchange Commission on September 27, 1996 Registration No. 2-10816 811-58 - ----------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM N-1A ---- REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X / ---- ---- Pre-Effective Amendment No. / / ---- ---- Post-Effective Amendment No. 85 / X / and ---- ---- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X / ACT OF 1940 ---- ---- Amendment No. 19 / X / (Check appropriate box or boxes) ---- --------------- THE GEORGE PUTNAM FUND OF BOSTON (Exact name of registrant as specified in charter) One Post Office Square, Boston, Massachusetts 02109 (Address of principal executive offices) Registrant's Telephone Number, including Area Code (617) 292-1000 --------------- It is proposed that this filing will become effective (check appropriate box) ---- / / immediately upon filing pursuant to paragraph (b) - ---- ---- / / on (date) pursuant to paragraph (b) - ---- ---- / / 60 days after filing pursuant to paragraph (a)(1) - ---- ---- / X / on November 30, 1996 pursuant to paragraph (a)(1) - ---- ---- / / 75 days after filing pursuant to paragraph (a)(2) - ---- ---- / / on (date) pursuant to paragraph (a)(2) of Rule 485. - ---- If appropriate, check the following box: ---- / / this post-effective amendment designates a new - ---- effective date for a previously filed post-effective amendment. -------------- JOHN R. VERANI, Vice President THE GEORGE PUTNAM FUND OF BOSTON One Post Office Square Boston, Massachusetts 02109 (Name and address of agent for service) --------------- Copy to: JOHN W. GERSTMAYR, Esquire ROPES & GRAY One International Place Boston, Massachusetts 02110 The Registrant has registered an indefinite number or amount of securities under the Securities Act of 1933 pursuant to Rule 24f-2. A Rule 24f-2 notice for the fiscal year ended July 31, 1996 was filed on September 26 , 1996 . THE GEORGE PUTNAM FUND OF BOSTON CROSS REFERENCE SHEET (AS REQUIRED BY RULE 481(A)) PART A N-1A ITEM NO. LOCATION 1. Cover Page......................... Cover page 2. Synopsis........................... Expenses summary 3. Condensed Financial Information.... Financial highlights; How performance is shown 4. General Description of Registrant.. Objective; How the fund pursues its objective; Organization and history 5. Management of the Fund............. Expenses summary; How the fund is managed; About Putnam Investments, Inc. 5A. Management's Discussion of Fund Performance........................ (Contained in the annual report of the Registrant) 6. Capital Stock and Other Securities. Cover page; Organization and history; How the fund makes distributions to shareholders; tax information 7. Purchase of Securities Being Offered............................ How to buy shares; Distribution plans; How to sell shares; How to exchange shares; How the fund values its shares 8. Redemption or Repurchase........... How to buy shares; How to sell shares; How to exchange shares; Organization and history 9. Pending Legal Proceedings.......... Not applicable PART B N-1A ITEM NO. LOCATION 10. Cover Page......................... Cover page 11. Table of Contents.................. Cover page 12. General Information and History.... Organization and history (Part A) 13. Investment Objective and Policies.. How the fund pursues its objective (Part A); Investment restrictions; Miscellaneous investment practices 14. Management of the Registrant.......... Management (Trustees; Trustee fees; Officers); Additional officers 15. Control Persons and Principal......... Management (Trustees; Holders of Securities Officers); Charges and expenses (Share ownership) 16. Investment Advisory and Other......... Organization and Services history (Part A); Management (Trustees; Officers; The management contract; Principal underwriter; Investor servicing agent and custodian); Charges and expenses; Distribution plans; Independent accountants and financial statements 17. Brokerage Allocation.................. Management (Portfolio transactions); Charges and expenses 18. Capital Stock and Other Securities.... Organization and history (Part A); How the fund makes distributions to shareholders; tax information (Part A); Suspension of redemptions 19. Purchase, Redemption, and Pricing..... How to buy shares of Securities Being Offered (Part A); How to sell shares (Part A); How to exchange shares (Part A); How to buy shares; Determination of net asset value; Suspension of redemptions 20. Tax Status............................ How the fund makes distributions to shareholders; tax information (Part A); Taxes 21. Underwriters.......................... Management (Principal underwriter); Charges and expenses 22. Calculation of Performance Data....... How performance is shown (Part A); Investment performance; Standard performance measures 23. Financial Statements.................. Independent accountants and financial statements PART C Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C of the Registration Statement. PROSPECTUS NOVEMBER 30, 1996 THE GEORGE PUTNAM FUND OF BOSTON CLASS A, B AND M SHARES INVESTMENT STRATEGY: GROWTH AND INCOME This prospectus explains concisely what you should know before investing in The George Putnam Fund of Boston (the "fund"). Please read it carefully and keep it for future reference. You can find more detailed information in the November 30, 1996 statement of additional information (the "SAI"), as amended from time to time. For a free copy of the SAI or other information, call Putnam Investor Services at 1-800-225-1581. The SAI has been filed with the Securities and Exchange Commission and is incorporated into this prospectus by reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. BOSTON * LONDON * TOKYO ABOUT THE FUND EXPENSES SUMMARY .............................................................. ... This section describes the sales charges, management fees, and annual operating expenses that apply to the fund's various classes of shares. Use it to help you estimate the impact of transaction costs on your investment over time. FINANCIAL HIGHLIGHTS .............................................................. ... Study this table to see, among other things, how the fund performed each year for the past 10 years or since it began investment operations if it has been in operation for less than 10 years. OBJECTIVE .............................................................. ... Read this section to make sure the fund's objective is consistent with your own. HOW THE FUND PURSUES ITS OBJECTIVE .............................................................. ... This section explains in detail how the fund seeks its investment objective. RISK FACTORS. All investments entail some risk. Read this section to make sure you understand the risks that are associated with an investment in the fund. HOW PERFORMANCE IS SHOWN .............................................................. ... This section describes and defines the measures used to assess fund performance. All data are based on past investment results and do not predict future performance. HOW THE FUND IS MANAGED .............................................................. ... Consult this section for information about the fund's management, allocation of its expenses, and how purchases and sales of securities are made . ORGANIZATION AND HISTORY .............................................................. ... In this section, you will learn when the fund was introduced, how it is organized, how it may offer shares, and who its Trustees are. ABOUT YOUR INVESTMENT ALTERNATIVE SALES ARRANGEMENTS .............................................................. ... Read this section for descriptions of the classes of shares this prospectus offers and for points you should consider when making your choice. HOW TO BUY SHARES .............................................................. ... This section describes the ways you may purchase shares and tells you the minimum amounts required to open various types of accounts. It explains how sales charges are determined and how you may become eligible for reduced sales charges on each class of shares. DISTRIBUTION PLANS .............................................................. ... This section tells you what distribution fees are charged against each class of shares. HOW TO SELL SHARES .............................................................. ... In this section you can learn how to sell fund shares directly to the fund or through an investment dealer. HOW TO EXCHANGE SHARES .............................................................. ... Find out in this section how you may exchange fund shares for shares of other Putnam funds. The section also explains how exchanges can be made without sales charges and the conditions under which sales charges may be required. HOW THE FUND VALUES ITS SHARES .............................................................. ... This section explains how the fund determines the value of its shares. HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION .............................................................. ... This section describes the various options you have in choosing how to receive fund dividends . It also discusses the tax status of the payments and counsels you to seek specific advice about your own situation. ABOUT PUTNAM INVESTMENTS, INC. .............................................................. ... Read this section to learn more about the companies that provide the marketing, investment management, and shareholder account services to Putnam funds and their shareholders. APPENDIX Securities ratings ABOUT THE FUND EXPENSES SUMMARY Expenses are one of several factors to consider when investing. The following table summarizes your maximum transaction costs from investing in the fund and expenses based on the most recent fiscal year. The examples show the cumulative expenses attributable to a hypothetical $1,000 investment over specified periods. CLASS A CLASS B CLASS M SHARES SHARES SHARES SHAREHOLDER TRANSACTION EXPENSES Maximum sales charge imposed on purchases (as a percentage of offering price) 5.75% NONE* 3.50%* Deferred sales charge 5.0% in the first (as a percentage year, declining of the lower of to 1.0% in the original purchase sixth year, and price or redemption eliminated proceeds) NONE** thereafter NONE ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets) Total fund Management 12b-1 Other operating fees fees expenses expenses ---------- ----- -------- --------- Class A 0.55% 0.25% 0.34% 1.14% Class B 0.55% 1.00% 0.35% 1.90% Class M 0.55% 0.75% 0.39% 1.69% The table is provided to help you understand the expenses of investing and your share of fund operating expenses . The expenses shown in the table do not reflect the application of credits that reduce fund expenses. The annual management fees shown in the table have been restated to reflect an increase in the management fees payable to Putnam Investment Management, Inc., the fund's investment manager ("Putnam Management"). Actual management fees were 0.36% for all classes of shares and total fund operating expenses were 0.95%, 1.71% and 1.50%, for class A , B and M shares , respectively . EXAMPLES Your investment of $1,000 would incur the following expenses, assuming 5% annual return and, except as indicated, redemption at the end of each period: 1 3 5 10 year years years years CLASS A $68 $92 $117 $188 CLASS B $69 $90 $123 $202** * CLASS B (NO REDEMPTION) $19 $60 $103 $202*** CLASS M $52 $86 $124 $228 The examples do not represent past or future expense levels. Actual expenses may be greater or less than those shown. Federal regulations require the examples to assume a 5% annual return, but actual annual return varies. * The higher 12b-1 fees borne by class B and class M shares may cause long-term shareholders to pay more than the economic equivalent of the maximum permitted front-end sales charge on class A shares. ** A deferred sales charge of up to 1.00% is assessed on certain redemptions of class A shares that were purchased without an initial sales charge. See "How to buy shares - Class A shares." *** Reflects conversion of class B shares to class A shares (which pay lower ongoing expenses) approximately eight years after purchase. See "Alternative sales arrangements." FINANCIAL HIGHLIGHTS The following table presents per share financial information for class A, B and M shares. This information has been derived from the fund's financial statements, which have been audited and reported on by the independent accountants. The "Report of independent accountants" and financial statements included in the fund's annual report to shareholders for the 1996 fiscal year are incorporated by reference into this prospectus. The fund's annual report, which contains additional unaudited performance information, is available without charge upon request.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) DECEMBER 1, 1994 YEAR (COMMENCEMENT ENDED OF OPERATIONS) JULY 31 TO JULY 31 YEAR ENDED JULY 31 1996 1995 1996 1995 1994 1993 CLASS M CLASS B NET ASSET VALUE, BEGINNING OF PERIOD $14.84 $12.77 $14.83 $13.46 $14.19 $14.22 INVESTMENT OPERATIONS: Net investment income .55 .31 .51 .52 .50 .56 Net realized and unrealized gain (loss) on investments 1.50 2.03 1.50 1.63 (.12) .48 TOTAL FROM INVESTMENT OPERATIONS 2.05 2.34 2.10 2.15 .38 1.04 LESS DISTRIBUTIONS FROM: Net investment income (.52) (.27) (.47) (.46) (.49) (.59) Net realized gain on investments (.63) -- (.63) (.32) (.62) (.48) TOTAL DISTRIBUTIONS (1.15) (.27) (1.10) (.78) (1.11) (1.07) NET ASSET VALUE, END OF PERIOD $15.74 $14.84 $15.74 $14.83 $13.46 $14.19 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(a) 14.26 18.52(c) 13.97 16.87 2.70 7.87 NET ASSETS, END OF PERIOD (in thousands) $49,541 $8,164 $435,278 $224,166 $151,327 $81,983 Ratio of expenses to average net assets (%)(b) 1.50 .93(c) 1.71 1.66 1.71 1.66 Ratio of net investment income to average net assets (%) 3.50 2.53(c) 3.31 3.81 3.39 3.43 Portfolio turnover (%) 119.44 102.57 119.44 102.57 100.69 89.22 (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the year ended July 31, 1996 includes amounts paid through brokerage service and expense offset arrangements. Prior period ratios exclude these amounts. (c) Not annualized. (d) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
FINANCIAL HIGHLIGHTS (Continued) (For a share outstanding throughout the period) APRIL 27, 1992 (COMMENCEMENT OF OPERATIONS) TO JULY 31 YEAR ENDED JULY 31 1992 1996 1995 1994 1993 1992 1991 CLASS B CLASS A NET ASSET VALUE, BEGINNING OF PERIOD $13.73 $14.90 $13.52 $14.24 $14.24 $13.52 $13.39 INVESTMENT OPERATIONS: Net investment income .13(d) .63 .63 .59 .62 .64 .69 Net realized and unrealized gain (loss) on investments .53 1.50 1.63 (.11) .52 1.12 .64 TOTAL FROM INVESTMENT OPERATIONS .66 2.13 2.26 .48 1.14 1.76 1.33 LESS DISTRIBUTIONS FROM: Net investment income (.17) (.58) (.56) (.58) (.66) (.68) (.68) Net realized gain on investments -- (.63) (.32) (.62) (.48) (.36) (.52) TOTAL DISTRIBUTIONS (.17) (1.21) (.88) (1.20) (1.14) (1.04) (1.20) NET ASSET VALUE, END OF PERIOD $14.22 $15.82 $14.90 $13.52 $14.24 $14.24 $13.52 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (a) 4.99(c) 14.75 17.73 3.46 8.64 13.68 11.28 NET ASSETS, END OF PERIOD (in thousands) $11,946 $1,515,260 $1,036,674 $913,171 $772,540 $622,129 $479,287 Ratio of expenses to average net assets (%)(b) .55(c) .95 .91 .95 .90 1.06 .94 Ratio of net investment income to average net assets (%) .84(c) 4.07 4.58 4.15 4.34 4.62 5.42 Portfolio turnover (%) 78.90 119.44 102.57 100.69 89.22 78.90 64.98 /TABLE
FINANCIAL HIGHLIGHTS (Continued) (For a share outstanding throughout the period) SEVEN YEAR MONTHS ENDED ENDED JULY 31 JULY 31 YEAR ENDED DECEMBER 31 1990 1989 1988 1987 CLASS A NET ASSET VALUE, BEGINNING OF PERIOD $14.32 $12.32 $11.91 $14.66 INVESTMENT OPERATIONS: Net investment income .75 .45 .73 .71 Net realized and unrealized gain (loss) on investments .02 1.88 .68 (.03) TOTAL FROM INVESTMENT OPERATIONS .77 2.33 1.41 .68 LESS DISTRIBUTIONS FROM: Net investment income (.82) (.33) (.72) (.80) Net realized gain on investments (.88) -- (.28) (2.63) TOTAL DISTRIBUTIONS (1.70) (.33) (1.00) (3.43) NET ASSET VALUE, END OF PERIOD $13.39 $14.32 $12.32 $11.91 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(a) 5.86 19.21(c) 12.10 3.72 NET ASSETS, END OF PERIOD (in thousands) $442,964 $430,568 $387,186 $384,213 Ratio of expenses to average net assets (%)(b) .84 .48(c) .73 .71 Ratio of net investment income to average net assets (%) 5.52 3.41(c) 5.82 4.86 Portfolio turnover (%) 70.54 52.82(c) 139.28 129.94
OBJECTIVE THE GEORGE PUTNAM FUND OF BOSTON SEEKS TO PROVIDE A BALANCED INVESTMENT COMPOSED OF A WELL-DIVERSIFIED PORTFOLIO OF STOCKS AND BONDS WHICH WILL PRODUCE BOTH CAPITAL GROWTH AND CURRENT INCOME. The fund is not intended to be a complete investment program, and there is no assurance it will achieve its objective. HOW THE FUND PURSUES ITS OBJECTIVE BASIC INVESTMENT STRATEGY IN SEEKING ITS OBJECTIVE, THE FUND MAY INVEST IN ALMOST ANY TYPE OF SECURITY OR NEGOTIABLE INSTRUMENT, INCLUDING CASH OR MONEY MARKET INSTRUMENTS. The fund's portfolio will include some securities selected primarily to provide for capital protection, others selected for dependable income and still others for growth in value. The proportion invested in each type of security is not fixed, although ordinarily no more than 75% of the fund's assets consist of common stocks and that portion of convertible securities attributable to conversion rights. The fund may, however, at times invest more than 75% of its assets in such securities if Putnam Management determines that unusual market or economic conditions make it appropriate to do so. ALTERNATIVE INVESTMENT STRATEGIES At times Putnam Management may judge that conditions in the securities markets make pursuing the fund's basic investment strategy inconsistent with the best interests of its shareholders. At such times Putnam Management may temporarily use alternative strategies primarily designed to reduce fluctuations in the value of fund assets. In implementing these defensive strategies, the fund may concentrate its investments in debt securities, preferred stocks, cash or money market instruments or invest in any other securities Putnam Management considers consistent with such defensive strategies. It is impossible to predict when, or for how long, these alternative strategies will be used . FOREIGN INVESTMENTS THE FUND MAY INVEST UP TO 20% OF ITS ASSETS IN SECURITIES PRINCIPALLY TRADED IN FOREIGN MARKETS. The fund may also purchase Eurodollar certificates of deposit without regard to the 20% limit. Since foreign securities are normally denominated and traded in foreign currencies, the values of the fund's assets may be affected favorably or unfavorably by currency exchange rates and exchange control regulations. There may be less information publicly available about a foreign company than about a U.S. company, and foreign companies are not generally subject to accounting, auditing, and financial reporting standards and practices comparable to those in the United States. The securities of some foreign companies are less liquid and at times more volatile than securities of comparable U.S. companies. Foreign brokerage commissions and other fees are also generally higher than those in the United States. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of fund assets held abroad) and expenses not present in the settlement of domestic investments. In addition, there may be a possibility of nationalization or expropriation of assets, imposition of currency exchange controls, confiscatory taxation, political or financial instability and diplomatic developments that could affect the value of investments in certain foreign countries. Legal remedies available to investors in certain foreign countries may be limited . The laws of some foreign countries may limit investments in securities of certain issuers located in those foreign countries. Special tax considerations apply to foreign securities. The risks described above are typically increased for investments in securities principally traded in, or issued by issuers located in, underdeveloped and developing nations, which are sometimes referred to as "emerging markets." The fund may engage in a variety of foreign currency exchange transactions in connection with its foreign investments , including transactions involving futures contracts, forward contracts and options. For a further discussion of the risks associated with purchasing and selling futures contracts and options, see "Futures and options." The SAI also contains information concerning these transactions. The decision as to whether and to what extent the fund will engage in foreign currency exchange transactions will depend on a number of factors, including prevailing market conditions, the composition of the fund's portfolio and the availability of suitable transactions. Accordingly, there can be no assurance that the fund will engage in foreign currency exchange transactions at any given time or from time to time . A MORE DETAILED EXPLANATION OF FOREIGN INVESTMENTS, AND THE RISKS AND SPECIAL TAX CONSIDERATIONS ASSOCIATED WITH THEM, IS INCLUDED IN THE SAI. PORTFOLIO TURNOVER The length of time the fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by the fund is known as "portfolio turnover." As a result of the fund's investment policies, under certain market conditions its portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover generally involves some expense , including brokerage commissions or dealer markups and other transaction costs on the sale of securities and reinvestment in other securities. These transactions may result in realization of taxable capital gains. Portfolio turnover rates are shown in the section "Financial highlights ." RISK FACTORS INVESTMENTS IN FIXED-INCOME SECURITIES. The fund may invest in both higher-rated and lower-rated fixed-income securities. The values of fixed-income securities fluctuate in response to changes in interest rates. Thus, a decrease in interest rates will generally result in an increase in the value of the fund's fixed-income securities. Conversely, during periods of rising interest rates, the value of the fund's fixed-income securities will generally decline. In addition, the values of such securities are affected by changes in general economic conditions and business conditions affecting the specific industries of their issuers. Changes by recognized rating services in their ratings of any fixed-income security and in the ability of an issuer to make payments of interest and principal may also affect the value of these investments. Changes in the value of portfolio securities generally will not affect income derived from such securities, but will affect the fund's net asset value. The values of lower-rated securities generally fluctuate more than those of higher-rated securities. The fund will invest in securities rated at the time of purchase at least B by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's ("S&P"), or in unrated securities which Putnam Management determines are of comparable quality. Securities rated B are predominantly speculative and have large uncertainties or major risk exposures to adverse conditions. Securities rated lower than Baa by Moody's or BBB by S&P and unrated securities of comparable quality are sometimes referred to as "junk bonds." The rating services' descriptions of securities in the various rating categories, including the speculative characteristics of securities in the lower rating categories, are set forth in the Appendix to this prospectus. The table below shows the percentages of net assets invested during fiscal 1996 in securities assigned to the various rating categories by S&P, or, if unrated by S&P, assigned to comparable rating categories by Moody's, and in unrated securities determined by Putnam Management to be of comparable quality . UNRATED SECURITIES RATED SECURITIES, OF COMPARABLE QUALITY, AS PERCENTAGE OF AS PERCENTAGE OF RATING NET ASSETS NET ASSETS "AAA" 23.65% 0.14% "AA" 1.54% -- "A" 1.88% 0.08% "BBB" 3.55% 0.11% "BB" 2.63% 0.51% "B" 2.38% -- "CCC" 0.08% -- ------ ---- - 35.71% 0.84% == ===== ===== Putnam Management seeks to minimize the risks of investing in lower-rated securities through careful investment analysis. When the fund invests in securities in the lower rating categories, the achievement of its goals is more dependent on Putnam Management's ability than would be the case if it were investing in securities in the higher rating categories. Investors should consider carefully their ability to assume the risks of owning shares of a mutual fund that may invest in securities in the lower rating categories. The fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Putnam Management will consider such reduction in its determination of whether the fund should continue to hold the security in its portfolio. Certain investment grade securities share some of the risk factors discussed above with respect to lower-rated securities. At times, a substantial portion of fund assets may be invested in securities as to which the fund, by itself or together with other funds and accounts managed by Putnam Management and its affiliates, holds all or a major portion. Under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, it may be more difficult to sell these securities when Putnam Management believes it advisable to do so or the fund may be able to sell the securities only at prices lower than if they were more widely held. Under these circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value. In order to enforce its rights in the event of a default of these securities, the fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on the securities. This could increase fund operating expenses and adversely affect its net asset value. Certain securities held by the fund may permit the issuer at its option to "call," or redeem, its securities. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. The fund may invest in so-called "zero-coupon" bonds , which are issued at a significant discount from face value and pay interest only at maturity rather than at intervals during the life of the security. The values of zero-coupon bonds are subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Zero-coupon bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently. The fund is required to accrue and distribute interest income from zero-coupon bonds on a current basis, even though it does not receive that income currently in cash. Thus it may be necessary to sell other investments to obtain cash needed to make income distributions. FOR ADDITIONAL INFORMATION CONCERNING THE RISKS ASSOCIATED WITH INVESTING IN SECURITIES IN THE LOWER RATING CATEGORIES, SEE THE SAI. FUTURES AND OPTIONS THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS. An "index future" is a contract to buy or sell units of a particular stock index at an agreed price on a specified future date. Depending on the change in value of the index between the time the fund enters into and terminates an index future transaction, the fund realizes a gain or loss. In addition to or as an alternative to purchasing or selling index futures, the fund may buy and sell call and put options on index futures or stock indexes. The fund may engage in index futures and options transactions for hedging purposes and for nonhedging purposes, such as to adjust its exposure to relevant markets or as a substitute for direct investment. THE USE OF INDEX FUTURES AND RELATED OPTIONS INVOLVES CERTAIN SPECIAL RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS AND MAY RESULT IN LOSSES. Certain risks arise from the possibility of imperfect correlations among movements in the prices of financial futures and options purchased or sold by the fund, of the underlying stock index or portfolio securities and, in the case of hedging transactions, of the securities that are the subject of the hedge. The successful use of the strategies described above further depends on Putnam Management's ability to forecast market movements correctly. Other risks arise from the potential inability to close out index futures or options positions. There can be no assurance that a liquid secondary market will exist for any index future or option at any particular time. Certain provisions of the Internal Revenue Code and certain regulatory requirements may limit the use of index futures and options transactions. A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, IS INCLUDED IN THE SAI. OTHER INVESTMENT PRACTICES THE FUND MAY ALSO ENGAGE IN THE FOLLOWING INVESTMENT PRACTICES, EACH OF WHICH INVOLVES CERTAIN SPECIAL RISKS. THE SAI CONTAINS MORE DETAILED INFORMATION ABOUT THESE PRACTICES, INCLUDING LIMITATIONS DESIGNED TO REDUCE THESE RISKS. OPTIONS. The fund may seek to increase its current return by writing covered call and put options on securities it owns or in which it may invest. The fund receives a premium from writing a call or put option, which increases the return if the option expires unexercised or is closed out at a net profit. When the fund writes a call option, it gives up the opportunity to profit from any increase in the price of a security above the exercise price of the option; when it writes a put option, it takes the risk that it will be required to purchase a security from the option holder at a price above the current market price of the security. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The fund may also buy and sell put and call options and from time to time, may also buy and sell combinations of put and call options on the same underlying security . The aggregate value of the securities underlying the options may not exceed 25% of fund assets. The use of these strategies may be limited by applicable law. SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS. The fund may lend portfolio securities to broker-dealers and may enter into repurchase agreements without limit . These transactions must be fully collateralized at all times. The fund may also purchase securities for future delivery, which may increase its overall investment exposure and involves a risk of loss if the value of the securities declines prior to the settlement date. These transactions involve some risk to the fund if the other party should default on its obligation and the fund is delayed or prevented from recovering the collateral or completing the transaction. DERIVATIVES Certain of the instruments in which the fund may invest, such as futures contracts, options and forward contracts, are considered to be "derivatives." Derivatives are financial instruments whose value depends upon, or is derived from, the value of an underlying asset, such as a security or an index. Further information about these instruments and the risks involved in their use is included elsewhere in this prospectus and in the SAI. LIMITING INVESTMENT RISK SPECIFIC INVESTMENT RESTRICTIONS HELP TO LIMIT INVESTMENT RISKS FOR THE FUND'S SHAREHOLDERS. These restrictions prohibit the fund from acquiring , with respect to 75% of its total assets, more than 10% of the voting securities of any one issuer.* They also prohibit the fund from investing more than: (a) (with respect to 75% of its total assets) 5% of its total assets in securities of any one issuer other than the U.S. government ;* (b) 5% of its net assets in companies that, together with any predecessor, have been in operation less than three years ; (c) 25% of its total assets in any one industry (other than securities of the U.S. government, its agencies or instrumentalities); * or (d) 15% of its net assets in any combination of securities that are not readily marketable, in securities restricted as to resale (excluding securities determined by the Trustees (or the person designated by the Trustees to make such determinations) to be readily marketable), and in repurchase agreements maturing in more than seven days. Restrictions marked with an asterisk (*) above are summaries of fundamental policies. See the SAI for the full text of these policies and other fundamental policies. Except for investment policies designated as fundamental in this prospectus or the SAI, the investment policies described in this prospectus and in the SAI are not fundamental policies. The Trustees may change any non-fundamental investment policy without shareholder approval. As a matter of policy, the Trustees would not materially change the fund's investment objective without shareholder approval. HOW PERFORMANCE IS SHOWN FUND ADVERTISEMENTS MAY, FROM TIME TO TIME , INCLUDE PERFORMANCE INFORMATION . "Yield" for each class of shares is calculated by dividing the annualized net investment income per share during a recent 30-day period by the maximum public offering price per share of the class on the last day of that period. Yield is based on the price of the shares, including the maximum initial sales charge in the case of class A and class M shares, but does not reflect any contingent deferred sales charge in the case of class B shares. "Total return" for the one-, five- and ten-year periods (or for the life of a class, if shorter) through the most recent calendar quarter represents the average annual compounded rate of return on an investment of $1,000 in the fund invested at the maximum public offering price (in the case of class A and class M shares) or reflecting the deduction of any applicable contingent deferred sales charge (in the case of class B shares). Total return may also be presented for other periods or based on investment at reduced sales charge levels. Any quotation of investment performance not reflecting the maximum initial sales charge or contingent deferred sales charge would be reduced if the sales charge were used. ALL DATA ARE BASED ON PAST INVESTMENT RESULTS AND DO NOT PREDICT FUTURE PERFORMANCE. Investment performance, which will vary, is based on many factors, including market conditions, portfolio composition , fund operating expenses and which class of shares the investor purchases. Investment performance also often reflects the risks associated with the fund's investment objective and policies. These factors should be considered when comparing the fund's investment results with those of other mutual funds and other investment vehicles. Quotations of investment performance for any period when an expense limitation was in effect will be greater than if the limitation had not been in effect. Fund performance may be compared to that of various indexes. See the SAI. HOW THE FUND IS MANAGED THE TRUSTEES ARE RESPONSIBLE FOR GENERALLY OVERSEEING THE CONDUCT OF FUND BUSINESS. Subject to such policies as the Trustees may determine, Putnam Management furnishes a continuing investment program for the fund and makes investment decisions on its behalf. Subject to the control of the Trustees, Putnam Management also manages the fund's other affairs and business. The fund pays Putnam Management a quarterly fee for these services based on average net assets. See "Expenses summary" and the SAI. The following officers of Putnam Management have had primary responsibility for the day-to-day management of the fund's portfolio since the years stated below: Business experience Year (at least 5 years) ---- ------- ----------------- - ---- Edward P. Bousa Employed as an investment Senior Vice President 1994 professional by Putnam Management since 1992. Prior to October, 1992, Mr. Bousa was Vice President and Portfolio Manager at Fidelity Investments. Kenneth J. Taubes Employed as an investment Senior Vice President 1993 professional by Putnam Management since 1991. Rosemary H. Thomsen Employed as an investment Senior Vice President 1995 professional by Putnam Management since 1986. The fund pays all expenses not assumed by Putnam Management, including Trustees' fees, auditing, legal, custodial, investor servicing and shareholder reporting expenses, and payments under its distribution plans (which are in turn allocated to the relevant class of shares). The fund also reimburses Putnam Management for the compensation and related expenses of certain fund officers and their staff who provide administrative services . The total reimbursement is determined annually by the Trustees. Putnam Management places all orders for purchases and sales of fund securities. In selecting broker-dealers, Putnam Management may consider research and brokerage services furnished to it and its affiliates. Subject to seeking the most favorable price and execution available, Putnam Management may consider sales of fund shares (and, if permitted by law, of the other Putnam funds) as a factor in the selection of broker- dealers. ORGANIZATION AND HISTORY The George Putnam Fund of Boston is a Massachusetts business trust organized on November 1, 1937. A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of State of The Commonwealth of Massachusetts. The fund is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest, $1.00 par value, which may be divided without shareholder approval into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees determine. Only class A, B and M shares are offered by this prospectus. The fund may also offer other classes of shares with different sales charges and expenses. Because of these different sales charges and expenses, the investment performance of the classes will vary. For more information, including your eligibility to purchase any other class of shares, contact your investment dealer or Putnam Mutual Funds (at 1-800-225-1581). Each share has one vote, with fractional shares voting proportionally. Shares of all classes will vote together as a single class except when otherwise required by law or as determined by the Trustees. Shares are freely transferable, are entitled to dividends as declared by the Trustees, and, if the fund were liquidated, would receive the net assets of the fund. The fund may suspend the sale of shares at any time and may refuse any order to purchase shares. Although the fund is not required to hold annual meetings of its shareholders, shareholders holding at least 10% of the outstanding shares entitled to vote have the right to call a meeting to elect or remove Trustees, or to take other actions as provided in the Agreement and Declaration of Trust. THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of the Putnam funds. Chairman and Director of Putnam Management and Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director, Marsh & McLennan Companies, Inc.; WILLIAM F. POUNDS, VICE CHAIRMAN. Professor of Management, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; JAMESON ADKINS BAXTER, President, Baxter Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American Management Corp.; JOHN A. HILL, Principal and Managing Director, First Reserve Corporation; RONALD J. JACKSON, Former Chairman, President and Chief Executive Officer of Fisher-Price, Inc., Director of Safety 1st, Inc., Trustee of Salem Hospital and Overseer of the Peabody Essex Museum; ELIZABETH T. KENNAN, President Emeritus and Professor, Mount Holyoke College; LAWRENCE J. LASSER,* Vice President of the Putnam funds. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Management. Director, Marsh & McLennan Companies, Inc.; ROBERT E. PATTERSON, Executive Vice President, Cabot Partners Limited Partnership; DONALD S. PERKINS,* Director of various corporations, including Cummins Engine Company, Lucent Technologies, Inc., Spring Industries, Inc. and Time Warner Inc.; GEORGE PUTNAM, III,* President, New Generation Research, Inc.; ELI SHAPIRO, Alfred P. Sloan Professor of Management, Emeritus, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; A.J.C. SMITH,* Chairman, Chief Executive Officer and Director, Marsh & McLennan Companies, Inc.; and W. NICHOLAS THORNDIKE, Director of various corporations and charitable organizations, including Data General Corporation, Bradley Real Estate, Inc. and Providence Journal Co. Also, Trustee of Massachusetts General Hospital and Trustee of Eastern Utilities Associates. The Trustees are also Trustees of the other Putnam funds. Those marked with an asterisk (*) are or may be deemed to be "interested persons" of the fund, Putnam Management or Putnam Mutual Funds. ABOUT YOUR INVESTMENT ALTERNATIVE SALES ARRANGEMENTS CLASS A SHARES. An investor who purchases class A shares pays a sales charge at the time of purchase. As a result, class A shares are not subject to any charges when they are redeemed, except for certain sales at net asset value that are subject to a contingent deferred sales charge ("CDSC"). Certain purchases of class A shares qualify for reduced sales charges. Class A shares bear a lower 12b-1 fee than class B and class M shares. See "How to buy shares - Class A shares" and "Distribution plans." CLASS B SHARES. Class B shares are sold without an initial sales charge, but are subject to a CDSC if redeemed within a specified period after purchase. Class B shares also bear a higher 12b-1 fee than class A and class M shares. Class B shares automatically convert into class A shares, based on relative net asset value, approximately eight years after purchase. For more information about the conversion of class B shares, see the SAI. This discussion includes information about how shares acquired through reinvestment of distributions are treated for conversion purposes. The discussion also notes certain circumstances under which a conversion may not occur. Class B shares provide an investor the benefit of putting all of the investor's dollars to work from the time the investment is made. Until conversion, class B shares will have a higher expense ratio and pay lower dividends than class A and class M shares because of the higher 12b-1 fee. See "How to buy shares - Class B shares" and "Distribution plans." CLASS M SHARES. An investor who purchases class M shares pays a sales charge at the time of purchase that is lower than the sales charge applicable to class A shares. Certain purchases of class M shares qualify for reduced sales charges. Class M shares bear a 12b-1 fee that is lower than class B shares but higher than class A shares. Class M shares are not subject to any CDSC and do not convert into any other class of shares. See "How to buy shares -- Class M shares" and "Distribution plans." WHICH ARRANGEMENT IS BEST FOR YOU? The decision as to which class of shares provides a more suitable investment for an investor depends on a number of factors, including the amount and intended length of the investment. Investors making investments that qualify for reduced sales charges might consider class A or class M shares. Investors who prefer not to pay an initial sales charge might consider class B shares. Orders for class B shares for $250,000 or more will be treated as orders for class A shares or declined. For more information about these sales arrangements, consult your investment dealer or Putnam Investor Services. Shares may only be exchanged for shares of the same class of another Putnam fund. See "How to exchange shares." HOW TO BUY SHARES You can open a fund account with as little as $500 and make additional investments at any time with as little as $50. You can buy fund shares three ways - through most investment dealers, through Putnam Mutual Funds (at 1-800-225-1581), or through a systematic investment plan. If you do not have a dealer, Putnam Mutual Funds can refer you to one. BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS. Complete an order form and write a check for the amount you wish to invest, payable to the fund. Return the completed form and check to Putnam Mutual Funds, which will act as your agent in purchasing shares through your designated investment dealer. BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular investments of $25 or more per month through automatic deductions from your bank checking or savings account. Application forms are available from your investment dealer or through Putnam Investor Services. Shares are sold at the public offering price based on the net asset value next determined after Putnam Investor Services receives your order. In most cases, in order to receive that day's public offering price, Putnam Investor Services must receive your order before the close of regular trading on the New York Stock Exchange. If you buy shares through your investment dealer, the dealer must receive your order before the close of regular trading on the New York Stock Exchange to receive that day's public offering price. CLASS A SHARES The public offering price of class A shares is the net asset value plus a sales charge that varies depending on the size of your purchase. The fund receives the net asset value. The sales charge is allocated between your investment dealer and Putnam Mutual Funds as shown in the following table, except when Putnam Mutual Funds, in its discretion, allocates the entire amount to your investment dealer. SALES CHARGE AMOUNT OF AS A PERCENTAGE OF: SALES CHARGE ------------------- REALLOWED TO NET DEALERS AS A AMOUNT OF TRANSACTION AMOUNT OFFERING PERCENTAGE OF AT OFFERING PRICE ($) INVESTED PRICE OFFERING PRICE - ----------------------------------------------------------------- Under 50,000 6.10% 5.75% 5.00% 50,000 but under 100,000 4.71 4.50 3.75 100,000 but under 250,000 3.63 3.50 2.75 250,000 but under 500,000 2.56 2.50 2.00 500,000 but under 1,000,000 2.04 2.00 1.75 - ----------------------------------------------------------------- There is no initial sales charge on purchases of class A shares of $1 million or more. However, a CDSC of 1.00% or 0.50%, respectively, will be imposed on redemptions (other than redemptions by certain participant-directed qualified retirement plans, which are subject to a two-year CDSC of 1.00%, as described below) within the first or second year after purchase . There are also no initial sales charges on Class A shares purchased by participant-directed qualified retirement plans with at least 200 eligible employees. A CDSC of 1.00% will, however, be imposed upon the redemption of shares purchased after July 31, 1996 at net asset value by a participant-directed qualified retirement plan (including a plan with at least 200 eligible employees) that initially invested less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates and that sells 90% or more of the amount initially invested within two years after its initial purchase. Shares purchased by certain investors (including participant- directed qualified retirement plans with at least 200 eligible employees) investing $1 million or more who have made arrangements with Putnam Mutual Funds and whose dealer of record waived the commission as described below are not subject to the CDSC. In determining whether a CDSC is payable, shares not subject to any charge will be redeemed first. Any CDSC will be based on the lower of the shares' cost and current net asset value. Any shares acquired by reinvestment of distributions will be redeemed without a CDSC. Putnam Mutual Funds receives the entire amount of any CDSC you pay. See the SAI for more information about the CDSC. Except as stated below, Putnam Mutual Funds pays investment dealers of record commissions on sales of class A shares of $1 million or more based on an investor's cumulative purchases during the one-year period beginning with the date of the initial purchase at net asset value. Each subsequent one-year measuring period for these purposes will begin with the first net asset value purchase following the end of the prior period. Such commissions are paid at the rate of 1.00% of the amount under $3 million, 0.50% of the next $47 million and 0.25% thereafter. On sales at net asset value to a participant-directed qualified retirement plan initially investing less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates (including a plan with at least 200 eligible employees), Putnam Mutual Funds pays commissions during each one-year measuring period, determined as described above, at the rate of 1.00% of the first $2 million, 0.80% of the next $1 million and 0.50% thereafter. On sales at net asset value to all other participant-directed qualified retirement plans, Putnam Mutual Funds pays commissions on the initial investment and on subsequent net quarterly sales at the rate of 0.15%. A participant-directed qualified retirement plan participating in a "multi-fund" program approved by Putnam Mutual Funds may include amounts invested in other mutual funds participating in such program for purposes of determining whether the plan may purchase class A shares at net asset value. These investments will also be included for purposes of the discount privileges and programs described below. CLASS B SHARES Class B shares are sold without an initial sales charge, although a CDSC will be imposed if you redeem shares within a specified period after purchase, as shown in the table below. The following types of shares may be redeemed without charge at any time: (i) shares acquired by reinvestment of distributions , and (ii) shares otherwise exempt from the CDSC, as described in "How to buy shares--General" below. For other shares, the amount of the charge is determined as a percentage of the lesser of the current market value or the cost of the shares being redeemed. YEAR 1 2 3 4 5 6 7+ - ------------------------------------------------------------- CHARGE 5% 4% 3% 3% 2% 1% 0% In determining whether a CDSC is payable on any redemption, shares not subject to any charge will be redeemed first, followed by shares held longest during the CDSC period. For this purpose, the amount of any increase in a share's value above its initial purchase price is not regarded as a share exempt from the CDSC. Thus, when a share that has appreciated in value is redeemed during the CDSC period, a CDSC is assessed only on its initial purchase price. For information on how sales charges are calculated if you exchange your shares, see "How to exchange shares." Putnam Mutual Funds receives the entire amount of any CDSC you pay. CLASS M SHARES The public offering price of class M shares is the net asset value plus a sales charge that varies depending on the size of your purchase. The fund receives the net asset value. The sales charge is allocated between your investment dealer and Putnam Mutual Funds as shown in the following table, except when Putnam Mutual Funds, as its discretion, allocates the entire amount to your investment dealer. SALES CHARGE AMOUNT OF AS A PERCENTAGE OF: SALES CHARGE ------------------- REALLOWED TO NET DEALERS AS A AMOUNT OF TRANSACTION AMOUNT OFFERING PERCENTAGE OF AT OFFERING PRICE ($) INVESTED PRICE OFFERING PRICE - ----------------------------------------------------------------- Under 50,000 3.63% 3.50% 3.00% 50,000 but under 100,000 2.56 2.50 2.00 100,000 but under 250,000 1.52 1.50 1.00 250,000 but under 500,000 1.01 1.00 1.00 500,000 and above NONE NONE NONE - ----------------------------------------------------------------- GENERAL YOU MAY BE ELIGIBLE TO BUY FUND SHARES AT REDUCED SALES CHARGES. Consult your investment dealer or Putnam Mutual Funds for details about Putnam's combined purchase privilege, cumulative quantity discount, statement of intention, group sales plan, qualified retirement plans and other plans. Descriptions are also included in the order form and in the SAI. Class A, class B and class M shares are available at net asset value without an initial sales charge or a CDSC to current and retired Trustees (and their families), current and retired employees (and their families) of Putnam Management and affiliates, registered representatives and other employees (and their families) of broker-dealers having sales agreements with Putnam Mutual Funds, employees (and their families) of financial institutions having sales agreements with Putnam Mutual Funds (or otherwise having an arrangement with a broker-dealer or financial institution with respect to sales of fund shares), financial institution trust departments investing an aggregate of $1 million or more in Putnam funds, clients of certain administrators of tax-qualified plans, employee benefit plans of companies with more than 750 employees, tax-qualified plans when proceeds from repayments of loans to participants are invested (or reinvested) in Putnam funds, "wrap accounts" for the benefit of clients of broker-dealers, financial institutions or financial planners adhering to certain standards established by Putnam Mutual Funds, and investors meeting certain requirements who sold shares of certain Putnam closed-end funds pursuant to a tender offer by the closed-end fund. In addition, shares are available at net asset value without an initial sales charge or a CDSC in connection with the acquisition by the fund of assets of an investment company or personal holding company. The CDSC will be waived on redemptions of shares arising out of the death or post-purchase disability of a shareholder or settlor of a living trust account, and on redemptions in connection with certain withdrawals from IRA or other retirement plans. Up to 12% of the value of shares subject to a systematic withdrawal plan may also be redeemed each year without a CDSC. The SAI contains additional information about purchasing shares at reduced sales charges. Shareholders of other Putnam funds may be entitled to exchange their shares for, or reinvest distributions from their funds in, fund shares at net asset value. If you are considering redeeming or exchanging shares or transferring shares to another person shortly after purchase, you should pay for those shares with a certified check to avoid any delay in redemption, exchange or transfer. Otherwise , payment may be delayed until the purchase price of those shares has been collected or, if you redeem by telephone, until 15 calendar days after the purchase date. To eliminate the need for safekeeping, certificates will not be issued for your shares unless you request them. Putnam Mutual Funds will from time to time, at its expense, provide additional promotional incentives or payments to dealers that sell shares of the Putnam funds. These incentives or payments may include payments for travel expenses, including lodging, incurred in connection with trips taken by invited registered representatives and their guests to locations within and outside the United States for meetings or seminars of a business nature. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares. Certain dealers may not sell all classes of shares. DISTRIBUTION PLANS CLASS A DISTRIBUTION PLAN. The class A Plan provides for payments by the fund to Putnam Mutual Funds at the annual rate of up to 0.35% of average net assets attributable to class A shares. The Trustees currently limit payments under the class A plan to the annual rate of 0.25% of such assets. Putnam Mutual Funds makes quarterly payments to qualifying dealers (including, for this purpose, certain financial institutions) to compensate them for services provided in connection with sales of class A shares and the maintenance of shareholder accounts. The payments are based on the average net asset value of class A shares which are attributable to shareholders for whom the dealers are designated as the dealer of record. This calculation excludes until one year after purchase shares purchased at net asset value by shareholders investing $1 million or more. Also excluded until one year after purchase are shares purchased at net asset value by participant-directed qualified retirement plans with at least 200 eligible employees. These shares are not subject to the one-year exclusion provision in cases where certain shareholders who invested $1 million or more have made arrangements with Putnam Mutual Funds and the dealer of record waived the sales commission. Except as stated below, Putnam Mutual Funds makes the quarterly payments at the annual rate of 0.20% of such average net asset value for shares outstanding as of December 31, 1989 and 0.25% of such average net asset value for shares acquired after that date (including shares acquired through reinvestment of distributions). For participant-directed qualified retirement plans initially investing less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates, Putnam Mutual Funds' payments to qualifying dealers on shares purchased at net asset value are 100% of the rate stated above if average plan assets in Putnam funds (excluding money market funds) during the quarter are less than $20 million, 60% of the stated rate if average plan assets are at least $20 million but under $30 million, and 40% of the stated rate if average plan assets are $30 million or more. For all other participant-directed qualified retirement plans purchasing shares at net asset value , Putnam Mutual Funds makes quarterly payments to qualifying dealers at the annual rate of 0.10% of the average net asset value of such shares. CLASS B AND CLASS M DISTRIBUTION PLANS. The class B and class M plans provide for payments by the fund to Putnam Mutual Funds at the annual rate of up to 1.00% of average net assets attributable to class B shares and class M shares, as the case may be. The Trustees currently limit payments under the class M plan to the annual rate of 0.75% of such assets. Although class B shares are sold without an initial sales charge, Putnam Mutual Funds pays a sales commission equal to 4.00% of the amount invested to dealers who sell class B shares. These commissions are not paid on exchanges from other Putnam funds or on sales to investors exempt from the CDSC. The amount paid to dealers at the time of the sale of class M shares is set forth above under "How to buy shares -- Class M shares." In addition, to further compensate dealers (including qualifying financial institutions) for services provided in connection with sales of class B shares and class M shares and the maintenance of shareholder accounts, Putnam Mutual Funds makes quarterly payments to qualifying dealers. The payments are based on the average net asset value of class B shares and class M shares attributable to shareholders for whom the dealers are designated as the dealer of record. Putnam Mutual Funds makes the payments at an annual rate of 0.25% of such average net asset value of class B shares and class M shares, as the case may be. Putnam Mutual Funds also pays to dealers, as additional compensation with respect to the sale of class M shares, 0.40% of such average net asset value of class M shares. For class M shares, the total annual payment to dealers equals 0.65% of such average net asset value. GENERAL. Payments under the plans are intended to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of fund shares, including the payments to dealers mentioned above. Putnam Mutual Funds may suspend or modify such payments to dealers. The payments are also subject to the continuation of the relevant distribution plan, the terms of service agreements between dealers and Putnam Mutual Funds, and any applicable limits imposed by the National Association of Securities Dealers, Inc. HOW TO SELL SHARES You can sell your shares to the fund any day the New York Stock Exchange is open, either directly to the fund or through your investment dealer. The fund will only redeem shares for which it has received payment. SELLING SHARES DIRECTLY TO YOUR FUND. Send a signed letter of instruction or stock power form to Putnam Investor Services, along with any certificates that represent shares you want to sell. The price you will receive is the next net asset value calculated after the fund receives your request in proper form less any applicable CDSC. In order to receive that day's net asset value, Putnam Investor Services must receive your request before the close of regular trading on the New York Stock Exchange. If you sell shares having a net asset value of $100,000 or more, the signatures of registered owners or their legal representatives must be guaranteed by a bank, broker-dealer or certain other financial institutions. See the SAI for more information about where to obtain a signature guarantee. Stock power forms are available from your investment dealer, Putnam Investor Services and many commercial banks. If you want your redemption proceeds sent to an address other than your address as it appears on Putnam's records, a signature guarantee is required. Putnam Investor Services usually requires additional documentation for the sale of shares by a corporation, partnership, agent or fiduciary, or a surviving joint owner. Contact Putnam Investor Services for details. YOUR FUND GENERALLY SENDS YOU PAYMENT FOR YOUR SHARES THE BUSINESS DAY AFTER YOUR REQUEST IS RECEIVED. Under unusual circumstances, the fund may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities law. You may use Putnam's Telephone Redemption Privilege to redeem shares valued up to $100,000 from your account unless you have notified Putnam Investor Services of an address change within the preceding 15 days. Unless an investor indicates otherwise on the account application, Putnam Investor Services will be authorized to act upon redemption and transfer instructions received by telephone from a shareholder, or any person claiming to act as his or her representative, who can provide Putnam Investor Services with his or her account registration and address as it appears on Putnam Investor Services' records. Putnam Investor Services will employ these and other reasonable procedures to confirm that instructions communicated by telephone are genuine; if it fails to employ reasonable procedures, Putnam Investor Services may be liable for any losses due to unauthorized or fraudulent instructions. For information, consult Putnam Investor Services. During periods of unusual market changes and shareholder activity, you may experience delays in contacting Putnam Investor Services by telephone. In this event, you may wish to submit a written redemption request, as described above, or contact your investment dealer, as described below. The Telephone Redemption Privilege is not available if you were issued certificates for shares that remain outstanding. The Telephone Redemption Privilege may be modified or terminated without notice. SELLING SHARES THROUGH YOUR INVESTMENT DEALER. Your dealer must receive your request before the close of regular trading on the New York Stock Exchange to receive that day's net asset value. Your dealer will be responsible for furnishing all necessary documentation to Putnam Investor Services, and may charge you for its services. HOW TO EXCHANGE SHARES You can exchange your shares for shares of the same class of certain other Putnam funds at net asset value beginning 15 days after purchase. Not all Putnam funds offer all classes of shares. If you exchange shares subject to a CDSC, the transaction will not be subject to the CDSC. However, when you redeem the shares acquired through the exchange, the redemption may be subject to the CDSC, depending upon when you originally purchased the shares. The CDSC will be computed using the schedule of any fund into or from which you have exchanged your shares that would result in your paying the highest CDSC applicable to your class of shares. For purposes of computing the CDSC, the length of time you have owned your shares will be measured from the date of original purchase and will not be affected by any exchange. To exchange your shares, simply complete an Exchange Authorization Form and send it to Putnam Investor Services. The form is available from Putnam Investor Services. For federal income tax purposes, an exchange is treated as a sale of shares and generally results in a capital gain or loss. A Telephone Exchange Privilege is currently available for amounts up to $500,000. Putnam Investor Services' procedures for telephonic transactions are described above under "How to sell shares." The Telephone Exchange Privilege is not available if you were issued certificates for shares that remain outstanding. Ask your investment dealer or Putnam Investor Services for prospectuses of other Putnam funds. Shares of certain Putnam funds are not available to residents of all states. The exchange privilege is not intended as a vehicle for short- term trading. Excessive exchange activity may interfere with portfolio management and have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where Putnam Management or the Trustees believe doing so would be in the best interests of your fund, the fund reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Consult Putnam Investor Services before requesting an exchange. See the SAI to find out more about the exchange privilege. HOW THE FUND VALUES ITS SHARES THE FUND CALCULATES THE NET ASSET VALUE OF A SHARE OF EACH CLASS BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS LIABILITIES, BY THE NUMBER OF ITS SHARES OUTSTANDING. SHARES ARE VALUED AS OF THE CLOSE OF REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE EACH DAY THE EXCHANGE IS OPEN. Portfolio securities for which market quotations are readily available are stated at market value. Long-term corporate bonds and notes, for which market quotations are not considered readily available, are stated at fair value on the basis of valuations furnished by a pricing service approved by the Trustees which determines valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities, which are generally recognized by institutional traders. Short-term investments that will mature in 60 days or less are stated at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. Securities quoted in foreign currencies are translated into U.S. dollars at current exchange rates or at such other rates as the Trustees may determine in computing net asset value. As a result, fluctuations in the value of such currencies in relation to the U.S. dollar will affect the net asset value of fund shares even though there has not been any change in the values of such securities as quoted in such foreign currencies. HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION The fund distributes net investment income quarterly and any net realized capital gains at least annually. Distributions from capital gains are made after applying any available capital loss carryovers. Distributions paid on class A shares will generally be greater than those paid on class B and class M shares because expenses attributable to class B and class M shares will generally be higher. YOU CAN CHOOSE FROM THREE DISTRIBUTION OPTIONS: - - Reinvest all distributions in additional shares without a sales charge; - - Receive distributions from net investment income in cash while reinvesting capital gains distributions in additional shares without a sales charge; or - - Receive all distributions in cash. You can change your distribution option by notifying Putnam Investor Services in writing. If you do not select an option when you open your account, all distributions will be reinvested. All distributions not paid in cash will be reinvested in shares of the class on which the distributions are paid. You will receive a statement confirming reinvestment of distributions in additional shares (or in shares of other Putnam funds for Dividends Plus accounts) promptly following the quarter in which the reinvestment occurs. If a check representing a fund distribution is not cashed within a specified period, Putnam Investor Services will notify you that you have the option of requesting another check or reinvesting the distribution in the fund or in another Putnam fund. If Putnam Investor Services does not receive your election, the distribution will be reinvested in the fund. Similarly, if correspondence sent by the fund or Putnam Investor Services is returned as "undeliverable," fund distributions will automatically be reinvested in the fund or in another Putnam fund. The fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal taxes on income and gains it distributes to shareholders. The fund will distribute substantially all of its ordinary income and capital gain net income on a current basis. Fund distributions will be taxable to you as ordinary income, except that any distributions of net long-term capital gains will be taxable as such, regardless of how long you have held the shares. Distributions will be taxable as described above whether received in cash or in shares through the reinvestment of distributions. Early in each year Putnam Investor Services will notify you of the amount and tax status of distributions paid to you for the preceding year. The foregoing is a summary of certain federal income tax consequences of investing in the fund. You should consult your tax adviser to determine the precise effect of an investment in the fund on your particular tax situation (including possible liability for state and local taxes). ABOUT PUTNAM INVESTMENTS, INC. PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937. Putnam Mutual Funds is the principal underwriter of the fund and of other Putnam funds. Putnam Fiduciary Trust Company is the custodian of the fund . Putnam Investor Services, a division of Putnam Fiduciary Trust Company, is the investor servicing and transfer agent for the fund . Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust Company are subsidiaries of Putnam Investments, Inc., which is wholly owned by Marsh & McLennan Companies, Inc., a publicly- owned holding company whose principal businesses are international insurance and reinsurance brokerage, employee benefit consulting and investment management. APPENDIX SECURITIES RATINGS THE FOLLOWING RATING SERVICES DESCRIBE RATED SECURITIES AS FOLLOWS: MOODY'S INVESTORS SERVICE, INC. BONDS Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities. A -- Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa -- Bonds which are rated Baa are considered as medium-grade obligations , (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate , and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa - Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. STANDARD & POOR'S BONDS AAA -- Debt rated 'AAA' has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA -- Debt rated 'AA' has a very strong capacity to pay interest and repay principal and differ from the higher rated issues only in small degree. A -- Debt rated 'A' has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB-B-CCC -- Debt rated 'BB', 'B' and 'CCC' is regarded , on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation . 'BB' indicates the lowest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. BB -- Debt rated `BB' has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The `BB' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied `BBB-' rating. B -- Debt rated `B' has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The `B' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied `BB' or `BB-' rating. CCC -- Debt rated `CCC' has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The `CCC' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied `B' or `B-' rating. THE GEORGE PUTNAM FUND OF BOSTON One Post Office Square Boston, MA 02109 FUND INFORMATION: INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 INVESTOR SERVICING AGENT Putnam Investor Services Mailing address: P.O. Box 41203 Providence, RI 02940-1203 CUSTODIAN Putnam Fiduciary Trust Company One Post Office Square Boston, MA 02109 LEGAL COUNSEL Ropes & Gray One International Place Boston, MA 02110 INDEPENDENT ACCOUNTANTS Price Waterhouse LLP 160 Federal Street Boston, MA 02110 PUTNAMINVESTMENTS One Post Office Square Boston, Massachusetts 02109 Toll-free 1-800-225-1581 THE GEORGE PUTNAM FUND OF BOSTON ONE POST OFFICE SQUARE, BOSTON, MA 02109 CLASS A SHARES INVESTMENT STRATEGY: GROWTH AND INCOME PROSPECTUS - NOVEMBER 30, 1996 This prospectus explains concisely what you should know before investing in class A shares of The George Putnam Fund of Boston (the "fund") which are offered without a sales charge through eligible employer-sponsored defined contribution plans ("defined contribution plans"). Please read it carefully and keep it for future reference. You can find more detailed information about the fund in the November 30, 1996 statement of additional information (the "SAI"), as amended from time to time. For a free copy of the SAI, or for other information, including a prospectus regarding class A shares for other investors, call Putnam Investor Services at 1-800-752-9894. The SAI has been filed with the Securities and Exchange Commission and is incorporated into this prospectus by reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PUTNAMINVESTMENTS PUTNAM DEFINED CONTRIBUTION PLANS ABOUT THE FUND Expenses summary..................................... Financial highlights................................. Objective............................................ How the fund pursues its objective................... Risk factors.................................... How performance is shown............................. How the fund is managed.............................. Organization and history............................. ABOUT YOUR INVESTMENT How to buy shares.................................... Distribution plan.................................... How to sell shares................................... How to exchange shares............................... How the fund values its shares....................... How the fund makes distributions to shareholders; tax information.......................................... ABOUT PUTNAM INVESTMENTS, INC............................. APPENDIX Securities ratings........................................ ABOUT THE FUND EXPENSES SUMMARY Expenses are one of several factors to consider when investing . The following table summarizes expenses attributable to class A shares based on the fund's most recent fiscal year. The example shows the cumulative expenses attributable to a hypothetical $1,000 investment in class A shares over specified periods. ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets) Management fees 0.55% 12b-1 fees 0.25% Other expenses 0.34% Total fund operating expenses 1.14% The table is provided to help you understand the expenses of investing in the fund and your share of the operating expenses that the fund incurs. The expenses shown in the table do not reflect the application of credits that reduce fund expenses. The annual management fees shown in the table have been restated to reflect an increase in the management fees payable to Putnam Investment Management, Inc., the fund's investment manager ("Putnam Management"). Actual management fees were 0.36% and total fund operating expenses were 0.95%. EXAMPLE Your investment of $1,000 would incur the following expenses, assuming 5% annual return and redemption at the end of each period: 1 3 5 10 year years years years $12 $36 $63 $139 The example does not represent past or future expense levels and actual expenses may be greater or less than those shown. Federal regulations require the example to assume a 5% annual return, but actual annual return varies. The example does not reflect any charges or expenses related to your employer's plan. FINANCIAL HIGHLIGHTS The following table presents per share financial information for class A shares. This information has been derived from the fund's financial statements, which have been audited and reported on by the fund's independent accountants. The "Report of independent accountants" and financial statements included in the fund's annual report to shareholders for the 1996 fiscal year are incorporated by reference into this prospectus. The fund's annual report, which contains additional unaudited performance information, is available without charge upon request.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the year) Year ended October 31 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 Class A NET ASSET VALUE, BEGINNING OF YEAR $6.53 $7.36 $6.97 $6.80 $6.35 $6.90 $6.88 $6.63 $7.36 $7.14 INVESTMENT OPERATIONS Net investment income .47 .54 .56 .60 .64 .65 .66 .67 .62 .74 Net realized and unrealized gain (loss) on investments .55 (.84) .40 .18 .45 (.52) .03 .28 (.56) .27 TOTAL FROM INVESTMENT OPERATIONS 1.02 (.30) .96 .78 1.09 .13 .69 .95 .06 1.01 LESS DISTRIBUTIONS: From net investment income (.48) (.41) (.56) (.61) (.64) (.67) (.67) (.70) (.79) (.79) In excess of net investment income -- -- (.01) -- -- -- -- -- -- -- From net realized gain on investments -- (.04) -- -- -- (.01) -- -- -- -- From paid-in capital -- (.08) -- -- -- -- -- -- -- -- TOTAL DISTRIBUTIONS (.48) (.53) (.57) (.61) (.64) (.68) (.67) (.70) (.79) (.79) NET ASSET VALUE, END OF YEAR $7.07 $6.53 $7.36 $6.97 $6.80 $6.35 6.90 $6.88 $6.63 $7.36 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (A)16.23 (4.16) 14.36 11.86 18.05 2.05 10.69 15.06 .69 14.79 NET ASSETS, END OF YEAR (in thousands) $928,995 $781,784 $814,289 $633,135 $504,708 $429,336 $416,103 $362,345 $321,425 $211,524 Ratio of expenses to average net assets (%)(b) 1.05 .83 .77 .97 .91 .80 .80 .76 .78 .73 Ratio of net investment income to average net assets (%) 6.91 7.10 7.71 8.62 9.66 9.87 9.67 9.86 8.72 10.06 Portfolio turnover (%) 169.29 128.82 129.95 146.66 84.39 68.23 96.81 201.15 203.30 201.55 (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the year ended October 31, 1995 includes amounts paid through expense offset arrangements. Prior year ratios exclude these amounts.
OBJECTIVE THE GEORGE PUTNAM FUND OF BOSTON SEEKS TO PROVIDE A BALANCED INVESTMENT COMPOSED OF A WELL-DIVERSIFIED PORTFOLIO OF STOCKS AND BONDS WHICH WILL PRODUCE BOTH CAPITAL GROWTH AND CURRENT INCOME. The fund is not intended to be a complete investment program, and there is no assurance it will achieve its objective. HOW THE FUND PURSUES ITS OBJECTIVE BASIC INVESTMENT STRATEGY IN SEEKING ITS OBJECTIVE, THE FUND MAY INVEST IN ALMOST ANY TYPE OF SECURITY OR NEGOTIABLE INSTRUMENT, INCLUDING CASH OR MONEY MARKET INSTRUMENTS. The fund's portfolio will include some securities selected primarily to provide for capital protection, others selected for dependable income and still others for growth in value. The proportion invested in each type of security is not fixed, although ordinarily no more than 75% of the fund's assets consist of common stocks and that portion of convertible securities attributable to conversion rights. The fund may, however, at times invest more than 75% of its assets in such securities if Putnam Management determines that unusual market or economic conditions make it appropriate to do so. ALTERNATIVE INVESTMENT STRATEGIES At times Putnam Management may judge that conditions in the securities markets make pursuing the fund's basic investment strategy inconsistent with the best interests of its shareholders. At such times Putnam Management may temporarily use alternative strategies primarily designed to reduce fluctuations in the value of fund assets. In implementing these defensive strategies, the fund may concentrate its investments in debt securities, preferred stocks, cash or money market instruments or invest in any other securities Putnam Management considers consistent with such defensive strategies. It is impossible to predict when, or for how long, these alternative strategies will be used . FOREIGN INVESTMENTS THE FUND MAY INVEST UP TO 20% OF ITS ASSETS IN SECURITIES PRINCIPALLY TRADED IN FOREIGN MARKETS. The fund may also purchase Eurodollar certificates of deposit without regard to the 20% limit. Since foreign securities are normally denominated and traded in foreign currencies, the values of the fund's assets may be affected favorably or unfavorably by currency exchange rates and exchange control regulations. There may be less information publicly available about a foreign company than about a U.S. company, and foreign companies are not generally subject to accounting, auditing, and financial reporting standards and practices comparable to those in the United States. The securities of some foreign companies are less liquid and at times more volatile than securities of comparable U.S. companies. Foreign brokerage commissions and other fees are also generally higher than those in the United States. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of fund assets held abroad) and expenses not present in the settlement of domestic investments. In addition, there may be a possibility of nationalization or expropriation of assets, imposition of currency exchange controls, confiscatory taxation, political or financial instability and diplomatic developments that could affect the value of investments in certain foreign countries. Legal remedies available to investors in certain foreign countries may be limited . The laws of some foreign countries may limit investments in securities of certain issuers located in those foreign countries. Special tax considerations apply to foreign securities. The risks described above are typically increased for investments in securities principally traded in, or issued by issuers located in, underdeveloped and developing nations, which are sometimes referred to as "emerging markets." The fund may engage in a variety of foreign currency exchange transactions in connection with its foreign investments , including transactions involving futures contracts, forward contracts and options. For a further discussion of the risks associated with purchasing and selling futures contracts and options, see "Futures and options." The SAI also contains information concerning these transactions. The decision as to whether and to what extent the fund will engage in foreign currency exchange transactions will depend on a number of factors, including prevailing market conditions, the composition of the fund's portfolio and the availability of suitable transactions. Accordingly, there can be no assurance that the fund will engage in foreign currency exchange transactions at any given time or from time to time . A MORE DETAILED EXPLANATION OF FOREIGN INVESTMENTS, AND THE RISKS AND SPECIAL TAX CONSIDERATIONS ASSOCIATED WITH THEM, IS INCLUDED IN THE SAI. PORTFOLIO TURNOVER The length of time the fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by the fund is known as "portfolio turnover." As a result of the fund's investment policies, under certain market conditions its portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover generally involves some expense , including brokerage commissions or dealer markups and other transaction costs on the sale of securities and reinvestment in other securities. These transactions may result in realization of taxable capital gains. Portfolio turnover rates are shown in the section "Financial highlights ." RISK FACTORS INVESTMENTS IN FIXED-INCOME SECURITIES. The fund may invest in both higher-rated and lower-rated fixed-income securities. The values of fixed-income securities fluctuate in response to changes in interest rates. Thus, a decrease in interest rates will generally result in an increase in the value of the fund's fixed-income securities. Conversely, during periods of rising interest rates, the value of the fund's fixed-income securities will generally decline. In addition, the values of such securities are affected by changes in general economic conditions and business conditions affecting the specific industries of their issuers. Changes by recognized rating services in their ratings of any fixed-income security and in the ability of an issuer to make payments of interest and principal may also affect the value of these investments. Changes in the value of portfolio securities generally will not affect income derived from such securities, but will affect the fund's net asset value. The values of lower-rated securities generally fluctuate more than those of higher-rated securities. The fund will invest in securities rated at the time of purchase at least B by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's ("S&P"), or in unrated securities which Putnam Management determines are of comparable quality. Securities rated B are predominantly speculative and have large uncertainties or major risk exposures to adverse conditions. Securities rated lower than Baa by Moody's or BBB by S&P and unrated securities of comparable quality are sometimes referred to as "junk bonds." The rating services' descriptions of securities in the various rating categories, including the speculative characteristics of securities in the lower rating categories, are set forth in the Appendix to this prospectus. The table below shows the percentages of net assets invested during fiscal 1996 in securities assigned to the various rating categories by S&P, or, if unrated by S&P, assigned to comparable rating categories by Moody's, and in unrated securities determined by Putnam Management to be of comparable quality . UNRATED SECURITIES RATED SECURITIES, OF COMPARABLE QUALITY, AS PERCENTAGE OF AS PERCENTAGE OF RATING NET ASSETS NET ASSETS "AAA" 23.65% 0.14% "AA" 1.54% -- "A" 1.88% 0.08% "BBB" 3.55% 0.11% "BB" 2.63% 0.51% "B" 2.38% -- "CCC" 0.08% -- ------ ---- - 35.71% 0.84% == ===== ===== Putnam Management seeks to minimize the risks of investing in lower-rated securities through careful investment analysis. When the fund invests in securities in the lower rating categories, the achievement of its goals is more dependent on Putnam Management's ability than would be the case if it were investing in securities in the higher rating categories. Investors should consider carefully their ability to assume the risks of owning shares of a mutual fund that may invest in securities in the lower rating categories. The fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Putnam Management will consider such reduction in its determination of whether the fund should continue to hold the security in its portfolio. Certain investment grade securities share some of the risk factors discussed above with respect to lower-rated securities. At times, a substantial portion of fund assets may be invested in securities as to which the fund, by itself or together with other funds and accounts managed by Putnam Management and its affiliates, holds all or a major portion. Under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, it may be more difficult to sell these securities when Putnam Management believes it advisable to do so or the fund may be able to sell the securities only at prices lower than if they were more widely held. Under these circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value. In order to enforce its rights in the event of a default of these securities, the fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on the securities. This could increase fund operating expenses and adversely affect its net asset value. Certain securities held by the fund may permit the issuer at its option to "call," or redeem, its securities. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. The fund may invest in so-called "zero-coupon" bonds , which are issued at a significant discount from face value and pay interest only at maturity rather than at intervals during the life of the security. The values of zero-coupon bonds are subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Zero-coupon bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently. The fund is required to accrue and distribute interest income from zero-coupon bonds on a current basis, even though it does not receive that income currently in cash. Thus it may be necessary to sell other investments to obtain cash needed to make income distributions. FOR ADDITIONAL INFORMATION CONCERNING THE RISKS ASSOCIATED WITH INVESTING IN SECURITIES IN THE LOWER RATING CATEGORIES, SEE THE SAI. FUTURES AND OPTIONS THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS. An "index future" is a contract to buy or sell units of a particular stock index at an agreed price on a specified future date. Depending on the change in value of the index between the time the fund enters into and terminates an index future transaction, the fund realizes a gain or loss. In addition to or as an alternative to purchasing or selling index futures, the fund may buy and sell call and put options on index futures or stock indexes. The fund may engage in index futures and options transactions for hedging purposes and for nonhedging purposes, such as to adjust its exposure to relevant markets or as a substitute for direct investment. THE USE OF INDEX FUTURES AND RELATED OPTIONS INVOLVES CERTAIN SPECIAL RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS AND MAY RESULT IN LOSSES. Certain risks arise from the possibility of imperfect correlations among movements in the prices of financial futures and options purchased or sold by the fund, of the underlying stock index or portfolio securities and, in the case of hedging transactions, of the securities that are the subject of the hedge. The successful use of the strategies described above further depends on Putnam Management's ability to forecast market movements correctly. Other risks arise from the potential inability to close out index futures or options positions. There can be no assurance that a liquid secondary market will exist for any index future or option at any particular time. Certain provisions of the Internal Revenue Code and certain regulatory requirements may limit the use of index futures and options transactions. A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, IS INCLUDED IN THE SAI. OTHER INVESTMENT PRACTICES THE FUND MAY ALSO ENGAGE IN THE FOLLOWING INVESTMENT PRACTICES, EACH OF WHICH INVOLVES CERTAIN SPECIAL RISKS. THE SAI CONTAINS MORE DETAILED INFORMATION ABOUT THESE PRACTICES, INCLUDING LIMITATIONS DESIGNED TO REDUCE THESE RISKS. OPTIONS. The fund may seek to increase its current return by writing covered call and put options on securities it owns or in which it may invest. The fund receives a premium from writing a call or put option, which increases the return if the option expires unexercised or is closed out at a net profit. When the fund writes a call option, it gives up the opportunity to profit from any increase in the price of a security above the exercise price of the option; when it writes a put option, it takes the risk that it will be required to purchase a security from the option holder at a price above the current market price of the security. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The fund may also buy and sell put and call options and from time to time, may also buy and sell combinations of put and call options on the same underlying security . The aggregate value of the securities underlying the options may not exceed 25% of fund assets. The use of these strategies may be limited by applicable law. SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS. The fund may lend portfolio securities to broker-dealers and may enter into repurchase agreements without limit . These transactions must be fully collateralized at all times. The fund may also purchase securities for future delivery, which may increase its overall investment exposure and involves a risk of loss if the value of the securities declines prior to the settlement date. These transactions involve some risk to the fund if the other party should default on its obligation and the fund is delayed or prevented from recovering the collateral or completing the transaction. DERIVATIVES Certain of the instruments in which the fund may invest, such as futures contracts, options and forward contracts , are considered to be "derivatives." Derivatives are financial instruments whose value depends upon, or is derived from, the value of an underlying asset, such as a security or an index. Further information about these instruments and the risks involved in their use is included elsewhere in this prospectus and in the SAI. LIMITING INVESTMENT RISK SPECIFIC INVESTMENT RESTRICTIONS HELP TO LIMIT INVESTMENT RISKS FOR THE FUND'S SHAREHOLDERS. These restrictions prohibit the fund from acquiring , with respect to 75% of its total assets, more than 10% of the voting securities of any one issuer.* They also prohibit the fund from investing more than: (a) (with respect to 75% of its total assets) 5% of its total assets in securities of any one issuer other than the U.S. government ;* (b) 5% of its net assets in companies that, together with any predecessor, have been in operation less than three years ; (c) 25% of its total assets in any one industry (other than securities of the U.S. government, its agencies or instrumentalities); * or (d) 15% of its net assets in any combination of securities that are not readily marketable, in securities restricted as to resale (excluding securities determined by the Trustees (or the person designated by the Trustees to make such determinations) to be readily marketable), and in repurchase agreements maturing in more than seven days. Restrictions marked with an asterisk (*) above are summaries of fundamental policies. See the SAI for the full text of these policies and other fundamental policies. Except for investment policies designated as fundamental in this prospectus or the SAI, the investment policies described in this prospectus and in the SAI are not fundamental policies. The Trustees may change any non-fundamental investment policy without shareholder approval. As a matter of policy, the Trustees would not materially change the fund's investment objective without shareholder approval. HOW PERFORMANCE IS SHOWN FUND ADVERTISEMENTS MAY, FROM TIME TO TIME INCLUDE PERFORMANCE INFORMATION . "Yield" for each class of shares is calculated by dividing the annualized net investment income per share during a recent 30-day period by the maximum public offering price per share of the class on the last day of that period. "Total return" for the one-, five- and ten-year periods (or for the life of class A shares of the fund, if shorter) through the most recent calendar quarter represents the average annual compounded rate of return on an investment of $1,000 in the fund invested at the maximum public offering price. Total return may also be presented for other periods or based on investment at reduced sales charge levels. Any quotation of investment performance not reflecting the maximum initial sales charge would be reduced if the sales charge were used. ALL DATA ARE BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DO NOT PREDICT FUTURE PERFORMANCE. Investment performance, which will vary, is based on many factors, including market conditions, portfolio composition , fund operating expenses and which class of shares the investor purchases. Investment performance also often reflects the risks associated with the fund's investment objective and policies. These factors should be considered when comparing the fund's investment results with those of other mutual funds and other investment vehicles. Quotations of investment performance for any period when an expense limitation was in effect will be greater than if the limitation had not been in effect. The fund's performance may be compared to that of various indexes. See the SAI. Because shares sold through eligible defined contribution plans are sold without a sales charge, quotations of investment performance reflecting the deduction of a sales charge will be lower than the actual investment performance of shares purchased through such plans. HOW THE FUND IS MANAGED THE TRUSTEES ARE RESPONSIBLE FOR GENERALLY OVERSEEING THE CONDUCT OF FUND BUSINESS. Subject to such policies as the Trustees may determine, Putnam Management furnishes a continuing investment program for the fund and makes investment decisions on its behalf. Subject to the control of the Trustees, Putnam Management also manages the fund's other affairs and business. The fund pays Putnam Management a quarterly fee for these services based on average net assets. See "Expenses summary" and the SAI. The following officers of Putnam Management have had primary responsibility for the day-to-day management of the fund's portfolio since the years stated below: Business experience Year (at least 5 years) ---- ------------------------- --- Edward P. Bousa Employed as an investment Senior Vice President 1994 professional by Putnam Management since 1992. Prior to October, 1992, Mr. Bousa was Vice President and Portfolio Manager at Fidelity Investments. Kenneth J. Taubes Employed as an investment Senior Vice President 1993 professional by Putnam Management since 1991. Rosemary H. Thomsen Employed as an investment Senior Vice President 1995 professional by Putnam Management since 1986. The fund pays all expenses not assumed by Putnam Management, including Trustees' fees, auditing, legal, custodial, investor servicing and shareholder reporting expenses, and payments under its distribution plans (which are in turn allocated to the relevant class of shares). The fund also reimburses Putnam Management for the compensation and related expenses of certain fund officers and their staff who provide administrative services . The total reimbursement is determined annually by the Trustees. Putnam Management places all orders for purchases and sales of fund securities. In selecting broker-dealers, Putnam Management may consider research and brokerage services furnished to it and its affiliates. Subject to seeking the most favorable price and execution available, Putnam Management may consider sales of fund shares (and, if permitted by law, of the other Putnam funds) as a factor in the selection of broker- dealers. ORGANIZATION AND HISTORY The George Putnam Fund of Boston is a Massachusetts business trust organized on November 1, 1937. A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of State of The Commonwealth of Massachusetts. The fund is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest, $1.00 par value, which may be divided without shareholder approval into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees determine. Only class A shares are offered by this prospectus. The fund also offers other classes of shares with different sales charges and expenses. Because of these different sales charges and expenses, the investment performance of the classes will vary. For more information, including your eligibility to purchase any other class of shares, contact your investment dealer or Putnam Mutual Funds (at 1-800-225-1581). Each share has one vote, with fractional shares voting proportionally. Shares of all classes will vote together as a single class except when otherwise required by law or as determined by the Trustees. Shares are freely transferable, are entitled to dividends as declared by the Trustees, and, if the fund were liquidated, would receive the net assets of the fund. The fund may suspend the sale of shares at any time and may refuse any order to purchase shares. Although the fund is not required to hold annual meetings of its shareholders, shareholders holding at least 10% of the outstanding shares entitled to vote have the right to call a meeting to elect or remove Trustees, or to take other actions as provided in the Agreement and Declaration of Trust. THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of the Putnam funds. Chairman and Director of Putnam Management and Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director, Marsh & McLennan Companies, Inc.; WILLIAM F. POUNDS, VICE CHAIRMAN. Professor of Management, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; JAMESON ADKINS BAXTER, President, Baxter Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American Management Corp.; JOHN A. HILL, Principal and Managing Director, First Reserve Corporation; RONALD J. JACKSON, Former Chairman, President and Chief Executive Officer of Fisher-Price, Inc., Director of Safety 1st, Inc., Trustee of Salem Hospital and Overseer of the Peabody Essex Museum; ELIZABETH T. KENNAN, President Emeritus and Professor, Mount Holyoke College; LAWRENCE J. LASSER,* Vice President of the Putnam funds. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Management. Director, Marsh & McLennan Companies, Inc.; ROBERT E. PATTERSON, Executive Vice President, Cabot Partners Limited Partnership; DONALD S. PERKINS,* Director of various corporations, including Cummins Engine Company, Lucent Technologies, Inc., Spring Industries, Inc. and Time Warner Inc.; GEORGE PUTNAM, III,* President, New Generation Research, Inc.; ELI SHAPIRO, Alfred P. Sloan Professor of Management, Emeritus, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; A.J.C. SMITH,* Chairman, Chief Executive Officer and Director, Marsh & McLennan Companies, Inc.; and W. NICHOLAS THORNDIKE, Director of various corporations and charitable organizations, including Data General Corporation, Bradley Real Estate, Inc. and Providence Journal Co. Also, Trustee of Massachusetts General Hospital and Trustee of Eastern Utilities Associates. The Trustees are also Trustees of the other Putnam funds. Those marked with an asterisk (*) are or may be deemed to be "interested persons" of the fund, Putnam Management or Putnam Mutual Funds. ABOUT YOUR INVESTMENT HOW TO BUY SHARES ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR EMPLOYER'S DEFINED CONTRIBUTION PLAN. FOR MORE INFORMATION ABOUT HOW TO PURCHASE SHARES OF THE FUND THROUGH YOUR EMPLOYER'S PLAN OR LIMITATIONS ON THE AMOUNT THAT MAY BE PURCHASED, PLEASE CONSULT YOUR EMPLOYER. Shares are sold to eligible defined contribution plans at the net asset value per share next determined after receipt of an order by Putnam Mutual Funds. Orders must be received by Putnam Mutual Funds before the close of regular trading on the New York Stock Exchange in order to receive that day's net asset value. In order to be eligible to purchase shares at net asset value, a defined contribution plan must either initially invest at least $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates or, if the dealer of record waives its commission, initially invest at least $1 million in the fund . Defined contribution plans participating in a "multi- fund" program approved by Putnam Mutual Funds may include amounts invested in other mutual funds participating in such program for purposes of determining whether the plan may purchase class A shares at net asset value. Eligible plans may make additional investments of any amount at any time. To eliminate the need for safekeeping, the fund will not issue certificates for your shares. On sales at net asset value to defined contribution plans initially investing at least $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates , Putnam Mutual Funds pays commissions on the initial investment and on subsequent net quarterly sales at the rate of 0.15%. Putnam Mutual Funds will from time to time, at its expense, provide additional promotional incentives or payments to dealers that sell shares of the Putnam funds. These incentives or payments may include payments for travel expenses, including lodging, incurred in connection with trips taken by invited registered representatives and their guests to locations within and outside the United States for meetings or seminars of a business nature. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares. Certain dealers may not sell all classes of shares. DISTRIBUTION PLAN CLASS A DISTRIBUTION PLAN. The class A Plan provides for payments by the fund to Putnam Mutual Funds at the annual rate of up to 0.35% of average net assets attributable to class A shares. The Trustees currently limit payments under the class A plan to the annual rate of 0.25% of such assets. Putnam Mutual Funds makes quarterly payments to qualifying dealers (including, for this purpose, certain financial institutions) to compensate them for services provided in connection with sales of class A shares and the maintenance of shareholder accounts. The payments are based on the average net asset value of class A shares which are attributable to shareholders for whom the dealers are designated as the dealer of record. This calculation excludes until one year after purchase shares purchased at net asset value by shareholders investing $1 million or more. Also excluded until one year after purchase are shares purchased at net asset value by participant-directed qualified retirement plans with at least 200 eligible employees. These shares are not subject to the one-year exclusion provision in cases where certain shareholders who invested $1 million or more have made arrangements with Putnam Mutual Funds and the dealer of record waived the sales commission. Except as stated below, Putnam Mutual Funds makes the quarterly payments at the annual rate of 0.20% of such average net asset value for shares outstanding as of December 31, 1989 and 0.25% of such average net asset value for shares acquired after that date (including shares acquired through reinvestment of distributions). For participant-directed qualified retirement plans initially investing less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates, Putnam Mutual Funds' payments to qualifying dealers on shares purchased at net asset value are 100% of the rate stated above if average plan assets in Putnam funds (excluding money market funds) during the quarter are less than $20 million, 60% of the stated rate if average plan assets are at least $20 million but under $30 million, and 40% of the stated rate if average plan assets are $30 million or more. For all other participant-directed qualified retirement plans purchasing shares at net asset value , Putnam Mutual Funds makes quarterly payments to qualifying dealers at the annual rate of 0.10% of the average net asset value of such shares. Payments under the plans are intended to compensate Putnam Mutual Funds for services provided and expenses incurred by it as principal underwriter of fund shares, including the payments to dealers mentioned above. Putnam Mutual Funds may suspend or modify such payments to dealers. The payments are also subject to the continuation of the distribution plan, the terms of service agreements between dealers and Putnam Mutual Funds, and any applicable limits imposed by the National Association of Securities Dealers, Inc. HOW TO SELL SHARES SUBJECT TO ANY RESTRICTIONS IMPOSED BY YOUR EMPLOYER'S PLAN, YOU CAN SELL YOUR SHARES THROUGH THE PLAN TO THE FUND ANY DAY THE NEW YORK STOCK EXCHANGE IS OPEN. For more information about how to sell shares of the fund through your employer's plan, including any charges that may be imposed by the plan, please consult with your employer. Your plan administrator must send a signed letter of instruction to Putnam Investor Services. The price you will receive is the next net asset value calculated after the fund receives the request in proper form. All requests must be received by the fund prior to the close of regular trading on the New York Stock Exchange in order to receive that day's net asset value. If your plan sells shares having a net asset value of $100,000 or more, signatures of registered owners or their legal representatives must be guaranteed by a bank, broker-dealer or certain other financial institutions. See the SAI for more information about where to obtain a signature guarantee. THE FUND GENERALLY PROVIDES PAYMENT FOR REDEEMED SHARES THE BUSINESS DAY AFTER THE REQUEST IS RECEIVED. Under unusual circumstances, the fund may suspend redemptions or postpone payment for more than seven days, as permitted by federal securities law. The fund will only redeem shares for which it has received payment. HOW TO EXCHANGE SHARES Subject to any restrictions contained in your plan, you can exchange your shares for shares of other Putnam funds available through your plan at net asset value. Contact your plan administrator or Putnam Investor Services for more information on how to exchange your shares or how to obtain prospectuses of other Putnam funds in which you may invest. The exchange privilege is not intended as a vehicle for short- term trading. Excessive exchange activity may interfere with portfolio management and have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where Putnam Management or the Trustees believe doing so would be in the best interests of your fund, the fund reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Consult Putnam Investor Services before requesting an exchange. See the SAI to find out more about the exchange privilege. HOW THE FUND VALUES ITS SHARES THE FUND CALCULATES THE NET ASSET VALUE OF A SHARE OF EACH CLASS BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS LIABILITIES, BY THE NUMBER OF ITS SHARES OUTSTANDING. SHARES ARE VALUED AS OF THE CLOSE OF REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE EACH DAY THE EXCHANGE IS OPEN. Portfolio securities for which market quotations are readily available are stated at market value. Long-term corporate bonds and notes, for which market quotations are not considered readily available, are stated at fair value on the basis of valuations furnished by a pricing service approved by the Trustees which determines valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities, which are generally recognized by institutional traders. Short-term investments that will mature in 60 days or less are stated at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. Securities quoted in foreign currencies are translated into U.S. dollars at current exchange rates or at such other rates as the Trustees may determine in computing net asset value. As a result, fluctuations in the value of such currencies in relation to the U.S. dollar will affect the net asset value of fund shares even though there has not been any change in the values of such securities as quoted in such foreign currencies. HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION The fund distributes net investment income quarterly and any net realized capital gains at least annually. Distributions from capital gains are made after applying any available capital loss carryovers. The terms of your plan will govern how your plan may receive distributions from the fund. Generally, periodic distributions from the fund to your plan are reinvested in additional fund shares, although your plan may permit you to receive fund distributions from net investment income in cash while reinvesting capital gains distributions in additional shares or to receive all fund distributions in cash. If another option is not selected, all distributions will be reinvested in additional fund shares. The fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal taxes on income and gains it distributes to shareholders . The fund will distribute substantially all of its ordinary income and capital gain net income on a current basis. Generally, fund distributions are taxable as ordinary income, except that any distributions of net long-term capital gains will be taxable as such regardless of how long you have held your shares . However, distributions by the fund to employer-sponsored defined contribution plans that qualify for tax-exempt treatment under federal income tax laws will not be taxable. Special tax rules apply to investments through such plans. You should consult your tax adviser to determine the suitability of the fund as an investment through such a plan and the tax treatment of distributions (including distributions of amounts attributable to an investment in the fund) from such a plan. The foregoing is a summary of certain federal income tax consequences of investing in the fund. You should consult your tax adviser to determine the precise effect of an investment in the fund on your particular tax situation (including possible liability for state and local taxes). ABOUT PUTNAM INVESTMENTS, INC. PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937. Putnam Mutual Funds is the principal underwriter of the fund and of other Putnam funds. Putnam Defined Contribution Plans is a division of Putnam Mutual Funds. Putnam Fiduciary Trust Company is the fund's custodian. Putnam Investor Services, a division of Putnam Fiduciary Trust Company, is the fund's investor servicing and transfer agent. Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust Company are located at One Post Office Square, Boston, Massachusetts 02109 and are subsidiaries of Putnam Investments, Inc., which is wholly owned by Marsh & McLennan Companies, Inc., a publicly-owned holding company whose principal businesses are international insurance and reinsurance brokerage, employee benefit consulting and investment management. APPENDIX SECURITIES RATINGS THE FOLLOWING RATING SERVICES DESCRIBE RATED SECURITIES AS FOLLOWS: MOODY'S INVESTORS SERVICE, INC. BONDS Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities. A -- Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa -- Bonds which are rated Baa are considered as medium-grade obligations , (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate , and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa - Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. STANDARD & POOR'S BONDS AAA -- Debt rated 'AAA' has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA -- Debt rated 'AA' has a very strong capacity to pay interest and repay principal and differ from the higher rated issues only in small degree. A -- Debt rated 'A' has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB-B-CCC -- Debt rated 'BB', 'B' and 'CCC' is regarded , on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation . 'BB' indicates the lowest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. BB -- Debt rated `BB' has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The `BB' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied `BBB-' rating. B -- Debt rated `B' has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The `B' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied `BB' or `BB-' rating. CCC -- Debt rated `CCC' has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The `CCC' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied `B' or `B-' rating. THE GEORGE PUTNAM FUND OF BOSTON ONE POST OFFICE SQUARE, BOSTON, MA 02109 CLASS Y SHARES INVESTMENT STRATEGY: GROWTH AND INCOME PROSPECTUS -- NOVEMBER 30, 1996 This prospectus explains concisely what you should know before investing in class Y shares of The George Putnam Fund of Boston (the "fund"). Please read it carefully and keep it for future reference. You can find more detailed information about the fund in the November 30, 1996 statement of additional information (the "SAI"), as amended from time to time. For a free copy of the SAI or for other information, call Putnam Investor Services at 1-800-752-9894. The SAI has been filed with the Securities and Exchange Commission and is incorporated into this prospectus by reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PUTNAMINVESTMENTS PUTNAM DEFINED CONTRIBUTION PLANS ABOUT THE FUND Expenses summary..................................... Financial highlights................................. Objective............................................ How the fund pursues its objective................... Risk factors.................................... How performance is shown............................. How the fund is managed.............................. Organization and history............................. ABOUT YOUR INVESTMENT How to buy shares.................................... How to sell shares................................... How to exchange shares............................... How the fund values its shares....................... How the fund makes distributions to shareholders; tax information.......................................... ABOUT PUTNAM INVESTMENTS, INC............................. APPENDIX Securities ratings........................................ ABOUT THE FUND EXPENSES SUMMARY Expenses are one of several factors to consider when investing . The following table summarizes expenses attributable to class A shares based on the fund's most recent fiscal year. The example shows the cumulative expenses attributable to a hypothetical $1,000 investment in class Y shares over specified periods. ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets) Management fees 0.55% Other expenses 0.34% Total fund operating expenses 0.89% The table is provided to help you understand the expenses of investing in the fund and your share of the operating expenses that the fund incurs. The expenses shown in the table do not reflect the application of credits that reduce certain expenses. The annual management fees shown in the table have been restated to reflect an increase in the management fees payable to Putnam Investment Management, Inc., the fund's investment manager ("Putnam Management"). Actual management fees were 0.36% and total fund operating expenses were 0.70%. EXAMPLE Your investment of $1,000 would incur the following expenses, assuming 5% annual return and redemption at the end of each period: 1 3 5 10 YEAR YEARS YEARS YEARS $9 $28 $49 $110 The example does not represent past or future expense levels. Actual expenses may be greater or less than those shown. Federal regulations require the example to assume a 5% annual return, but actual annual return varies. The example does not reflect any charges or expenses related to your employer's plan. FINANCIAL HIGHLIGHTS The table below presents per share financial information for the life of class Y shares. This information has been derived from the fund's financial statements, which have been audited and reported on by the fund's independent accountants. The "Report of independent accountants" and financial statements included in the fund's annual report to shareholders for the 1996 fiscal year are incorporated by reference into this prospectus. The fund's annual report, which contains additional unaudited performance information, is available without charge upon request.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) APRIL 1, 1994 (COMMENCEMENT OF OPERATIONS) YEAR ENDED JULY TO JULY 31 1996 1995 1994 CLASS Y NET ASSET VALUE, BEGINNING OF PERIOD $14.92 $13.54 $13.21 INVESTMENT OPERATIONS: Net investment income .68 .66 .17 Net realized and unrealized gain on investments 1.50 1.63 .31 TOTAL FROM INVESTMENT OPERATIONS 2.18 2.29 .48 LESS DISTRIBUTIONS FROM: Net investment income (.62) (.59)(.15) Net realized gain on investments (.63) (.32) -- TOTAL DISTRIBUTIONS 1.25 (.91) (.15) NET ASSET VALUE, END OF PERIOD $15.85 $14.92 $13.54 TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(a) 15.09 18.00 3.65(c) NET ASSETS, END OF PERIOD (in thousands) $207,508 $153,597 $71,566 Ratio of expenses to average net assets (%)(b) .70 .66 .25(c) Ratio of net investment income to average net assets (%) 4.33 4.78 1.34(c) Portfolio turnover (%) 119.44 102.57 100.69 (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the year ended July 31, 1996 includes amounts paid through brokerage service and expense offset arrangements. Prior period ratios exclude these amounts. (c) Not annualized.
OBJECTIVE THE GEORGE PUTNAM FUND OF BOSTON SEEKS TO PROVIDE A BALANCED INVESTMENT COMPOSED OF A WELL-DIVERSIFIED PORTFOLIO OF STOCKS AND BONDS WHICH WILL PRODUCE BOTH CAPITAL GROWTH AND CURRENT INCOME. The fund is not intended to be a complete investment program, and there is no assurance it will achieve its objective. HOW THE FUND PURSUES ITS OBJECTIVE BASIC INVESTMENT STRATEGY IN SEEKING ITS OBJECTIVE, THE FUND MAY INVEST IN ALMOST ANY TYPE OF SECURITY OR NEGOTIABLE INSTRUMENT, INCLUDING CASH OR MONEY MARKET INSTRUMENTS. The fund's portfolio will include some securities selected primarily to provide for capital protection, others selected for dependable income and still others for growth in value. The proportion invested in each type of security is not fixed, although ordinarily no more than 75% of the fund's assets consist of common stocks and that portion of convertible securities attributable to conversion rights. The fund may, however, at times invest more than 75% of its assets in such securities if Putnam Management determines that unusual market or economic conditions make it appropriate to do so. ALTERNATIVE INVESTMENT STRATEGIES At times Putnam Management may judge that conditions in the securities markets make pursuing the fund's basic investment strategy inconsistent with the best interests of its shareholders. At such times Putnam Management may temporarily use alternative strategies primarily designed to reduce fluctuations in the value of fund assets. In implementing these defensive strategies, the fund may concentrate its investments in debt securities, preferred stocks, cash or money market instruments or invest in any other securities Putnam Management considers consistent with such defensive strategies. It is impossible to predict when, or for how long, these alternative strategies will be used . FOREIGN INVESTMENTS THE FUND MAY INVEST UP TO 20% OF ITS ASSETS IN SECURITIES PRINCIPALLY TRADED IN FOREIGN MARKETS. The fund may also purchase Eurodollar certificates of deposit without regard to the 20% limit. Since foreign securities are normally denominated and traded in foreign currencies, the values of the fund's assets may be affected favorably or unfavorably by currency exchange rates and exchange control regulations. There may be less information publicly available about a foreign company than about a U.S. company, and foreign companies are not generally subject to accounting, auditing, and financial reporting standards and practices comparable to those in the United States. The securities of some foreign companies are less liquid and at times more volatile than securities of comparable U.S. companies. Foreign brokerage commissions and other fees are also generally higher than those in the United States. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of fund assets held abroad) and expenses not present in the settlement of domestic investments. In addition, there may be a possibility of nationalization or expropriation of assets, imposition of currency exchange controls, confiscatory taxation, political or financial instability and diplomatic developments that could affect the value of investments in certain foreign countries. Legal remedies available to investors in certain foreign countries may be limited . The laws of some foreign countries may limit investments in securities of certain issuers located in those foreign countries. Special tax considerations apply to foreign securities. The risks described above are typically increased for investments in securities principally traded in, or issued by issuers located in, underdeveloped and developing nations, which are sometimes referred to as "emerging markets." The fund may engage in a variety of foreign currency exchange transactions in connection with its foreign investments , including transactions involving futures contracts, forward contracts and options. For a further discussion of the risks associated with purchasing and selling futures contracts and options, see "Futures and options." The SAI also contains information concerning these transactions. The decision as to whether and to what extent the fund will engage in foreign currency exchange transactions will depend on a number of factors, including prevailing market conditions, the composition of the fund's portfolio and the availability of suitable transactions. Accordingly, there can be no assurance that the fund will engage in foreign currency exchange transactions at any given time or from time to time . A MORE DETAILED EXPLANATION OF FOREIGN INVESTMENTS, AND THE RISKS AND SPECIAL TAX CONSIDERATIONS ASSOCIATED WITH THEM, IS INCLUDED IN THE SAI. PORTFOLIO TURNOVER The length of time the fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by the fund is known as "portfolio turnover." As a result of the fund's investment policies, under certain market conditions its portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover generally involves some expense , including brokerage commissions or dealer markups and other transaction costs on the sale of securities and reinvestment in other securities. These transactions may result in realization of taxable capital gains. Portfolio turnover rates are shown in the section "Financial highlights ." RISK FACTORS INVESTMENTS IN FIXED-INCOME SECURITIES. The fund may invest in both higher-rated and lower-rated fixed-income securities. The values of fixed-income securities fluctuate in response to changes in interest rates. Thus, a decrease in interest rates will generally result in an increase in the value of the fund's fixed-income securities. Conversely, during periods of rising interest rates, the value of the fund's fixed-income securities will generally decline. In addition, the values of such securities are affected by changes in general economic conditions and business conditions affecting the specific industries of their issuers. Changes by recognized rating services in their ratings of any fixed-income security and in the ability of an issuer to make payments of interest and principal may also affect the value of these investments. Changes in the value of portfolio securities generally will not affect income derived from such securities, but will affect the fund's net asset value. The values of lower-rated securities generally fluctuate more than those of higher-rated securities. The fund will invest in securities rated at the time of purchase at least B by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's ("S&P"), or in unrated securities which Putnam Management determines are of comparable quality. Securities rated B are predominantly speculative and have large uncertainties or major risk exposures to adverse conditions. Securities rated lower than Baa by Moody's or BBB by S&P and unrated securities of comparable quality are sometimes referred to as "junk bonds." The rating services' descriptions of securities in the various rating categories, including the speculative characteristics of securities in the lower rating categories, are set forth in the Appendix to this prospectus. The table below shows the percentages of net assets invested during fiscal 1996 in securities assigned to the various rating categories by S&P, or, if unrated by S&P, assigned to comparable rating categories by Moody's, and in unrated securities determined by Putnam Management to be of comparable quality . UNRATED SECURITIES RATED SECURITIES, OF COMPARABLE QUALITY, AS PERCENTAGE OF AS PERCENTAGE OF RATING NET ASSETS NET ASSETS "AAA" 23.65% 0.14% "AA" 1.54% -- "A" 1.88% 0.08% "BBB" 3.55% 0.11% "BB" 2.63% 0.51% "B" 2.38% -- "CCC" 0.08% -- ------ ---- - 35.71% 0.84% == ===== ===== Putnam Management seeks to minimize the risks of investing in lower-rated securities through careful investment analysis. When the fund invests in securities in the lower rating categories, the achievement of its goals is more dependent on Putnam Management's ability than would be the case if it were investing in securities in the higher rating categories. Investors should consider carefully their ability to assume the risks of owning shares of a mutual fund that may invest in securities in the lower rating categories. The fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Putnam Management will consider such reduction in its determination of whether the fund should continue to hold the security in its portfolio. Certain investment grade securities share some of the risk factors discussed above with respect to lower-rated securities. At times, a substantial portion of fund assets may be invested in securities as to which the fund, by itself or together with other funds and accounts managed by Putnam Management and its affiliates, holds all or a major portion. Under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, it may be more difficult to sell these securities when Putnam Management believes it advisable to do so or the fund may be able to sell the securities only at prices lower than if they were more widely held. Under these circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value. In order to enforce its rights in the event of a default of these securities, the fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on the securities. This could increase fund operating expenses and adversely affect its net asset value. Certain securities held by the fund may permit the issuer at its option to "call," or redeem, its securities. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. The fund may invest in so-called "zero-coupon" bonds , which are issued at a significant discount from face value and pay interest only at maturity rather than at intervals during the life of the security. The values of zero-coupon bonds are subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Zero-coupon bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently. The fund is required to accrue and distribute interest income from zero-coupon bonds on a current basis, even though it does not receive that income currently in cash. Thus it may be necessary to sell other investments to obtain cash needed to make income distributions. FOR ADDITIONAL INFORMATION CONCERNING THE RISKS ASSOCIATED WITH INVESTING IN SECURITIES IN THE LOWER RATING CATEGORIES, SEE THE SAI. FUTURES AND OPTIONS THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS. An "index future" is a contract to buy or sell units of a particular stock index at an agreed price on a specified future date. Depending on the change in value of the index between the time the fund enters into and terminates an index future transaction, the fund realizes a gain or loss. In addition to or as an alternative to purchasing or selling index futures, the fund may buy and sell call and put options on index futures or stock indexes. The fund may engage in index futures and options transactions for hedging purposes and for nonhedging purposes, such as to adjust its exposure to relevant markets or as a substitute for direct investment. THE USE OF INDEX FUTURES AND RELATED OPTIONS INVOLVES CERTAIN SPECIAL RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS AND MAY RESULT IN LOSSES. Certain risks arise from the possibility of imperfect correlations among movements in the prices of financial futures and options purchased or sold by the fund, of the underlying stock index or portfolio securities and, in the case of hedging transactions, of the securities that are the subject of the hedge. The successful use of the strategies described above further depends on Putnam Management's ability to forecast market movements correctly. Other risks arise from the potential inability to close out index futures or options positions. There can be no assurance that a liquid secondary market will exist for any index future or option at any particular time. Certain provisions of the Internal Revenue Code and certain regulatory requirements may limit the use of index futures and options transactions. A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, IS INCLUDED IN THE SAI. OTHER INVESTMENT PRACTICES THE FUND MAY ALSO ENGAGE IN THE FOLLOWING INVESTMENT PRACTICES, EACH OF WHICH INVOLVES CERTAIN SPECIAL RISKS. THE SAI CONTAINS MORE DETAILED INFORMATION ABOUT THESE PRACTICES, INCLUDING LIMITATIONS DESIGNED TO REDUCE THESE RISKS. OPTIONS. The fund may seek to increase its current return by writing covered call and put options on securities it owns or in which it may invest. The fund receives a premium from writing a call or put option, which increases the return if the option expires unexercised or is closed out at a net profit. When the fund writes a call option, it gives up the opportunity to profit from any increase in the price of a security above the exercise price of the option; when it writes a put option, it takes the risk that it will be required to purchase a security from the option holder at a price above the current market price of the security. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The fund may also buy and sell put and call options and from time to time, may also buy and sell combinations of put and call options on the same underlying security . The aggregate value of the securities underlying the options may not exceed 25% of fund assets. The use of these strategies may be limited by applicable law. SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS. The fund may lend portfolio securities to broker-dealers and may enter into repurchase agreements without limit . These transactions must be fully collateralized at all times. The fund may also purchase securities for future delivery, which may increase its overall investment exposure and involves a risk of loss if the value of the securities declines prior to the settlement date. These transactions involve some risk to the fund if the other party should default on its obligation and the fund is delayed or prevented from recovering the collateral or completing the transaction. DERIVATIVES Certain of the instruments in which the fund may invest, such as futures contracts, options and forward contracts, are considered to be "derivatives." Derivatives are financial instruments whose value depends upon, or is derived from, the value of an underlying asset, such as a security or an index. Further information about these instruments and the risks involved in their use is included elsewhere in this prospectus and in the SAI. LIMITING INVESTMENT RISK SPECIFIC INVESTMENT RESTRICTIONS HELP TO LIMIT INVESTMENT RISKS FOR THE FUND'S SHAREHOLDERS. These restrictions prohibit the fund from acquiring , with respect to 75% of its total assets, more than 10% of the voting securities of any one issuer.* They also prohibit the fund from investing more than: (a) (with respect to 75% of its total assets) 5% of its total assets in securities of any one issuer other than the U.S. government ;* (b) 5% of its net assets in companies that, together with any predecessor, have been in operation less than three years ; (c) 25% of its total assets in any one industry (other than securities of the U.S. government, its agencies or instrumentalities); * or (d) 15% of its net assets in any combination of securities that are not readily marketable, in securities restricted as to resale (excluding securities determined by the Trustees (or the person designated by the Trustees to make such determinations) to be readily marketable), and in repurchase agreements maturing in more than seven days. Restrictions marked with an asterisk (*) above are summaries of fundamental policies. See the SAI for the full text of these policies and other fundamental policies. Except for investment policies designated as fundamental in this prospectus or the SAI, the investment policies described in this prospectus and in the SAI are not fundamental policies. The Trustees may change any non-fundamental investment policy without shareholder approval. As a matter of policy, the Trustees would not materially change the fund's investment objective without shareholder approval. HOW PERFORMANCE IS SHOWN FUND ADVERTISEMENTS MAY, FROM TIME TO TIME INCLUDE PERFORMANCE INFORMATION . "Yield" for each class of shares is calculated by dividing the annualized net investment income per share during a recent 30-day period by the maximum public offering price per share of such class on the last day of that period. "Total return" for the one-, five- and ten-year periods (or for the life of the class Y shares of the fund , if shorter) through the most recent calendar quarter represents the average annual compounded rate of return on an investment of $1,000 in the fund. Total return may also be presented for other periods. ALL DATA ARE BASED ON PAST INVESTMENT RESULTS AND DO NOT PREDICT FUTURE PERFORMANCE. Investment performance, which will vary, is based on many factors, including market conditions, portfolio composition , fund operating expenses and which class of shares the investor purchases. Investment performance also often reflects the risks associated with the fund's investment objective and policies. These factors should be considered when comparing the fund's investment results with those of other mutual funds and other investment vehicles. Quotations of investment performance for any period when an expense limitation was in effect will be greater than if the limitation had not been in effect. Fund performance may be compared to that of various indexes. See the SAI. HOW THE FUND IS MANAGED THE TRUSTEES ARE RESPONSIBLE FOR GENERALLY OVERSEEING THE CONDUCT OF FUND BUSINESS. Subject to such policies as the Trustees may determine, Putnam Management furnishes a continuing investment program for the fund and makes investment decisions on its behalf. Subject to the control of the Trustees, Putnam Management also manages the fund's other affairs and business. The fund pays Putnam Management a quarterly fee for these services based on average net assets. See "Expenses summary" and the SAI. The following officers of Putnam Management have had primary responsibility for the day-to-day management of the fund's portfolio since the years stated below: Business experience Year (at least 5 years) ---- ------------------------- --- Edward P. Bousa Employed as an investment Senior Vice President 1994 professional by Putnam Management since 1992. Prior to October, 1992, Mr. Bousa was Vice President and Portfolio Manager at Fidelity Investments. Kenneth J. Taubes Employed as an investment Senior Vice President 1993 professional by Putnam Management since 1991. Rosemary H. Thomsen Employed as an investment Senior Vice President 1995 professional by Putnam Management since 1986. The fund pays all expenses not assumed by Putnam Management, including Trustees' fees, auditing, legal, custodial, investor servicing and shareholder reporting expenses, and payments under its distribution plans (which are in turn allocated to the relevant class of shares). The fund also reimburses Putnam Management for the compensation and related expenses of certain fund officers and their staff who provide administrative services . The total reimbursement is determined annually by the Trustees. Putnam Management places all orders for purchases and sales of fund securities. In selecting broker-dealers, Putnam Management may consider research and brokerage services furnished to it and its affiliates. Subject to seeking the most favorable price and execution available, Putnam Management may consider sales of fund shares (and, if permitted by law, of the other Putnam funds) as a factor in the selection of broker- dealers. ORGANIZATION AND HISTORY The George Putnam Fund of Boston is a Massachusetts business trust organized on November 1, 1937. A copy of the Agreement and Declaration of Trust, which is governed by Massachusetts law, is on file with the Secretary of State of The Commonwealth of Massachusetts. The fund is an open-end, diversified management investment company with an unlimited number of authorized shares of beneficial interest, $1.00 par value, which may be divided without shareholder approval into two or more classes of shares having such preferences and special or relative rights and privileges as the Trustees determine. Only class Y shares are offered by this prospectus. The fund also offers other classes of shares with different sales charges and expenses. Because of these different sales charges and expenses, the investment performance of the classes will vary. For more information, including your eligibility to purchase any other class of shares, contact your investment dealer or Putnam Mutual Funds (at 1-800-225-1581). Each share has one vote, with fractional shares voting proportionally. Shares of all classes will vote together as a single class except when otherwise required by law or as determined by the Trustees. Shares are freely transferable, are entitled to dividends as declared by the Trustees, and, if the fund were liquidated, would receive the net assets of the fund. The fund may suspend the sale of shares at any time and may refuse any order to purchase shares. Although the fund is not required to hold annual meetings of its shareholders, shareholders holding at least 10% of the outstanding shares entitled to vote have the right to call a meeting to elect or remove Trustees, or to take other actions as provided in the Agreement and Declaration of Trust. THE FUND'S TRUSTEES: GEORGE PUTNAM,* CHAIRMAN. President of the Putnam funds. Chairman and Director of Putnam Management and Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director, Marsh & McLennan Companies, Inc.; WILLIAM F. POUNDS, VICE CHAIRMAN. Professor of Management, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; JAMESON ADKINS BAXTER, President, Baxter Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American Management Corp.; JOHN A. HILL, Principal and Managing Director, First Reserve Corporation; RONALD J. JACKSON, Former Chairman, President and Chief Executive Officer of Fisher-Price, Inc., Director of Safety 1st, Inc., Trustee of Salem Hospital and Overseer of the Peabody Essex Museum; ELIZABETH T. KENNAN, President Emeritus and Professor, Mount Holyoke College; LAWRENCE J. LASSER,* Vice President of the Putnam funds. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Management. Director, Marsh & McLennan Companies, Inc.; ROBERT E. PATTERSON, Executive Vice President, Cabot Partners Limited Partnership; DONALD S. PERKINS,* Director of various corporations, including Cummins Engine Company, Lucent Technologies, Inc., Spring Industries, Inc. and Time Warner Inc.; GEORGE PUTNAM, III,* President, New Generation Research, Inc.; ELI SHAPIRO, Alfred P. Sloan Professor of Management, Emeritus, Alfred P. Sloan School of Management, Massachusetts Institute of Technology; A.J.C. SMITH,* Chairman, Chief Executive Officer and Director, Marsh & McLennan Companies, Inc.; and W. NICHOLAS THORNDIKE, Director of various corporations and charitable organizations, including Data General Corporation, Bradley Real Estate, Inc. and Providence Journal Co. Also, Trustee of Massachusetts General Hospital and Trustee of Eastern Utilities Associates. The Trustees are also Trustees of the other Putnam funds. Those marked with an asterisk (*) are or may be deemed to be "interested persons" of the fund, Putnam Management or Putnam Mutual Funds. ABOUT YOUR INVESTMENT HOW TO BUY SHARES ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR EMPLOYER'S DEFINED CONTRIBUTION PLAN. FOR MORE INFORMATION ABOUT HOW TO PURCHASE SHARES OF THE FUND THROUGH YOUR EMPLOYER'S PLAN OR LIMITATIONS ON THE AMOUNT THAT MAY BE PURCHASED, PLEASE CONSULT YOUR EMPLOYER. Shares are sold to eligible defined contribution plans at the net asset value per share next determined after receipt of an order by Putnam Mutual Funds. Orders must be received by Putnam Mutual Funds before the close of regular trading on the New York Stock Exchange in order to receive that day's net asset value. Class Y shares are available to defined contribution plans whose investment in Putnam funds and other assets managed by Putnam Management or its affiliates, combined with such investments by the plan's sponsor and the sponsor's other employee benefit plans, equals at least $250 million. Defined contribution plans that elect to buy class Y shares upon attaining eligibility will receive class Y shares in place of any class A shares then owned. Class Y shares are also available to defined contribution plans whose sponsor confirms a good faith expectation that investments in Putnam-managed assets by the sponsor and its employee benefit plans will attain $250 million (using the higher of purchase price or current market value) within one year of the initial purchase of class Y shares, and agrees that class Y shares may be redeemed and class A shares purchased if that level is not attained. To eliminate the need for safekeeping, the fund will not issue certificates for your shares. Putnam Mutual Funds will from time to time, at its expense, provide promotional incentives or payments to dealers that sell shares of the Putnam funds. These incentives or payments may include payments for travel expenses, including lodging, incurred in connection with trips taken by invited registered representatives and their guests to locations within and outside the United States for meetings or seminars of a business nature. In some instances, these incentives or payments may be offered only to certain dealers who have sold or may sell significant amounts of shares. Certain dealers may not sell all classes of shares. HOW TO SELL SHARES SUBJECT TO ANY RESTRICTIONS IMPOSED BY YOUR EMPLOYER'S PLAN, YOU CAN SELL YOUR SHARES THROUGH THE PLAN TO THE FUND ANY DAY THE NEW YORK STOCK EXCHANGE IS OPEN. For more information about how to sell shares of the fund through your employer's plan, including any charges that may be imposed by the plan, please consult your employer. Your plan administrator must send a signed letter of instruction to Putnam Investor Services. The price you will receive is the next net asset value calculated after the fund receives the request in proper form. All requests must be received by the fund prior to the close of regular trading on the New York Stock Exchange in order to receive that day's net asset value. If you sell shares having a net asset value of $100,000 or more, signatures of registered owners or their legal representatives must be guaranteed by a bank, broker-dealer or certain other financial institutions. See the SAI for more information about where to obtain a signature guarantee. THE FUND GENERALLY PROVIDES PAYMENT FOR REDEEMED SHARES THE BUSINESS DAY AFTER THE REQUEST IS RECEIVED. Under unusual circumstances, the fund may suspend redemptions or postpone payment for more than seven days, as permitted by federal securities law. The fund will only redeem shares for which it has received payment. HOW TO EXCHANGE SHARES Subject to any restrictions contained in your plan, you can exchange your shares for shares of other Putnam funds available through your plan at net asset value. Contact your plan administrator or Putnam Investor Services for more information on how to exchange your shares or how to obtain prospectuses of other Putnam funds in which you may invest. The exchange privilege is not intended as a vehicle for short- term trading. Excessive exchange activity may interfere with portfolio management and have an adverse effect on all shareholders. In order to limit excessive exchange activity and in other circumstances where Putnam Management or the Trustees believe doing so would be in the best interests of your fund, the fund reserves the right to revise or terminate the exchange privilege, limit the amount or number of exchanges or reject any exchange. Consult Putnam Investor Services before requesting an exchange. See the SAI to find out more about the exchange privilege. HOW THE FUND VALUES ITS SHARES THE FUND CALCULATES THE NET ASSET VALUE OF A SHARE OF EACH CLASS BY DIVIDING THE TOTAL VALUE OF ITS ASSETS, LESS LIABILITIES, BY THE NUMBER OF ITS SHARES OUTSTANDING. SHARES ARE VALUED AS OF THE CLOSE OF REGULAR TRADING ON THE NEW YORK STOCK EXCHANGE EACH DAY THE EXCHANGE IS OPEN. Portfolio securities for which market quotations are readily available are stated at market value. Long-term corporate bonds and notes, for which market quotations are not considered readily available, are stated at fair value on the basis of valuations furnished by a pricing service approved by the Trustees which determines valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities, which are generally recognized by institutional traders. Short-term investments that will mature in 60 days or less are stated at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. Securities quoted in foreign currencies are translated into U.S. dollars at current exchange rates or at such other rates as the Trustees may determine in computing net asset value. As a result, fluctuations in the value of such currencies in relation to the U.S. dollar will affect the net asset value of fund shares even though there has not been any change in the values of such securities as quoted in such foreign currencies. HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION The fund distributes net investment income quarterly and any net realized capital gains at least annually. Distributions from capital gains are made after applying any available capital loss carryovers. The terms of your plan will govern how your plan may receive distributions from the fund. Generally, periodic distributions from the fund to your plan are reinvested in additional fund shares, although your plan may permit you to receive fund distributions from net investment income in cash while reinvesting capital gains distributions in additional shares or to receive all fund distributions in cash. If another option is not selected, all distributions will be reinvested in additional fund shares. The fund intends to qualify as a "regulated investment company" for federal income tax purposes and to meet all other requirements necessary for it to be relieved of federal taxes on income and gains it distributes. The fund will distribute substantially all of its ordinary income and capital gain net income on a current basis. Generally, fund distributions are taxable as ordinary income, except that any distributions of net long-term capital gains will be taxed as such. However, distributions by the fund to employer-sponsored defined contribution plans that qualify for tax-exempt treatment under federal income tax laws will not be taxable. Special tax rules apply to investments through such plans. You should consult your tax adviser to determine the suitability of the fund as an investment through such a plan and the tax treatment of distributions (including distributions of amounts attributable to an investment in the fund) from such a plan. The foregoing is a summary of certain federal income tax consequences of investing in the fund. You should consult your tax adviser to determine the precise effect of an investment in the fund on your particular tax situation (including possible liability for state and local taxes). ABOUT PUTNAM INVESTMENTS, INC. PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937. Putnam Mutual Funds is the principal underwriter of the fund and of other Putnam funds. Putnam Defined Contribution Plans is a division of Putnam Mutual Funds. Putnam Fiduciary Trust Company is the fund's custodian. Putnam Investor Services, a division of Putnam Fiduciary Trust Company, is the fund's investor servicing and transfer agent. Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust Company are located at One Post Office Square, Boston, Massachusetts 02109 and are subsidiaries of Putnam Investments, Inc., which is wholly owned by Marsh & McLennan Companies, Inc., a publicly-owned holding company whose principal businesses are international insurance and reinsurance brokerage, employee benefit consulting and investment management. APPENDIX SECURITIES RATINGS THE FOLLOWING RATING SERVICES DESCRIBE RATED SECURITIES AS FOLLOWS: MOODY'S INVESTORS SERVICE, INC. BONDS Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities. A -- Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa -- Bonds which are rated Baa are considered as medium-grade obligations , (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate , and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa - Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. STANDARD & POOR'S BONDS AAA -- Debt rated 'AAA' has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA -- Debt rated 'AA' has a very strong capacity to pay interest and repay principal and differ from the higher rated issues only in small degree. A -- Debt rated 'A' has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB -- Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB-B-CCC -- Debt rated 'BB', 'B' and 'CCC' is regarded , on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation . 'BB' indicates the lowest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. BB -- Debt rated `BB' has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The `BB' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied `BBB-' rating. B -- Debt rated `B' has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The `B' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied `BB' or `BB-' rating. CCC -- Debt rated `CCC' has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The `CCC' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied `B' or `B-' rating. THE GEORGE PUTNAM FUND OF BOSTON FORM N-1A PART B STATEMENT OF ADDITIONAL INFORMATION ("SAI") NOVEMBER 30, 1996 This SAI is not a prospectus and is only authorized for distribution when accompanied or preceded by the prospectus of the fund dated November 30, 1996 , as revised from time to time. This SAI contains information which may be useful to investors but which is not included in the prospectus. If the fund has more than one form of current prospectus, each reference to the prospectus in this SAI shall include all of the fund's prospectuses, unless otherwise noted. The SAI should be read together with the applicable prospectus. Investors may obtain a free copy of the applicable prospectus from Putnam Investor Services, Mailing address: P.O. Box 41203, Providence, RI 02940- 1203. Part I of this SAI contains specific information about the fund. Part II includes information about the fund and the other Putnam funds. TABLE OF CONTENTS PART I PAGE INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . .I-3 CHARGES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . .I-5 INVESTMENT PERFORMANCE. . . . . . . . . . . . . . . . . . . . I-10 ADDITIONAL OFFICERS . . . . . . . . . . . . . . . . . . . . . I-11 INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS. . . . . . . I-11 PART II MISCELLANEOUS INVESTMENT PRACTICES. . . . . . . . . . . . . . II-1 TAXES . . . . . . . . . . . . . . . . . . . . . . . . II- 25 MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . II- 30 DETERMINATION OF NET ASSET VALUE. . . . . . . . . . . II- 40 HOW TO BUY SHARES . . . . . . . . . . . . . . . . . . II- 42 DISTRIBUTION PLANS. . . . . . . . . . . . . . . . . . II- 54 INVESTOR SERVICES . . . . . . . . . . . . . . . . . . II- 55 SIGNATURE GUARANTEES. . . . . . . . . . . . . . . . . II- 60 SUSPENSION OF REDEMPTIONS . . . . . . . . . . . . . . II- 61 SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . II- 61 STANDARD PERFORMANCE MEASURES . . . . . . . . . . . . II- 61 COMPARISON OF PORTFOLIO PERFORMANCE . . . . . . . . . II- 63 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . II- 67 SAI PART I INVESTMENT RESTRICTIONS AS FUNDAMENTAL INVESTMENT RESTRICTIONS, WHICH MAY NOT BE CHANGED WITHOUT A VOTE OF A MAJORITY OF THE OUTSTANDING VOTING SECURITIES, THE FUND MAY NOT AND WILL NOT: (1) With respect to 75% of its total assets, invest in the securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities. (2) With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer. (3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate , securities which are secured by interests in real estate, and securities which represent interests in real estate, and it may acquire and dispose of real estate or interests in real estate acquired through the exercise of its rights as a holder of debt obligations secured by real estate or interests therein. (4) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities) if, as a result of such purchase, more than 25% of the fund's total assets would be invested in any one industry. (5) Invest in commodities or commodity contracts except that it may purchase or sell financial futures contracts and options thereon. (6) Act as an underwriter except to the extent that, in connection with the disposition of its portfolio securities, it may be deemed to be an underwriter under certain federal securities laws. (7) Borrow money in excess of 10% of the value (taken at the lower of cost or current value) of its total assets (not including the amount borrowed) at the time the borrowing is made, and then only from banks as a temporary measure to facilitate the meeting of redemption requests (not for leverage) which might otherwise require the untimely disposition of portfolio investments or for extraordinary or emergency purposes. Such borrowings will be repaid before any additional investments are purchased. (8) Make loans, except by purchase of debt obligations in which the fund may invest consistent with its investment policies, by entering into repurchase agreements , or by lending its portfolio securities . (9) Purchase any security the disposition of which is restricted under federal securities laws if as a result more than 15% of the fund's net assets, taken at current value, would be invested in such securities, excluding restricted securities that have been determined by the Trustees of the fund (or the person designated by them to make such determinations) to be readily marketable. Investment restrictions 1- 9 are fundamental policies of the fund and cannot be changed without a "vote of a majority of the outstanding voting securities" of the fund. The Trustees may not deal with the fund as principal in the purchase or sale of securities, or borrow money or property from the fund. Although certain of the fund's fundamental investment restrictions permit it to borrow money to a limited extent, the fund does not currently intend to do so and did not do so last year. The Investment Company Act of 1940 provides that a "vote of a majority of the outstanding voting securities" of the fund means the affirmative vote of the lesser of (l) more than 50% of the outstanding fund shares, or (2) 67% or more of the shares present at a meeting if more than 50% of the outstanding fund shares are represented at the meeting in person or by proxy. IT IS CONTRARY TO THE FUND'S PRESENT POLICY, WHICH MAY BE CHANGED WITHOUT SHAREHOLDER APPROVAL, TO: (1) Invest for the purpose of exercising control or management. (2) Buy or sell oil, gas, or other mineral leases, rights or royalty contracts. (3) Engage in puts, calls, straddles, spreads or any combination thereof, except that the fund may buy and sell put and call options (and any combination thereof) on securities, on financial futures contracts, and on securities indices. (4) Invest in the securities of any other registered open-end investment companies, except as they may be acquired as part of a merger or consolidation or acquisition of assets or by purchases in the open market involving only customary brokers' commissions. (5) Invest in (a) securities which are not readily marketable, (b) securities restricted as to resale (excluding securities determined by the Trustees of the fund (or the person designated by the Trustees of the fund to make such determinations) to be readily marketable, and (c) repurchase agreements maturing in more than seven days, if, as a result, more than 15% of the fund's net assets (taken at current value) would be invested in securities described in (a), (b) and (c) above. (6) Invest in warrants if, as a result, such investments (valued at the lower cost or market) would exceed 5% of the value of the fund's net assets; provided that not more than 2% of the fund's net assets may be invested in warrants not listed on the New York or American Stock Exchanges. (7) Invest in securities of an issuer which, together with any predecessors, controlling persons, general partners and guarantors, have a record of less than three years' continuous business operation or relevant business experience, if, as a result, the aggregate of such investments would exceed 5% of the value of the fund's net assets; provided, however, that this restriction shall not apply to any obligations of the U.S. government or its instrumentalities or agencies. (8) Invest in securities of any issuer, if, to the knowledge of the fund, officers and Trustees of the fund and officers and directors of Putnam Management who beneficially own more than 0.5% of the securities of that issuer together own more than 5% of such securities. (9) Purchase securities on margin, except such short-term credits as may be necessary for the clearance of purchases and sales of securities, and except that it may make margin payments in connection with financial futures contracts or options. (10) Pledge, hypothecate, mortgage or otherwise encumber its assets in excess of 33 1/3% of its total assets (taken at cost) in connection with permitted borrowings. (11) Make short sales of securities or maintain a short position for the account of the fund unless at all times when a short position is open it owns an equal amount of such securities or owns securities which, without payment of any further consideration, are convertible into or exchangeable for securities of the same issue as, and in equal amount to, the securities sold short. All percentage limitations on investments (other than pursuant to non-fundamental restriction (5)) will apply at the time of the making of an investment and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment. CHARGES AND EXPENSES MANAGEMENT FEES Under a Management Contract dated July 11, 1996 , the fund pays a quarterly fee to Putnam Management based on the average net assets of the fund, as determined at the close of each business day during the quarter, at the annual rate of 0.65% of the first $500 million of average net assets, 0.55% of the next $500 million, 0.50% of the next $500 million, 0.45% of the next $5 billion, 0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.39% of the next $5 billion and 0.38% thereafter. For the past three fiscal years, pursuant to a management contract in effect prior to July 11, 1996, under which the management fees payable to Putnam Management were paid at an annual rate of 0.60% of the first $100 million of average net assets, 0.50% of the next $100 million, 0.40% of the next $300 million, 0.325% of the next $500 million and 0.30% of any amount over $1 billion , the fund incurred the following fees: FISCAL MANAGEMENT YEAR FEE PAID ------ ---------- 1996 $6,565,587 1995 $4,618,445 1994 $3,839,981 BROKERAGE COMMISSIONS The following table shows brokerage commissions paid during the fiscal periods indicated. FISCAL BROKERAGE YEAR COMMISSIONS ------ ------------ 1996 $2,022,218 1995 $1,526,541 1994 $1,834,341 The following table shows transactions placed with brokers and dealers during the most recent fiscal year to recognize research, statistical and quotation services Putnam Management considered to be particularly useful to it and its affiliates : DOLLAR VALUE PERCENT OF OF THESE TOTAL AMOUNT OF TRANSACTIONS TRANSACTIONS COMMISSIONS ------------ ------------ ----------- $799,179,042 46.80% $1,049,800 ADMINISTRATIVE EXPENSE REIMBURSEMENT The fund reimbursed Putnam Management in the following amount for administrative services during fiscal 1995, including the following amount for compensation of certain officers of the fund and contributions to the Putnam Investments, Inc. Profit Sharing Retirement Plan for their benefit: PORTION OF TOTAL REIMBURSEMENT FOR COMPENSATION TOTAL AND REIMBURSEMENT CONTRIBUTIONS ------------- ---------------- $25,297 $22,255 TRUSTEE FEES Each Trustee receives a fee for his or her services. Each Trustee also receives fees for serving as Trustee of other Putnam funds. The Trustees periodically review their fees to assure that such fees continue to be appropriate in light of their responsibilities as well as in relation to fees paid to trustees of other mutual fund complexes. The Trustees meet monthly over a two-day period, except in August. The Compensation Committee, which consists solely of Trustees not affiliated with Putnam Management and is responsible for recommending Trustee compensation, estimates that Committee and Trustee meeting time together with the appropriate preparation requires the equivalent of at least three business days per Trustee meeting. The following table shows the year each Trustee was first elected a Trustee of the Putnam funds, the fees paid to each Trustee by the fund for fiscal 1996 and the fees paid to each Trustee by all of the Putnam funds during calendar year 1995 : COMPENSATION TABLE Total Aggregate compensation compensation from all Trustees from the fund (1) Putnam funds (2) - ---------------------------------------------------------------- Jameson A. Baxter/1994 (3) $2,899 $150,854 Hans H. Estin/1972 2,884 150,854 John A. Hill/1985 (3) 2,865 149,854 Ronald J. Jackson/1996(3)(4) 494 N/A Elizabeth T. Kennan/1992 2,884 148,854 Lawrence J. Lasser/1992 2,858 150,854 Robert E. Patterson/1984 3,043 152,854 Donald S. Perkins/1982 2,868 150,854 William F. Pounds/1971 2,883 (5) 149,854 George Putnam/1957 2,884 150,854 George Putnam, III/1984 2,884 150,854 Eli Shapiro/1995 (6) 3,059 95,372 A.J.C. Smith/1986 2,858 149,854 W. Nicholas Thorndike/1992 3,027 152,854 (1) Includes an annual retainer and an attendance fee for each meeting attended. (2) As of December 31, 1995, there were 99 funds in the Putnam family. (3 ) Includes compensation deferred during the fiscal year pursuant to a Trustee Compensation Deferral Plan. The total amounts of deferred compensation payable to Ms. Baxter, Mr. Hill and Mr. Jackson by the fund as of July 31, 1996 were $1,798, $3,210 and $449, respectively, including income earned on such amounts. (4) Elected as a Trustee in May 1996. (5) Includes additional compensation for service as Vice Chairman of the Putnam Funds. (6) Elected as a Trustee in April 1995. The Trustees have approved Retirement Guidelines for Trustees of the Putnam funds. These Guidelines provide generally that a Trustee who retires after reaching age 72 and who has at least 10 years of continuous service will be eligible to receive a retirement benefit from each Putnam fund for which he or she served as a Trustee. The amount and form of such benefit is subject to determination annually by the Trustees and, unless otherwise determined by the Trustees, will be an annual cash benefit payable for life equal to one-half of the Trustee retainer fees paid by each fund at the time of retirement. Several retired Trustees are currently receiving benefits pursuant to the Guidelines and it is anticipated that the current Trustees will receive similar benefits upon their retirement. A Trustee who retired in calendar 1995 and was eligible to receive benefits under these Guidelines would have received an annual benefit of $66,749 , based upon the aggregate retainer fees paid by the Putnam funds for such year. The Trustees reserve the right to amend or terminate such Guidelines and the related payments at any time, and may modify or waive the foregoing eligibility requirements when deemed appropriate. For additional information concerning the Trustees, see "Management" in Part II of this SAI. SHARE OWNERSHIP At August 31, 1996 the officers and Trustees of the fund as a group owned less than 1% of the outstanding shares of each class of the fund , and, except as noted below, to the knowledge of the fund no person owned of record or beneficially 5% or more of the shares of any class of shares of the fund. SHAREHOLDER NAME PERCENTAGE CLASS AND ADDRESS* OWNED ----- ---------------------- -------- Y Borg-Warner Automotive Inc. 32.55% Retirement Savings Plan Y Borg-Warner Automotive Diversified 6.76% Transmission Products Corporatation, Muncie Plan, Local 287 Retirement Investment Plan Y Borg-Warner Security Corporation 6.21% Investment Plan Y State of Michigan Civil Service 7.65% Deferred Compensation IRC 457 Plan Y Hanford Operations and Engineering 13.27% Investment Plan Y The Thomson Holdings Inc. Savings Plan 6.43% Y Thomson Professional Publishing Inc., 5.55% Employees Savings Plan * The address for the names listed is: c/o Putnam Fiduciary Trust Company, as trustee or agent, 859 Willard Street, Quincy, MA 02269. DISTRIBUTION FEES During fiscal 1996 , the fund paid the following 12b-1 fees to Putnam Mutual Funds: CLASS A CLASS B CLASS M ------- ------- ------- $3,200,297 $3,215,925 $186,245 CLASS A SALES CHARGES AND CONTINGENT DEFERRED SALES CHARGES Putnam Mutual Funds received sales charges with respect to class A shares in the following amounts during the periods indicated: SALES CHARGES RETAINED BY PUTNAM CONTINGENT TOTAL MUTUAL FUNDS DEFERRED FRONT-END AFTER SALES FISCAL YEAR SALES CHARGES DEALER CONCESSIONS CHARGES - ----------- ------------- ------------------ -------- 1996 $5,699,180 $973,355 $12,744 1995 $1,830,724 $299,871 $6,203 1994 $2,491,065 $313,559 $7,258 CLASS B CONTINGENT DEFERRED SALES CHARGES Putnam Mutual Funds received contingent deferred sales charges upon redemptions of class B shares in the following amounts during the periods indicated: CONTINGENT DEFERRED FISCAL YEAR SALES CHARGES - ----------- ------------------- 1996 $381,376 1995 $388,691 1994 $190,181 CLASS M SALES CHARGES Putnam Mutual Funds received sales charges with respect to class M shares in the following amounts during the periods indicated : SALES CHARGES RETAINED BY PUTNAM MUTUAL FUNDS TOTAL AFTER FISCAL YEAR SALES CHARGES DEALER CONCESSIONS - ----------- ------------- ------- ----------- 1996 $228,886 $40,833 1995 $63,251 $9,902 INVESTOR SERVICING AND CUSTODY FEES AND EXPENSES During the 1996 fiscal year, the fund incurred $5,219,713 in fees and out-of-pocket expenses for investor servicing and custody services provided by Putnam Fiduciary Trust Company. INVESTMENT PERFORMANCE STANDARD PERFORMANCE MEASURES (for periods ended July 31, 1995) Class A Class B Class M Class Y Inception date: 11/5/37 4/27/92 12/1/94 4/1/94 ANNUALIZED TOTAL RETURN - ----------------------------------------------------------------- 1 year 8.15% 8.90% 10.24% 15.09% 5 years 10.23 -- -- -- 10 years 10.71 -- -- -- Life of class -- 10.43 17.39 15.73 YIELD 30-day Yield 4.08% 3.58% 3.67% 4.56% Data represent past performance and are not indicative of future results. Total return and yield for class A and class M shares reflect the deduction of the maximum sales charge of 5.75% and 3.50%, respectively. Total return for class B shares reflects the deduction of the applicable contingent deferred sales charge ("CDSC") . The maximum class B CDSC is 5.0%. See "Standard performance measures" in Part II of this SAI for information on how performance is calculated. Past performance is no guarantee of future results. ADDITIONAL OFFICERS In addition to the persons listed as fund officers in Part II of this SAI, each of the following persons is also a Vice President of the fund and certain of the other Putnam funds , the total number of which is noted parenthetically . Officers of Putnam Management hold the same offices in Putnam Management's parent company, Putnam Investments, Inc. OFFICER NAME (AGE) (NUMBER OF FUNDS) PETER CARMAN (AGE 55) (40 FUNDS) . Senior Managing Director of Putnam Management. Prior to August, 1993, Mr. Carman was Chief Investment Officer, Chairman of the U.S. Equity Investment Policy Committee and a Director of Sanford C. Bernstein & Company, Inc. BRETT C. BROWCHUK (AGE 33) (48 FUNDS). Managing Director of Putnam Management. Prior to April, 1994, Mr. Browchuk was Managing Director at Fidelity Investments. THOMAS V. REILLY (AGE 49) (15 FUNDS). Managing Director of Putnam Management. EDWARD P. BOUSA (AGE 37) (3 FUNDS) . Senior Vice President of Putnam Management. Prior to October, 1992, Mr. Bousa was Vice President and Portfolio Manager at Fidelity Investments. KENNETH J. TAUBES (AGE 38) (7 FUNDS) . Senior Vice President of Putnam Management. Senior Vice President of Putnam Fiduciary Trust Company. ROSEMARY H. THOMSEN (AGE 35) (8 FUNDS) . Senior Vice President of Putnam Management. Senior Vice President of Putnam Fiduciary Trust Company . INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, are the fund's independent accountants, providing audit services, tax return review and other tax consulting services and assistance and consultation in connection with the review of various Securities and Exchange Commission filings. The Report of Independent Accountants, financial highlights and financial statements included in the fund's Annual Report for the fiscal year ended July 31, 1996 , filed electronically on September 26, 1996 (File No. 811-58), are incorporated by reference into this SAI. The financial highlights included in the prospectus and incorporated by reference into this SAI and the financial statements incorporated by reference into the prospectus and this SAI have been so included and incorporated in reliance upon the report of the independent accountants, given on their authority as experts in auditing and accounting. TABLE OF CONTENTS MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-25 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-30 DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-40 HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-42 DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .II-54 INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-55 SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-60 SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-61 SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-61 STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-61 COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-63 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-67 THE PUTNAM FUNDS STATEMENT OF ADDITIONAL INFORMATION ("SAI") PART II The following information applies generally to your fund and to the other Putnam funds. In certain cases the discussion applies to some but not all of the funds or their shareholders, and you should refer to your prospectus to determine whether the matter is applicable to you or your fund. You will also be referred to Part I for certain information applicable to your particular fund. Shareholders who purchase shares at net asset value through employer-sponsored defined contribution plans should also consult their employer for information about the extent to which the matters described below apply to them. MISCELLANEOUS INVESTMENT PRACTICES YOUR FUND'S PROSPECTUS STATES WHICH OF THE FOLLOWING INVESTMENT PRACTICES ARE AVAILABLE TO YOUR FUND. THE FACT THAT YOUR FUND IS AUTHORIZED TO ENGAGE IN A PARTICULAR PRACTICE DOES NOT NECESSARILY MEAN THAT IT WILL ACTUALLY DO SO. YOU SHOULD DISREGARD ANY PRACTICE DESCRIBED BELOW WHICH IS NOT MENTIONED IN THE PROSPECTUS. SHORT-TERM TRADING In seeking the fund's objectives(s), Putnam Management will buy or sell portfolio securities whenever Putnam Management believes it appropriate to do so. In deciding whether to sell a portfolio security, Putnam Management does not consider how long the fund has owned the security. From time to time the fund will buy securities intending to seek short-term trading profits. A change in the securities held by the fund is known as "portfolio turnover" and generally involves some expense to the fund. This expense may include brokerage commissions or dealer markups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. If sales of portfolio securities cause the fund to realize net short-term capital gains, such gains will be taxable as ordinary income. As a result of the fund's investment policies, under certain market conditions the fund's portfolio turnover rate may be higher than that of other mutual funds. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly average of the value of portfolio securities -- excluding securities whose maturities at acquisition were one year or less. The fund's portfolio turnover rate is not a limiting factor when Putnam Management considers a change in the fund's portfolio. LOWER-RATED SECURITIES The fund may invest in lower-rated fixed-income securities (commonly known as "junk bonds"), to the extent described in the prospectus. The lower ratings of certain securities held by the fund reflect a greater possibility that adverse changes in the financial condition of the issuer or in general economic conditions, or both, or an unanticipated rise in interest rates, may impair the ability of the issuer to make payments of interest and principal. The inability (or perceived inability) of issuers to make timely payment of interest and principal would likely make the values of securities held by the fund more volatile and could limit the fund's ability to sell its securities at prices approximating the values the fund had placed on such securities. In the absence of a liquid trading market for securities held by it, the fund at times may be unable to establish the fair value of such securities. Securities ratings are based largely on the issuer's historical financial condition and the rating agencies' analysis at the time of rating. Consequently, the rating assigned to any particular security is not necessarily a reflection of the issuer's current financial condition, which may be better or worse than the rating would indicate. In addition, the rating assigned to a security by Moody's Investors Service, Inc. or Standard & Poor's (or by any other nationally recognized securities rating organization) does not reflect an assessment of the volatility of the security's market value or the liquidity of an investment in the security. See the prospectus or Part I of this SAI for a description of security ratings. Like those of other fixed-income securities, the values of lower-rated securities fluctuate in response to changes in interest rates. A decrease in interest rates will generally result in an increase in the value of the fund's assets. Conversely, during periods of rising interest rates, the value of the fund's assets will generally decline. The values of lower- rated securities may often be affected to a greater extent by changes in general economic conditions and business conditions affecting the issuers of such securities and their industries. Negative publicity or investor perceptions may also adversely affect the values of lower-rated securities. Changes by recognized rating services in their ratings of any fixed-income security and changes in the ability of an issuer to make payments of interest and principal may also affect the value of these investments. Changes in the value of portfolio securities generally will not affect income derived from these securities, but will affect the fund's net asset value. The fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase. However, Putnam Management will monitor the investment to determine whether its retention will assist in meeting the fund's investment objective(s). Issuers of lower-rated securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. Such issuers may not have more traditional methods of financing available to them and may be unable to repay outstanding obligations at maturity by refinancing. The risk of loss due to default in payment of interest or repayment of principal by such issuers is significantly greater because such securities frequently are unsecured and subordinated to the prior payment of senior indebtedness. At times, a substantial portion of the fund's assets may be invested in securities as to which the fund, by itself or together with other funds and accounts managed by Putnam Management and its affiliates, holds all or a major portion. Although Putnam Management generally considers such securities to be liquid because of the availability of an institutional market for such securities, it is possible that, under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell these securities when Putnam Management believes it advisable to do so or may be able to sell the securities only at prices lower than if they were more widely held. Under these circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net asset value. In order to enforce its rights in the event of a default under such securities, the fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on such securities. This could increase the fund's operating expenses and adversely affect the fund's net asset value. In the case of tax-exempt funds, any income derived from the fund's ownership or operation of such assets would not be tax-exempt. The ability of a holder of a tax-exempt security to enforce the terms of that security in a bankruptcy proceeding may be more limited than would be the case with respect to privately- issued securities. In addition, the fund's intention to qualify as a "regulated investment company" under the Internal Revenue Code may limit the extent to which the fund may exercise its rights by taking possession of such assets. Certain securities held by the fund may permit the issuer at its option to "call," or redeem, its securities. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. If the fund's prospectus describes so-called "zero-coupon" bonds and "payment-in-kind" bonds as possible investments, the fund may invest without limit in such bonds unless otherwise specified in the prospectus. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in- kind bonds do not pay current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. The fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders even though such bonds do not pay current interest in cash. Thus, the fund could be required at times to liquidate investments in order to satisfy its dividend requirements. To the extent the fund invests in securities in the lower rating categories, the achievement of the fund's goals is more dependent on Putnam Management's investment analysis than would be the case if the fund were investing in securities in the higher rating categories. This may be particularly true with respect to tax- exempt securities, as the amount of information about the financial condition of an issuer of tax-exempt securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. INVESTMENTS IN MISCELLANEOUS FIXED INCOME SECURITIES Unless otherwise specified in the prospectus or elsewhere in this SAI, if the fund may invest in inverse floating obligations, premium securities, or interest-only or principal-only classes of mortgage-backed securities (IOs and POs), it may do so without limit. The fund, however, currently does not intend to invest more than 15% of its assets in inverse floating obligations or more than 35% of its assets in IOs and POs under normal market conditions. PRIVATE PLACEMENTS The fund may invest in securities that are purchased in private placements and, accordingly, are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell such securities when Putnam Management believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. At times, it may also be more difficult to determine the fair value of such securities for purposes of computing the fund's net assets value. MORTGAGE RELATED SECURITIES The fund may invest in mortgage-backed securities, including collateralized mortgage obligations ("CMOs") and certain stripped mortgage-backed securities. CMOs and other mortgage-backed securities represent a participation in, or are secured by, mortgage loans. Mortgage-backed securities have yield and maturity characteristics corresponding to the underlying assets. Unlike traditional debt securities, which may pay a fixed rate of interest until maturity, when the entire principal amount comes due, payments on certain mortgage-backed securities include both interest and a partial repayment of principal. Besides the scheduled repayment of principal, repayments of principal may result from the voluntary prepayment, refinancing, or foreclosure of the underlying mortgage loans. If property owners make unscheduled prepayments of their mortgage loans, these prepayments will result in early payment of the applicable mortgage-related securities. In that event the fund may be unable to invest the proceeds from the early payment of the mortgage-related securities in an investment that provides as high a yield as the mortgage-related securities. Consequently, early payment associated with mortgage-related securities may cause these securities to experience significantly greater price and yield volatility than that experienced by traditional fixed- income securities. The occurrence of mortgage prepayments is affected by factors including the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. During periods of falling interest rates, the rate of mortgage prepayments tends to increase, thereby tending to decrease the life of mortgage- related securities. During periods of rising interest rates, the rate of mortgage prepayments usually decreases, thereby tending to increase the life of mortgage-related securities. If the life of a mortgage-related security is inaccurately predicted, the fund may not be able to realize the rate of return it expected. Mortgage-backed securities are less effective than other types of securities as a means of "locking in" attractive long-term interest rates. One reason is the need to reinvest prepayments of principal; another is the possibility of significant unscheduled prepayments resulting from declines in interest rates. These prepayments would have to be reinvested at lower rates. As a result, these securities may have less potential for capital appreciation during periods of declining interest rates than other securities of comparable maturities, although they may have a similar risk of decline in market value during periods of rising interest rates. Prepayments may cause losses in securities purchased at a premium. At times, some of the mortgage-backed securities in which the fund may invest will have higher than market interest rates and therefore will be purchased at a premium above their par value. Unscheduled prepayments, which are made at par, will cause the fund to experience a loss equal to any unamortized premium. CMOs may be issued by a U.S. government agency or instrumentality or by a private issuer. Although payment of the principal of, and interest on, the underlying collateral securing privately issued CMOs may be guaranteed by the U.S. government or its agencies or instrumentalities, these CMOs represent obligations solely of the private issuer and are not insured or guaranteed by the U.S. government, its agencies or instrumentalities or any other person or entity. Prepayments could cause early retirement of CMOs. CMOs are designed to reduce the risk of prepayment for investors by issuing multiple classes of securities, each having different maturities, interest rates and payment schedules, and with the principal and interest on the underlying mortgages allocated among the several classes in various ways. Payment of interest or principal on some classes or series of CMOs may be subject to contingencies or some classes or series may bear some or all of the risk of default on the underlying mortgages. CMOS of different classes or series are generally retired in sequence as the underlying mortgage loans in the mortgage pool are repaid. If enough mortgages are repaid ahead of schedule, the classes or series of a CMO with the earliest maturities generally will be retired prior to their maturities. Thus, the early retirement of particular classes or series of a CMO held by the fund would have the same effect as the prepayment of mortgages underlying other mortgage-backed securities. Prepayments could result in losses on stripped mortgage-backed securities. Stripped mortgage-backed securities are usually structured with two classes that receive different portions of the interest and principal distributions on a pool of mortgage loans. The fund may invest in both the interest-only or "IO" class and the principal-only or "PO" class. The yield to maturity on an IO class of stripped mortgage-backed securities is extremely sensitive not only to changes in prevailing interest rates but also to the rate of principal payments (including prepayments) on the underlying assets. A rapid rate of principal prepayments may have a measurable adverse effect on the fund's yield to maturity to the extent it invests in IOs. If the assets underlying the IO experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, POs tend to increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The secondary market for stripped mortgage-backed securities may be more volatile and less liquid than that for other mortgage- backed securities, potentially limiting the fund's ability to buy or sell those securities at any particular time. SECURITIES LOANS The fund may make secured loans of its portfolio securities, on either a short-term or long-term basis, amounting to not more than 25% of its total assets, thereby realizing additional income. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. As a matter of policy, securities loans are made to broker-dealers pursuant to agreements requiring that the loans be continuously secured by collateral consisting of cash or short-term debt obligations at least equal at all times to the value of the securities on loan, "marked-to-market" daily. The borrower pays to the fund an amount equal to any dividends or interest received on securities lent. The fund retains all or a portion of the interest received on investment of the cash collateral or receives a fee from the borrower. Although voting rights, or rights to consent, with respect to the loaned securities may pass to the borrower, the fund retains the right to call the loans at any time on reasonable notice, and it will do so to enable the fund to exercise voting rights on any matters materially affecting the investment. The fund may also call such loans in order to sell the securities. FORWARD COMMITMENTS The fund may enter into contracts to purchase securities for a fixed price at a future date beyond customary settlement time ("forward commitments") if the fund holds, and maintains until the settlement date in a segregated account, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or if the fund enters into offsetting contracts for the forward sale of other securities it owns. In the case of to-be- announced ("TBA") purchase commitments, the unit price and the estimated principal amount are established when the fund enters into a contract, with the actual principal amount being within a specified range of the estimate. Forward commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund's other assets. Where such purchases are made through dealers, the fund relies on the dealer to consummate the sale. The dealer's failure to do so may result in the loss to the fund of an advantageous yield or price. Although the fund will generally enter into forward commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so. The fund may realize short-term profits or losses upon the sale of forward commitments. The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as "cover" for the transaction. Unsettled TBA sale commitments are valued at current market value of the underlying securities. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss on the commitment without regard to any unrealized gain or loss on the underlying security. If the fund delivers securities under the commitment, the fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. REPURCHASE AGREEMENTS The fund may enter into repurchase agreements up to the limit specified in the prospectus. A repurchase agreement is a contract under which the fund acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller to repurchase and the fund to resell such security at a fixed time and price (representing the fund's cost plus interest). It is the fund's present intention to enter into repurchase agreements only with commercial banks and registered broker-dealers and only with respect to obligations of the U.S. government or its agencies or instrumentalities. Repurchase agreements may also be viewed as loans made by the fund which are collateralized by the securities subject to repurchase. Putnam Management will monitor such transactions to ensure that the value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including the interest factor. If the seller defaults, the fund could realize a loss on the sale of the underlying security to the extent that the proceeds of sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate. Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. OPTIONS ON SECURITIES WRITING COVERED OPTIONS. The fund may write covered call options and covered put options on optionable securities held in its portfolio, when in the opinion of Putnam Management such transactions are consistent with the fund's investment objective(s) and policies. Call options written by the fund give the purchaser the right to buy the underlying securities from the fund at a stated exercise price; put options give the purchaser the right to sell the underlying securities to the fund at a stated price. The fund may write only covered options, which means that, so long as the fund is obligated as the writer of a call option, it will own the underlying securities subject to the option (or comparable securities satisfying the cover requirements of securities exchanges). In the case of put options, the fund will hold cash and/or high-grade short-term debt obligations equal to the price to be paid if the option is exercised. In addition, the fund will be considered to have covered a put or call option if and to the extent that it holds an option that offsets some or all of the risk of the option it has written. The fund may write combinations of covered puts and calls on the same underlying security. The fund will receive a premium from writing a put or call option, which increases the fund's return on the underlying security in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, the fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. By writing a put option, the fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. The fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. If the fund writes a call option but does not own the underlying security, and when it writes a put option, the fund may be required to deposit cash or securities with its broker as "margin," or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations. PURCHASING PUT OPTIONS. The fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. PURCHASING CALL OPTIONS. The fund may purchase call options to hedge against an increase in the price of securities that the fund wants ultimately to buy. Such hedge protection is provided during the life of the call option since the fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. RISK FACTORS IN OPTIONS TRANSACTIONS The successful use of the fund's options strategies depends on the ability of Putnam Management to forecast correctly interest rate and market movements. For example, if the fund were to write a call option based on Putnam Management's expectation that the price of the underlying security would fall, but the price were to rise instead, the fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the fund were to write a put option based on Putnam Management's expectation that the price of the underlying security would rise, but the price were to fall instead, the fund could be required to purchase the security upon exercise at a price higher than the current market price. When the fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the fund will lose part or all of its investment in the option. This contrasts with an investment by the fund in the underlying security, since the fund will not realize a loss if the security's price does not change. The effective use of options also depends on the fund's ability to terminate option positions at times when Putnam Management deems it desirable to do so. There is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events -- such as volume in excess of trading or clearing capability -- were to interrupt its normal operations. A market may at times find it necessary to impose restrictions on particular types of options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the fund, as option writer, would remain obligated under the option until expiration or exercise. Disruptions in the markets for the securities underlying options purchased or sold by the fund could result in losses on the options. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options. The fund, as holder of such a put option, could lose its entire investment if the prohibition remained in effect until the put option's expiration. Foreign-traded options are subject to many of the same risks presented by internationally-traded securities. In addition, because of time differences between the United States and various foreign countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States. Over-the-counter ("OTC") options purchased by the fund and assets held to cover OTC options written by the fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the fund's ability to invest in illiquid securities. FUTURES CONTRACTS AND RELATED OPTIONS Subject to applicable law, and unless otherwise specified in the prospectus, the fund may invest without limit in the types of futures contracts and related options identified in the prospectus for hedging and non-hedging purposes. The use of futures and options transactions for purposes other than hedging entails greater risks. A financial futures contract sale creates an obligation by the seller to deliver the type of financial instrument called for in the contract in a specified delivery month for a stated price. A financial futures contract purchase creates an obligation by the purchaser to take delivery of the type of financial instrument called for in the contract in a specified delivery month at a stated price. The specific instruments delivered or taken, respectively, at settlement date are not determined until on or near that date. The determination is made in accordance with the rules of the exchange on which the futures contract sale or purchase was made. Futures contracts are traded in the United States only on commodity exchanges or boards of trade -- known as "contract markets" -- approved for such trading by the Commodity Futures Trading Commission (the "CFTC"), and must be executed through a futures commission merchant or brokerage firm which is a member of the relevant contract market. Although futures contracts (other than index futures) by their terms call for actual delivery or acceptance of commodities or securities, in most cases the contracts are closed out before the settlement date without the making or taking of delivery. Closing out a futures contract sale is effected by purchasing a futures contract for the same aggregate amount of the specific type of financial instrument or commodity with the same delivery date. If the price of the initial sale of the futures contract exceeds the price of the offsetting purchase, the seller is paid the difference and realizes a gain. Conversely, if the price of the offsetting purchase exceeds the price of the initial sale, the seller realizes a loss. If the fund is unable to enter into a closing transaction, the amount of the fund's potential loss is unlimited. The closing out of a futures contract purchase is effected by the purchaser's entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the purchaser realizes a gain, and if the purchase price exceeds the offsetting sale price, he realizes a loss. In general 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the CFTC is treated as short-term gain or loss, and 60% is treated as long-term gain or loss. Unlike when the fund purchases or sells a security, no price is paid or received by the fund upon the purchase or sale of a futures contract. Upon entering into a contract, the fund is required to deposit with its custodian in a segregated account in the name of the futures broker an amount of cash and/or U.S. government securities. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds to finance the transactions. Rather, initial margin is similar to a performance bond or good faith deposit which is returned to the fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Futures contracts also involve brokerage costs. Subsequent payments, called "variation margin" or "maintenance margin," to and from the broker (or the custodian) are made on a daily basis as the price of the underlying security or commodity fluctuates, making the long and short positions in the futures contract more or less valuable, a process known as "marking to the market." For example, when the fund has purchased a futures contract on a security and the price of the underlying security has risen, that position will have increased in value and the fund will receive from the broker a variation margin payment based on that increase in value. Conversely, when the fund has purchased a security futures contract and the price of the underlying security has declined, the position would be less valuable and the fund would be required to make a variation margin payment to the broker. The fund may elect to close some or all of its futures positions at any time prior to their expiration in order to reduce or eliminate a hedge position then currently held by the fund. The fund may close its positions by taking opposite positions which will operate to terminate the fund's position in the futures contracts. Final determinations of variation margin are then made, additional cash is required to be paid by or released to the fund, and the fund realizes a loss or a gain. Such closing transactions involve additional commission costs. OPTIONS ON FUTURES CONTRACTS. The fund may purchase and write call and put options on futures contracts it may buy or sell and enter into closing transactions with respect to such options to terminate existing positions. Options on future contracts give the purchaser the right in return for the premium paid to assume a position in a futures contract at the specified option exercise price at any time during the period of the option. The fund may use options on futures contracts in lieu of writing or buying options directly on the underlying securities or purchasing and selling the underlying futures contracts. For example, to hedge against a possible decrease in the value of its portfolio securities, the fund may purchase put options or write call options on futures contracts rather than selling futures contracts. Similarly, the fund may purchase call options or write put options on futures contracts as a substitute for the purchase of futures contracts to hedge against a possible increase in the price of securities which the fund expects to purchase. Such options generally operate in the same manner as options purchased or written directly on the underlying investments. As with options on securities, the holder or writer of an option may terminate his position by selling or purchasing an offsetting option. There is no guarantee that such closing transactions can be effected. The fund will be required to deposit initial margin and maintenance margin with respect to put and call options on futures contracts written by it pursuant to brokers' requirements similar to those described above in connection with the discussion of futures contracts. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. Successful use of futures contracts by the fund is subject to Putnam Management's ability to predict movements in various factors affecting securities markets, including interest rates. Compared to the purchase or sale of futures contracts, the purchase of call or put options on futures contracts involves less potential risk to the fund because the maximum amount at risk is the premium paid for the options (plus transaction costs). However, there may be circumstances when the purchase of a call or put option on a futures contract would result in a loss to the fund when the purchase or sale of a futures contract would not, such as when there is no movement in the prices of the hedged investments. The writing of an option on a futures contract involves risks similar to those risks relating to the sale of futures contracts. There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain market clearing facilities inadequate, and thereby result in the institution by exchanges of special procedures which may interfere with the timely execution of customer orders. To reduce or eliminate a position held by the fund, the fund may seek to close out such position. The ability to establish and close out positions will be subject to the development and maintenance of a liquid secondary market. It is not certain that this market will develop or continue to exist for a particular futures contract or option. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain contracts or options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of contracts or options, or underlying securities; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or a clearing corporation may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of contracts or options (or a particular class or series of contracts or options), in which event the secondary market on that exchange for such contracts or options (or in the class or series of contracts or options) would cease to exist, although outstanding contracts or options on the exchange that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS. U.S. Treasury security futures contracts require the seller to deliver, or the purchaser to take delivery of, the type of U.S. Treasury security called for in the contract at a specified date and price. Options on U.S. Treasury security futures contracts give the purchaser the right in return for the premium paid to assume a position in a U.S. Treasury security futures contract at the specified option exercise price at any time during the period of the option. Successful use of U.S. Treasury security futures contracts by the fund is subject to Putnam Management's ability to predict movements in the direction of interest rates and other factors affecting markets for debt securities. For example, if the fund has sold U.S. Treasury security futures contracts in order to hedge against the possibility of an increase in interest rates which would adversely affect securities held in its portfolio, and the prices of the fund's securities increase instead as a result of a decline in interest rates, the fund will lose part or all of the benefit of the increased value of its securities which it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the fund has insufficient cash, it may have to sell securities to meet daily maintenance margin requirements at a time when it may be disadvantageous to do so. There is also a risk that price movements in U.S. Treasury security futures contracts and related options will not correlate closely with price movements in markets for particular securities. For example, if the fund has hedged against a decline in the values of tax-exempt securities held by it by selling Treasury security futures and the values of Treasury securities subsequently increase while the values of its tax-exempt securities decrease, the fund would incur losses on both the Treasury security futures contracts written by it and the tax-exempt securities held in its portfolio. INDEX FUTURES CONTRACTS. An index futures contract is a contract to buy or sell units of an index at a specified future date at a price agreed upon when the contract is made. Entering into a contract to buy units of an index is commonly referred to as buying or purchasing a contract or holding a long position in the index. Entering into a contract to sell units of an index is commonly referred to as selling a contract or holding a short position. A unit is the current value of the index. The fund may enter into stock index futures contracts, debt index futures contracts, or other index futures contracts appropriate to its objective(s). The fund may also purchase and sell options on index futures contracts. For example, the Standard & Poor's Composite 500 Stock Price Index ("S&P 500") is composed of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The S&P 500 assigns relative weightings to the common stocks included in the Index, and the value fluctuates with changes in the market values of those common stocks. In the case of the S&P 500, contracts are to buy or sell 500 units. Thus, if the value of the S&P 500 were $150, one contract would be worth $75,000 (500 units x $150). The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. For example, if the fund enters into a futures contract to buy 500 units of the S&P 500 at a specified future date at a contract price of $150 and the S&P 500 is at $154 on that future date, the fund will gain $2,000 (500 units x gain of $4). If the fund enters into a futures contract to sell 500 units of the stock index at a specified future date at a contract price of $150 and the S&P 500 is at $152 on that future date, the fund will lose $1,000 (500 units x loss of $2). There are several risks in connection with the use by the fund of index futures. One risk arises because of the imperfect correlation between movements in the prices of the index futures and movements in the prices of securities which are the subject of the hedge. Putnam Management will, however, attempt to reduce this risk by buying or selling, to the extent possible, futures on indices the movements of which will, in its judgment, have a significant correlation with movements in the prices of the securities sought to be hedged. Successful use of index futures by the fund is also subject to Putnam Management's ability to predict movements in the direction of the market. For example, it is possible that, where the fund has sold futures to hedge its portfolio against a decline in the market, the index on which the futures are written may advance and the value of securities held in the fund's portfolio may decline. If this occurred, the fund would lose money on the futures and also experience a decline in value in its portfolio securities. It is also possible that, if the fund has hedged against the possibility of a decline in the market adversely affecting securities held in its portfolio and securities prices increase instead, the fund will lose part or all of the benefit of the increased value of those securities it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements at a time when it is disadvantageous to do so. In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the index futures and the portion of the portfolio being hedged, the prices of index futures may not correlate perfectly with movements in the underlying index due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the index and futures markets. Second, margin requirements in the futures market are less onerous than margin requirements in the securities market, and as a result the futures market may attract more speculators than the securities market does. Increased participation by speculators in the futures market may also cause temporary price distortions. Due to the possibility of price distortions in the futures market and also because of the imperfect correlation between movements in the index and movements in the prices of index futures, even a correct forecast of general market trends by Putnam Management may still not result in a profitable position over a short time period. OPTIONS ON STOCK INDEX FUTURES. Options on index futures are similar to options on securities except that options on index futures give the purchaser the right, in return for the premium paid, to assume a position in an index futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account which represents the amount by which the market price of the index futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the index future. If an option is exercised on the last trading day prior to its expiration date, the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing level of the index on which the future is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid. OPTIONS ON INDICES As an alternative to purchasing call and put options on index futures, the fund may purchase and sell call and put options on the underlying indices themselves. Such options would be used in a manner identical to the use of options on index futures. INDEX WARRANTS The fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If the fund were not to exercise an index warrant prior to its expiration, then the fund would lose the amount of the purchase price paid by it for the warrant. The fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Although the fund will normally invest only in exchange-listed warrants, index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the fund's ability to exercise the warrants at such time, or in such quantities, as the fund would otherwise wish to do. FOREIGN SECURITIES Under its current policy, which may be changed without shareholder approval, the fund may invest up to the limit of its total assets specified in its prospectus in securities principally traded in markets outside the United States. Eurodollar certificates of deposit are excluded for purposes of this limitation. Since foreign securities are normally denominated and traded in foreign currencies, the value of the fund's assets may be affected favorably or unfavorably by changes in currency exchange rates, exchange control regulations and restrictions or prohibitions on the repatriation of foreign currencies. There may be less information publicly available about a foreign company than about a U.S. company, and foreign companies are not generally subject to accounting, auditing and financial reporting standards and practices comparable to those in the United States. The securities of some foreign companies are less liquid and at times more volatile than securities of comparable U.S. companies. Foreign brokerage commissions and other fees are also generally higher than in the United States. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of the fund's assets held abroad) and expenses not present in the settlement of domestic investments. In addition, there may be a possibility of nationalization or expropriation of assets, imposition of currency exchange controls, confiscatory taxation, political or financial instability and diplomatic developments which could affect the value of the fund's investments in certain foreign countries. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries. The laws of some foreign countries may limit the fund's ability to invest in securities of certain issuers located in those foreign countries. Special tax considerations apply to foreign securities. The risks described above, including the risks of nationalization or expropriation of assets, are typically increased to the extent that the fund invests in issuers located in less developed and developing nations, whose securities markets are sometimes referred to as "emerging securities markets." Investments in securities located in such countries are speculative and subject to certain special risks. Political and economic structures in many of these countries may be in their infancy and developing rapidly, and such countries may lack the social, political and economic stability characteristic of more developed countries. Certain of these countries have in the past failed to recognize private property rights and have at times nationalized and expropriated the assets of private companies. In addition, unanticipated political or social developments may affect the values of the fund's investments in these countries and the availability to the fund of additional investments in these countries. The small size, limited trading volume and relative inexperience of the securities markets in these countries may make the fund's investments in such countries illiquid and more volatile than investments in more developed countries, and the fund may be required to establish special custodial or other arrangements before making investments in these countries. There may be little financial or accounting information available with respect to issuers located in these countries, and it may be difficult as a result to assess the value or prospects of an investment in such issuers. FOREIGN CURRENCY TRANSACTIONS Unless otherwise specified in the prospectus or Part I of this SAI, the fund may engage without limit in currency exchange transactions, including purchasing and selling foreign currency, foreign currency options, foreign currency forward contracts and foreign currency futures contracts and related options, to protect against uncertainty in the level of future currency exchange rates. In addition, the fund may write covered call and put options on foreign currencies for the purpose of increasing its current return. Generally, the fund may engage in both "transaction hedging" and "position hedging." When it engages in transaction hedging, the fund enters into foreign currency transactions with respect to specific receivables or payables, generally arising in connection with the purchase or sale of portfolio securities. The fund will engage in transaction hedging when it desires to "lock in" the U.S. dollar price of a security it has agreed to purchase or sell, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. By transaction hedging the fund will attempt to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is earned, and the date on which such payments are made or received. The fund may purchase or sell a foreign currency on a spot (or cash) basis at the prevailing spot rate in connection with the settlement of transactions in portfolio securities denominated in that foreign currency. The fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and purchase and sell foreign currency futures contracts. For transaction hedging purposes the fund may also purchase exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives the fund the right to assume a short position in the futures contract until the expiration of the option. A put option on a currency gives the fund the right to sell the currency at an exercise price until the expiration of the option. A call option on a futures contract gives the fund the right to assume a long position in the futures contract until the expiration of the option. A call option on a currency gives the fund the right to purchase the currency at the exercise price until the expiration of the option. When it engages in position hedging, the fund enters into foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which its portfolio securities are denominated (or an increase in the value of currency for securities which the fund expects to purchase). In connection with position hedging, the fund may purchase put or call options on foreign currency and on foreign currency futures contracts and buy or sell forward contracts and foreign currency futures contracts. The fund may also purchase or sell foreign currency on a spot basis. It is impossible to forecast with precision the market value of portfolio securities at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary for the fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency the fund is obligated to deliver and a decision is made to sell the security or securities and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities if the market value of such security or securities exceeds the amount of foreign currency the fund is obligated to deliver. Transaction and position hedging do not eliminate fluctuations in the underlying prices of the securities which the fund owns or intends to purchase or sell. They simply establish a rate of exchange which one can achieve at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they tend to limit any potential gain which might result from the increase in value of such currency. See "Risk factors in options transactions" above. The fund may seek to increase its current return or to offset some of the costs of hedging against fluctuations in current exchange rates by writing covered call options and covered put options on foreign currencies. The fund receives a premium from writing a call or put option, which increases the fund's current return if the option expires unexercised or is closed out at a net profit. The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The fund's currency hedging transactions may call for the delivery of one foreign currency in exchange for another foreign currency and may at times not involve currencies in which its portfolio securities are then denominated. Putnam Management will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the fund. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge. The value of any currency, including U.S. dollars and foreign currencies, may be affected by complex political and economic factors applicable to the issuing country. In addition, the exchange rates of foreign currencies (and therefore the values of foreign currency options, forward contracts and futures contracts) may be affected significantly, fixed, or supported directly or indirectly by U.S. and foreign government actions. Government intervention may increase risks involved in purchasing or selling foreign currency options, forward contracts and futures contracts, since exchange rates may not be free to fluctuate in response to other market forces. The value of a foreign currency option, forward contract or futures contract reflects the value of an exchange rate, which in turn reflects relative values of two currencies, the U.S. dollar and the foreign currency in question. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be involved in the exercise of foreign currency options, forward contracts and futures contracts, investors may be disadvantaged by having to deal in an odd-lot market for the underlying foreign currencies in connection with options at prices that are less favorable than for round lots. Foreign governmental restrictions or taxes could result in adverse changes in the cost of acquiring or disposing of foreign currencies. There is no systematic reporting of last sale information for foreign currencies and there is no regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Available quotation information is generally representative of very large round-lot transactions in the interbank market and thus may not reflect exchange rates for smaller odd-lot transactions (less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that options markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that cannot be reflected in the options markets. CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract as agreed by the parties, at a price set at the time of the contract. In the case of a cancelable forward contract, the holder has the unilateral right to cancel the contract at maturity by paying a specified fee. The contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. A foreign currency futures contract is a standardized contract for the future delivery of a specified amount of a foreign currency at a price set at the time of the contract. Foreign currency futures contracts traded in the United States are designed by and traded on exchanges regulated by the CFTC, such as the New York Mercantile Exchange. Forward foreign currency exchange contracts differ from foreign currency futures contracts in certain respects. For example, the maturity date of a forward contract may be any fixed number of days from the date of the contract agreed upon by the parties, rather than a predetermined date in a given month. Forward contracts may be in any amounts agreed upon by the parties rather than predetermined amounts. Also, forward foreign exchange contracts are traded directly between currency traders so that no intermediary is required. A forward contract generally requires no margin or other deposit. At the maturity of a forward or futures contract, the fund either may accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract. Closing transactions with respect to futures contracts are effected on a commodities exchange; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts. Positions in the foreign currency futures contracts may be closed out only on an exchange or board of trade which provides a secondary market in such contracts. Although the fund intends to purchase or sell foreign currency futures contracts only on exchanges or boards of trade where there appears to be an active secondary market, there is no assurance that a secondary market on an exchange or board of trade will exist for any particular contract or at any particular time. In such event, it may not be possible to close a futures position and, in the event of adverse price movements, the fund would continue to be required to make daily cash payments of variation margin. FOREIGN CURRENCY OPTIONS. In general, options on foreign currencies operate similarly to options on securities and are subject to many of the risks described above. Foreign currency options are traded primarily in the over-the-counter market, although options on foreign currencies are also listed on several exchanges. Options are traded not only on the currencies of individual nations, but also on the European Currency Unit ("ECU"). The ECU is composed of amounts of a number of currencies, and is the official medium of exchange of the European Community's European Monetary System. The fund will only purchase or write foreign currency options when Putnam Management believes that a liquid secondary market exists for such options. There can be no assurance that a liquid secondary market will exist for a particular option at any specific time. Options on foreign currencies are affected by all of those factors which influence foreign exchange rates and investments generally. SETTLEMENT PROCEDURES. Settlement procedures relating to the fund's investments in foreign securities and to the fund's foreign currency exchange transactions may be more complex than settlements with respect to investments in debt or equity securities of U.S. issuers, and may involve certain risks not present in the fund's domestic investments. For example, settlement of transactions involving foreign securities or foreign currencies may occur within a foreign country, and the fund may be required to accept or make delivery of the underlying securities or currency in conformity with any applicable U.S. or foreign restrictions or regulations, and may be required to pay any fees, taxes or charges associated with such delivery. Such investments may also involve the risk that an entity involved in the settlement may not meet its obligations. FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not charge a fee for currency conversion, they do realize a profit based on the difference (the "spread") between prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to the fund at one rate, while offering a lesser rate of exchange should the fund desire to resell that currency to the dealer. RESTRICTED SECURITIES The SEC Staff currently takes the view that any delegation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the funds) must be pursuant to written procedures established by the Trustees. It is the present intention of the funds' Trustees that, if the Trustees decide to delegate such determinations to Putnam Management or another person, they would do so pursuant to written procedures, consistent with the Staff's position. Should the Staff modify its position in the future, the Trustees would consider what action would be appropriate in light of the Staff's position at that time. TAXES TAXATION OF THE FUND. The fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In order so to qualify and to qualify for the special tax treatment accorded regulated investment companies and their shareholders, the fund must, among other things: (a) Derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, and gains from the sale of stock, securities and foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies; (b) derive less than 30% of its gross income from the sale or other disposition of certain assets (including stock or securities and certain options, futures contracts, forward contracts and foreign currencies) held for less than three months; (c) distribute with respect to each taxable year at least 90% of the sum of its taxable net investment income, its net tax-exempt income, and the excess, if any, of net short-term capital gains over net long-term capital losses for such year; and (d) diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the market value of the fund's assets is represented by cash and cash items, U.S. government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the fund's total assets and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities (other than those of the U.S. Government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related trades or businesses. If the fund qualifies as a regulated investment company that is accorded special tax treatment, the fund will not be subject to federal income tax on income paid to its shareholders in the form of dividends (including capital gain dividends). If the fund failed to qualify as a regulated investment company accorded special tax treatment in any taxable year, the fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment. If the fund fails to distribute in a calendar year substantially all of its ordinary income for such year and substantially all of its capital gain net income for the one-year period ending October 31 (or later if the fund is permitted so to elect and so elects), plus any retained amount from the prior year, the fund will be subject to a 4% excise tax on the undistributed amounts. A dividend paid to shareholders by the fund in January of a year generally is deemed to have been paid by the fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax. EXEMPT-INTEREST DIVIDENDS. The fund will be qualified to pay exempt-interest dividends to its shareholders only if, at the close of each quarter of the fund's taxable year, at least 50% of the total value of the fund's assets consists of obligations the interest on which is exempt from federal income tax. Distributions that the fund properly designates as exempt- interest dividends are treated as interest excludable from shareholders' gross income for federal income tax purposes but may be taxable for federal alternative minimum tax purposes and for state and local purposes. If the fund intends to be qualified to pay exempt-interest dividends, the fund may be limited in its ability to enter into taxable transactions involving forward commitments, repurchase agreements, financial futures and options contracts on financial futures, tax-exempt bond indices and other assets. Part or all of the interest on indebtedness, if any, incurred or continued by a shareholder to purchase or carry shares of a fund paying exempt-interest dividends is not deductible. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness, multiplied by the percentage of the fund's total distributions (not including distributions from net long-term capital gains) paid to the shareholder that are exempt-interest dividends. Under rules used by the Internal Revenue Service for determining when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares. In general, exempt-interest dividends, if any, attributable to interest received on certain private activity obligations and certain industrial development bonds will not be tax-exempt to any shareholders who are "substantial users" of the facilities financed by such obligations or bonds or who are "related persons" of such substantial users. A fund which is qualified to pay exempt-interest dividends will inform investors within 60 days of the fund's fiscal year-end of the percentage of its income distributions designated as tax-exempt. The percentage is applied uniformly to all distributions made during the year. The percentage of income designated as tax-exempt for any particular distribution may be substantially different from the percentage of the fund's income that was tax-exempt during the period covered by the distribution. HEDGING TRANSACTIONS. If the fund engages in hedging transactions, including hedging transactions in options, futures contracts, and straddles, or other similar transactions, it will be subject to special tax rules (including mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund's securities, or convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund will endeavor to make any available elections pertaining to such transactions in a manner believed to be in the best interests of the fund. Under the 30% of gross income test described above (see "Taxation of the fund"), the fund will be restricted in selling assets held or considered under Code rules to have been held for less than three months, and in engaging in certain hedging transactions (including hedging transactions in options and futures) that in some circumstances could cause certain fund assets to be treated as held for less than three months. Certain of the fund's hedging activities (including its transactions, if any, in foreign currencies or foreign currency-denominated instruments) are likely to produce a difference between its book income and its taxable income. If the fund's book income exceeds its taxable income, the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the fund's remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter as a return of capital to the extent of the recipient's basis in the shares, and (iii) thereafter as gain from the sale or exchange of a capital asset. If the fund's book income is less than its taxable income, the fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment. RETURN OF CAPITAL DISTRIBUTIONS. If the fund makes a distribution to you in excess of its current and accumulated "earnings and profits" in any taxable year, the excess distribution will be treated as a return of capital to the extent of your tax basis in your shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces your tax basis in your shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by you of your shares. SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. The fund's investment in securities issued at a discount and certain other obligations will (and investments in securities purchased at a discount may) require the fund to accrue and distribute income not yet received. In order to generate sufficient cash to make the requisite distributions, the fund may be required to sell securities in its portfolio that it otherwise would have continued to hold. CAPITAL LOSS CARRYOVER. Distributions from capital gains are made after applying any available capital loss carryovers. The amounts and expiration dates of any capital loss carryovers available to the fund are shown in Note 1 (Federal income taxes) to the financial statements included in Part I of this SAI or incorporated by reference into this SAI. FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED HEDGING TRANSACTIONS. The fund's transactions in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. If more than 50% of the fund's assets at year end consists of the debt and equity securities of foreign corporations, the fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries. In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholder's ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the amount of such taxes. Shareholders who do not itemize on their federal income tax returns may claim a credit (but no deduction) for such foreign taxes. Investment by the fund in "passive foreign investment companies" could subject the fund to a U.S. federal income tax or other charge on the proceeds from the sale of its investment in such a company; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a "qualified electing fund." A "passive foreign investment company" is any foreign corporation: (i) 75 percent of more of the income of which for the taxable year is passive income, or (ii) the average percentage of the assets of which (generally by value, but by adjusted tax basis in certain cases) that produce or are held for the production of passive income is at least 50 percent. Generally, passive income for this purpose means dividends, interest (including income equivalent to interest), royalties, rents, annuities, the excess of gains over losses from certain property transactions and commodities transactions, and foreign currency gains. Passive income for this purpose does not include rents and royalties received by the foreign corporation from active business and certain income received from related persons. SALE OR REDEMPTION OF SHARES. The sale, exchange or redemption of fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months, and otherwise as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss will be disallowed for Federal income tax purposes to the extent of any exempt- interest dividends received on such shares. In addition, any loss (not already disallowed as provided in the preceding sentence) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any long-term capital gain distributions received by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of fund shares will be disallowed if other shares of the same fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss. SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS. Special tax rules apply to investments though defined contribution plans and other tax-qualified plans. Shareholders should consult their tax adviser to determine the suitability of shares of a fund as an investment through such plans and the precise effect of an investment on their particular tax situation. BACKUP WITHHOLDING. The fund generally is required to withhold and remit to the U.S. Treasury 31% of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the fund with a correct taxpayer identification number (TIN), who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is not subject to such withholding. Shareholders who fail to furnish their correct TIN are subject to a penalty of $50 for each such failure unless the failure is due to reasonable cause and not wilful neglect. An individual's taxpayer identification number is his or her social security number. MANAGEMENT TRUSTEES NAME (AGE) *+GEORGE PUTNAM (69), Chairman and President. Chairman and Director of Putnam Management and Putnam Mutual Funds. Director, The Boston Company, Inc., Boston Safe Deposit and Trust Company, Freeport-McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan Oil and Gas, Inc., General Mills, Inc., Houghton Mifflin Company, Marsh & McLennan Companies, Inc. and Rockefeller Group, Inc. +WILLIAM F. POUNDS (68), Vice Chairman. Professor of Management, Alfred P. Sloan School of Management, Massachusetts Institute of Technology. Director of EG&G, Inc., IDEXX Laboratories, Inc., Perseptive Biosystems, Inc., Management Sciences for Health, Inc., and Sun Company, Inc. JAMESON A. BAXTER (52), Trustee. President, Baxter Associates, Inc. (a management and financial consultant). Director of Avondale Federal Savings Bank, ASHTA Chemicals, Inc. and Banta Corporation. Chairman Emeritus of the Board of Trustees, Mount Holyoke College. +HANS H. ESTIN (67), Trustee. Vice Chairman, North American Management Corp. (a registered investment adviser). Director of The Boston Company, Inc. and Boston Safe Deposit and Trust Company. JOHN A. HILL (54), Trustee. Chairman and Managing Director, First Reserve Corporation (a registered investment adviser). Director, Maverick Tube Corporation, PetroCorp Incorporated, Snyder Oil Corporation, Weatherford Enterra, Inc. (an oil field service company) and various First Reserve Funds. RONALD J. JACKSON (52), Trustee. Former Chairman, President and Chief Executive Officer of Fisher-Price, Inc. Trustee of Salem Hospital and Overseer of the Peabody Essex Museum. ELIZABETH T. KENNAN (58), Trustee. President Emeritus and Professor, Mount Holyoke College. Director, the Kentucky Home Life Insurance Companies, NYNEX Corporation, Northeast Utilities and Talbots. Trustee of the University of Notre Dame. *LAWRENCE J. LASSER (53), Trustee and Vice President. President, Chief Executive Officer and Director of Putnam Investments, Inc. and Putnam Investment Management, Inc. Director of Marsh & McLennan Companies, Inc. +ROBERT E. PATTERSON (51), Trustee. Executive Vice President and Director of Acquisitions, Cabot Partners Limited Partnership (a registered investment adviser). *DONALD S. PERKINS (69), Trustee. Director of various corporations, including AON Corp., Cummins Engine Company, Inc., Current Assets L.L.C., Illinova and Illinois Power Company, Inland Steel Industries, Inc., LaSalle Street Fund, Inc., Lucent Technologies Inc., Springs Industries, Inc. (a textile manufacturer), and Time Warner Inc. *#GEORGE PUTNAM III (44), Trustee. President, New Generation Research, Inc. (publisher of bankruptcy information) and New Generation Advisers, Inc. (a registered investment adviser). ELI SHAPIRO (79), Trustee. Alfred P. Sloan Professor of Management, Emeritus, Alfred P. Sloan School of Management, Massachusetts Institute of Technology. Director of Nomura Dividend Fund, Inc. (a privately held registered investment company managed by Putnam Management) and former Trustee of the Putnam funds (1984-1990). *A.J.C. SMITH (62), Trustee. Chairman and Chief Executive Officer, Marsh & McLennan Companies, Inc. Director, Trident Corp. W. NICHOLAS THORNDIKE (63), Trustee. Director of various corporations and charitable organizations, including Courier Corporation, Data General Corporation, Bradley Real Estate, Inc., and Providence Journal Co. OFFICERS NAME (AGE) CHARLES E. PORTER (57), Executive Vice President. Managing Director of Putnam Investments, Inc. and Putnam Management. PATRICIA C. FLAHERTY (49), Senior Vice President. Senior Vice President of Putnam Investments, Inc. and Putnam Management. WILLIAM N. SHIEBLER (54), Vice President. Director and Senior Managing Director of Putnam Investments, Inc. President and Director of Putnam Mutual Funds. GORDON H. SILVER (48), Vice President. Director and Senior Managing Director of Putnam Investments, Inc. and Putnam Management. JOHN R. VERANI (56), Vice President. Senior Vice President of Putnam Investments, Inc. and Putnam Management. PAUL M. O'NEIL (42), Vice President. Vice President of Putnam Investments, Inc. and Putnam Management. JOHN D. HUGHES (61), Vice President and Treasurer. BEVERLY MARCUS (51), Clerk and Assistant Treasurer. *Trustees who are or may be deemed to be "interested persons" (as defined in the Investment Company Act of 1940) of the fund, Putnam Management or Putnam Mutual Funds. +Members of the Executive Committee of the Trustees. The Executive Committee meets between regular meetings of the Trustees as may be required to review investment matters and other affairs of the fund and may exercise all of the powers of the Trustees. #George Putnam, III is the son of George Putnam. ----------------- Certain other officers of Putnam Management are officers of the fund. SEE "ADDITIONAL OFFICERS" IN PART I OF THIS SAI. The mailing address of each of the officers and Trustees is One Post Office Square, Boston, Massachusetts 02109. Except as stated below, the principal occupations of the officers and Trustees for the last five years have been with the employers as shown above, although in some cases they have held different positions with such employers. Prior to 1993, Mr. Jackson was Chairman of the Board, President and Chief Executive Officer of Fisher-Price, Inc. Prior to January, 1992, Ms. Baxter was Vice President and Principal, Regency Group, Inc. and Consultant, The First Boston Corporation. Prior to May, 1991, Dr. Pounds was Senior Advisor to the Rockefeller Family and Associates, Chairman of Rockefeller Trust Company and Director of Rockefeller Group, Inc. During the past five years Dr. Shapiro has provided economic and financial consulting services to various clients. Each Trustee of the fund receives an annual fee and an additional fee for each Trustees' meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings and for special services rendered in that connection. All of the Trustees are Trustees of all the Putnam funds and each receives fees for his or her services. FOR DETAILS OF TRUSTEES' FEES PAID BY THE FUND AND INFORMATION CONCERNING RETIREMENT GUIDELINES FOR THE TRUSTEES, SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI. The Agreement and Declaration of Trust of the fund provides that the fund will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the fund, except if it is determined in the manner specified in the Agreement and Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the fund or that such indemnification would relieve any officer or Trustee of any liability to the fund or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of his or her duties. The fund, at its expense, provides liability insurance for the benefit of its Trustees and officers. PUTNAM MANAGEMENT AND ITS AFFILIATES Putnam Management is one of America's oldest and largest money management firms. Putnam Management's staff of experienced portfolio managers and research analysts selects securities and constantly supervises the fund's portfolio. By pooling an investor's money with that of other investors, a greater variety of securities can be purchased than would be the case individually; the resulting diversification helps reduce investment risk. Putnam Management has been managing mutual funds since 1937. Today, the firm serves as the investment manager for the funds in the Putnam Family, with over $113 billion in assets in over 6.2 million shareholder accounts at June 30, 1996. An affiliate, The Putnam Advisory Company, Inc., manages domestic and foreign institutional accounts and mutual funds, including the accounts of many Fortune 500 companies. Another affiliate, Putnam Fiduciary Trust Company, provides investment advice to institutional clients under its banking and fiduciary powers. At June 30, 1996, Putnam Management and its affiliates managed nearly $149 billion in assets, including over $17 billion in tax- exempt securities and over $66 billion in retirement plan assets. Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust Company are subsidiaries of Putnam Investments, Inc., a holding company which is in turn wholly owned by Marsh & McLennan Companies, Inc., a publicly-owned holding company whose principal operating subsidiaries are international insurance and reinsurance brokers, investment managers and management consultants. Trustees and officers of the fund who are also officers of Putnam Management or its affiliates or who are stockholders of Marsh & McLennan Companies, Inc. will benefit from the advisory fees, sales commissions, distribution fees, custodian fees and transfer agency fees paid or allowed by the fund. THE MANAGEMENT CONTRACT Under a Management Contract between the fund and Putnam Management, subject to such policies as the Trustees may determine, Putnam Management, at its expense, furnishes continuously an investment program for the fund and makes investment decisions on behalf of the fund. Subject to the control of the Trustees, Putnam Management also manages, supervises and conducts the other affairs and business of the fund, furnishes office space and equipment, provides bookkeeping and clerical services (including determination of the fund's net asset value, but excluding shareholder accounting services) and places all orders for the purchase and sale of the fund's portfolio securities. Putnam Management may place fund portfolio transactions with broker-dealers which furnish Putnam Management, without cost to it, certain research, statistical and quotation services of value to Putnam Management and its affiliates in advising the fund and other clients. In so doing, Putnam Management may cause the fund to pay greater brokerage commissions than it might otherwise pay. FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER THE MANAGEMENT CONTRACT, SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI. Putnam Management's compensation under the Management Contract may be reduced in any year if the fund's expenses exceed the limits on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the fund are qualified for offer or sale. The term "expenses" is defined in the statutes or regulations of such jurisdictions, and generally excludes brokerage commissions, taxes, interest, extraordinary expenses and, if the fund has a distribution plan, payments made under such plan. The only such limitation as of the date of this SAI (applicable to any fund registered for sale in California) was 2.5% of the first $30 million of average net assets, 2% of the next $70 million and 1.5% of any excess over $100 million. Under the Management Contract, Putnam Management may reduce its compensation to the extent that the fund's expenses exceed such lower expense limitation as Putnam Management may, by notice to the fund, declare to be effective. The expenses subject to this limitation are exclusive of brokerage commissions, interest, taxes, deferred organizational and extraordinary expenses and, if the fund has a distribution plan, payments required under such plan. For the purpose of determining any such limitation on Putnam Management's compensation, expenses of the fund shall not reflect the application of commissions or cash management credits that may reduce designated fund expenses. THE TERMS OF ANY EXPENSE LIMITATION FROM TIME TO TIME IN EFFECT ARE DESCRIBED IN EITHER THE PROSPECTUS OR PART I OF THIS SAI. In addition to the fee paid to Putnam Management, the fund reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their assistants who provide certain administrative services for the fund and the other Putnam funds, each of which bears an allocated share of the foregoing costs. The aggregate amount of all such payments and reimbursements is determined annually by the Trustees. THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S MOST RECENT FISCAL YEAR IS INCLUDED IN "CHARGES AND EXPENSES" IN PART I OF THIS SAI. Putnam Management pays all other salaries of officers of the fund. The fund pays all expenses not assumed by Putnam Management including, without limitation, auditing, legal, custodial, investor servicing and shareholder reporting expenses. The fund pays the cost of typesetting for its prospectuses and the cost of printing and mailing any prospectuses sent to its shareholders. Putnam Mutual Funds pays the cost of printing and distributing all other prospectuses. The Management Contract provides that Putnam Management shall not be subject to any liability to the fund or to any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of Putnam Management. The Management Contract may be terminated without penalty by vote of the Trustees or the shareholders of the fund, or by Putnam Management, on 30 days' written notice. It may be amended only by a vote of the shareholders of the fund. The Management Contract also terminates without payment of any penalty in the event of its assignment. The Management Contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the Investment Company Act of 1940. PERSONAL INVESTMENTS BY EMPLOYEES OF PUTNAM MANAGEMENT Employees of Putnam Management are permitted to engage in personal securities transactions, subject to requirements and restrictions set forth in Putnam Management's Code of Ethics. The Code of Ethics contains provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of investment advisory clients such as the funds. Among other things, the Code of Ethics, consistent with standards recommended by the Investment Company Institute's Advisory Group on Personal Investing, prohibits certain types of transactions absent prior approval, imposes time periods during which personal transactions may not be made in certain securities, and requires the submission of duplicate broker confirmations and quarterly reporting of securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process. Exceptions to these and other provisions of the Code of Ethics may be granted in particular circumstances after review by appropriate personnel. PORTFOLIO TRANSACTIONS INVESTMENT DECISIONS. Investment decisions for the fund and for the other investment advisory clients of Putnam Management and its affiliates are made with a view to achieving their respective investment objectives. Investment decisions are the product of many factors in addition to basic suitability for the particular client involved. Thus, a particular security may be bought or sold for certain clients even though it could have been bought or sold for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling the security. In some instances, one client may sell a particular security to another client. It also sometimes happens that two or more clients simultaneously purchase or sell the same security, in which event each day's transactions in such security are, insofar as possible, averaged as to price and allocated between such clients in a manner which in Putnam Management's opinion is equitable to each and in accordance with the amount being purchased or sold by each. There may be circumstances when purchases or sales of portfolio securities for one or more clients will have an adverse effect on other clients. BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by the fund of negotiated brokerage commissions. Such commissions vary among different brokers. A particular broker may charge different commissions according to such factors as the difficulty and size of the transaction. Transactions in foreign investments often involve the payment of fixed brokerage commissions, which may be higher than those in the United States. There is generally no stated commission in the case of securities traded in the over-the-counter markets, but the price paid by the fund usually includes an undisclosed dealer commission or mark-up. In underwritten offerings, the price paid by the fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer. It is anticipated that most purchases and sales of securities by funds investing primarily in tax-exempt securities and certain other fixed-income securities will be with the issuer or with underwriters of or dealers in those securities, acting as principal. Accordingly, those funds would not ordinarily pay significant brokerage commissions with respect to securities transactions. SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI FOR INFORMATION CONCERNING COMMISSIONS PAID BY THE FUND. It has for many years been a common practice in the investment advisory business for advisers of investment companies and other institutional investors to receive brokerage and research services (as defined in the Securities Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that execute portfolio transactions for the clients of such advisers and from third parties with which such broker-dealers have arrangements. Consistent with this practice, Putnam Management receives brokerage and research services and other similar services from many broker-dealers with which Putnam Management places the fund's portfolio transactions and from third parties with which these broker-dealers have arrangements. These services include such matters as general economic and market reviews, industry and company reviews, evaluations of investments, recommendations as to the purchase and sale of investments, newspapers, magazines, pricing services, quotation services, news services and personal computers utilized by Putnam Management's managers and analysts. Where the services referred to above are not used exclusively by Putnam Management for research purposes, Putnam Management, based upon its own allocations of expected use, bears that portion of the cost of these services which directly relates to their non-research use. Some of these services are of value to Putnam Management and its affiliates in advising various of their clients (including the fund), although not all of these services are necessarily useful and of value in managing the fund. The management fee paid by the fund is not reduced because Putnam Management and its affiliates receive these services even though Putnam Management might otherwise be required to purchase some of these services for cash. Putnam Management places all orders for the purchase and sale of portfolio investments for the fund and buys and sells investments for the fund through a substantial number of brokers and dealers. In so doing, Putnam Management uses its best efforts to obtain for the fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution, Putnam Management, having in mind the fund's best interests, considers all factors it deems relevant, including, by way of illustration, price, the size of the transaction, the nature of the market for the security or other investment, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions. As permitted by Section 28(e) of the 1934 Act, and by the Management Contract, Putnam Management may cause the fund to pay a broker-dealer which provides "brokerage and research services" (as defined in the 1934 Act) to Putnam Management an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the fund on an agency basis in excess of the commission which another broker-dealer would have charged for effecting that transaction. Putnam Management's authority to cause the fund to pay any such greater commissions is also subject to such policies as the Trustees may adopt from time to time. Putnam Management does not currently intend to cause the fund to make such payments. It is the position of the staff of the Securities and Exchange Commission that Section 28(e) does not apply to the payment of such greater commissions in "principal" transactions. Accordingly Putnam Management will use its best effort to obtain the most favorable price and execution available with respect to such transactions, as described above. The Management Contract provides that commissions, fees, brokerage or similar payments received by Putnam Management or an affiliate in connection with the purchase and sale of portfolio investments of the fund, less any direct expenses approved by the Trustees, shall be recaptured by the fund through a reduction of the fee payable by the fund under the Management Contract. Putnam Management seeks to recapture for the fund soliciting dealer fees on the tender of the fund's portfolio securities in tender or exchange offers. Any such fees which may be recaptured are likely to be minor in amount. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc. and subject to seeking the most favorable price and execution available and such other policies as the Trustees may determine, Putnam Management may consider sales of shares of the fund (and, if permitted by law, of the other Putnam funds) as a factor in the selection of broker-dealers to execute portfolio transactions for the fund. PRINCIPAL UNDERWRITER Putnam Mutual Funds is the principal underwriter of shares of the fund and the other continuously offered Putnam funds. Putnam Mutual Funds is not obligated to sell any specific amount of shares of the fund and will purchase shares for resale only against orders for shares. SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI FOR INFORMATION ON SALES CHARGES AND OTHER PAYMENTS RECEIVED BY PUTNAM MUTUAL FUNDS. INVESTOR SERVICING AGENT AND CUSTODIAN Putnam Investor Services, a division of Putnam Fiduciary Trust Company ("PFTC"), is the fund's investor servicing agent (transfer, plan and dividend disbursing agent), for which it receives fees which are paid monthly by the fund as an expense of all its shareholders. The fee paid to Putnam Investor Services is determined on the basis of the number of shareholder accounts, the number of transactions and the assets of the fund. Putnam Investor Services has won the DALBAR Quality Tested Service Seal every year since the award's 1990 inception. Over 10,000 tests of 38 separate shareholder service components demonstrated that Putnam Investor Services tied for highest scores, with two other mutual fund companies, in all categories. PFTC is the custodian of the fund's assets. In carrying out its duties under its custodian contract, PFTC may employ one or more subcustodians whose responsibilities include safeguarding and controlling the fund's cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on the fund's investments. PFTC and any subcustodians employed by it have a lien on the securities of the fund (to the extent permitted by the fund's investment restrictions) to secure charges and any advances made by such subcustodians at the end of any day for the purpose of paying for securities purchased by the fund. The fund expects that such advances will exist only in unusual circumstances. Neither PFTC nor any subcustodian determines the investment policies of the fund or decides which securities the fund will buy or sell. PFTC pays the fees and other charges of any subcustodians employed by it. The fund may from time to time pay custodial expenses in full or in part through the placement by Putnam Management of the fund's portfolio transactions with the subcustodians or with a third- party broker having an agreement with the subcustodians. The fund pays PFTC an annual fee based on the fund's assets, securities transactions and securities holdings and reimburses PFTC for certain out-of-pocket expenses incurred by it or any subcustodian employed by it in performing custodial services. SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI FOR INFORMATION ON FEES AND REIMBURSEMENTS FOR INVESTOR SERVICING AND CUSTODY RECEIVED BY PFTC. THE FEES MAY BE REDUCED BY CREDITS ALLOWED BY PFTC. DETERMINATION OF NET ASSET VALUE The fund determines the net asset value per share of each class of shares once each day the New York Stock Exchange (the "Exchange") is open. Currently, the Exchange is closed Saturdays, Sundays and the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July, Labor Day, Thanksgiving and Christmas. The fund determines net asset value as of the close of regular trading on the Exchange, currently 4:00 p.m. However, equity options held by the fund are priced as of the close of trading at 4:10 p.m., and futures contracts on U.S. government and other fixed-income securities and index options held by the fund are priced as of their close of trading at 4:15 p.m. Securities for which market quotations are readily available are valued at prices which, in the opinion of Putnam Management, most nearly represent the market values of such securities. Currently, such prices are determined using the last reported sale price or, if no sales are reported (as in the case of some securities traded over-the-counter), the last reported bid price, except that certain securities are valued at the mean between the last reported bid and asked prices. Short-term investments having remaining maturities of 60 days or less are valued at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. Liabilities are deducted from the total, and the resulting amount is divided by the number of shares of the class outstanding. Reliable market quotations are not considered to be readily available for long-term corporate bonds and notes, certain preferred stocks, tax-exempt securities, and certain foreign securities. These investments are valued at fair value on the basis of valuations furnished by pricing services, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. If any securities held by the fund are restricted as to resale, Putnam Management determines their fair value following procedures approved by the Trustees. The fair value of such securities is generally determined as the amount which the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the securities (including any registration expenses that might be borne by the fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted securities of the same class, the size of the holding, the prices of any recent transactions or offers with respect to such securities and any available analysts' reports regarding the issuer. Generally, trading in certain securities (such as foreign securities) is substantially completed each day at various times prior to the close of the Exchange. The values of these securities used in determining the net asset value of the fund's shares are computed as of such times. Also, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain securities (such as convertible bonds, U.S. government securities, and tax-exempt securities) are determined based on market quotations collected earlier in the day at the latest practicable time prior to the close of the Exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the Exchange which will not be reflected in the computation of the fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value following procedures approved by the Trustees. Money market funds generally value their portfolio securities at amortized cost according to Rule 2a-7 under the Investment Company Act of 1940. HOW TO BUY SHARES GENERAL The prospectus contains a general description of how investors may buy shares of the fund and states whether the fund offers more than one class of shares. This SAI contains additional information which may be of interest to investors. Class A shares and class M shares are generally sold with a sales charge payable at the time of purchase (except for class A shares and class M shares of money market funds). As used in this SAI and unless the context requires otherwise, the term "class A shares" includes shares of funds that offer only one class of shares. The prospectus contains a table of applicable sales charges. For information about how to purchase class A or class M shares of a Putnam fund at net asset value through an employer's defined contribution plan, please consult your employer. Certain purchases of class A shares and class M shares may be exempt from a sales charge or, in the case of class A shares, may be subject to a contingent deferred sales charge ("CDSC"). See "General--Sales without sales charges or contingent deferred sales charges," "Additional Information About Class A and Class M shares," and "Contingent Deferred Sales Charges--Class A shares." Class B shares and class C shares are sold subject to a CDSC payable upon redemption within a specified period after purchase. The prospectus contains a table of applicable CDSCs. Class B shares will automatically convert into class A shares at the end of the month eight years after the purchase date. Class B shares acquired by exchanging class B shares of another Putnam fund will convert into class A shares based on the time of the initial purchase. Class B shares acquired through reinvestment of distributions will convert into Class A shares based on the date of the initial purchase to which such shares relate. For this purpose, class B shares acquired through reinvestment of distributions will be attributed to particular purchases of class B shares in accordance with such procedures as the Trustees may determine from time to time. The conversion of class B shares to class A shares is subject to the condition that such conversions will not constitute taxable events for Federal tax purposes. Class Y shares, which are not subject to sales charges or a CDSC, are available only to certain defined contribution plans. See the prospectus that offers class Y shares for more information. Certain purchase programs described below are not available to defined contribution plans. Consult your employer for information on how to purchase shares through your plan. The fund is currently making a continuous offering of its shares. The fund receives the entire net asset value of shares sold. The fund will accept unconditional orders for shares to be executed at the public offering price based on the net asset value per share next determined after the order is placed. In the case of class A shares and class M shares, the public offering price is the net asset value plus the applicable sales charge, if any. No sales charge is included in the public offering price of other classes of shares. In the case of orders for purchase of shares placed through dealers, the public offering price will be based on the net asset value determined on the day the order is placed, but only if the dealer receives the order before the close of regular trading on the Exchange. If the dealer receives the order after the close of the Exchange, the price will be based on the net asset value next determined. If funds for the purchase of shares are sent directly to Putnam Investor Services, they will be invested at the public offering price based on the net asset value next determined after receipt. Payment for shares of the fund must be in U.S. dollars; if made by check, the check must be drawn on a U.S. bank. Initial and subsequent purchases must satisfy the minimums stated in the prospectus, except that (i) individual investments under certain employee benefit plans or Tax Qualified Retirement Plans may be lower, (ii) persons who are already shareholders may make additional purchases of $50 or more by sending funds directly to Putnam Investor Services (see "Your investing account" below), and (iii) for investors participating in systematic investment plans and military allotment plans, the initial and subsequent purchases must be $25 or more. Information about these plans is available from investment dealers or from Putnam Mutual Funds. As a convenience to investors, shares may be purchased through a systematic investment plan. Pre-authorized monthly bank drafts for a fixed amount (at least $25) are used to purchase fund shares at the applicable public offering price next determined after Putnam Mutual Funds receives the proceeds from the draft (normally the 20th of each month, or the next business day thereafter). Further information and application forms are available from investment dealers or from Putnam Mutual Funds. Except for funds that declare a distribution daily, distributions to be reinvested are reinvested without a sales charge in shares of the same class as of the ex-dividend date using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. Dividends for Putnam money market funds are credited to a shareholder's account on the payment date. Distributions for all other funds that declare a distribution daily are reinvested without a sales charge as of the next day following the period for which distributions are paid using the net asset value determined on that date, and are credited to a shareholder's account on the payment date. PAYMENT IN SECURITIES. In addition to cash, the fund may accept securities as payment for fund shares at the applicable net asset value. Generally, the fund will only consider accepting securities to increase its holdings in a portfolio security, or if Putnam Management determines that the offered securities are a suitable investment for the fund and in a sufficient amount for efficient management. While no minimum has been established, it is expected that the fund would not accept securities with a value of less than $100,000 per issue as payment for shares. The fund may reject in whole or in part any or all offers to pay for purchases of fund shares with securities, may require partial payment in cash for such purchases to provide funds for applicable sales charges, and may discontinue accepting securities as payment for fund shares at any time without notice. The fund will value accepted securities in the manner described in the section "Determination of Net Asset Value" for valuing shares of the fund. The fund will only accept securities which are delivered in proper form. The fund will not accept options or restricted securities as payment for shares. The acceptance of securities by certain funds in exchange for fund shares is subject to additional requirements. In the case of Putnam American Government Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds, Putnam Capital Appreciation Fund, Putnam Diversified Equity Trust, Putnam Diversified Income Trust II, Putnam Equity Income Fund, Putnam Europe Growth Fund, The Putnam Fund for Growth & Income, Putnam Funds Trust, Putnam Global Governmental Income Trust, Putnam Growth and Income Fund II, Putnam High Yield Advantage Fund, Putnam Intermediate Tax Exempt Fund, Putnam Investment Funds, Putnam Intermediate U.S. Government Income Fund, Putnam Investment-Grade Bond Fund, Putnam Municipal Income Fund, Putnam Natural Resources Fund, Putnam OTC Emerging Growth Fund, Putnam Overseas Growth Fund, Putnam Preferred Income Fund, Putnam Tax Exempt Income Fund and Putnam Tax-Free Income Trust, transactions involving the issuance of fund shares for securities or assets other than cash will be limited to a bona-fide re- organization or statutory merger and to other acquisitions of portfolio securities that meet all the following conditions: (a) such securities meet the investment objective(s) and policies of the fund; (b) such securities are acquired for investment and not for resale; (c) such securities are liquid securities which are not restricted as to transfer either by law or liquidity of market; and (d) such securities have a value which is readily ascertainable, as evidenced by a listing on the American Stock Exchange, the New York Stock Exchange or The Nasdaq Stock Market, Inc. In addition, Putnam Global Governmental Income Trust may accept only investment grade bonds with prices regularly stated in publications generally accepted by investors, such as the London Financial Times and the Association of International Bond Dealers manual, or securities listed on the New York or American Stock Exchanges or on The Nasdaq Stock Market, Inc. Putnam Diversified Income Trust may accept only bonds with prices regularly stated in publications generally accepted by investors. For federal income tax purposes, a purchase of fund shares with securities will be treated as a sale or exchange of such securities on which the investor will realize a taxable gain or loss. The processing of a purchase of fund shares with securities involves certain delays while the fund considers the suitability of such securities and while other requirements are satisfied. For information regarding procedures for payment in securities, contact Putnam Mutual Funds. Investors should not send securities to the fund except when authorized to do so and in accordance with specific instructions received from Putnam Mutual Funds. SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED SALES CHARGES. The fund may sell shares without a sales charge or CDSC to: (i) current and retired Trustees of the fund; officers of the fund; directors and current and retired U.S. full-time employees of Putnam Management, Putnam Mutual Funds, their parent corporations and certain corporate affiliates; family members of and employee benefit plans for the foregoing; and partnerships, trusts or other entities in which any of the foregoing has a substantial interest; (ii) employee benefit plans, for the repurchase of shares in connection with repayment of plan loans made to plan participants (if the sum loaned was obtained by redeeming shares of a Putnam fund sold with a sales charge) (not offered by tax-exempt funds); (iii) clients of administrators of tax-qualified employee benefit plans which have entered into agreements with Putnam Mutual Funds (not offered by tax-exempt funds); (iv) registered representatives and other employees of broker-dealers having sales agreements with Putnam Mutual Funds; employees of financial institutions having sales agreements with Putnam Mutual Funds or otherwise having an arrangement with any such broker-dealer or financial institution with respect to sales of fund shares; and their spouses and children under age 21 (Putnam Mutual Funds is regarded as the dealer of record for all such accounts); (v) investors meeting certain requirements who sold shares of certain Putnam closed-end funds pursuant to a tender offer by such closed-end fund; (vi) a trust department of any financial institution purchasing shares of the fund in its capacity as trustee of any trust, if the value of the shares of the fund and other Putnam funds purchased or held by all such trusts exceeds $1 million in the aggregate; and (vii) "wrap accounts" maintained for clients of broker- dealers, financial institutions or financial planners who have entered into agreements with Putnam Mutual Funds with respect to such accounts. In addition, the fund may issue its shares at net asset value without an initial sales charge or a CDSC in connection with the acquisition of substantially all of the securities owned by other investment companies or personal holding companies, and the CDSC will be waived on redemptions of shares arising out of death or disability or in connection with certain withdrawals from IRA or other retirement plans. Up to 12% of the value of class B shares subject to a systematic withdrawal plan may also be redeemed each year without a CDSC. The fund may sell class M shares at net asset value to members of qualified groups. See "Group purchases of class A and class M shares" below. PAYMENTS TO DEALERS. Putnam Mutual Funds may, at its expense, pay concessions in addition to the payments disclosed in the prospectus to dealers which satisfy certain criteria established from time to time by Putnam Mutual Funds relating to increasing net sales of shares of the Putnam funds over prior periods, and certain other factors. ADDITIONAL INFORMATION ABOUT CLASS A AND CLASS M SHARES The underwriter's commission is the sales charge shown in the prospectus less any applicable dealer discount. Putnam Mutual Funds will give dealers ten days' notice of any changes in the dealer discount. Putnam Mutual Funds retains the entire sales charge on any retail sales made by it. Putnam Mutual Funds offers several plans by which an investor may obtain reduced sales charges on purchases of class A shares and class M shares. The variations in sales charges reflect the varying efforts required to sell shares to separate categories of purchasers. These plans may be altered or discontinued at any time. COMBINED PURCHASE PRIVILEGE. The following persons may qualify for the sales charge reductions or eliminations shown in the prospectus by combining into a single transaction the purchase of class A shares or class M shares with other purchases of any class of shares: (i) an individual, or a "company" as defined in Section 2(a)(8) of the Investment Company Act of 1940 (which includes corporations which are corporate affiliates of each other); (ii) an individual, his or her spouse and their children under twenty-one, purchasing for his, her or their own account; (iii) a trustee or other fiduciary purchasing for a single trust estate or single fiduciary account (including a pension, profit-sharing, or other employee benefit trust created pursuant to a plan qualified under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code")); (iv) tax-exempt organizations qualifying under Section 501(c)(3) of the Internal Revenue Code (not including tax- exempt organizations qualifying under Section 403(b)(7) (a "403(b) plan") of the Code; and (v) employee benefit plans of a single employer or of affiliated employers, other than 403(b) plans. A combined purchase currently may also include shares of any class of other continuously offered Putnam funds (other than money market funds) purchased at the same time through a single investment dealer, if the dealer places the order for such shares directly with Putnam Mutual Funds. CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A purchaser of class A shares or class M shares may qualify for a cumulative quantity discount by combining a current purchase (or combined purchases as described above) with certain other shares of any class of Putnam funds already owned. The applicable sales charge is based on the total of: (i) the investor's current purchase; and (ii) the maximum public offering price (at the close of business on the previous day) of: (a) all shares held by the investor in all of the Putnam funds (except money market funds); and (b) any shares of money market funds acquired by exchange from other Putnam funds; and (iii) the maximum public offering price of all shares described in paragraph (ii) owned by another shareholder eligible to participate with the investor in a "combined purchase" (see above). To qualify for the combined purchase privilege or to obtain the cumulative quantity discount on a purchase through an investment dealer, when each purchase is made the investor or dealer must provide Putnam Mutual Funds with sufficient information to verify that the purchase qualifies for the privilege or discount. The shareholder must furnish this information to Putnam Investor Services when making direct cash investments. STATEMENT OF INTENTION. Investors may also obtain the reduced sales charges for class A shares or class M shares shown in the prospectus for investments of a particular amount by means of a written Statement of Intention, which expresses the investor's intention to invest that amount (including certain "credits," as described below) within a period of 13 months in shares of any class of the fund or any other continuously offered Putnam fund (excluding money market funds). Each purchase of class A shares or class M shares under a Statement of Intention will be made at the public offering price applicable at the time of such purchase to a single transaction of the total dollar amount indicated in the Statement of Intention. A Statement of Intention may include purchases of shares made not more than 90 days prior to the date that an investor signs a Statement; however, the 13-month period during which the Statement of Intention is in effect will begin on the date of the earliest purchase to be included. An investor may receive a credit toward the amount indicated in the Statement of Intention equal to the maximum public offering price as of the close of business on the previous day of all shares he or she owns on the date of the Statement of Intention which are eligible for purchase under a Statement of Intention (plus any shares of money market funds acquired by exchange of such eligible shares). Investors do not receive credit for shares purchased by the reinvestment of distributions. Investors qualifying for the "combined purchase privilege" (see above) may purchase shares under a single Statement of Intention. The Statement of Intention is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Statement of Intention is 5% of such amount, and must be invested immediately. Class A shares or class M shares purchased with the first 5% of such amount will be held in escrow to secure payment of the higher sales charge applicable to the shares actually purchased if the full amount indicated is not purchased. When the full amount indicated has been purchased, the escrow will be released. If an investor desires to redeem escrowed shares before the full amount has been purchased, the shares will be released from escrow only if the investor pays the sales charge that, without regard to the Statement of Intention, would apply to the total investment made to date. To the extent that an investor purchases more than the dollar amount indicated on the Statement of Intention and qualifies for a further reduced sales charge, the sales charge will be adjusted for the entire amount purchased at the end of the 13-month period, upon recovery from the investor's dealer of its portion of the sales charge adjustment. Once received from the dealer, which may take a period of time or may never occur, the sales charge adjustment will be used to purchase additional shares at the then current offering price applicable to the actual amount of the aggregate purchases. These additional shares will not be considered as part of the total investment for the purpose of determining the applicable sales charge pursuant to the Statement of Intention. No sales charge adjustment will be made unless and until the investor's dealer returns any excess commissions previously received. To the extent that an investor purchases less than the dollar amount indicated on the Statement of Intention within the 13- month period, the sales charge will be adjusted upward for the entire amount purchased at the end of the 13-month period. This adjustment will be made by redeeming shares from the account to cover the additional sales charge, the proceeds of which will be paid to the investor's dealer and Putnam Mutual Funds in accordance with the prospectus. If the account exceeds an amount that would otherwise qualify for a reduced sales charge, that reduced sales charge will be applied. Statements of Intention are not available for certain employee benefit plans. Statement of Intention forms may be obtained from Putnam Mutual Funds or from investment dealers. Interested investors should read the Statement of Intention carefully. GROUP PURCHASES OF CLASS A AND CLASS M SHARES. Members of qualified groups may purchase class A shares of the fund at a group sales charge rate of 4.50% of the public offering price (4.71% of the net amount invested). The dealer discount on such sales is 3.75% of the offering price. Members of qualified groups may also purchase class M shares at net asset value. To receive the class A or class M group rate, group members must purchase shares through a single investment dealer designated by the group. The designated dealer must transmit each member's initial purchase to Putnam Mutual Funds, together with payment and completed application forms. After the initial purchase, a member may send funds for the purchase of shares directly to Putnam Investor Services. Purchases of shares are made at the public offering price based on the net asset value next determined after Putnam Mutual Funds or Putnam Investor Services receives payment for the shares. The minimum investment requirements described above apply to purchases by any group member. Only shares purchased under the class A group discount are included in calculating the purchased amount for the purposes of these requirements. Qualified groups include the employees of a corporation or a sole proprietorship, members and employees of a partnership or association, or other organized groups of persons (the members of which may include other qualified groups) provided that: (i) the group has at least 25 members of which, with respect to the class A discount only, at least 10 members participate in the initial purchase; (ii) the group has been in existence for at least six months; (iii) the group has some purpose in addition to the purchase of investment company shares at a reduced sales charge; (iv) the group's sole organizational nexus or connection is not that the members are credit card holders of a company, policy holders of an insurance company, customers of a bank or broker-dealer, clients of an investment adviser or security holders of a company; (v) with respect to the class A discount only, the group agrees to provide its designated investment dealer access to the group's membership by means of written communication or direct presentation to the membership at a meeting on not less frequently than an annual basis; (vi) the group or its investment dealer will provide annual certification in form satisfactory to Putnam Investor Services that the group then has at least 25 members and, with respect to the class A discount only, that at least ten members participated in group purchases during the immediately preceding 12 calendar months; and (vii) the group or its investment dealer will provide periodic certification in form satisfactory to Putnam Investor Services as to the eligibility of the purchasing members of the group. Members of a qualified group include: (i) any group which meets the requirements stated above and which is a constituent member of a qualified group; (ii) any individual purchasing for his or her own account who is carried on the records of the group or on the records of any constituent member of the group as being a good standing employee, partner, member or person of like status of the group or constituent member; or (iii) any fiduciary purchasing shares for the account of a member of a qualified group or a member's beneficiary. For example, a qualified group could consist of a trade association which would have as its members individuals, sole proprietors, partnerships and corporations. The members of the group would then consist of the individuals, the sole proprietors and their employees, the members of the partnerships and their employees, and the corporations and their employees, as well as the trustees of employee benefit trusts acquiring class A shares for the benefit of any of the foregoing. A member of a qualified group may, depending upon the value of class A shares of the fund owned or proposed to be purchased by the member, be entitled to purchase class A shares of the fund at non-group sales charge rates shown in the prospectus which may be lower than the group sales charge rate, if the member qualifies as a person entitled to reduced non-group sales charges. Such a group member will be entitled to purchase at the lower rate if, at the time of purchase, the member or his or her investment dealer furnishes sufficient information for Putnam Mutual Funds or Putnam Investor Services to verify that the purchase qualifies for the lower rate. Interested groups should contact their investment dealer or Putnam Mutual Funds. The fund reserves the right to revise the terms of or to suspend or discontinue group sales at any time. EMPLOYEE BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS. The term "employee benefit plan" means any plan or arrangement, whether or not tax-qualified, which provides for the purchase of class A shares. The term "affiliated employer" means employers who are affiliated with each other within the meaning of Section 2(a)(3)(C) of the Investment Company Act of 1940. The term "individual account plan" means any employee benefit plan whereby (i) class A shares are purchased through payroll deductions or otherwise by a fiduciary or other person for the account of participants who are employees (or their spouses) of an employer, or of affiliated employers, and (ii) a separate investing account is maintained in the name of such fiduciary or other person for the account of each participant in the plan. The table of sales charges in the prospectus applies to sales to employee benefit plans, except that the fund may sell class A shares at net asset value to employee benefit plans, including individual account plans, of employers or of affiliated employers which have at least 750 employees to whom such plan is made available, in connection with a payroll deduction system of plan funding (or other system acceptable to Putnam Investor Services) by which contributions or account information for plan participation are transmitted to Putnam Investor Services by methods acceptable to Putnam Investor Services. The fund may also sell class A shares at net asset value to participant- directed qualified retirement plans with at least 200 eligible employees, or prior to December 1, 1995, a plan sponsored by an employer or by affiliated employers which have at least 750 employees and, beginning December 1, 1995, the fund may sell class M shares at net asset value to participant-directed qualified retirement plans with at least 50 eligible employees. A participant-directed qualified retirement plan participating in a "multi-fund" program approved by Putnam Mutual Funds may include amounts invested in the other mutual funds participating in such program for purposes of determining whether the plan may purchase class A shares at net asset value based on the size of the purchase as described in the prospectus. These investments will also be included for purposes of the discount privileges and programs described above. Additional information about participant-directed qualified retirement plans and individual account plans is available from investment dealers or from Putnam Mutual Funds. CONTINGENT DEFERRED SALES CHARGES CLASS A SHARES. Class A shares purchased at net asset value by shareholders investing $1 million or more, including purchases pursuant to any Combined Purchase Privilege, Right of Accumulation or Statement of Intention, are subject to a CDSC of 1.00% or 0.50%, respectively, if redeemed within the first or second year after purchase. The class A CDSC is imposed on the lower of the cost and the current net asset value of the shares redeemed. The CDSC does not apply to shares sold without a sales charge through participant-directed qualified retirement plans and shares purchased by certain investors investing $1 million or more that have made arrangements with Putnam Mutual Funds and whose dealer of record waived the commission described in the next paragraph. Except as stated below, Putnam Mutual Funds pays investment dealers of record commissions on sales of class A shares of $1 million or more based on an investor's cumulative purchases of such shares, including purchases pursuant to any Combined Purchase Privilege, Right of Accumulation or Statement of Intention, during the one-year period beginning with the date of the initial purchase at net asset value and each subsequent one- year period beginning with the first net asset value purchase following the end of the prior period. Such commissions are paid at the rate of 1.00% of the amount under $3 million, 0.50% of the next $47 million and 0.25% thereafter. On sales at net asset value to a participant-directed qualified retirement plan initially investing less than $20 million in Putnam funds and other investments managed by Putnam Management or its affiliates (including a plan with at least 200 eligible employees, or prior to December 1, 1995, a plan sponsored by an employer with more than 750 employees), Putnam Mutual Funds pays commissions during each one-year measuring period, determined as described above, at the rate of 1.00% of the first $2 million, 0.80% of the next $1 million and 0.50% thereafter, except that commissions on sales prior to December 1, 1995 are based on cumulative purchases during the life of the account and are paid at the rate of 1.00% of the amount under $3 million and 0.50% thereafter. On sales at net asset value to all other participant-directed qualified retirement plans, Putnam Mutual Funds pays commissions on the initial investment and on subsequent net quarterly sales (gross sales minus gross redemptions during the quarter) at the rate of 0.15%. Money market fund shares are excluded from all commission calculations, except for determining the amount initially invested by a participant-directed qualified retirement plan. Commissions on sales at net asset value to such plans are subject to Putnam Mutual Funds' right to reclaim such commissions if the shares are redeemed within two years. Different CDSC and commission rates may apply to shares purchased before April 1, 1994. CLASS B AND CLASS C SHARES. Investors who set up an Automatic Cash Withdrawal Plan ("ACWP") for a class B and class C share account (see "Plans available to shareholders -- Automatic Cash Withdrawal Plan") may withdraw through the ACWP up to 12% of the net asset value of the account (calculated as set forth below) each year without incurring any CDSC. Shares not subject to a CDSC (such as shares representing reinvestment of distributions) will be redeemed first and will count toward the 12% limitation. If there are insufficient shares not subject to a CDSC, shares subject to the lowest CDSC liability will be redeemed next until the 12% limit is reached. The 12% figure is calculated on a pro rata basis at the time of the first payment made pursuant to an ACWP and recalculated thereafter on a pro rata basis at the time of each ACWP payment. Therefore, shareholders who have chosen an ACWP based on a percentage of the net asset value of their account of up to 12% will be able to receive ACWP payments without incurring a CDSC. However, shareholders who have chosen a specific dollar amount (for example, $100 per month from a fund that pays income distributions monthly) for their periodic ACWP payment should be aware that the amount of that payment not subject to a CDSC may vary over time depending on the net asset value of their account. For example, if the net asset value of the account is $10,000 at the time of payment, the shareholder will receive $100 free of the CDSC (12% of $10,000 divided by 12 monthly payments). However, if at the time of the next payment the net asset value of the account has fallen to $9,400, the shareholder will receive $94 free of any CDSC (12% of $9,400 divided by 12 monthly payments) and $6 subject to the lowest applicable CDSC. This ACWP privilege may be revised or terminated at any time. ALL SHARES. No CDSC is imposed on shares of any class subject to a CDSC ("CDSC Shares") to the extent that the CDSC Shares redeemed (i) are no longer subject to the holding period therefor, (ii) resulted from reinvestment of distributions on CDSC Shares, or (iii) were exchanged for shares of another Putnam fund, provided that the shares acquired in such exchange or subsequent exchanges (including shares of a Putnam money market fund) will continue to remain subject to the CDSC, if applicable, until the applicable holding period expires. In determining whether the CDSC applies to each redemption of CDSC Shares, CDSC Shares not subject to a CDSC are redeemed first. The fund will waive any CDSC on redemptions, in the case of individual, joint or Uniform Transfers to Minors Act accounts, in the event of death or post-purchase disability of a shareholder, for the purpose of paying benefits pursuant to tax-qualified retirement plans ("Benefit Payments"), or, in the case of living trust accounts, in the event of the death or post-purchase disability of the settlor of the trust). Benefit payments currently include, without limitation, (1) distributions from an IRA due to death or disability, (2) a return of excess contributions to an IRA or 401(k) plan, and (3) distributions from retirement plans qualified under Section 401(a) of the Code or from a 403(b) plan due to death, disability, retirement or separation from service. These waivers may be changed at any time. Additional waivers may apply to IRA accounts opened prior to February 1, 1994. DISTRIBUTION PLANS If the fund or a class of shares of the fund has adopted a distribution plan, the prospectus describes the principal features of the plan. This SAI contains additional information which may be of interest to investors. Continuance of a plan is subject to annual approval by a vote of the Trustees, including a majority of the Trustees who are not interested persons of the fund and who have no direct or indirect interest in the plan or related arrangements (the "Qualified Trustees"), cast in person at a meeting called for that purpose. All material amendments to a plan must be likewise approved by the Trustees and the Qualified Trustees. No plan may be amended in order to increase materially the costs which the fund may bear for distribution pursuant to such plan without also being approved by a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be. A plan terminates automatically in the event of its assignment and may be terminated without penalty, at any time, by a vote of a majority of the Qualified Trustees or by a vote of a majority of the outstanding voting securities of the fund or the relevant class of the fund, as the case may be. If plan payments are made to reimburse Putnam Mutual Funds for payments to dealers based on the average net asset value of fund shares attributable to shareholders for whom the dealers are designated as the dealer of record, "average net asset value" attributable to a shareholder account means the product of (i) the fund's average daily share balance of the account and (ii) the fund's average daily net asset value per share (or the average daily net asset value per share of the class, if applicable). For administrative reasons, Putnam Mutual Funds may enter into agreements with certain dealers providing for the calculation of "average net asset value" on the basis of assets of the accounts of the dealer's customers on an established day in each quarter. Financial institutions receiving payments from Putnam Mutual Funds as described above may be required to comply with various state and federal regulatory requirements, including among others those regulating the activities of securities brokers or dealers. INVESTOR SERVICES SHAREHOLDER INFORMATION Each time shareholders buy or sell shares, they will receive a statement confirming the transaction and listing their current share balance. (Under certain investment plans, a statement may only be sent quarterly.) Shareholders will receive a statement confirming reinvestment of distributions in additional fund shares (or in shares of other Putnam funds for Dividends Plus accounts) promptly following the quarter in which the reinvestment occurs. To help shareholders take full advantage of their Putnam investment, they will receive a Welcome Kit and a periodic publication covering many topics of interest to investors. The fund also sends annual and semiannual reports that keep shareholders informed about its portfolio and performance, and year-end tax information to simplify their recordkeeping. Easy-to-read, free booklets on special subjects such as the Exchange Privilege and IRAs are available from Putnam Investor Services. Shareholders may call Putnam Investor Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m. and 7:00 p.m. Boston time for more information, including account balances. YOUR INVESTING ACCOUNT The following information provides more detail concerning the operation of a Putnam Investing Account. For further information or assistance, investors should consult Putnam Investor Services. Shareholders who purchase shares through a defined contribution plan should note that not all of the services or features described below may be available to them, and they should contact their employer for details. A shareholder may reinvest a cash distribution without a front-end sales charge or without the reinvested shares being subject to a CDSC, as the case may be, by delivering to Putnam Investor Services the uncashed distribution check, endorsed to the order of the fund. Putnam Investor Services must receive the properly endorsed check within 1 year after the date of the check. The Investing Account also provides a way to accumulate shares of the fund. In most cases, after an initial investment of $500, a shareholder may send checks to Putnam Investor Services for $50 or more, made payable to the fund, to purchase additional shares at the applicable public offering price next determined after Putnam Investor Services receives the check. Checks must be drawn on a U.S. bank and must be payable in U.S. dollars. Putnam Investor Services acts as the shareholder's agent whenever it receives instructions to carry out a transaction on the shareholder's account. Upon receipt of instructions that shares are to be purchased for a shareholder's account, shares will be purchased through the investment dealer designated by the shareholder. Shareholders may change investment dealers at any time by written notice to Putnam Investor Services, provided the new dealer has a sales agreement with Putnam Mutual Funds. Shares credited to an account are transferable upon written instructions in good order to Putnam Investor Services and may be sold to the fund as described under "How to sell shares" in the prospectus. Money market funds and certain other funds will not issue share certificates. A shareholder may send to Putnam Investor Services any certificates which have been previously issued for safekeeping at no charge to the shareholder. Putnam Mutual Funds, at its expense, may provide certain additional reports and administrative material to qualifying institutional investors with fiduciary responsibilities to assist these investors in discharging their responsibilities. Institutions seeking further information about this service should contact Putnam Mutual Funds, which may modify or terminate this service at any time. Putnam Investor Services may make special services available to shareholders with investments exceeding $1,000,000. Contact Putnam Investor Services for details. The fund pays Putnam Investor Services' fees for maintaining Investing Accounts. REINSTATEMENT PRIVILEGE An investor who has redeemed shares of the fund may reinvest (within 1 year) the proceeds of such sale in shares of the same class of the fund, or may be able to reinvest (within 1 year) the proceeds in shares of the same class of one of the other continuously offered Putnam funds (through the Exchange Privilege described in the prospectus), including, in the case of shares subject to a CDSC, the amount of CDSC charged on the redemption. Any such reinvestment would be at the net asset value of the shares of the fund(s) the investor selects, next determined after Putnam Mutual Funds receives a Reinstatement Authorization. The time that the previous investment was held will be included in determining any applicable CDSC due upon redemptions and, in the case of class B shares, the eight-year period for conversion to class A shares. Shareholders will receive from Putnam Mutual Funds the amount of any CDSC paid at the time of redemption as part of the reinstated investment, which may be treated as capital gains to the shareholder for tax purposes. Exercise of the Reinstatement Privilege does not alter the federal income tax treatment of any capital gains realized on a sale of fund shares, but to the extent that any shares are sold at a loss and the proceeds are reinvested in shares of the fund, some or all of the loss may be disallowed as a deduction. Consult your tax adviser. Investors who desire to exercise the Reinstatement Privilege should contact their investment dealer or Putnam Investor Services. EXCHANGE PRIVILEGE Except as otherwise set forth in this section, by calling Putnam Investor Services, investors may exchange shares valued up to $500,000 between accounts with identical registrations, provided that no certificates are outstanding for such shares and no address change has been made within the preceding 15 days. During periods of unusual market changes and shareholder activity, shareholders may experience delays in contacting Putnam Investor Services by telephone to exercise the Telephone Exchange Privilege. Putnam Investor Services also makes exchanges promptly after receiving a properly completed Exchange Authorization Form and, if issued, share certificates. If the shareholder is a corporation, partnership, agent, or surviving joint owner, Putnam Investor Services will require additional documentation of a customary nature. Because an exchange of shares involves the redemption of fund shares and reinvestment of the proceeds in shares of another Putnam fund, completion of an exchange may be delayed under unusual circumstances if the fund were to suspend redemptions or postpone payment for the fund shares being exchanged, in accordance with federal securities laws. Exchange Authorization Forms and prospectuses of the other Putnam funds are available from Putnam Mutual Funds or investment dealers having sales contracts with Putnam Mutual Funds. The prospectus of each fund describes its investment objective(s) and policies, and shareholders should obtain a prospectus and consider these objectives and policies carefully before requesting an exchange. Shares of certain Putnam funds are not available to residents of all states. The fund reserves the right to change or suspend the Exchange Privilege at any time. Shareholders would be notified of any change or suspension. Additional information is available from Putnam Investor Services. Shares of the fund must be held at least 15 days by the shareholder requesting an exchange. There is no holding period if the shareholder acquired the shares to be exchanged through reinvestment of distributions, transfer from another shareholder, prior exchange or certain employer-sponsored defined contribution plans. In all cases, the shares to be exchanged must be registered on the records of the fund in the name of the shareholder requesting the exchange. Shareholders of other Putnam funds may also exchange their shares at net asset value for shares of the fund, as set forth in the current prospectus of each fund. For federal income tax purposes, an exchange is a sale on which the investor generally will realize a capital gain or loss depending on whether the net asset value at the time of the exchange is more or less than the investor's basis. The Exchange Privilege may be revised or terminated at any time. Shareholders would be notified of any such change or suspension. DIVIDENDS PLUS Shareholders may invest the fund's distributions of net investment income or distributions combining net investment income and short-term capital gains in shares of the same class of another continuously offered Putnam fund (the "receiving fund") using the net asset value per share of the receiving fund determined on the date the fund's distribution is payable. No sales charge or CDSC will apply to the purchased shares unless the fund paying the distribution is a money market fund. The prospectus of each fund describes its investment objective(s) and policies, and shareholders should obtain a prospectus and consider these objective(s) and policies carefully before investing their distributions in the receiving fund. Shares of certain Putnam funds are not available to residents of all states. The minimum account size requirement for the receiving fund will not apply if the current value of your account in the fund paying the distribution is more than $5,000. Shareholders of other Putnam funds (except for money market funds, whose shareholders must pay a sales charge or become subject to a CDSC) may also use their distributions to purchase shares of the fund at net asset value. For federal tax purposes, distributions from the fund which are reinvested in another fund are treated as paid by the fund to the shareholder and invested by the shareholder in the receiving fund and thus, to the extent comprised of taxable income and deemed paid to a taxable shareholder, are taxable. The Dividends PLUS program may be revised or terminated at any time. PLANS AVAILABLE TO SHAREHOLDERS The plans described below are fully voluntary and may be terminated at any time without the imposition by the fund or Putnam Investor Services of any penalty. All plans provide for automatic reinvestment of all distributions in additional shares of the fund at net asset value. The fund, Putnam Mutual Funds or Putnam Investor Services may modify or cease offering these plans at any time. AUTOMATIC CASH WITHDRAWAL PLAN ("ACWP"). An investor who owns or buys shares of the fund valued at $10,000 or more at the current public offering price may open an ACWP plan and have a designated sum of money ($50 or more) paid monthly, quarterly, semi-annually or annually to the investor or another person. (Payments from the fund can be combined with payments from other Putnam funds into a single check through a designated payment plan.) Shares are deposited in a plan account, and all distributions are reinvested in additional shares of the fund at net asset value (except where the plan is utilized in connection with a charitable remainder trust). Shares in a plan account are then redeemed at net asset value to make each withdrawal payment. Payment will be made to any person the investor designates; however, if shares are registered in the name of a trustee or other fiduciary, payment will be made only to the fiduciary, except in the case of a profit-sharing or pension plan where payment will be made to a designee. As withdrawal payments may include a return of principal, they cannot be considered a guaranteed annuity or actual yield of income to the investor. The redemption of shares in connection with a plan generally will result in a gain or loss for tax purposes. Some or all of the losses realized upon redemption may be disallowed pursuant to the so-called wash sale rules if shares of the same fund from which shares were redeemed are purchased (including through the reinvestment of fund distributions) within a period beginning 30 days before, and ending 30 days after, such redemption. In such a case, the basis of the replacement shares will be increased to reflect the disallowed loss. Continued withdrawals in excess of income will reduce and possibly exhaust invested principal, especially in the event of a market decline. The maintenance of a plan concurrently with purchases of additional shares of the fund would be disadvantageous to the investor because of the sales charge payable on such purchases. For this reason, the minimum investment accepted while a plan is in effect is $1,000, and an investor may not maintain a plan for the accumulation of shares of the fund (other than through reinvestment of distributions) and a plan at the same time. The cost of administering these plans for the benefit of those shareholders participating in them is borne by the fund as an expense of all shareholders. The fund, Putnam Mutual Funds or Putnam Investor Services may terminate or change the terms of the plan at any time. A plan will be terminated if communications mailed to the shareholder are returned as undeliverable. Investors should consider carefully with their own financial advisers whether the plan and the specified amounts to be withdrawn are appropriate in their circumstances. The fund and Putnam Investor Services make no recommendations or representations in this regard. TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS. (NOT OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-EXEMPT SECURITIES.) Investors may purchase shares of the fund through the following Tax Qualified Retirement Plans, available to qualified individuals or organizations: Standard and variable profit-sharing (including 401(k)) and money purchase pension plans; and Individual Retirement Account Plans (IRAs). Each of these Plans has been qualified as a prototype plan by the Internal Revenue Service. Putnam Investor Services will furnish services under each plan at a specified annual cost. Putnam Fiduciary Trust Company serves as trustee under each of these Plans. Forms and further information on these Plans are available from investment dealers or from Putnam Mutual Funds. In addition, specialized professional plan administration services are available on an optional basis; contact Putnam Defined Contribution Plan Services at 1-800-225-2465, extension 8600. A 403(b) Retirement Plan is available for employees of public school systems and organizations which meet the requirements of Section 501(c)(3) of the Internal Revenue Code. Forms and further information on the 403(b) Plan are also available from investment dealers or from Putnam Mutual Funds. Shares of the fund may also be used in simplified employee pension (SEP) plans. For further information on the Putnam prototype SEP plan, contact an investment dealer or Putnam Mutual Funds. Consultation with a competent financial and tax adviser regarding these Plans and consideration of the suitability of fund shares as an investment under the Employee Retirement Income Security Act of 1974, or otherwise, is recommended. SIGNATURE GUARANTEES Redemption requests for shares having a net asset value of $100,000 or more must be signed by the registered owners or their legal representatives and must be guaranteed by a bank, broker/dealer, municipal securities dealer or broker, government securities dealer or broker, credit union, national securities exchange, registered securities association, clearing agency, savings association or trust company, provided such institution is acceptable under and conforms with Putnam Fiduciary Trust Company's signature guarantee procedures. A copy of such procedures is available upon request. If you want your redemption proceeds sent to an address other than your address as it appears on Putnam's records, you must provide a signature guarantee. Putnam Investor Services usually requires additional documentation for the sale of shares by a corporation, partnership, agent or fiduciary, or a surviving joint owner. Contact Putnam Investor Services for details. SUSPENSION OF REDEMPTIONS The fund may not suspend shareholders' right of redemption, or postpone payment for more than seven days, unless the New York Stock Exchange is closed for other than customary weekends or holidays, or if permitted by the rules of the Securities and Exchange Commission during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the fund to dispose of its securities or to determine fairly the value of its net assets, or during any other period permitted by order of the Commission for protection of investors. SHAREHOLDER LIABILITY Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the fund. However, the Agreement and Declaration of Trust disclaims shareholder liability for acts or obligations of the fund and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the fund or the Trustees. The Agreement and Declaration of Trust provides for indemnification out of fund property for all loss and expense of any shareholder held personally liable for the obligations of the fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the fund would be unable to meet its obligations. The likelihood of such circumstances is remote. STANDARD PERFORMANCE MEASURES Yield and total return data for the fund may from time to time be presented in Part I of this SAI and in advertisements. In the case of funds with more than one class of shares, all performance information is calculated separately for each class. The data is calculated as follows. Total return for one-, five- and ten-year periods (or for such shorter periods as the fund has been in operation or shares of the relevant class have been outstanding) is determined by calculating the actual dollar amount of investment return on a $1,000 investment in the fund made at the beginning of the period, at the maximum public offering price for class A shares and class M shares and net asset value for other classes of shares, and then calculating the annual compounded rate of return which would produce that amount. Total return for a period of one year is equal to the actual return of the fund during that period. Total return calculations assume deduction of the fund's maximum sales charge or CDSC, if applicable, and reinvestment of all fund distributions at net asset value on their respective reinvestment dates. The fund's yield is presented for a specified thirty-day period (the "base period"). Yield is based on the amount determined by (i) calculating the aggregate amount of dividends and interest earned by the fund during the base period less expenses for that period, and (ii) dividing that amount by the product of (A) the average daily number of shares of the fund outstanding during the base period and entitled to receive dividends and (B) the per share maximum public offering price for class A shares or class M shares, as appropriate, and net asset value for other classes of shares on the last day of the base period. The result is annualized on a compounding basis to determine the yield. For this calculation, interest earned on debt obligations held by the fund is generally calculated using the yield to maturity (or first expected call date) of such obligations based on their market values (or, in the case of receivables-backed securities such as the Government National Mortgage Association ("GNMAs"), based on cost). Dividends on equity securities are accrued daily at their stated dividend rates. The amount of expenses used in determining the fund's yield includes, in addition to expenses actually accrued by the fund, an estimate of the amount of expenses that the fund would have incurred if brokerage commissions had not been used to reduce such expenses. If the fund is a money market fund, yield is computed by determining the percentage net change, excluding capital changes, in the value of an investment in one share over the seven-day period for which yield is presented (the "base period"), and multiplying the net change by 365/7 (or approximately 52 weeks). Effective yield represents a compounding of the yield by adding 1 to the number representing the percentage change in value of the investment during the base period, raising that sum to a power equal to 365/7, and subtracting 1 from the result. If the fund is a tax-exempt fund, the tax-equivalent yield during the base period may be presented for shareholders in one or more stated tax brackets. Tax-equivalent yield is calculated by adjusting the tax-exempt yield by a factor designed to show the approximate yield that a taxable investment would have to earn to produce an after-tax yield equal, for that shareholder, to the tax-exempt yield. The tax-equivalent yield will differ for shareholders in other tax brackets. At times, Putnam Management may reduce its compensation or assume expenses of the fund in order to reduce the fund's expenses. The per share amount of any such fee reduction or assumption of expenses during the fund's past ten fiscal years (or for the life of the fund, if shorter) is reflected in the table in the section entitled "Financial highlights" in the prospectus. Any such fee reduction or assumption of expenses would increase the fund's yield and total return during the period of the fee reduction or assumption of expenses. All data are based on past performance and do not predict future results. COMPARISON OF PORTFOLIO PERFORMANCE Independent statistical agencies measure the fund's investment performance and publish comparative information showing how the fund, and other investment companies, performed in specified time periods. Three agencies whose reports are commonly used for such comparisons are set forth below. From time to time, the fund may distribute these comparisons to its shareholders or to potential investors. THE AGENCIES LISTED BELOW MEASURE PERFORMANCE BASED ON THEIR OWN CRITERIA RATHER THAN ON THE STANDARDIZED PERFORMANCE MEASURES DESCRIBED IN THE PRECEDING SECTION. LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund rankings monthly. The rankings are based on total return performance calculated by Lipper, generally reflecting changes in net asset value adjusted for reinvestment of capital gains and income dividends. They do not reflect deduction of any sales charges. Lipper rankings cover a variety of performance periods, including year-to-date, 1-year, 5-year, and 10-year performance. Lipper classifies mutual funds by investment objective and asset category. MORNINGSTAR, INC. distributes mutual fund ratings twice a month. The ratings are divided into five groups: highest, above average, neutral, below average and lowest. They represent a fund's historical risk/reward ratio relative to other funds in its broad investment class as determined by Morningstar, Inc. Morningstar ratings cover a variety of performance periods, including 3-year, 5- year, 10-year and overall performance. The performance factor for the overall rating is a weighted-average assessment of the fund's 3-year, 5-year, and 10-year total return performance (if available) reflecting deduction of expenses and sales charges. Performance is adjusted using quantitative techniques to reflect the risk profile of the fund. The ratings are derived from a purely quantitative system that does not utilize the subjective criteria customarily employed by rating agencies such as Standard & Poor's and Moody's Investor Service, Inc. CDA/WIESENBERGER'S MANAGEMENT RESULTS publishes mutual fund rankings and is distributed monthly. The rankings are based entirely on total return calculated by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and 10-year. Mutual funds are ranked in general categories (e.g., international bond, international equity, municipal bond, and maximum capital gain). Weisenberger rankings do not reflect deduction of sales charges or fees. Independent publications may also evaluate the fund's performance. The fund may from time to time refer to results published in various periodicals, including Barrons, Financial World, Forbes, Fortune, Investor's Business Daily, Kiplinger's Personal Finance Magazine, Money, U.S. News and World Report and The Wall Street Journal. Independent, unmanaged indexes, such as those listed below, may be used to present a comparative benchmark of fund performance. The performance figures of an index reflect changes in market prices, reinvestment of all dividend and interest payments and, where applicable, deduction of foreign withholding taxes, and do not take into account brokerage commissions or other costs. Because the fund is a managed portfolio, the securities it owns will not match those in an index. Securities in an index may change from time to time. THE CONSUMER PRICE INDEX, prepared by the U.S. Bureau of Labor Statistics, is a commonly used measure of the rate of inflation. The index shows the average change in the cost of selected consumer goods and services and does not represent a return on an investment vehicle. THE DOW JONES INDUSTRIAL AVERAGE is an index of 30 common stocks frequently used as a general measure of stock market performance. THE DOW JONES UTILITIES AVERAGE is an index of 15 utility stocks frequently used as a general measure of stock market performance. CS FIRST BOSTON HIGH YIELD INDEX is a market-weighted index including publicly traded bonds having a rating below BBB by Standard & Poor's and Baa by Moody's. THE LEHMAN BROTHERS AGGREGATE BOND INDEX is an index composed of securities from The Lehman Brothers Government/Corporate Bond Index, The Lehman Brothers Mortgage-Backed Securities Index and The Lehman Brothers Asset-Backed Securities Index and is frequently used as a broad market measure for fixed-income securities. THE LEHMAN BROTHERS ASSET-BACKED SECURITIES INDEX is an index composed of credit card, auto, and home equity loans. Included in the index are pass-through, bullet (noncallable), and controlled amortization structured debt securities; no subordinated debt is included. All securities have an average life of at least one year. THE LEHMAN BROTHERS CORPORATE BOND INDEX is an index of publicly issued, fixed-rate, non-convertible investment-grade domestic corporate debt securities frequently used as a general measure of the performance of fixed-income securities. THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is an index of publicly issued U.S. Treasury obligations, debt obligations of U.S. government agencies (excluding mortgage-backed securities), fixed-rate, non-convertible, investment-grade corporate debt securities and U.S. dollar-denominated, SEC-registered non-convertible debt issued by foreign governmental entities or international agencies used as a general measure of the performance of fixed-income securities. THE LEHMAN BROTHERS INTERMEDIATE TREASURY BOND INDEX is an index of publicly issued U.S. Treasury obligations with maturities of up to ten years and is used as a general gauge of the market for intermediate-term fixed-income securities. THE LEHMAN BROTHERS LONG-TERM TREASURY BOND INDEX is an index of publicly issued U.S. Treasury obligations (excluding flower bonds and foreign-targeted issues) that are U.S. dollar-denominated and have maturities of 10 years or greater. THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX includes 15- and 30-year fixed rate securities backed by mortgage pools of the Government National Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association. THE LEHMAN BROTHERS MUNICIPAL BOND INDEX is an index of approximately 20,000 investment-grade, fixed-rate tax-exempt bonds. THE LEHMAN BROTHERS TREASURY BOND INDEX is an index of publicly issued U.S. Treasury obligations (excluding flower bonds and foreign-targeted issues) that are U.S. dollar denominated, have a minimum of one year to maturity, and are issued in amounts over $100 million. THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX is an index of approximately 1,482 equity securities listed on the stock exchanges of the United States, Europe, Canada, Australia, New Zealand and the Far East, with all values expressed in U.S. dollars. THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX is an index of approximately 1,045 equity securities issued by companies located in 18 countries and listed on the stock exchanges of Europe, Australia, and the Far East. All values are expressed in U.S. dollars. THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX is an index of approximately 627 equity securities issued by companies located in one of 13 European countries, with all values expressed in U.S. dollars. THE MORGAN STANLEY CAPITAL INTERNATIONAL PACIFIC INDEX is an index of approximately 418 equity securities issued by companies located in 5 countries and listed on the exchanges of Australia, New Zealand, Japan, Hong Kong, Singapore/Malaysia. All values are expressed in U.S. dollars. THE NASDAQ INDUSTRIAL AVERAGE is an index of stocks traded in The Nasdaq Stock Market, Inc. National Market System. THE RUSSELL 2000 INDEX is composed of the 2,000 smallest securities in the Russell 3000 Index, representing approximately 7% of the Russell 3000 total market capitalization. The Russell 3000 Index is composed of 3,000 large U.S. companies ranked by market capitalization, representing approximately 98% of the U.S. equity market. THE SALOMON BROTHERS LONG-TERM HIGH-GRADE CORPORATE BOND INDEX is an index of publicly traded corporate bonds having a rating of at least AA by Standard & Poor's or Aa by Moody's and is frequently used as a general measure of the performance of fixed-income securities. THE SALOMON BROTHERS LONG-TERM TREASURY INDEX is an index of U.S. government securities with maturities greater than 10 years. THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX is an index that tracks the performance of the 14 government bond markets of Australia, Austria, Belgium Canada, Denmark, France, Germany, Italy, Japan, Netherlands, Spain, Sweden, United Kingdom and the United States. Country eligibility is determined by market capitalization and investability criteria. THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX (non $U.S.) is an index of foreign government bonds calculated to provide a measure of performance in the government bond markets outside of the United States. STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX is an index of common stocks frequently used as a general measure of stock market performance. STANDARD & POOR'S 40 UTILITIES INDEX is an index of 40 utility stocks. STANDARD & POOR'S/BARRA VALUE INDEX is an index constructed by ranking the securities in the Standard & Poor's 500 Composite Stock Price Index by price-to-book ratio and including the securities with the lowest price- to-book ratios that represent approximately half of the market capitalization of the Standard & Poor's 500 Composite Stock Price Index. In addition, Putnam Mutual Funds may distribute to shareholders or prospective investors illustrations of the benefits of reinvesting tax-exempt or tax-deferred distributions over specified time periods, which may include comparisons to fully taxable distributions. These illustrations use hypothetical rates of tax-advantaged and taxable returns and are not intended to indicate the past or future performance of any fund. DEFINITIONS "Putnam Management" -- Putnam Investment Management, Inc., the fund's investment manager. "Putnam Mutual Funds" -- Putnam Mutual Funds Corp., the fund's principal underwriter. "Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company, Company" the fund's custodian. "Putnam Investor Services" -- Putnam Investor Services, a division of Putnam Fiduciary Trust Company, the fund's investor servicing agent. THE GEORGE PUTNAM FUND OF BOSTON FORM N-1A PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) Index to Financial Statements and Supporting Schedules: (1) Financial Statements: Statement of assets and liabilities -- July 31, 1996(a) . Statement of operations -- year ended July 31, 1996(a) . Statement of changes in net assets -- years ended July 31, 1996 and 1995(a) . Financial highlights(a)(b). Notes to financial statements(a). (2) Supporting Schedules: Schedule I -- Portfolio of investments owned -- July 31, 1996(a) . Schedules II through IX omitted because the required matter is not present. - ------------------------ (a) Incorporated by reference into Parts A and B. (b) Included in Part A. (b) Exhibits: 1a . Agreement and Declaration of Trust, as amended August 1, 1996 -- Exhibit 1. 1b. Agreement and Declaration of Trust, as amended July 11, 1996 -- Exhibit 2. 2. By-Laws, as amended through February 1, 1994 -- Incorporated by reference to Post- Effective Amendment No. 83 to the Registrant's Registration Statement. 3. Not applicable. 4a. Class A Specimen share certificate -- Incorporated by reference to Post-Effective Amendment No. 80 to the Registrant's Registration Statement. 4b. Class B Specimen share certificate -- Incorporated by reference to Post-Effective Amendment No. 81 to the Registrant's Registration Statement. 4c. Class M Specimen share certificate -- Incorporated by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement. 4d. Portions of Agreement and Declaration of Trust Relating to Shareholder's Rights -- Incorporated by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement. 4e. Portions of By-Laws Relating to Shareholder's Rights -- Incorporated by reference to Post- Effective Amendment No. 83 to the Registrant's Registration Statement. 5. Management Contract dated July 11, 1996 -- Exhibit 3. 6a. Distributors' Contract dated May 6, 1994 -- Incorporated by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement. 6b. Form of Specimen Dealer Sales Contract -- Incorporated by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement. 6c. Form of Specimen Financial Institution Sales Contract -- Incorporated by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement. 7. Not applicable. 8. Custodian Agreement with Putnam Fiduciary Trust Company dated May 3, 1991, as amended July 13, 1992 -- Incorporated by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement. 9. Investor Servicing Agreement dated June 3, 1991 with Putnam Fiduciary Trust Company -- Incorporated by reference to Post-Effective Amendment No. 79 to the Registrant's Registration Statement. 10. Opinion of Ropes & Gray, including consent -- Incorporated by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement. 11. Not applicable. 12. Not applicable. 13. Class B Investment Letter from The Putnam Management Company, Inc. to the Registrant -- Incorporated by reference to Post-Effective Amendment No. 81 to the Registrant's Registration Statement. 14a. Form of Prototype Individual Retirement Account Plan -- Incorporated by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement. 14b. Form of Prototype Basic Plan Documents and related Plan Agreements -- Exhibit 4. 15a. Class A Distribution Plan and Agreement dated January 1, 1990, as amended April 24, 1992 -- Incorporated by reference to Post-Effective Amendment No. 81 to the Registrant's Registration Statement. 15b. Class B Distribution Plan and Agreement dated April 24, 1992 -- Incorporated by reference to Post-Effective Amendment No. 81 to the Registrant's Registration Statement. 15c. Class C Distribution Plan and Agreement dated February 28, 1993 -- Incorporated by reference to Post-Effective Amendment No. 82 to the Registrant's Registration Statement. 15d. Class M Distribution Plan and Agreement dated November 28, 1994 -- Incorporated by reference to Post-Effective Amendment No. 84 to the Registrant's Registration Statement. 15e. Form of Specimen Dealer Service Agreement -- Incorporated by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement. 15f. Form of Specimen Financial Institution Service Agreement -- Incorporated by reference to Post-Effective Amendment No. 83 to the Registrant's Registration Statement. 16. Schedules for computation of performance quotations. - Exhibit 5 . 17a. Financial Data Schedule for Class A shares -- Exhibit 6 . 17b. Financial Data Schedule for Class B shares -- Exhibit 7 . 17c. Financial Data Schedule for Class M shares -- Exhibit 8 . 17d. Financial Data Schedule for Class Y shares -- Exhibit 9 . 18. Rule 18f-3(d) Plan -- Incorporated by reference to Post-Effective Amendment No. 84 to the Registrant's Registration Statement. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT None. ITEM 26. NUMBER OF HOLDERS OF SECURITIES As of July 31, 1996 the number of record holders of each class of securities of the Registrant is as follows: NUMBER OF RECORD HOLDERS ------------------------------------- CLASS A CLASS B CLASS M CLASS Y ------- ------- ------- ------- 54,191 34,804 1,851 34 ITEM 27. INDEMNIFICATION Article V, Section 10 of the Registrant's Agreement and Declaration of Trust, as amended, provides: Liability of Trustees. Section 10. A Trustee shall be liable for his or her own wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else. Item 28. Business and Other Connections of Investment Adviser Except as set forth below, the directors and officers of the Registrant's investment adviser have been engaged during the past two fiscal years in no business, vocation or employment of a substantial nature other than as directors or officers of the investment adviser or certain of its corporate affiliates. Certain officers of the investment adviser serve as officers of some or all of the Putnam funds. The address of the investment adviser, its corporate affiliates and the Putnam Funds is One Post Office Square, Boston, Massachusetts 02109. NAME NON-PUTNAM BUSINESS AND OTHER CONNECTIONS Manjit S. Bakshi Prior to October, 1995, Fidelity Vice President Management & Research Company, 82 Devonshire St., Boston, MA 02110 Robert K. Baumbach Prior to August, 1994, Vice President Vice President and Analyst, Keystone Custodian Funds, 200 Berkeley St., Boston, MA 02110 Robert R. Beck Director, Charles Bridge Publishing, Senior Vice President 85 Main St., Watertown, MA 02172 Janet S. Becker Prior to July, 1995, National Account Assistant Vice President Manager for Booz-Allen & Hamilton, American Express Travel Management Services, 100 Cambridge Park Drive, 02140; Prior to August, 1994, Account Manager, Hilton at Dedham Place, Dedham, MA 02026 Matthew G. Bevin Prior to February, 1995, Consultant, Assistant Vice President SEI Corporation, 680 East Swedesford Road, Wayne, PA 19807 Thomas Bogan Prior to November, 1994, Analyst Senior Vice President Lord, Abbett & Co., 767 Fifth Avenue, New York, NY 10153 John A. Boselli Prior to April, 1996, Senior Manager, Vice President Price Waterhouse LLP, 200 E. Randolph Drive, Chicago, IL 60601 Susan M. Braid Prior to October, 1995, Manager, Vice President Pioneer Group, Inc., 60 State St., Boston, MA 02109 Brian E. Broyles Prior to September, 1995, Accounts Assistant Vice President Payable Manager, Entex Information Services, Six International Drive, Rye Brook, NY 10573 Andrea Burke Prior to August, 1994, Vice President Vice President and Portfolio Manager, Back Bay Advisors, 399 Boylston St., Boston, MA 02116 Robert W. Burke Member-Executive Committee, The Ridge Senior Managing Director Club, Country Club Road, Sandwich, MA 02563; Member-Advisory Board, Cathedral High School, 74 Union Park St., So. Boston, MA 02118 Peter A. Capodilupo Prior to June, 1996, Chief Human Vice President Resources Officer, Harvard Business School, Soldiers Field Rd., Boston, MA 02163 Susan Chapman Prior to June, 1995, Vice President, Senior Vice President Forbes, Walsh, Kelly & Company, Inc., 17 Battery Place, New York, NY 10004 Louis F. Chrostowski Prior to August, 1995, Manager of Vice President Compensation and Benefits, Itek Optical Systems, 10 MacGuire Rd., Lexington, MA 02173 C. Beth Cotner Director, The Lyric Stage Theater, 140 Senior Vice President Clarendon St., Boston, MA; Prior to September, 1995, Executive Vice President, Director of U.S. Equity Funds, Kemper Financial Services, 120 S. LaSalle St., Chicago, IL 60603 Peter J. Curran Prior to January, 1996, Vice President Senior Vice President ITT Sheraton Director Worldwide Staffing, ITT Sheraton Corporation, 60 State St., Boston, MA 02109 Judith S. Deming Prior to May, 1995, Asset Manager, Assistant Vice President Fidelity Management & Research Company, 82 Devonshire St., Boston, MA 02109 Theodore J. Deutz Prior to January, 1995, Senior Vice Vice President President, Metropolitan West Securities, Inc. 10880 Wilshire Blvd., Suite 200, Los Angeles, CA 90024 Michael G. Dolan Chairman-Finance Council, St. Mary's Assistant Vice President Parish, 44 Myrtle St., Melrose, MA 02176; Member, School Advisory Board, St. Mary's School, 44 Myrtle St., Melrose, MA 02176 Andrea Donnelly Prior to March, 1996, Equity Trader, Assistant Vice President Hellman Jordan Management Company, Inc., 75 State St., Suite 2420, Boston, MA 02109 Joseph J. Eagleeye Prior to August, 1994, Associate, Assistant Vice President David Taussig & Associates, 424 University Ave., Sacramento, CA 95813 Ian C. Ferguson Senior Managing Director Prior to April, 1996, Chief Executive Officer, HSBC Asset Management, Ltd., 6 Bevis Marks, London, England Michael T. Fitzgerald Prior to September, 1994, Senior Senior Vice President Vice President, Vantage Global Advisers, 1201 Morningside Dr., Manhattan Beach, CA 90266 Brian J. Fullterton Prior to November, 1995, Vice Senior Vice President President, Pension and 401(k) Derivatives Marketing, J.P. Morgan, 60 Wall Street, New York, NY 10260 Roland Gillis Prior to March, 1995, Vice President Senior Vice President and Senior Portfolio Manager, Keystone Group, Inc., 200 Berkeley St., Boston, MA 02116 C. Kim Goodwin Prior to May, 1996, Vice President Senior Vice President Prudential Mutual Fund Investment Management, 751 Broad St., Newark, NJ 07101 J. Peter Grant Trustee, The Dover Church, Dover, MA Senior Vice President 02030 Jill Grossberg Prior to March, 1995, Associate Assistant Vice President Counsel, 440 Financial Group of and Associate Counsel Worcester, Inc., 440 Lincoln St., Worcester, MA 01653 Paul E. Haagensen Director, Haagensen Research Senior Vice President Foundation, 630 West 168th St., New York, NY 10032 Matthew C. Halperin Prior to April, 1996, Portfolio Senior Vice President Manager, Allstate Insurance, 3075 Sanders Road, Northbrook, IL 60062 Richard Harris Prior to October, 1995, Senior Vice Vice President President, Smith Mitchell Investment Group, 135 Main St., San Francisco, CA 94105; Prior to January, 1995, Managing Director, Dean Witter Reynolds, Inc., 101 California St., San Francisco, CA 94941 Deborah R. Healey Director and Secretary, Edwin Warren, Senior Vice President Inc., Rte. 100, Waitsfield, VT 05673 Daniel Herbert Prior to April, 1996, Vice President Vice President and Analyst, Keystone Group, Inc., 200 Berkeley St., Boston, MA 02116 Pamela Holding Prior to May, 1995, Senior Securities Vice President Analyst, Kemper Financial Services, Inc., 120 South LaSalle St., Chicago, IL 60603 Thomas J. Hoey Prior to April, 1996, Securities Vice President Analyst, Driehaus Capital Management, Inc., 25 East Erie St., Chicago, IL 60610 Joseph Joseph Prior to October, 1994, Managing Vice President Director, Vert Independent Capital Research, 53 Wall St., New York, NY 10052 Omid Kamshad Prior to January, 1996, Investment Senior Vice President Director, Lombard Odier, 13 Southampton Place, London, England, WC1; Prior to May, 1995, Director, Baring Asset Management, 155 Bishopsgate, London, England EC23XY Mary E. Kearney Trustee, Massachusetts Eye and Ear Managing Director Infirmary, 243 Charles St., Boston, MA 02114; Prior to February, 1995, Partner, Price Waterhouse, 160 Federal St., Boston, MA 02110 Paula Kienert Prior to June, 1995, Senior Reference Assistant Vice President Librarian, Fidelity Investments, 82 Devonshire Street, Boston, MA 02109 John P. Kihn Prior to April, 1996, Associate Vice President Portfolio Manager, Colonial Management Associates, Inc., One Financial Center, Boston, MA 02110 Chief Financial Officer, Bergman Research Group, Inc., 640 Bailey Road, Pittsburg, CA 94565 D. William Kohli Prior to September, 1994, Executive Managing Director Vice President and Co-Director of Global Bond Management, Franklin Advisors/Templeton Investment Counsel, 777 Mariners Island Blvd., San Mateo, CA 94404 Peter B. Krug Prior to January, 1995, Owner and Vice President Director, Griswold Special Care, 42 Ethan Allen Drive, Acton, MA 01720 Catherine A. Latham Prior to August, 1995, Director of Vice President Human Resources, Electronic Data Systems, 1601 Trapello Rd., Waltham, MA 02254 Kevin Lemire Prior to March, 1995, Corporate Assistant Vice President Facilities Manager, Bose Corporation, The Mountain, Framingham, MA 01701; Prior to June, 1994, Facilities Manager, The Pioneer Group, 60 State St., Boston, MA 02109 Lawrence J. Lasser Director, Marsh & McLennan Companies, President, Director Inc., 1221 Avenue of the Americas, and Chief Executive New York, NY 10020; Board Member, Artery Business Committee, One Beacon Street, Boston, MA 02108; Board of Managers, Investment and Finance Committees, Beth Israel Hospital, 330 Brookline Avenue, Boston, MA 02215; Board of Governors, Executive Committee, Investment Company Institute, 1401 H. St., N.W., Suite 1200, Washington, DC 20005; Board of Overseers, Museum of Fin Arts, 465 Huntington Ave., Boston, MA 02115; Board Member, Trust for City Hall Plaza, Three Center Plaza, Boston, MA 02108; Board Member, The Vault Coordinating Committee, c/o John Hancock Mutual Life Insurance Company, Law Sector, T-55, P.O. Box 111, Boston, MA 02117 James W. Lukens Prior to February, 1995, Vice Senior Vice President President of Institutional Marketing, Keystone Group, Inc., 200 Berkeley St., Boston, MA 02116 Kevin Maloney Trustee, Town of Hanover, NH, Trustee Managing Director of Trust Funds, Hanover, NH 03755; President and Board Member, Hampshire Cooperative Nursery School, Dartmouth College Highway, Hanover, NH 03755; Prior to April, 1995, Associate Professor, Amos Tuck School of Business, Dartmouth College, Hanover, NH 03255 Helen Mazareas Prior to May, 1995, Librarian, Assistant Vice President Scudder, Stevens & Clark, 2 International Place, Boston, MA 02110 Alexander J. McAuley Prior to June, 1995, Vice President, Senior Vice President Deutsche Bank Securities Corp. - Deutsche Asset Management, 1290 Avenue of the Americas, New York, NY 10019 William F. McGue Member, Advisory Committee, Academy Managing Director of Finance, 2 Oliver St., Boston, MA 02109 Carol McMullen Prior to June, 1995, Senior Vice, Managing Director President and Senior Portfolio Manager, Baring Asset Management, 125 High Street, Boston, MA 02110 Sandeep Mehta Prior to May, 1996, Vice President, Vice President Wellington Management Co., 100 Vanguard Blvd., Malvern, PA 19355 Darryl Mikami Prior to June, 1995, Vice President, Senior Vice President Fidelity Management & Research Company, 82 Devonshire St., Boston, MA 02109 Carol H. Miller Board Member, The Lyric Stage Theater, Assistant Vice President 140 Clarendon St., Boston, MA; Prior to July, 1995, Business Development Officer, Bank of Boston - Connecticut, 100 Pearl St., Hartford, CT 06101 Seung H. Minn Prior to June, 1995, Vice President Vice President Portfolio Management and Research, Templeton Quantitative Advisors, Inc., 31 W. 52nd St., New York, NY 10019 Maziar Minovi Prior to January, 1995, Associate Vice President Privatization Specialist, The International Bank for Reconstruction and Development, 1818 H St. N.W., Washington, DC 20433 Jeanne L. Mockard Trustee, The Bryn Mawr School, 109 Senior Vice President W. Melrose Avenue, Baltimore, MD 21210 Kenneth Mongtomery Prior to July, 1995, Senior Vice Managing Director President and Director of World Wide Sales, Chemcial Banking Corporation, Paul G. Murphy Prior to January, 1995, Section Assistant Vice President Manager, First Data Corp., 53 State Street, Boston, MA 02109 Lois O'Brien Prior to March, 1996, Director, Assistant Vice President Training and Development, J. Baker, Inc., 555 Turnpike St., Canton, MA 02021 C. Patrick O'Donnell, Jr. Prior to May, 1994, President, Managing Director Exeter Research, Inc., 163 Water Street, Exeter, New Hampshire, 03833 Keith Plapinger Vice Chairman and Trustee, Advent Vice President School, 17 Brimmer St., Boston, MA Jane E. Price Prior to February, 1995, Associate Assistant Vice President ERISA Attorney, Hale & Dorr, 60 State St., Boston, MA 02109 Charles E. Porter Director, The Boston Fulbright Executive Vice President Committee, 99 Garden St., Cambridge, MA; Trustee, Anatolia College and The American College of Thessaloniki, 555 10 Pycea, Thessaloniki, Greece George Putnam Chairman and Director, Putnam Mutual Chairman and Director Funds Corp.; Director, The Boston Company, Inc., One Boston Place, Boston, MA 02108; Director, Boston Safe Deposit and Trust Company, One Boston Place, Boston, MA 02108; Director, Freeport-McMoRan, Inc., 200 Park Avenue, New York, NY 10166; Director, General Mills, Inc., 9200 Wayzata Boulevard, Minneapolis, MN 55440; Director, Houghton Mifflin Company, One Beacon Street, Boston, MA 02108; Director, Marsh & McLennan Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020; Director, Rockefeller Group, Inc., 1230 Avenue of the Americas, New York, NY 10020 Keith Quinton Director, Eleazar, Inc., West Wheelock Senior Vice President St., Hanover, NH 03755; Prior to July, 1995, Vice President, Falconwood Securities Corporation, 565 5th Avenue, New York, NY 10017 Paul T. Quistberg Prior to July, 1995, Assistant Assistant Vice President Investment Officer, The Travelers Insurance Group., One Tower Square, Hartford, CT 06101 Kimberly A. Raynor Prior to April, 1996, Principal, Vice President Principal, Scudder, Stevens & Clark, 2 International Place, Boston, MA 02110 Thomas Rosalanko Prior to February, 1995, Senior Senior Vice President Account Manager, SEI Corporation, 680 East Swedesford Road, Wayne, PA 19807 Michael Scanlon Prior to February, 1995, Senior Assistant Vice President Financial Analyst, Massachusetts Financial Services, 500 Boylston St., Boston, MA 02116 Justin M. Scott Director, DSI Properties (Neja) Ltd. Managing Director Epping Rd., Reydon, Essex CM19 5RD; Director, DSI Management (Neja) Ltd., Epping Rd., Reydon, Essex CM19 5RD Max S. Senter General Partner, M.S. Senter & Sons Senior Vice President Partnership, 4900 Fayetteville, Rd., Raleigh, NC 27611 Robert M. Shafto Prior to January, 1995, Account Assistant Vice President Manager, IBM Corporation, 404 Wyman St., Waltham, MA 02254 Gordon H. Silver Trustee, Wang Center for the Managing Director Performing Arts, 270 Tremont St., Boston, MA 02116 Diedre West-Smith Prior to January, 1995, Senior Finance Assistant Vice President Officer, BayBank, 3 Universal Office Park, Waltham, MA 02254 Margaret Smith Prior to September, 1995, Vice Senior Vice President President, State Street Research, One Financial Center, Boston, MA 02111 Erin J. Spatz Prior to May, 1996, Vice Vice President President, Pioneering Management Organization, 60 State St., Boston, MA 02109 Steven Spiegel Director, Ultra Corp., 29 East Senior Managing Director Madison St., Chicago, IL 60602; Trustee, Babson College, One College Drive, Wellesley, MA 02157; Prior to December, 1994, Managing Director/Retirement, Lehman Brothers, Inc., 200 Vesey St., World Financial Center, New York, NY 10285 George W. Stairs Prior to July, 1994, Equity Research Vice President Analyst, ValueQuest Limited, Roundy's Hill, Marblehead, MA 01945 James H. Steggall Prior to May, 1995, Senior Municipal Assistant Vice President Analyst, Colonial Management Associates, Inc., One Financial Center, Boston, MA 02111; Prior to May, 1994, Controller, Wheelabrator Environmental Systems, Libery Lane, Hampton, NH 03842 Karen Stewart Prior to May, 1995, Equity Research Assistant Vice President Analyst, Chancellor Capital Management, 1166 Avenue of the Americas, New York, NY 10036 Roger Sullivan Prior to December, 1994, Vice Senior Vice President President, State Street Research & Management Co., One Financial Center, Boston, MA 02111 Robert Swift Prior to August, 1995, Far East Team Senior Vice President Leader and Portfolio Manager, IAI International/Hill Samuel Investment Advisors, 10 Fleet Place, London, England Jerry H. Tempelman Prior to May, 1994, Senior Money Assistant Vice President Market Trader, State Street Bank & Trust Co., 225 Franklin, Street, Boston, MA 02110 Michael Temple Prior to June, 1995, Vice President, Vice President Duff & Phelps, 55 East Monroe, Chicago, IL 60613 John A. Thompson Prior to September, 1995, Senior Vice President Trader, John Hancock Mutual Life Insurance Company, 200 Clarendon St., Boston, MA 02117 Hillary F. Till Prior to May, 1994, Fixed-Income Vice President Derivative Trader, Bank of Boston, 100 Federal Street, Boston, MA 02109 Lisa L. Trubiano Prior to July, 1995, Senior Marketing Vice President Consultant, John Hancock Mutual Life Insurance Company, 200 Clarendon St., Boston, MA 02117 Elizabeth A. Underhill Prior to August, 1994, Vice President Senior Vice President and Senior Equity Analyst, State Street Bank and Trust Company, 225 Franklin St., Boston, MA 02110 Charles C. Van Vleet Prior to August, 1994, Vice President Senior Vice President and Fixed-Income Manager, Alliance Capital Management, 1345 Avenue of the Americas, New York, NY 10105 Herbert S. Wagner, III Prior to August, 1995, Investment Assistant Vice President The First National Bank of Chicago, One First National Plaza, Chicago, IL 60670 Francis P. Walsh Prior to November, 1994, Research Vice President Analyst, Furman, Selz, Inc. 230 Park Avenue, New York, NY 10169 Michael R. Weinstein Prior to March, 1994, Management Vice President Consultant, Arthur D. Little, Acorn Park, Cambridge, MA 02140 ITEM 29. PRINCIPAL UNDERWRITER (a) Putnam Mutual Funds Corp. is the principal underwriter for each of the following investment companies, including the Registrant: Putnam Adjustable Rate U.S. Government Fund, Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds, Putnam Balanced Retirement Fund, Putnam California Tax Exempt Income Trust, Putnam California Tax Exempt Money Market Fund, Putnam Capital Appreciation Fund, Putnam Capital Manager Trust, Putnam Convertible Income-Growth Trust, Putnam Diversified Equity Trust, Putnam Diversified Income Trust, Putnam Diversified Income Trust II, Putnam Equity Income Fund, Putnam Europe Growth Fund, Putnam Federal Income Trust, Putnam Florida Tax Exempt Income Fund, Putnam Funds Trust, The George Putnam Fund of Boston, Putnam Global Governmental Income Trust, Putnam Global Growth Fund, Putnam Global Natural Resources Fund, Putnam Growth Fund, The Putnam Fund for Growth and Income, Putnam Growth and Income Fund II, Putnam Health Sciences Trust, Putnam High Yield Trust, Putnam High Yield Advantage Fund, Putnam High Yield Municipal Trust, Putnam Income Fund, Putnam Intermediate Tax Exempt Fund, Putnam Intermediate U.S. Government Income Fund, Putnam Investment Funds, Putnam Investors Fund, Putnam International Growth Fund, Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam Money Market Fund, Putnam Municipal Income Fund, Putnam Natural Resources Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam New Opportunities Fund, Putnam New York Tax Exempt Income Trust, Putnam New York Tax Exempt Money Market Fund, Putnam New York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income Fund, Putnam OTC Emerging Growth Fund, Putnam Pennsylvania Tax Exempt Income Fund, Putnam Preferred Income Fund, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Tax-Free Income Trust, Putnam U.S. Government Income Trust, Putnam Utilities Growth and Income Fund, Putnam Vista Fund, Putnam Voyager Fund, Putnam Voyager Fund II. (b) The directors and officers of the Registrant's principal underwriter are listed below. The principal business address of each person is One Post Office Square, Boston, MA 02109: Positions and Offices Positions and Offices Name with Underwriter with Registrant John V. Adduci Assistant Vice President None Christopher S. Alpaugh Vice President None Paulette C. Amisano Vice President None Ronald J. Anwar Vice President None Steven E. Asher Senior Vice President None Scott A. Avery Vice President None Christian E. Aymond Vice President None Hallie L. Baron Assistant Vice President None Ira G. Baron Senior Vice President None John L. Bartlett Senior Vice President None Dale Beardon Senior Vice President None Steven M. Beatty Vice President None Deborah A. Beaudette Assistant Vice President None Matthew F. Beaudry Vice President None John J. Bent Vice President None Thomas A. Beringer Vice President None Sharon A. Berka Vice President None Kathleen A. Blackman Vice President None Maureen L. Boisvert Vice President None John F. Boneparth Managing Director None Keith R. Bouchard Vice President None Linda M. Brady Assistant Vice President None Leslee R. Bresnahan Senior Vice President None James D. Brockelman Senior Vice President None Joel S. Brookman Assistant Vice President None Dale R.C. Brown Assistant Vice President None Brian E. Broyles Assistant Vice President None Gail D. Buckner Senior Vice President None Robert W. Burke Senior Managing Director None Susan D. Cabana Vice President None Ellen S. Callahan Vice President None Thomas C. Callahan Assistant Vice President None Peter J. Campagna Vice President None Peter A. Capodilupo Vice President None Robert Capone Vice President None Patricia A. Cartwright Assistant Vice President None Janet Casale-Sweeney Vice President None Stephen J. Chaput Assistant Vice President None Steven F. Charlton Assistant Vice President None Louis F. Chrostowski Vice President None Daniel J. Church Vice President None James E. Clinton Assistant Vice President None John C. Clinton Assistant Vice President None Kathleen M. Collman Managing Director None Mark L. Coneeny Vice President None Clare D. Connelly Vice President None Donald A. Connelly Senior Vice President None Karen E. Connolly Assistant Vice President None Barry M. Conyers Assistant Vice President None Anna Coppola Vice President None F. Nicholas Corvinus Senior Vice President None Thomas A. Cosmer Vice President None Michele A. Cranston Vice President None Chad H. Cristo Assistant Vice President None Peter J. Curran Senior Vice President None Jessica E. Dahill Vice President None Kenneth L. Daly Senior Vice President None Edward H. Dane Vice President None Nancy M. Days Assistant Vice President None Pamela De Oliveira-Smith Assistant Vice President None Lisa M. DeMont Assistant Vice President None Richard D. DeSalvo Vice President None Joseph C. DeSimone Assistant Vice President None Daniel J. Delianedis Vice President None Judith S. Deming Assistant Vice President None Teresa F. Dennehy Assistant Vice President None Karen E. DiStasio Vice President None Michael G. Dolan Assistant Vice President None Scott M. Donaldson Vice President None Emily J. Durbin Vice President None David B. Edlin Senior Vice President None James M. English Senior Vice President None Vincent Esposito Managing Director None Mary K. Farrell Assistant Vice President None Michael J. Fechter Vice President None Susan H. Feldman Vice President None Paul F. Fichera Senior Vice President None C. Nancy Fisher Senior Vice President None Mitchell B. Fishman Senior Vice President None Joseph C. Fiumara Vice President None Patricia C. Flaherty Senior Vice President None Brian J. Fullerton Senior Vice President None Samuel F. Gagliardi Vice President None Karen M. Gardner Assistant Vice President None Judy S. Gates Vice President None Richard W. Gauger Assistant Vice President None Joseph P. Gennaco Vice President None Stephen E. Gibson Managing Director None Mark P. Goodfellow Assistant Vice President None Robert Goodman Managing Director None Mark D. Goodwin Assistant Vice President None Anthony J. Grace Assistant Vice President None Linda K. Grace Assistant Vice President None Robert G. Greenly Vice President None Jill Grossberg Assistant Vice President None Denise Grove Assistant Vice President None Jeffrey P. Gubala Vice President None James E. Halloran Vice President None Thomas W. Halloran Vice President None Meghan C. Hannigan Assistant Vice President None Bruce D. Harrington Assistant Vice President None Craig W. Hartigan Vice President None Howard W. Hawkins, III Vice President None Deanna R. Hayes-Castro Vice President None Paul P. Heffernan Vice President None Susan M. Heimanson Vice President None Joanne Heyman Assistant Vice President None Bess J.M. Hochstein Vice President None Jeremiah K. Holly, Sr. Vice President None Maureen A. Holmes Assistant Vice President None Paula J. Hoyt Assistant Vice President None William J. Hurley Senior Vice President None Gregory E. Hyde Senior Vice President None Dwight D. Jacobsen Senior Vice President None Douglas B. Jamieson Senior Managing Director, Director None Jay M. Johnson Vice President None Kevin M. Joyce Senior Vice President None Karen R. Kay Senior Vice President None Mary E. Kearney Managing Director None John P. Keating Vice President None A. Siobahn Kelly Assistant Vice President None Brian J. Kelly Vice President None Anne Kinsman Assistnat Vice President None Deborah H. Kirk Senior Vice President None Jill A. Koontz Assistant Vice President None Linda G. Kraunelis Assistant Vice President None Howard H. Kreutzberg Senior Vice President None Marjorie B. Krieger Assistant Vice President None Charles Lacasia Assistant Vice President None Arthur B. Laffer, Jr. Vice President None Catherine A. Latham Vice President None James D. Lathrop Vice President None Charles C. Ledbetter Vice President None Kevin Lemire Assistant Vice President None Anthony J. Leonard Vice President None Eric S. Levy Vice President None Edward V. Lewandowski Senior Vice President None Edward V. Lewandowski, Jr. Vice President None Samuel L. Lieberman Vice President None David M. Lifsitz Assistant Vice President None David R. Lilien Vice President None Ann Marie Linehan Assistant Vice President None Lisa M. Litant Assistant Vice President None Thomas W. Littauer Managing Director None Maura A. Lockwood Vice President None Rufino R. Lomba Vice President None Peter V. Lucas Senior Vice President None Robert F. Lucey Senior Managing Director, Director None Kathryn A. Lucier Assistant Vice President None Ann Malatos Assistant Vice President None Bonnie Mallin Vice President None Frederick S. Marius Assistant Vice President None Anne B. McCarthy Assistant Vice President None Paul McConville Vice President None McDermott, Daniel E. Assistant Vice President None Walter S. McFarland Vice President None Mark J. McKenna Senior Vice President None Gregory J. McMillan Vice President None Claye A. Metelmann Vice President None Bart D. Miller Vice President None Jeffery M. Miller Senior Vice President None Trisha A. Miller Senior Vice President None Ronald K. Mills Vice President None Kimberly A. Monahan Vice President None John L. Moore, III Vice President None Peter M. Moore Assistant Vice President None Mitchell Moret Senior Vice President None Barry L. Mosher Assistant Vice President None Donald E. Mullen Vice President None Paul G. Murphy Assistant Vice President None Brendan R. Murray Vice President None Robert Nadherny Vice President None Alexander L. Nelson Managing Director None John P. Nickodemus Vice President None Kristen P. O'Brien Vice President None Kevin L. O'Shea Senior Vice President None Nathan D. O'Steen Assistant Vice President None Joseph R. Palombo Managing Director None Scott A. Papes Vice President None Cynthia O. Parr Vice President None Samuel W. Perry Vice President None John G. Phoenix Vice President None Joseph Phoenix Senior Vice President None Keith Plapinger Vice President None Douglas H. Powell Vice President None Howard B. Present Senior Vice President None Jane E. Price Assistant Vice President None Scott M. Pulkrabek Vice President None George Putnam Director Chairman & President Kimberly Raynor Vice President None Debra V. Rothman Vice President None Robert B. Rowe Vice President None Kevin A. Rowell Senior Vice President None Thomas C. Rowley Vice President None Charles A. Ruys de Perez Senior Vice President None Deborah A. Ryan Assistant Vice President None Louise I. Santosuosso Assistant Vice President None Debra J. Sarkisian Assistant Vice President None Catherine A. Saunders Senior Vice President None Robbin L. Saunders Assistant Vice President None Karl W. Saur Vice President None Michael Scanlon Assistant Vice President None Shannon D. Schofield Vice President None Christine A. Scordato Vice President None Joseph W. Scott Assistant Vice President None John B. Shamburg Vice President None Kathleen G. Sharpless Managing Director None William N. Shiebler Director and President Vice President Robert J. Shull, II Vice President None Mark J. Siebold Assistant Vice President None Gordon H. Silver Senior Managing Director Vice President John Skistimas, Jr. Assistant Vice President None Steven Spiegel Senior Managing Director None Nicholas T. Stanojev Senior Vice President None Paul R. Stickney Vice President None John B. Stillwagon Assistant Vice President None Eric J. Studer Assistant Vice President None Brian L. Sullivan Vice President None Guy Sullivan Seniior Vice President None Kevin J. Sullivan Vice President None Moira Sullivan Vice President None Maureen C. Tallon Vice President None James S. Tambone Managing Director None B. Iris Tanner Assistant Vice President None Louis Tasiopoulos Managing Director None David S. Taylor Vice President None John R. Telling Vice President None Cynthia Tercha Vice President None Richard B. Tibbetts Senior Vice President None Patrice M. Tirado Vice President None Janet E. Tosi Assistant Vice President None Bonnie L. Troped Vice President None Christine M. Twigg Assistant Vice Presient None Larry R. Unger Vice President None Douglas J. Vander Linde Senior Vice President None Deirdre West-Smith Assistant Vice President None Edward F. Whalen Vice President None J. Bennett White Vice President None Kirk E. Williamson Senior Vice President None Leigh T. Williamson Vice President None Jane Wolfson Vice President None Benjamin I. Woloshin Vice President None William H. Woolverton Senior Vice President None Laura J. Zografos Vice President None ITEM 30. LOCATION OF ACCOUNTS AND RECORDS Persons maintaining physical possession of accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder are Registrant's Clerk, Beverly Marcus; Registrant's investment adviser, Putnam Investment Management, Inc.; Registrant's principal underwriter, Putnam Mutual Funds Corp.; Registrant's custodian, Putnam Fiduciary Trust Company ("PFTC"); and Registrant's transfer and dividend disbursing agent, Putnam Investor Services, a division of PFTC. The address of the Clerk, investment adviser, principal underwriter, custodian and transfer and dividend disbursing agent is One Post Office Square, Boston, Massachusetts 02109. ITEM 31. MANAGEMENT SERVICES None. ITEM 32. UNDERTAKINGS The Registrant undertakes to furnish to each person to whom a prospectus of the Registrant is delivered a copy of the Registrant's latest annual report to shareholders, upon request and without charge. CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses and Statement of Additional Information constituting parts of this Post-Effective Amendment No. 85 to the Registration Statement on Form N-1A (File No. 2-10816) ("the Registration Statement") of our report dated September 17, 1996 , relating to the financial statements and financial highlights appearing in the July 31, 1996 Annual Report of The George Putnam Fund of Boston, which financial statements and financial highlights are also incorporated by reference into the Registration Statement. We also consent to the references to us under the heading "Independent Accountants and Financial Statements" in such Statement of Additional Information and under the heading "Financial highlights" in such Prospectuses. PRICE WATERHOUSE LLP Boston, Massachusetts September 26, 1996 NOTICE A copy of the Agreement and Declaration of Trust of The George Putnam Fund of Boston is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually and the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Registrant. POWER OF ATTORNEY I, the undersigned Trustee of The George Putnam Fund of Boston, hereby severally constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of them singly, my true and lawful attorneys, with full power to them and each of them, to sign for me, and in my name and in the capacity indicated below, the Registration Statement on Form N-1A of The George Putnam Fund of Boston and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto my said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand and seal on the date set forth below. SIGNATURE TITLE DATE /s/ Ronald J. Jackson - --------------------- Trustee July 11, 1996 Ronald J. Jackson SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, and The Commonwealth of Massachusetts, on the 26th day of September, 1996 . THE GEORGE PUTNAM FUND OF BOSTON By: Gordon H. Silver, Vice President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement of The George Putnam Fund of Boston has been signed below by the following persons in the capacities and on the dates indicated: SIGNATURE TITLE George Putnam President and Chairman of the Board; Principal Executive Officer; Trustee John D. Hughes Senior Vice President; Treasurer and Principal Financial Officer Paul G. Bucuvalas Assistant Treasurer and Principal Accounting Officer Jameson A. Baxter Trustee Hans H. Estin Trustee John A. Hill Trustee Ronald J. Jackson Trustee Elizabeth T. Kennan Trustee Lawrence J. Lasser Trustee Robert E. Patterson Trustee Donald S. Perkins Trustee William F. Pounds Trustee George Putnam, III Trustee Eli Shapiro Trustee A.J.C. Smith Trustee W. Nicholas Thorndike Trustee By: Gordon H. Silver, as Attorney-in-Fact September 26, 1996 EXHIBIT INDEX THE GEORGE PUTNAM FUND OF BOSTON 1a. Agreement and Declaration of Trust, as amended August 1, 1996 -- Exhibit 1. 1b. Agreement and Declaration of Trust, as amended July 11, 1996 -- Exhibit 2. 5. Management Contract dated July 11, 1996 -- Exhibit 3. 14b. Form of Prototype Basic Plan Documents and related Plan Agreements -- Exhibit 4. 16. Schedules for computation of performance quotations. - Exhibit 5. 17a. Financial Data Schedule for Class A shares -- Exhibit 6. 17b. Financial Data Schedule for Class B shares -- Exhibit 7. 17c. Financial Data Schedule for Class M shares -- Exhibit 8. 17d. Financial Data Schedule for Class Y shares -- Exhibit 9. EX-99.B1 2 CHARTER THE GEORGE PUTNAM FUND OF BOSTON ------------------------ AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST This AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts, this 1st day of August, 1996, hereby amends and restates in its entirety the Agreement and Declaration of Trust dated November 1, 1937, as heretofore amended, by the Trustees hereunder and by the holders of shares of beneficial interest to be issued hereunder as hereinafter provided and shall be effective as of the date hereof. WITNESSETH that WHEREAS, the Trustees have agreed to manage all property coming into their hands as trustees in accordance with the provisions hereinafter set forth, NOW, THEREFORE, the said Trustees hereby declare that they will hold all cash, securities and other property which they may from time to time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the following terms and conditions for the benefit of the holders from time to time of certificates representing shares in this Trust as hereinafter set forth. ARTICLE I Name and Definitions NAME Section 1. This Trust shall be known as "The George Putnam Fund of Boston," and the Trustees shall conduct the business of the Trust under such name. Whenever said George Putnam shall cease for any reason to be a Trustee hereunder, his name shall not thereafter be used as part of the name of the Trust without his written consent or that of his heirs or personal representatives. DEFINITION OF "BENEFICIARY" Section 2. The term "beneficiaries" wherever it appears in this Declaration of Trust shall mean the holders of certificates representing the shares of beneficial interest issued by the Trustees as hereinafter provided. Every such beneficiary by the acceptance of a certificate representing one or more of such shares shall be held to have expressly assented and agreed to the terms hereof and to have become a party hereto. A beneficiary of record appearing upon the books of the Trustees shall be deemed by the Trustees for all purposes to be the owner of the shares standing in his name. DEFINITION OF "TRUST PROPERTY" Section 3. The term "Trust Property" wherever the same appears herein shall mean all of the Trust Property held by the Trustees as trustees hereunder. MARGINAL NOTES Section 4. The Article headings and marginal notes inserted in this Declaration are for convenience of reference and are not to be taken to control or affect the meaning, construction, or effect thereof. ARTICLE II Purpose of Trust PURPOSE OF TRUST The purpose of this Trust is to provide investors, including institutions, with a continuous source of investment under the personal management of the Trustees. It is expected that the Trust property will be invested largely in selected marketable securities, the Trustees giving emphasis to diversification as to types of securities as well as to industries and individual securities. Changes will be made from time to time in the proportion of the fund invested in the various types of securities or held in cash, as well as in the holdings of individual securities, in an attempt to secure the best utilization of the Trust's resources, giving emphasis to the conservation as well as to the growth of capital. ARTICLE III Issuance of Shares PAR VALUE OF SHARES Section 1. The beneficial ownership of the Trust Property shall be divided into an unlimited number of transferable shares of One Dollar ($1) par value each. The Trustee may, without approval of the beneficiaries, divide the shares into two or more classes, shares of each such class having such preferences and special or relative rights and privileges (including conversion rights, if any) as the Trustees may determine and as shall be set forth in the Bylaws. Such shares shall be represented by certificates in such form as the Trustees may from time to time determine, transferable by the holders thereof in person or by attorney upon the books of the Trustees upon surrender of such certificate properly endorsed for transfer. The Trustees may authorize the certificates to bear the facsimile signatures of any one or more of the Trustees provided such certificates are signed by an authorized officer of a duly appointed transfer agent or registrar of the Trust. The Trustees shall have full power and authority as to the issue and transfer of certificates in place of any certificates lost or destroyed. Such shares may be issued in such fractions as the Trustees shall determine from time to time, such fractional shares to have pro rata the same rights and privileges, including voting power, rights to dividends and other pro rata rights as full shares, and wherever the term share or shares is used herein it shall be deemed for all purposes to include such fractional shares to the extent of such fractions as full shares. The Trust at any time, at the discretion of the Trustees, may purchase, and the record holders shall be obligated to sell, all of such fractional shares at the liquidating value thereof in effect at the time of such purchase and the amount of such liquidating value shall be distributed to such record holders whereupon all such fractional shares shall become void and such holders of fractional shares shall have no rights in respect thereof. In lieu of issuing certificates for full or fractional shares, the Trustees may either issue receipts therefor in such form as they may determine or may keep accounts upon their books for the record holders of such shares, who shall in either case be deemed, for all purposes hereunder, to be the holders of certificates for such shares as if they had accepted such certificates and shall be held to have expressly assented, and agreed to the terms hereof. The record holders of the full or fractional shares of the Trust shall be entitled to obtain certificates therefor at any time upon request to the Trustees, but the Trust at the discretion of the Trustees may purchase, and such record holder shall be obligated to sell, any fractional shares of such holder at the liquidating value thereof in effect at the time of such request. AMOUNT RECEIVED BY TRUST Section 2. The shares of ownership in the Trust Property may be issued by the Trustees at not less than the par value thereof to such person or persons and at such price or prices for cash and/or such other property as they may from time to time determine. Upon the issue of shares in exchange for property whether acquired by merger or otherwise, the value of such property shall be appraised by the Trustees in such manner as shall be deemed by them to reflect its fair value, and the value thereof when so determined in good faith shall be conclusive. In no event shall any issue or sale, subsequent to the issue and sale of the first 10,400 shares, be at a rate which will yield to the Trust a sum or value less than the fair liquidating value per share of the then outstanding shares of the Trust as determined by the Trustees as hereinafter provided. Provided, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of shares of the Trust, that the Trustees may also issue shares pro rata to the beneficiaries at any time as a stock dividend and may issue to the beneficiaries from time to time rights to subscribe pro rata to new shares in the Trust at any price fixed by the Trustees; provided, however, that any such shares or rights to subscribe shares issued to the beneficiaries of a particular class of shares shall be issued to such beneficiaries pro rata in proportion to the number of shares of such class held by each of them. PAID-IN SURPLUS Section 3. Any excess received by the Trustees upon the issue and sale of the shares of the Trust over the par value thereof may be carried upon the books of the Trustees as paid-in surplus. The shares may at any time and from time to time in the discretion of the Trustees be changed to shares either of no par value or of such other par value as the Trustees may determine, and the difference between such other par value, or the difference between the stated value of the shares if they are changed to shares of no par value, and the then book value of the shares, exclusive of earned surplus, may be carried as paid-in or capital surplus. STATUS OF SHARES Section 4. Shares herein shall be deemed to be personal property giving only the rights in this Declaration of Trust or the Bylaws and in the certificates specifically set forth. The death of a beneficiary during the continuance of the Trust shall not operate to terminate the same nor entitle the representative of any deceased beneficiary to an accounting or to take any action in court or elsewhere against the Trustees, but only to the rights of said decedent under this Trust upon the surrender of the certificate or certificates for the shares owned by him. Ownership of shares shall not entitle the beneficiary to any title in or to the whole or any part of the Trust Property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of shares constitute the holders thereof partners. LIMITATION OF PERSONAL LIABILITY Section 5. The Trustees shall have no power to bind the beneficiaries personally or to call upon them for the payment of any sum of money or assessment whatsoever other than such as paid beneficiaries may at any time personally agree to pay by way of subscription to any shares or otherwise. ARTICLE IV Rights and Privileges of Beneficiaries Section 1. Subject to the voting powers of one or more classes of shares as set forth elsewhere in this Declaration of Trust or in the Bylaws, the beneficiaries shall have the right to vote regarding the following matters: (a) The election of Trustees as provided in Article V, Section 1; (b) The removal of Trustees as provided in Article V, Section 1; (c) The authorization of any proposed sale of the Trust Property as a whole as provided in Article VI, Section 1; and (d) The authorization of any proposed alteration or amendment of this Declaration of Trust as provided in Article VI, Section 4. VOTING POWERS AND MEETINGS Meetings of beneficiaries of any or all classes may be called by the Trustees from time to time for the purpose of taking action upon any matter requiring the vote or authority of the beneficiaries of such classes as herein provided or upon any other matter deemed by the Trustees to be necessary or desirable. Notice of any meeting of the beneficiaries shall be given by the Trustees at least ten (10) days before such meeting by mailing postage prepaid, a written or printed notice thereof stating the time, place and purpose of the meeting to each beneficiary entitled to vote at any such meeting at his address as the same appears upon the books of the Trust. Each beneficiary of record entitled to vote at any such meeting shall be entitled at such meeting one vote, either in person or by lawful proxy in writing filed with the Trustees, for each share of the Trust standing on its books in his name. On any matter submitted to a vote of beneficiaries, all shares of the Trust then entitled to vote shall, except as otherwise provided in the Bylaws, be voted in the aggregate as a single class without regard to classes of shares, except (1) when required by the 1940 Act or when the Trustees shall have determined that the matter affects one or more classes of shares materially differently, shares shall be voted by individual class; and (2) when the Trustees have determined that the matter affects only the interests of one or more classes, then only beneficiaries of such classes shall be entitled to vote thereon. At any meeting of the beneficiaries, a quorum for the transaction of business shall exist if holders of thirty percent of the shares of the Trust then outstanding and entitled to vote on a particular matter are present in person or by proxy, except that where this Declaration of Trust requires that holders of any class shall vote as an individual class, then thirty percent of the aggregate number of shares of that class entitled to vote shall be necessary to constitute a quorum for the transaction of business by that class. Any lesser number may make reasonable adjournments of such meeting until a quorum is obtained. If the Trustees shall fail or refuse to call or give notice of any meeting provided for above for a period of thirty (30) days after request in writing made by beneficiaries holding an aggregate of at least ten per cent (10%) of the shares of the Trust of all classes then outstanding and entitled to vote at any such meeting then beneficiaries holding a like percentage of such shares may call and give notice of such meeting, and thereupon the meeting shall be held in the manner provided for herein in case of call thereof by the Trustees. At each meeting of the beneficiaries, the Trustees shall appoint one of their number or one of the beneficiaries to preside thereat. The Trustees shall appoint a Clerk for each such meeting, who shall be duly sworn to the faithful discharge of his duties, to keep the minutes of such meeting, which minutes shall be signed and attested by him and filed with the records of the Trust. RIGHT TO DIVIDENDS Section 2. The beneficiaries shall be entitled to receive pro rata annually or oftener dividends in cash equal approximately to the net income of the Trust except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of shares of the Trust, provided that any distribution to the beneficiaries of a particular class of shares shall be made to such beneficiaries pro rata in proportion to the number of shares of such class held by each of them. Such distributions may be made even though the capital of the Trust may be impaired at the time of distribution. In addition the Trustees may make further distributions among the beneficiaries in cash or shares out of any available net assets of the Trust, but if any such distribution is made the source of the distribution together with the basis of calculation, in the case of a distribution out of capital gains, shall be called to the attention of the beneficiaries. In a case of a distribution payable in cash or stock at the election of any of the shareholders, the Trustees may prescribe whether a beneficiary failing to express his election before a given time shall be deemed to have elected to take shares rather than cash, or to take cash rather than shares, or to take shares with cash adjustments for fractions. DEFINITION OF NET INCOME Section 3. The term "net income" is hereby defined as the gross earnings of the Trust, excluding gains on sales of securities and stock dividends received, less the expenses of the Trust. The expenses shall include (1) taxes attributable to the income of the Trust exclusive of gains on sales, (2) the compensation of the Trustees, and (3) other charges properly deductible for the maintenance and administration of the Trust; but there shall not be deducted from gross or net income any losses on securities, realized or unrealized. The Trustees shall otherwise have full discretion to determine which items shall be treated as income and which items as capital and their determination shall be binding upon the beneficiaries. RIGHT TO SELL SHARES TO TRUST Section 4. The Trust shall purchase such shares as are offered by any beneficiary for redemption, upon the presentation of the certificate or certificates therefor, if any, to the Trust or to the Transfer Agent, duly endorsed or accompanied by a proper instrument of transfer, together with a request that the Trust purchase the shares represented thereby; and the Trust will pay therefor in cash the liquidating value of the shares so presented determined as of such time as the Trustees may from time to time specify, subject to any applicable rule of the Securities and Exchange Commission adopted under the Investment Company Act of 1940. For the protection of the remaining beneficiaries the Trustees reserve the right to demand not more than seven (7) full business days' written notice of the request to purchase such shares at such liquidating value, which period may be extended by the Trustees for such time as the New York Stock Exchange may at any time be closed for business or open upon a restricted basis, all under such reasonable rules and regulations as may be determined by the Trustees from time to time. DETERMINATION OF LIQUIDATING VALUE Section 5. For all purposes under this Indenture the liquidating value shall be determined by the Trustees or not less than two of any three or more officers of this Trust designated from time to time for this purpose by the Trustees as soon as possible after the close of the New York Stock Exchange on each business day upon which such Exchange is open, such liquidating value to remain in effect until the next determination of such liquidating value becomes effective; provided, however, that the Trustees or such officers may in their discretion make a more frequent determination of the liquidating value which shall become effective one hour after the time as of which such liquidating value is determined. Such liquidating value shall be determined in the following manner: (1) Securities for which market quotations are readily available shall be valued at that price which, in the opinion of the Trustees or the officer or officers making the determination, most nearly represents the market value of the particular security, and all other securities and assets shall be valued at their fair value as determined in good faith by the Trustees in accordance with accounting principles generally accepted at the time. All other securities and assets of the Trust, including cash, prepaid and accrued items, and dividends receivable, shall be appraised in such manner as shall be deemed by the Trustees to reflect their fair value. (2) From the total value of the Trust Property as so determined shall be deducted the liabilities of the Trust, including reserves for taxes, Trustees' compensation and such other expenses and liabilities of the Trust as may be determined by the Trustees to be accruing liabilities. For the purpose of determining such liquidating value in the case of repurchase there may also be deducted a reserve estimated by the Trustees to be reasonable for such taxes and expenses as would be then or thereafter incurred by the Trust if the Trust had sold all of its assets at the liquidating value thereof at the time of such determination. (3) The resulting amount shall represent the liquidating value of the Trust Property. In the event that there shall be more than one class of shares outstanding at the time of any such determination, the liquidating value of the Trust Property shall be allocated among such classes in such manner as the Trustees may reasonably determine in order to give effect to the preferences and special or relative rights and privileges of such classes. The net liquidating value per share shall be determined by dividing the liquidating value of the Trust Property by the number of shares of the Trust then outstanding (exclusive of any shares held in its Treasury) or, if more than one class of shares is outstanding, by dividing the liquidating value of the Trust Property allocated to each class by the number of shares of such respective class then outstanding (exclusive of any shares held in Treasury). The liquidating value of the Trust Property and shares as so determined shall be final and conclusive. REPORTS TO BENEFICIARIES Section 6. The Trustees shall keep accurate books of accounts and shall make reports to the beneficiaries at least semi-annually, such reports to contain a list of the investments of the Trust and a balance sheet and income statement for the period covered thereby in such detail as the Trustees shall deem proper. In addition, such reports shall contain a statement of all amounts paid to any firm, corporation, bank or trust company having a partner, officer or director who is also a Trustee of the Trust. ARTICLE V ELECTION, TERM OF OFFICE, POWERS AND DUTIES OF TRUSTEES ELECTION Section 1. A Trustee may be elected either by the Trustees or by the beneficiaries. There shall not be less than three Trustees. The number of Trustees shall be fixed by the Trustees. Each Trustee elected by the Trustees or the beneficiaries shall serve until he or she retires, resigns, is removed or dies or until the next meeting of beneficiaries called for the purpose of electing Trustees and until the election and qualification of his or her successor. At any meeting called for the purpose, a Trustee may be removed by a vote of the holders of two-thirds of the outstanding shares. The vote of beneficiaries holding a plurality of the shares of the Trust represented at such a meeting at which a quorum is present shall be necessary for the election of Trustees. TITLE OF SUCCESSORS The title to the Trust Property shall vest in any Trustee or Trustees elected or appointed as above provided, after written acceptance of such election or appointment by him or them, without any further act, and he or they shall thereupon have the same powers, duties and exemptions as though originally named as Trustee herein. Such written acceptances shall be filed with the records of the Trust, and any certificate signed by a majority of the Trustees as to who are or were Trustees at any time shall be conclusive and binding for all purposes. During any vacancy the remaining Trustee or a majority of the remaining Trustees may exercise any and all of the powers of the Trustees hereunder. The determination of vacancy or vacancies in the number of Trustees by reason of death, resignation or disability when made by the remaining Trustee or Trustees and set forth in any instrument filling such vacancy or vacancies shall be final and conclusive for all purposes. DELEGATION OF AUTHORITY Any Trustee may by power of attorney delegate his powers for a period not exceeding six (6) months at any one time to any other Trustee or Trustees hereunder, provided that in no case shall less than a majority of the Trustees personally exercise their powers hereunder except as herein otherwise expressly provided. Any instrument executed under the provisions of this section may be deposited with a custodian duly appointed for the Trust Property and the depositing in such manner shall have the same force and effect as the deposit with the Trustee or Trustees hereinbefore provided. Anything herein to the contrary notwithstanding, any vacancy or vacancies which reduce the number of the Trustees below three (3) shall be filled by the beneficiaries or the remaining Trustee or Trustees within six (6) months of the creation thereof. Notwithstanding any other provisions of this Declaration of Trust, the Trustees may, consistent with their responsibility for the general policies of the Trust and the general supervision of the business of the Trust and consistent with any applicable provisions of the Investment Company Act of 1940, delegate from time to time to such one or more of their number or to their officers, employees and agents or to any corporation, trust, association or other organization engaged as investment advisor or manager as hereinafter provided, the doing of such things, including, without limitation, authority to determine from time to time what investments shall be purchased, held, sold or exchanged and what portion, if any, of the Trust assets shall be held uninvested and to make changes in the investments of the Trust, and the execution of such deeds or other instruments either in the name of the Trust or the names of the Trustees or as their attorney or attorneys or otherwise as the Trustees may from time to time deem expedient. The Trustees may appoint from their number an executive committee of not less than three to serve during their pleasure. The executive committee may, when the Trustees are not in session at a meeting, exercise such of the powers and authority of the Trustees as may be conferred from time to time by the Trustees. Rules governing the actions of the executive committee may be adopted by the Trustees from time to time as they deem appropriate. The Trustees may appoint from their number such other committees from time to time as they deem appropriate. The number composing such committees, the powers and authority conferred upon such committees and the rules governing the actions of such committees shall be determined by the Trustees at their discretion. Any agreement, deed, mortgage, lease or other instrument or writing executed by one or more of the Trustees or by any officer, employee, or agent pursuant to general or specific authorization (or upon ratification thereof) by action of the Trustees as provided in this Declaration of Trust, shall be valid and binding upon the Trustees and upon the Trust. The Trustees may elect or appoint a Chairman (who shall be a Trustee) and a President (who shall be a Trustee) and may elect or appoint, from among their number or otherwise, one or more Vice-Presidents, a Treasurer, a Clerk, a Comptroller, one or more Assistant Clerks and Assistant Treasurers and such other officers or agents, who shall have such powers, duties and responsibilities as the Trustees may deem to be advisable. Two or more offices may be held by the same person. The Trustees may adopt and from time to time amend or repeal Bylaws for the conduct of the business of the Trust, and in such Bylaws may define the duties of the officers, agents, employees and representatives of the Trust. The Bylaws shall at all times be consistent with the provisions of this Declaration of Trust. NO DIRECT SALES OR PURCHASES OF SECURITIES BETWEEN TRUSTS AND TRUSTEES Section 2. No Trustee shall directly or indirectly purchase or sell any securities or other property from or to the Trust other than shares of the Trust, except purchases and sales of securities or other property if such transaction is permitted by, or is exempt or exempted from, the provisions of the Investment Company Act of 1940, as amended. Anything herein to the contrary notwithstanding, any Trustee or any organization with which any Trustee may be associated may also act as broker for the Trust in making purchases and sales of securities for or to the Trust of its investment portfolio, and may charge and receive from the Trust the usual and customary commission for such service. Any organization with which a Trustee may be associated in acting as broker for the Trust shall be responsible only for the proper execution of transactions in accordance with the instructions of the Trust and shall be subject to no further liability of any sort whatever. NO LOANS TO TRUSTEES OR DISTRIBUTOR Section 3. No Trustee or general distributor of the shares of the Trust or any officer or director of such distributor shall directly or indirectly borrow any money or other property from the Trust. INVESTMENT POWERS AND RESTRICTIONS Section 4. The Trustees shall have full power and authority to invest in, purchase, sell, and otherwise engage in transactions with respect to, securities, debt instruments and other property, instruments and rights of a financial character, and to engage in borrowings and to pledge or otherwise encumber the assets of the Trust. The Trustees also shall have full power and authority to exercise any rights of ownership with respect to any of the foregoing. The Trustees shall not in any way be bound or limited by any present or future law or custom in regard to trust investments but shall have full authority and power to make any and all investments which they in their uncontrolled discretion may deem proper to accomplish the purposes of the Trust. The Trustees shall also have full power and authority to sell or otherwise dispose of free and clear from any of the provisions of this Trust and from any of the liens created hereby all such investments and to reinvest the proceeds or any part thereof with continuing powers to so invest and reinvest during the continuance of the Trust. The Trustees may enter into a written contract with any person, including any firm, corporation, trust or association in which any Trustee or beneficiary may be interested, hereinafter called the "Managers," to act as investment advisors and managers of the Trust and to provide such investment and management services and facilities as the Trustees may from time to time consider necessary for the proper management of the Trust Property. Any such contract shall be consistent with and subject to the requirements of the Investment Company Act of 1940 with respect to its continuance in effect, its termination and the method of authorization and approval of such contract or renewal thereof, and such management contract shall not be amended, transferred, assigned, sold, hypothecated or pledged without the affirmative vote of the holders of a majority of the outstanding voting securities of the Trust. In the event of the cancellation or expiration by its own terms of any such management contract, no new management contract shall become effective without the affirmative vote of the holders of majority of the outstanding voting securities of the Trust. For the purposes of this paragraph, the term "majority of the outstanding voting securities" shall have the meaning defined in the Investment Company Act of 1940. ALL PROPERTY HELD BY CUSTODIAN Section 5. All securities, cash and other property owned by the Trust shall be held by one or more custodians who may be authorized to employ sub-custodians and to deposit all or any part of the securities, cash and other property in a system or systems for the central handling of securities. The custodian shall be employed under a written contract. Said contract and all amendments thereto shall be approved by the Trustees. The Trustees shall upon the resignation or inability to serve of its custodian or upon change of custodian: (i) in case of such resignation or inability to serve, use their best efforts to obtain a successor custodian, (ii) require that the cash and securities owned by the Trust be delivered directly to the successor custodian and (iii) in the event no successor custodian can be found, submit to the shareholders, before permitting delivery of the cash and securities owned by the Trust otherwise than to a successor custodian, the question whether this Trust shall be terminated or shall function without a custodian. Section 6. Without limiting the generality of any other power or authority herein granted to the Trustees, they shall have full power and authority to do any of the following acts: POWER TO PAY TAXES (a) To pay any and all taxes or liens of whatever nature or kind imposed upon or against the Trust property or any part thereof, or imposed individually or jointly upon any of the Trustees hereunder by reason of the Trust Property or the income or profits hereof, such payment to be out of the Trust Property available for that purpose. POWER TO MAKE DISTRIBUTIONS (b) To make distribution of income and of available net assets to the beneficiaries in the manner designated in Article IV, Section 2, hereof. POWER TO SELL, CONVEY AND DEAL WITH TRUST PROPERTY (c) In all matters and respects to sell, convey and generally to deal with the Trust property and to manage and conduct the Trust hereby created (including the giving or furnishing of proxies for voting at meetings in respect of any shares of stock, bonds or other securities at any time included in the Trust Property) as fully as if the Trustees were the absolute owners thereof, and to execute any and all instruments and to do any and all things incidental to said Trust not inconsistent with the provisions hereof, the execution or performance of which the Trustees may deem expedient. TO EMPLOY CUSTODIAN (d) To employ such custodian or custodians for the safekeeping of the Trust Property, such dividend disbursing agent or agents, and such transfer agent or transfer agents and registrar or registrars for the shares of the Trust, and to make and perform such contracts for the aforesaid purposes as in their opinion may be reasonable, necessary, or proper for the conduct of the affairs of the Trust, and to pay the fees and disbursements of such custodians, dividend disbursing agents, transfer agents and registrars out of the Trust property. The Trustees may, notwithstanding any other provisions herein, cause any or all of the Trust property to be transferred or to be acquired or held in the name of the custodians or subcustodians or in the name of any nominee or nominees or otherwise. TO APPOINT DISTRIBUTOR (e) To appoint a distributor or distributors and/or an agent or agents for the sale of the shares of the Trust and to allow such distributor or distributors and/or agent or agents a commission or discount upon the sale of such shares not to exceed nine percent (9%) of the selling price thereof, and to enter into such contract or contracts with such distributor or distributors and/or agents as the Trustees may in their discretion deem reasonable and proper. Any such contract for the sale or distribution of the shares of this Trust may be made with any Trustee or any beneficiary or any firm or corporation in which any Trustee or beneficiary is interested, and in the absence of any such contract the commission hereinabove provided may be paid to any Trustee or beneficiary or any firm or corporation in which any Trustee or beneficiary is interested effecting any such sale. Such distributor shall sell shares of the Trust either as principal or as agent only against orders therefor and purchase shares from anyone else only as agent of the Trust and neither the Trustees nor the distributor nor any of the officers or directors of the distributor shall take "long" or "short" positions in selling or purchasing shares. TO EMPLOY ACCOUNTANTS, AUDITORS AND LEGAL COUNSEL (f) To employ accountants and auditors and legal counsel when deemed necessary or proper for the purposes of the Trust and to pay their compensation and expenses out of the Trust Property. TO INCUR OTHER EXPENSES (g) To incur and pay out of the Trust Property such expenses and liabilities, not herein otherwise expressly provided, as may be deemed by the Trustees to be necessary or proper for the purposes of the Trust. TO ESTABLISH FISCAL YEAR (h) To establish a fiscal year and from time to time change and alter the same. TO MAKE ALLOCATION AMONG CLASSES (i) To the extent necessary or appropriate to give effect to the preferences and special or relative rights and privileges of any classes of shares, to allocate assets, liabilities, income and expenses of the Trust to a particular class of shares or to apportion the same among two or more classes of shares. TRUSTEES TO HOLD LEGAL TITLE Section 7. The Trustees shall hold legal title to and have absolute and exclusive control and management of all property at any time belonging to the Trust subject only to the specific limitations herein contained. The naming of any specific duties and powers herein shall not be construed as limiting the general powers conferred upon the Trustees and each of the powers herein named shall be deemed separate and distinct powers. SIGNATURES AND ACTION BY TRUSTEES Section 7. The Trustees may act with or without a meeting and the action of a majority of the Trustees for the time being either at a meeting or evidenced by a writing signed by such majority shall be valid and binding as the action of the Trustees. TRUSTEES' COMPENSATION Section 8. The Trustees as such shall be entitled to reasonable compensation from the Trust for their services as Trustees. If there is no management contract in effect, the Trustees shall be entitled to receive the same compensation otherwise payable to the Managers under the most recent contract entered into by the Trustees pursuant to Section 4 of this Article and for such compensation shall provide and pay for such services as the Trust may require. The Trustees, however, shall not be obligated to pay for any charges or liabilities herein authorized to be charged directly against the Trust property. Nothing herein contained shall in any way prevent the employment of any Trustee for legal, accounting, engineering or other special services and payment for such services out of the Trust property. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES Section 9. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees pursuant hereto or be made liable for the application of money or property paid, loaned or delivered. Every note, bond, contract, instrument, certificate, share, or undertaking and every other act or thing whatsoever executed or done by the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been executed or done only in their or his capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. Every note, bond, contract, instrument, certificate, share or undertaking made or issued by the Trustees shall recite that the same was executed or made by them as Trustee or Trustees and not individually and that the obligations of such instrument are not binding upon any of the Trustees or beneficiaries individually but binding only upon the Trust property, and may contain such further recital as he or they may deem appropriate, but the omission thereof shall not operate to bind any Trustee or Trustees individually. LIABILITY OF TRUSTEES Section 10. A Trustee shall be liable for his or her own wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else. ARTICLE VI Miscellaneous POWER TO SELL TRUST Section 1. Without limiting any of the powers or authorities hereinbefore set forth, the Trustees shall have the power and authority when authorized by the affirmative vote of the holders of a majority of the shares of the Trust then outstanding to sell all of the Trust property as a whole to any person, firm, association, trust, or corporation for such price in cash and/or securities of any such persons, firm, association, trust or corporation, and upon such terms and conditions as the Trustees may deem proper; and thereupon this Trust shall terminate. INDEMNITY Section 2. The Trust shall indemnify each of its Trustees, beneficiaries and officers (including persons who serve at its request as directors, officers or trustees of another organization in which it has any interest as a shareholder, creditor or otherwise) against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees, reasonably incurred by him in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which he may be or may have been involved as a party or otherwise or with which he may be or may have been threatened, while in office or thereafter, by reason of his being or having been such a Trustee, beneficiary or officer, except with respect to any matter as to which he shall have been finally adjudicated in any such action, suit or other proceeding (a) not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust or (b) to be liable to the Trust or its beneficiaries by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Expenses, including counsel fees so incurred by any such Trustee, beneficiary or officer (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), shall be paid from time to time by the Trust in advance of the final disposition of any such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Trustee, beneficiary or officer to repay the amounts so paid to the Trust if it is ultimately determined that indemnification of such expenses is not authorized under this Section 2, provided, however, that either (a) such Trustee, beneficiary or officer shall have provided appropriate security for such undertaking, (b) the Trust shall be insured against losses arising out of any such advance payments or (c) either a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter), or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a full trial type inquiry), that there is reason to believe that such Trustee, beneficiary or officer will be found entitled to indemnification under this Article. As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication by a court, or by any other body before which the proceeding was brought, that such Trustee, beneficiary or officer either (a) did not act in good faith in the reasonable belief that his action was in the best interests of the Trust or (b) is liable to the Trust or its beneficiaries by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, indemnification shall be provided if (a) approved as in the best interests of the Trust, after notice that it involves such indemnification by at least a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter) upon a determination, based upon a review of readily available facts (as opposed to a full trial type inquiry), that such Trustee, beneficiary or officer acted in good faith in the reasonable belief that his action was in the best interests of the Trust and is not liable to the Trust or its beneficiaries by reasons of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, or (b) there has been obtained an opinion in writing of independent legal counsel, based upon a review of readily available facts (as opposed to a full trial type inquiry), to the effect that such Trustee, beneficiary or officer appears to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust and that such indemnification would not protect such Trustee, beneficiary or officer against any liability to the Trust or its beneficiaries to which he would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Any approval pursuant to this paragraph shall not prevent the recovery from any Trustee, beneficiary or officer of any amount paid to him in accordance with this paragraph as indemnification if such Trustee, beneficiary or officer is subsequently adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust or to have been liable to the Trust or its beneficiaries by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which any Trustee, beneficiary or officer may be entitled. As used in this Section, the terms "Trustee", "beneficiary" and "officer" include their respective heirs, executors and administrators and a "disinterested Trustee" is a Trustee who is not an "interested person" of the Trust as defined in Section 2(a) (19) of the Investment Company Act of 1940, as amended (or who has been exempted from being an "interested person" by any rule, regulation or order of the Securities and Exchange Commission and against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or had been pending. Nothing contained in this Section shall affect any rights to indemnification to which personnel of the Trust other than Trustees, beneficiaries and officers, and other persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of any such person. TERMINATION OF TRUST Section 3. This Trust shall terminate in any event upon the expiration of twenty-one (21) years after the death of the following persons, being the Trustees named herein and their children now living: George Putnam, Charles M. Werly, S.H. Cunningham, Barbara Putnam, Katharine Putnam, Elizabeth Lowell Putnam, George Putnam, Jr., Helen Harte Putnam, Spurgeon Haddon Cunningham, Jr., James Hugh Cunningham, Nancy Jane Cunningham, John McKee Cunningham, Barbara Ann Cunningham, Cornelia Cunningham, Paul Gilmore Cunningham, Perry Oliver Cunningham, provided,however, that the Trustees shall have the power and authority to terminate this Trust at an earlier date by an instrument in writing setting forth such termination and by written notice thereof mailed, postage pre-paid, to the beneficiaries at their addresses as the same appear upon the records of the Trustees. Upon termination of this Trust either by expiration or otherwise the Trustees shall make provision for the payment of the expenses and liabilities of the Trust and of the Trustees and upon the surrender of the certificates representing the shares of this Trust then outstanding distribute the remaining assets, or sell and dispose of all or any part thereof and distribute the net proceeds thereof in cash and/or securities among the holders of such shares in proportion to their holdings, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of shares of the Trust, provided that any distribution to the beneficiaries of a particular class of shares shall be made to such beneficiaries pro rata in proportion to the number of shares of such class held by each of them. Thereupon the Trustees shall be discharged from all further obligation hereunder. The distributive share of any beneficiary not so surrendering his certificate or certificates may be deposited by the Trustees with any bank or trust company having an office in Boston, Massachusetts, with authority to such depositary to make delivery thereof to such beneficiary upon surrender to the depositary for the account of the Trustees of such certificate or certificates as above provided, and such deposit shall be deemed to be full payment of such distributive share. AMENDMENT OF TRUST Section 4. This Declaration of Trust may be altered or amended at any time by an instrument in writing signed by all of the then Trustees when authorized so to do by vote of the holders of a majority of the shares then outstanding, except that an alteration or an amendment which in the determination of the Trustees shall affect the holders of one or more classes of shares but not the holders of all outstanding classes shall be authorized by vote of the beneficiaries holding a majority of the shares entitled to vote of each class affected and no vote of beneficiaries of a class not affected shall be required. Said instrument shall certify that such authority or assent has been obtained and shall state when such alteration or amendment shall become effective. In the event that it becomes necessary under the provisions of Article I, Section 1, to change the name of the Trust, the Trustees, until action to that end is taken by the beneficiaries, may without any further authorization from the beneficiaries amend this Declaration of Trust by instrument in writing changing the name of this Trust to such other name as they may determine. Notice of such change of name shall be mailed forthwith to the beneficiaries at their addresses as the same appear upon the records of the Trustees. A copy of any alteration or amendment of this Declaration of Trust shall be filed with the Commissioner of Corporations and Taxation of The Commonwealth of Massachusetts within thirty (30) days after its execution or effective date. IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have hereunto set their hands and seals in the City of Boston, Massachusetts for themselves and their assigns, as of the day and year first above written and do hereby certify that this Amended and Restated Agreement and Declaration of Trust has been authorized by he holders of at least a majority of the outstanding shares of the Trust. /s/George Putnam /s/Robert E. Patterson - ------------------------ --------------------------- George Putnam Robert E. Patterson - ------------------------ --------------------------- Jameson A. Baxter Donald S. Perkins /s/Hans H. Estin /s/William F. Pounds - ------------------------ --------------------------- Hans H. Estin William F. Pounds - ------------------------ --------------------------- John A. Hill George Putnam, III /s/Ronald J. Jackson /s/Eli Shapiro - ------------------------ --------------------------- Ronald J. Jackson Eli Shapiro /s/A.J.C. Smith - ------------------------ --------------------------- Elizabeth T. Kennan A.J.C. Smith /s/Lawrence J. Lasser - ------------------------ --------------------------- Lawrence J. Lasser W. Nicholas Thorndike THE COMMONWEALTH OF MASSACHUSETTS Suffolk, ss. Boston, August 1, 1996 Then personally appeared each of the above named Trustees of The George Putnam Fund of Boston and acknowledged the foregoing instrument to be their free act and deed, before me, /s/Anne B. McCarthy -------------------------- Anne B. McCarthy My commission expires: 10/25/96 The address of the Trust is One Post Office Square, Boston, Massachusetts 02109. EX-99.B1 3 CHARTER THE GEORGE PUTNAM FUND OF BOSTON ------------------------ AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST This AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts, this 11th day of July, 1996, hereby amends and restates in its entirety the Agreement and Declaration of Trust dated November 1, 1937, as heretofore amended, by the Trustees hereunder and by the holders of shares of beneficial interest to be issued hereunder as hereinafter provided and shall be effective as of the date hereof. WITNESSETH that WHEREAS, the Trustees have agreed to manage all property coming into their hands as trustees in accordance with the provisions hereinafter set forth, NOW, THEREFORE, the said Trustees hereby declare that they will hold all cash, securities and other property which they may from time to time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the following terms and conditions for the benefit of the holders from time to time of certificates representing shares in this Trust as hereinafter set forth. ARTICLE I Name and Definitions NAME Section 1. This Trust shall be known as "The George Putnam Fund of Boston," and the Trustees shall conduct the business of the Trust under such name. Whenever said George Putnam shall cease for any reason to be a Trustee hereunder, his name shall not thereafter be used as part of the name of the Trust without his written consent or that of his heirs or personal representatives. DEFINITION OF "BENEFICIARY" Section 2. The term "beneficiaries" wherever it appears in this Declaration of Trust shall mean the holders of certificates representing the shares of beneficial interest issued by the Trustees as hereinafter provided. Every such beneficiary by the acceptance of a certificate representing one or more of such shares shall be held to have expressly assented and agreed to the terms hereof and to have become a party hereto. A beneficiary of record appearing upon the books of the Trustees shall be deemed by the Trustees for all purposes to be the owner of the shares standing in his name. DEFINITION OF "TRUST PROPERTY" Section 3. The term "Trust Property" wherever the same appears herein shall mean all of the Trust Property held by the Trustees as trustees hereunder. MARGINAL NOTES Section 4. The Article headings and marginal notes inserted in this Declaration are for convenience of reference and are not to be taken to control or affect the meaning, construction, or effect thereof. ARTICLE II Purpose of Trust PURPOSE OF TRUST The purpose of this Trust is to provide investors, including institutions, with a continuous source of investment under the personal management of the Trustees. It is expected that the Trust property will be invested largely in selected marketable securities, the Trustees giving emphasis to diversification as to types of securities as well as to industries and individual securities. Changes will be made from time to time in the proportion of the fund invested in the various types of securities or held in cash, as well as in the holdings of individual securities, in an attempt to secure the best utilization of the Trust's resources, giving emphasis to the conservation as well as to the growth of capital. ARTICLE III Issuance of Shares PAR VALUE OF SHARES Section 1. The beneficial ownership of the Trust Property shall be divided into an unlimited number of transferable shares of One Dollar ($1) par value each. The Trustee may, without approval of the beneficiaries, divide the shares into two or more classes, shares of each such class having such preferences and special or relative rights and privileges (including conversion rights, if any) as the Trustees may determine and as shall be set forth in the Bylaws. Such shares shall be represented by certificates in such form as the Trustees may from time to time determine, transferable by the holders thereof in person or by attorney upon the books of the Trustees upon surrender of such certificate properly endorsed for transfer. The Trustees may authorize the certificates to bear the facsimile signatures of any one or more of the Trustees provided such certificates are signed by an authorized officer of a duly appointed transfer agent or registrar of the Trust. The Trustees shall have full power and authority as to the issue and transfer of certificates in place of any certificates lost or destroyed. Such shares may be issued in such fractions as the Trustees shall determine from time to time, such fractional shares to have pro rata the same rights and privileges, including voting power, rights to dividends and other pro rata rights as full shares, and wherever the term share or shares is used herein it shall be deemed for all purposes to include such fractional shares to the extent of such fractions as full shares. The Trust at any time, at the discretion of the Trustees, may purchase, and the record holders shall be obligated to sell, all of such fractional shares at the liquidating value thereof in effect at the time of such purchase and the amount of such liquidating value shall be distributed to such record holders whereupon all such fractional shares shall become void and such holders of fractional shares shall have no rights in respect thereof. In lieu of issuing certificates for full or fractional shares, the Trustees may either issue receipts therefor in such form as they may determine or may keep accounts upon their books for the record holders of such shares, who shall in either case be deemed, for all purposes hereunder, to be the holders of certificates for such shares as if they had accepted such certificates and shall be held to have expressly assented, and agreed to the terms hereof. The record holders of the full or fractional shares of the Trust shall be entitled to obtain certificates therefor at any time upon request to the Trustees, but the Trust at the discretion of the Trustees may purchase, and such record holder shall be obligated to sell, any fractional shares of such holder at the liquidating value thereof in effect at the time of such request. AMOUNT RECEIVED BY TRUST Section 2. The shares of ownership in the Trust Property may be issued by the Trustees at not less than the par value thereof to such person or persons and at such price or prices for cash and/or such other property as they may from time to time determine. Upon the issue of shares in exchange for property whether acquired by merger or otherwise, the value of such property shall be appraised by the Trustees in such manner as shall be deemed by them to reflect its fair value, and the value thereof when so determined in good faith shall be conclusive. In no event shall any issue or sale, subsequent to the issue and sale of the first 10,400 shares, be at a rate which will yield to the Trust a sum or value less than the fair liquidating value per share of the then outstanding shares of the Trust as determined by the Trustees as hereinafter provided. Provided, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of shares of the Trust, that the Trustees may also issue shares pro rata to the beneficiaries at any time as a stock dividend and may issue to the beneficiaries from time to time rights to subscribe pro rata to new shares in the Trust at any price fixed by the Trustees; provided, however, that any such shares or rights to subscribe shares issued to the beneficiaries of a particular class of shares shall be issued to such beneficiaries pro rata in proportion to the number of shares of such class held by each of them. PAID-IN SURPLUS Section 3. Any excess received by the Trustees upon the issue and sale of the shares of the Trust over the par value thereof may be carried upon the books of the Trustees as paid-in surplus. The shares may at any time and from time to time in the discretion of the Trustees be changed to shares either of no par value or of such other par value as the Trustees may determine, and the difference between such other par value, or the difference between the stated value of the shares if they are changed to shares of no par value, and the then book value of the shares, exclusive of earned surplus, may be carried as paid-in or capital surplus. STATUS OF SHARES Section 4. Shares herein shall be deemed to be personal property giving only the rights in this Declaration of Trust or the Bylaws and in the certificates specifically set forth. The death of a beneficiary during the continuance of the Trust shall not operate to terminate the same nor entitle the representative of any deceased beneficiary to an accounting or to take any action in court or elsewhere against the Trustees, but only to the rights of said decedent under this Trust upon the surrender of the certificate or certificates for the shares owned by him. Ownership of shares shall not entitle the beneficiary to any title in or to the whole or any part of the Trust Property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of shares constitute the holders thereof partners. LIMITATION OF PERSONAL LIABILITY Section 5. The Trustees shall have no power to bind the beneficiaries personally or to call upon them for the payment of any sum of money or assessment whatsoever other than such as paid beneficiaries may at any time personally agree to pay by way of subscription to any shares or otherwise. ARTICLE IV Rights and Privileges of Beneficiaries Section 1. Subject to the voting powers of one or more classes of shares as set forth elsewhere in this Declaration of Trust or in the Bylaws, the beneficiaries shall have the right to vote regarding the following matters: (a) The election of Trustees as provided in Article V, Section 1; (b) The removal of Trustees as provided in Article V, Section 1; (c) The authorization of any proposed sale of the Trust Property as a whole as provided in Article VI, Section 1; and (d) The authorization of any proposed alteration or amendment of this Declaration of Trust as provided in Article VI, Section 4. VOTING POWERS AND MEETINGS Meetings of beneficiaries of any or all classes may be called by the Trustees from time to time for the purpose of taking action upon any matter requiring the vote or authority of the beneficiaries of such classes as herein provided or upon any other matter deemed by the Trustees to be necessary or desirable. Notice of any meeting of the beneficiaries shall be given by the Trustees at least ten (10) days before such meeting by mailing postage prepaid, a written or printed notice thereof stating the time, place and purpose of the meeting to each beneficiary entitled to vote at any such meeting at his address as the same appears upon the books of the Trust. Each beneficiary of record entitled to vote at any such meeting shall be entitled at such meeting one vote, either in person or by lawful proxy in writing filed with the Trustees, for each share of the Trust standing on its books in his name. On any matter submitted to a vote of beneficiaries, all shares of the Trust then entitled to vote shall, except as otherwise provided in the Bylaws, be voted in the aggregate as a single class without regard to classes of shares, except (1) when required by the 1940 Act or when the Trustees shall have determined that the matter affects one or more classes of shares materially differently, shares shall be voted by individual class; and (2) when the Trustees have determined that the matter affects only the interests of one or more classes, then only beneficiaries of such classes shall be entitled to vote thereon. At any meeting of the beneficiaries, a quorum for the transaction of business shall exist if holders of thirty percent of the shares of the Trust then outstanding and entitled to vote on a particular matter are present in person or by proxy, except that where this Declaration of Trust requires that holders of any class shall vote as an individual class, then thirty percent of the aggregate number of shares of that class entitled to vote shall be necessary to constitute a quorum for the transaction of business by that class. Any lesser number may make reasonable adjournments of such meeting until a quorum is obtained. If the Trustees shall fail or refuse to call or give notice of any meeting provided for above for a period of thirty (30) days after request in writing made by beneficiaries holding an aggregate of at least ten per cent (10%) of the shares of the Trust of all classes then outstanding and entitled to vote at any such meeting then beneficiaries holding a like percentage of such shares may call and give notice of such meeting, and thereupon the meeting shall be held in the manner provided for herein in case of call thereof by the Trustees. At each meeting of the beneficiaries, the Trustees shall appoint one of their number or one of the beneficiaries to preside thereat. The Trustees shall appoint a Clerk for each such meeting, who shall be duly sworn to the faithful discharge of his duties, to keep the minutes of such meeting, which minutes shall be signed and attested by him and filed with the records of the Trust. RIGHT TO DIVIDENDS Section 2. The beneficiaries shall be entitled to receive pro rata annually or oftener dividends in cash equal approximately to the net income of the Trust except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of shares of the Trust, provided that any distribution to the beneficiaries of a particular class of shares shall be made to such beneficiaries pro rata in proportion to the number of shares of such class held by each of them. Such distributions may be made even though the capital of the Trust may be impaired at the time of distribution. In addition the Trustees may make further distributions among the beneficiaries in cash or shares out of any available net assets of the Trust, but if any such distribution is made the source of the distribution together with the basis of calculation, in the case of a distribution out of capital gains, shall be called to the attention of the beneficiaries. In a case of a distribution payable in cash or stock at the election of any of the shareholders, the Trustees may prescribe whether a beneficiary failing to express his election before a given time shall be deemed to have elected to take shares rather than cash, or to take cash rather than shares, or to take shares with cash adjustments for fractions. DEFINITION OF NET INCOME Section 3. The term "net income" is hereby defined as the gross earnings of the Trust, excluding gains on sales of securities and stock dividends received, less the expenses of the Trust. The expenses shall include (1) taxes attributable to the income of the Trust exclusive of gains on sales, (2) the compensation of the Trustees, and (3) other charges properly deductible for the maintenance and administration of the Trust; but there shall not be deducted from gross or net income any losses on securities, realized or unrealized. The Trustees shall otherwise have full discretion to determine which items shall be treated as income and which items as capital and their determination shall be binding upon the beneficiaries. RIGHT TO SELL SHARES TO TRUST Section 4. The Trust shall purchase such shares as are offered by any beneficiary for redemption, upon the presentation of the certificate or certificates therefor, if any, to the Trust or to the Transfer Agent, duly endorsed or accompanied by a proper instrument of transfer, together with a request that the Trust purchase the shares represented thereby; and the Trust will pay therefor in cash the liquidating value of the shares so presented determined as of such time as the Trustees may from time to time specify, subject to any applicable rule of the Securities and Exchange Commission adopted under the Investment Company Act of 1940. For the protection of the remaining beneficiaries the Trustees reserve the right to demand not more than seven (7) full business days' written notice of the request to purchase such shares at such liquidating value, which period may be extended by the Trustees for such time as the New York Stock Exchange may at any time be closed for business or open upon a restricted basis, all under such reasonable rules and regulations as may be determined by the Trustees from time to time. DETERMINATION OF LIQUIDATING VALUE Section 5. For all purposes under this Indenture the liquidating value shall be determined by the Trustees or not less than two of any three or more officers of this Trust designated from time to time for this purpose by the Trustees as soon as possible after the close of the New York Stock Exchange on each business day upon which such Exchange is open, such liquidating value to remain in effect until the next determination of such liquidating value becomes effective; provided, however, that the Trustees or such officers may in their discretion make a more frequent determination of the liquidating value which shall become effective one hour after the time as of which such liquidating value is determined. Such liquidating value shall be determined in the following manner: (1) Securities for which market quotations are readily available shall be valued at that price which, in the opinion of the Trustees or the officer or officers making the determination, most nearly represents the market value of the particular security, and all other securities and assets shall be valued at their fair value as determined in good faith by the Trustees in accordance with accounting principles generally accepted at the time. All other securities and assets of the Trust, including cash, prepaid and accrued items, and dividends receivable, shall be appraised in such manner as shall be deemed by the Trustees to reflect their fair value. (2) From the total value of the Trust Property as so determined shall be deducted the liabilities of the Trust, including reserves for taxes, Trustees' compensation and such other expenses and liabilities of the Trust as may be determined by the Trustees to be accruing liabilities. For the purpose of determining such liquidating value in the case of repurchase there may also be deducted a reserve estimated by the Trustees to be reasonable for such taxes and expenses as would be then or thereafter incurred by the Trust if the Trust had sold all of its assets at the liquidating value thereof at the time of such determination. (3) The resulting amount shall represent the liquidating value of the Trust Property. In the event that there shall be more than one class of shares outstanding at the time of any such determination, the liquidating value of the Trust Property shall be allocated among such classes in such manner as the Trustees may reasonably determine in order to give effect to the preferences and special or relative rights and privileges of such classes. The net liquidating value per share shall be determined by dividing the liquidating value of the Trust Property by the number of shares of the Trust then outstanding (exclusive of any shares held in its Treasury) or, if more than one class of shares is outstanding, by dividing the liquidating value of the Trust Property allocated to each class by the number of shares of such respective class then outstanding (exclusive of any shares held in Treasury). The liquidating value of the Trust Property and shares as so determined shall be final and conclusive. REPORTS TO BENEFICIARIES Section 6. The Trustees shall keep accurate books of accounts and shall make reports to the beneficiaries at least semi-annually, such reports to contain a list of the investments of the Trust and a balance sheet and income statement for the period covered thereby in such detail as the Trustees shall deem proper. In addition, such reports shall contain a statement of all amounts paid to any firm, corporation, bank or trust company having a partner, officer or director who is also a Trustee of the Trust. ARTICLE V ELECTION, TERM OF OFFICE, POWERS AND DUTIES OF TRUSTEES ELECTION Section 1. A Trustee may be elected either by the Trustees or by the beneficiaries. There shall not be less than three Trustees. The number of Trustees shall be fixed by the Trustees. Each Trustee elected by the Trustees or the beneficiaries shall serve until he or she retires, resigns, is removed or dies or until the next meeting of beneficiaries called for the purpose of electing Trustees and until the election and qualification of his or her successor. At any meeting called for the purpose, a Trustee may be removed by a vote of the holders of two-thirds of the outstanding shares. The vote of beneficiaries holding a plurality of the shares of the Trust represented at such a meeting at which a quorum is present shall be necessary for the election of Trustees. TITLE OF SUCCESSORS The title to the Trust Property shall vest in any Trustee or Trustees elected or appointed as above provided, after written acceptance of such election or appointment by him or them, without any further act, and he or they shall thereupon have the same powers, duties and exemptions as though originally named as Trustee herein. Such written acceptances shall be filed with the records of the Trust, and any certificate signed by a majority of the Trustees as to who are or were Trustees at any time shall be conclusive and binding for all purposes. During any vacancy the remaining Trustee or a majority of the remaining Trustees may exercise any and all of the powers of the Trustees hereunder. The determination of vacancy or vacancies in the number of Trustees by reason of death, resignation or disability when made by the remaining Trustee or Trustees and set forth in any instrument filling such vacancy or vacancies shall be final and conclusive for all purposes. DELEGATION OF AUTHORITY Any Trustee may by power of attorney delegate his powers for a period not exceeding six (6) months at any one time to any other Trustee or Trustees hereunder, provided that in no case shall less than a majority of the Trustees personally exercise their powers hereunder except as herein otherwise expressly provided. Any instrument executed under the provisions of this section may be deposited with a custodian duly appointed for the Trust Property and the depositing in such manner shall have the same force and effect as the deposit with the Trustee or Trustees hereinbefore provided. Anything herein to the contrary notwithstanding, any vacancy or vacancies which reduce the number of the Trustees below three (3) shall be filled by the beneficiaries or the remaining Trustee or Trustees within six (6) months of the creation thereof. Notwithstanding any other provisions of this Declaration of Trust, the Trustees may, consistent with their responsibility for the general policies of the Trust and the general supervision of the business of the Trust and consistent with any applicable provisions of the Investment Company Act of 1940, delegate from time to time to such one or more of their number or to their officers, employees and agents or to any corporation, trust, association or other organization engaged as investment advisor or manager as hereinafter provided, the doing of such things, including, without limitation, authority to determine from time to time what investments shall be purchased, held, sold or exchanged and what portion, if any, of the Trust assets shall be held uninvested and to make changes in the investments of the Trust, and the execution of such deeds or other instruments either in the name of the Trust or the names of the Trustees or as their attorney or attorneys or otherwise as the Trustees may from time to time deem expedient. The Trustees may appoint from their number an executive committee of not less than three to serve during their pleasure. The executive committee may, when the Trustees are not in session at a meeting, exercise such of the powers and authority of the Trustees as may be conferred from time to time by the Trustees. Rules governing the actions of the executive committee may be adopted by the Trustees from time to time as they deem appropriate. The Trustees may appoint from their number such other committees from time to time as they deem appropriate. The number composing such committees, the powers and authority conferred upon such committees and the rules governing the actions of such committees shall be determined by the Trustees at their discretion. Any agreement, deed, mortgage, lease or other instrument or writing executed by one or more of the Trustees or by any officer, employee, or agent pursuant to general or specific authorization (or upon ratification thereof) by action of the Trustees as provided in this Declaration of Trust, shall be valid and binding upon the Trustees and upon the Trust. The Trustees may elect or appoint a Chairman (who shall be a Trustee) and a President (who shall be a Trustee) and may elect or appoint, from among their number or otherwise, one or more Vice-Presidents, a Treasurer, a Clerk, a Comptroller, one or more Assistant Clerks and Assistant Treasurers and such other officers or agents, who shall have such powers, duties and responsibilities as the Trustees may deem to be advisable. Two or more offices may be held by the same person. The Trustees may adopt and from time to time amend or repeal Bylaws for the conduct of the business of the Trust, and in such Bylaws may define the duties of the officers, agents, employees and representatives of the Trust. The Bylaws shall at all times be consistent with the provisions of this Declaration of Trust. NO DIRECT SALES OR PURCHASES OF SECURITIES BETWEEN TRUSTS AND TRUSTEES Section 2. No Trustee shall directly or indirectly purchase or sell any securities or other property from or to the Trust other than shares of the Trust, except purchases and sales of securities or other property if such transaction is permitted by, or is exempt or exempted from, the provisions of the Investment Company Act of 1940, as amended. Anything herein to the contrary notwithstanding, any Trustee or any organization with which any Trustee may be associated may also act as broker for the Trust in making purchases and sales of securities for or to the Trust of its investment portfolio, and may charge and receive from the Trust the usual and customary commission for such service. Any organization with which a Trustee may be associated in acting as broker for the Trust shall be responsible only for the proper execution of transactions in accordance with the instructions of the Trust and shall be subject to no further liability of any sort whatever. NO LOANS TO TRUSTEES OR DISTRIBUTOR Section 3. No Trustee or general distributor of the shares of the Trust or any officer or director of such distributor shall directly or indirectly borrow any money or other property from the Trust. INVESTMENT POWERS AND RESTRICTIONS Section 4. The Trustees shall have full power and authority to invest in, purchase, sell, and otherwise engage in transactions with respect to, securities, debt instruments and other property, instruments and rights of a financial character, engage in borrowings, pledge or otherwise encumber the assets of the Trust. The Trustees shall have full power and authority to buy and invest the funds in their hands in repurchase agreements with respect to not more than 25% of the Trust's total assets and to make loans of the Trust's portfolio securities with respect to not more than 25% of the Trust's total assets. The Trustees also shall have full power and authority to exercise any rights of ownership with respect to any of the foregoing. The Trustees shall not in any way be bound or limited by any present or future law or custom in regard to trust investments but shall have full authority and power to make any and all investments which they in their uncontrolled discretion may deem proper to accomplish the purposes of the Trust. The Trustees shall be limited in the purchase of securities or obligations to an investment which shall not exceed five per cent (5%) of the liquidating value of the Trust property at the time of such investment and shall be further limited to an investment in any one corporation or association of not exceeding ten percent (10%) of the stock or securities or ten percent (10%) of the outstanding voting securities or ten percent (10%) of the securities of any class of such corporation or association. The above limitations shall not apply, however, to investments in government or municipal securities or obligations. The Trustees shall not invest more than five percent (5%) of the liquidating value of the Trust property in equity securities of issuers for which market quotations are not readily available (but excluding from such 5% securities the disposition of which is restricted by federal securities laws). The Trustees shall also have full power and authority to sell or otherwise dispose of free and clear from any of the provisions of this Trust and from any of the liens created hereby all such investments and to reinvest the proceeds or any part thereof with continuing powers to so invest and reinvest during the continuance of the Trust. The Trustees may enter into a written contract with any person, including any firm, corporation, trust or association in which any Trustee or beneficiary may be interested, hereinafter called the "Managers," to act as investment advisors and managers of the Trust and to provide such investment and management services and facilities as the Trustees may from time to time consider necessary for the proper management of the Trust Property. Any such contract shall be consistent with and subject to the requirements of the Investment Company Act of 1940 with respect to its continuance in effect, its termination and the method of authorization and approval of such contract or renewal thereof, and such management contract shall not be amended, transferred, assigned, sold, hypothecated or pledged without the affirmative vote of the holders of a majority of the outstanding voting securities of the Trust. In the event of the cancellation or expiration by its own terms of any such management contract, no new management contract shall become effective without the affirmative vote of the holders of majority of the outstanding voting securities of the Trust. For the purposes of this paragraph, the term "majority of the outstanding voting securities" shall have the meaning defined in the Investment Company Act of 1940. ALL PROPERTY HELD BY CUSTODIAN Section 5. All securities, cash and other property owned by the Trust shall be held by one or more custodians who may be authorized to employ sub-custodians and to deposit all or any part of the securities, cash and other property in a system or systems for the central handling of securities. The custodian shall be employed under a written contract. Said contract and all amendments thereto shall be approved by the Trustees. The Trustees shall upon the resignation or inability to serve of its custodian or upon change of custodian: (i) in case of such resignation or inability to serve, use their best efforts to obtain a successor custodian, (ii) require that the cash and securities owned by the Trust be delivered directly to the successor custodian and (iii) in the event no successor custodian can be found, submit to the shareholders, before permitting delivery of the cash and securities owned by the Trust otherwise than to a successor custodian, the question whether this Trust shall be terminated or shall function without a custodian. Section 6. Without limiting the generality of any other power or authority herein granted to the Trustees, they shall have full power and authority to do any of the following acts: POWER TO PAY TAXES (a) To pay any and all taxes or liens of whatever nature or kind imposed upon or against the Trust property or any part thereof, or imposed individually or jointly upon any of the Trustees hereunder by reason of the Trust Property or the income or profits hereof, such payment to be out of the Trust Property available for that purpose. POWER TO MAKE DISTRIBUTIONS (b) To make distribution of income and of available net assets to the beneficiaries in the manner designated in Article IV, Section 2, hereof. POWER TO SELL, CONVEY AND DEAL WITH TRUST PROPERTY (c) In all matters and respects to sell, convey and generally to deal with the Trust property and to manage and conduct the Trust hereby created (including the giving or furnishing of proxies for voting at meetings in respect of any shares of stock, bonds or other securities at any time included in the Trust Property) as fully as if the Trustees were the absolute owners thereof, and to execute any and all instruments and to do any and all things incidental to said Trust not inconsistent with the provisions hereof, the execution or performance of which the Trustees may deem expedient. TO EMPLOY CUSTODIAN (d) To employ such custodian or custodians for the safekeeping of the Trust Property, such dividend disbursing agent or agents, and such transfer agent or transfer agents and registrar or registrars for the shares of the Trust, and to make and perform such contracts for the aforesaid purposes as in their opinion may be reasonable, necessary, or proper for the conduct of the affairs of the Trust, and to pay the fees and disbursements of such custodians, dividend disbursing agents, transfer agents and registrars out of the Trust property. The Trustees may, notwithstanding any other provisions herein, cause any or all of the Trust property to be transferred or to be acquired or held in the name of the custodians or subcustodians or in the name of any nominee or nominees or otherwise. TO APPOINT DISTRIBUTOR (e) To appoint a distributor or distributors and/or an agent or agents for the sale of the shares of the Trust and to allow such distributor or distributors and/or agent or agents a commission or discount upon the sale of such shares not to exceed nine percent (9%) of the selling price thereof, and to enter into such contract or contracts with such distributor or distributors and/or agents as the Trustees may in their discretion deem reasonable and proper. Any such contract for the sale or distribution of the shares of this Trust may be made with any Trustee or any beneficiary or any firm or corporation in which any Trustee or beneficiary is interested, and in the absence of any such contract the commission hereinabove provided may be paid to any Trustee or beneficiary or any firm or corporation in which any Trustee or beneficiary is interested effecting any such sale. Such distributor shall sell shares of the Trust either as principal or as agent only against orders therefor and purchase shares from anyone else only as agent of the Trust and neither the Trustees nor the distributor nor any of the officers or directors of the distributor shall take "long" or "short" positions in selling or purchasing shares. TO EMPLOY ACCOUNTANTS, AUDITORS AND LEGAL COUNSEL (f) To employ accountants and auditors and legal counsel when deemed necessary or proper for the purposes of the Trust and to pay their compensation and expenses out of the Trust Property. TO INCUR OTHER EXPENSES (g) To incur and pay out of the Trust Property such expenses and liabilities, not herein otherwise expressly provided, as may be deemed by the Trustees to be necessary or proper for the purposes of the Trust. TO ESTABLISH FISCAL YEAR (h) To establish a fiscal year and from time to time change and alter the same. TO MAKE ALLOCATION AMONG CLASSES (i) To the extent necessary or appropriate to give effect to the preferences and special or relative rights and privileges of any classes of shares, to allocate assets, liabilities, income and expenses of the Trust to a particular class of shares or to apportion the same among two or more classes of shares. TRUSTEES TO HOLD LEGAL TITLE Section 7. The Trustees shall hold legal title to and have absolute and exclusive control and management of all property at any time belonging to the Trust subject only to the specific limitations herein contained. The naming of any specific duties and powers herein shall not be construed as limiting the general powers conferred upon the Trustees and each of the powers herein named shall be deemed separate and distinct powers. SIGNATURES AND ACTION BY TRUSTEES Section 7. The Trustees may act with or without a meeting and the action of a majority of the Trustees for the time being either at a meeting or evidenced by a writing signed by such majority shall be valid and binding as the action of the Trustees. TRUSTEES' COMPENSATION Section 8. The Trustees as such shall be entitled to reasonable compensation from the Trust for their services as Trustees. If there is no management contract in effect, the Trustees shall be entitled to receive the same compensation otherwise payable to the Managers under the most recent contract entered into by the Trustees pursuant to Section 4 of this Article and for such compensation shall provide and pay for such services as the Trust may require. The Trustees, however, shall not be obligated to pay for any charges or liabilities herein authorized to be charged directly against the Trust property. Nothing herein contained shall in any way prevent the employment of any Trustee for legal, accounting, engineering or other special services and payment for such services out of the Trust property. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES Section 9. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees pursuant hereto or be made liable for the application of money or property paid, loaned or delivered. Every note, bond, contract, instrument, certificate, share, or undertaking and every other act or thing whatsoever executed or done by the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been executed or done only in their or his capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. Every note, bond, contract, instrument, certificate, share or undertaking made or issued by the Trustees shall recite that the same was executed or made by them as Trustee or Trustees and not individually and that the obligations of such instrument are not binding upon any of the Trustees or beneficiaries individually but binding only upon the Trust property, and may contain such further recital as he or they may deem appropriate, but the omission thereof shall not operate to bind any Trustee or Trustees individually. LIABILITY OF TRUSTEES Section 10. A Trustee shall be liable for his or her own wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else. ARTICLE VI Miscellaneous POWER TO SELL TRUST Section 1. Without limiting any of the powers or authorities hereinbefore set forth, the Trustees shall have the power and authority when authorized by the affirmative vote of the holders of a majority of the shares of the Trust then outstanding to sell all of the Trust property as a whole to any person, firm, association, trust, or corporation for such price in cash and/or securities of any such persons, firm, association, trust or corporation, and upon such terms and conditions as the Trustees may deem proper; and thereupon this Trust shall terminate. INDEMNITY Section 2. The Trust shall indemnify each of its Trustees, beneficiaries and officers (including persons who serve at its request as directors, officers or trustees of another organization in which it has any interest as a shareholder, creditor or otherwise) against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees, reasonably incurred by him in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which he may be or may have been involved as a party or otherwise or with which he may be or may have been threatened, while in office or thereafter, by reason of his being or having been such a Trustee, beneficiary or officer, except with respect to any matter as to which he shall have been finally adjudicated in any such action, suit or other proceeding (a) not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust or (b) to be liable to the Trust or its beneficiaries by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Expenses, including counsel fees so incurred by any such Trustee, beneficiary or officer (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), shall be paid from time to time by the Trust in advance of the final disposition of any such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Trustee, beneficiary or officer to repay the amounts so paid to the Trust if it is ultimately determined that indemnification of such expenses is not authorized under this Section 2, provided, however, that either (a) such Trustee, beneficiary or officer shall have provided appropriate security for such undertaking, (b) the Trust shall be insured against losses arising out of any such advance payments or (c) either a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter), or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a full trial type inquiry), that there is reason to believe that such Trustee, beneficiary or officer will be found entitled to indemnification under this Article. As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication by a court, or by any other body before which the proceeding was brought, that such Trustee, beneficiary or officer either (a) did not act in good faith in the reasonable belief that his action was in the best interests of the Trust or (b) is liable to the Trust or its beneficiaries by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, indemnification shall be provided if (a) approved as in the best interests of the Trust, after notice that it involves such indemnification by at least a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter) upon a determination, based upon a review of readily available facts (as opposed to a full trial type inquiry), that such Trustee, beneficiary or officer acted in good faith in the reasonable belief that his action was in the best interests of the Trust and is not liable to the Trust or its beneficiaries by reasons of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office, or (b) there has been obtained an opinion in writing of independent legal counsel, based upon a review of readily available facts (as opposed to a full trial type inquiry), to the effect that such Trustee, beneficiary or officer appears to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust and that such indemnification would not protect such Trustee, beneficiary or officer against any liability to the Trust or its beneficiaries to which he would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Any approval pursuant to this paragraph shall not prevent the recovery from any Trustee, beneficiary or officer of any amount paid to him in accordance with this paragraph as indemnification if such Trustee, beneficiary or officer is subsequently adjudicated by a court of competent jurisdiction not to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust or to have been liable to the Trust or its beneficiaries by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which any Trustee, beneficiary or officer may be entitled. As used in this Section, the terms "Trustee", "beneficiary" and "officer" include their respective heirs, executors and administrators and a "disinterested Trustee" is a Trustee who is not an "interested person" of the Trust as defined in Section 2(a) (19) of the Investment Company Act of 1940, as amended (or who has been exempted from being an "interested person" by any rule, regulation or order of the Securities and Exchange Commission and against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or had been pending. Nothing contained in this Section shall affect any rights to indemnification to which personnel of the Trust other than Trustees, beneficiaries and officers, and other persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of any such person. TERMINATION OF TRUST Section 3. This Trust shall terminate in any event upon the expiration of twenty-one (21) years after the death of the following persons, being the Trustees named herein and their children now living: George Putnam, Charles M. Werly, S.H. Cunningham, Barbara Putnam, Katharine Putnam, Elizabeth Lowell Putnam, George Putnam, Jr., Helen Harte Putnam, Spurgeon Haddon Cunningham, Jr., James Hugh Cunningham, Nancy Jane Cunningham, John McKee Cunningham, Barbara Ann Cunningham, Cornelia Cunningham, Paul Gilmore Cunningham, Perry Oliver Cunningham, provided,however, that the Trustees shall have the power and authority to terminate this Trust at an earlier date by an instrument in writing setting forth such termination and by written notice thereof mailed, postage pre-paid, to the beneficiaries at their addresses as the same appear upon the records of the Trustees. Upon termination of this Trust either by expiration or otherwise the Trustees shall make provision for the payment of the expenses and liabilities of the Trust and of the Trustees and upon the surrender of the certificates representing the shares of this Trust then outstanding distribute the remaining assets, or sell and dispose of all or any part thereof and distribute the net proceeds thereof in cash and/or securities among the holders of such shares in proportion to their holdings, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of shares of the Trust, provided that any distribution to the beneficiaries of a particular class of shares shall be made to such beneficiaries pro rata in proportion to the number of shares of such class held by each of them. Thereupon the Trustees shall be discharged from all further obligation hereunder. The distributive share of any beneficiary not so surrendering his certificate or certificates may be deposited by the Trustees with any bank or trust company having an office in Boston, Massachusetts, with authority to such depositary to make delivery thereof to such beneficiary upon surrender to the depositary for the account of the Trustees of such certificate or certificates as above provided, and such deposit shall be deemed to be full payment of such distributive share. AMENDMENT OF TRUST Section 4. This Declaration of Trust may be altered or amended at any time by an instrument in writing signed by all of the then Trustees when authorized so to do by vote of the holders of a majority of the shares then outstanding, except that an alteration or an amendment which in the determination of the Trustees shall affect the holders of one or more classes of shares but not the holders of all outstanding classes shall be authorized by vote of the beneficiaries holding a majority of the shares entitled to vote of each class affected and no vote of beneficiaries of a class not affected shall be required. Said instrument shall certify that such authority or assent has been obtained and shall state when such alteration or amendment shall become effective. In the event that it becomes necessary under the provisions of Article I, Section 1, to change the name of the Trust, the Trustees, until action to that end is taken by the beneficiaries, may without any further authorization from the beneficiaries amend this Declaration of Trust by instrument in writing changing the name of this Trust to such other name as they may determine. Notice of such change of name shall be mailed forthwith to the beneficiaries at their addresses as the same appear upon the records of the Trustees. A copy of any alteration or amendment of this Declaration of Trust shall be filed with the Commissioner of Corporations and Taxation of The Commonwealth of Massachusetts within thirty (30) days after its execution or effective date. IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have hereunto set their hands and seals in the City of Boston, Massachusetts for themselves and their assigns, as of the day and year first above written and do hereby certify that this Amended and Restated Agreement and Declaration of Trust has been authorized by he holders of at least a majority of the outstanding shares of the Trust. /s/ George Putnam /s/ Robert E. Patterson - ------------------------ --------------------------- George Putnam Robert E. Patterson /s/ Jameson A. Baxter /s/ Donald S. Perkins - ------------------------ --------------------------- Jameson A. Baxter Donald S. Perkins /s/ Hans H. Estin /s/ William F. Pounds - ------------------------ --------------------------- Hans H. Estin William F. Pounds /s/ John A. Hill /s/George Putnam, III - ------------------------ --------------------------- John A. Hill George Putnam, III /s/ Ronald J. Jackson /s/ Eli Shapiro - ------------------------ --------------------------- Ronald J. Jackson Eli Shapiro /s/ Elizabeth T. Kennan /s/ A.J.C. Smith - ------------------------ --------------------------- Elizabeth T. Kennan A.J.C. Smith /s/Lawrence J. Lasser /s/ W. Nicholas Thorndike - ------------------------ --------------------------- Lawrence J. Lasser W. Nicholas Thorndike THE COMMONWEALTH OF MASSACHUSETTS Suffolk, ss. Boston, July 11, 1996 Then personally appeared each of the above named Trustees of The George Putnam Fund of Boston and acknowledged the foregoing instrument to be their free act and deed, before me, /s/Anne B. McCarthy -------------------------- Anne B. McCarthy My commission expires: 10/25/96 The address of the Trust is One Post Office Square, Boston, Massachusetts 02109. EX-99.B5 4 ADVSR CONTR THE GEORGE PUTNAM FUND OF BOSTON MANAGEMENT CONTRACT Management Contract dated as of July 11, 1996 between The George Putnam Fund of Boston, a Massachusetts business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts corporation (the "Manager"). WITNESSETH: That in consideration of the mutual covenants herein contained, it is agreed as follows: 1. SERVICES TO BE RENDERED BY MANAGER TO FUND. (a) The Manager, at its expense, will furnish continuously an investment program for the Fund, will determine what investments shall be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund shall be held uninvested and shall, on behalf of the Fund, make changes in the Fund's investments. Subject always to the control of the Trustees of the Fund and except for the functions carried out by the officers and personnel referred to in Section 1(d), the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-laws of the Fund and its stated investment objectives, policies and restrictions, and will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine and shall exercise the same care and diligence expected of the Trustees. (b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(d), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the Fund's net asset value, but excluding shareholder accounting services. Except as otherwise provided in Section 1(d), the Manager will pay the compensation, if any, of the officers of the Fund. (c) The Manager, at its expense, shall place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager shall use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Manager, bearing in mind the Fund's best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker or dealer involved and the quality of service rendered by the broker or dealer in other transactions. Subject to such policies as the Trustees of the Fund may determine, the Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Contract or otherwise solely by reason of its having caused the Fund to pay a broker or dealer that provides brokerage and research services to the Manager an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Manager determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Manager's overall responsibilities with respect to the Fund and to other clients of the Manager as to which the Manager exercises investment discretion. The Manager agrees that in connection with purchases or sales of portfolio investments for the Fund's account, neither the Manager or any officer, director, employee or agent of the Manager shall act as a principal or receive any commission other than as provided in Section 3. (d) The Fund will pay or reimburse the Manager for the compensation in whole or in part of such officers of the Fund and persons assisting them as may be determined from time to time by the Trustees of the Fund. The Fund will also pay or reimburse the Manager for all or part of the cost of suitable office space, utilities, support services and equipment attributable to such officers and persons, as may be determined in each case by the Trustees of the Fund. The Fund will pay the fees, if any, of the Trustees of the Fund. (e) The Manager shall not be obligated to pay any expenses of or for the Fund not expressly assumed by the Manager pursuant to this Section 1 other than as provided in Section 3. 2. OTHER AGREEMENTS, ETC. It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager have and may have advisory, management, service or other contracts with other organizations and persons, and may have other interests and business. 3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER. The Fund will pay to the Manager as compensation for the Manager's services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), (c) and (e) of Section 1, a fee, computed and paid quarterly at the annual rate of: (a) 0.65% of the first $500 million of the average net asset value of the Fund; (b) 0.55% of the next $500 million of such average net asset value; (c) 0.50% of the next $500 million of such average net asset value; (d) 0.45% of the next $5 billion of such average net asset value; (e) 0.425% of the next $5 billion of such average net asset value; (f) 0.405% of the next $5 billion of such average net asset value; (g) 0.39% of the next $5 billion of such average net asset value; and (h) 0.38% of any amount thereafter. Such average net asset value shall be determined by taking an average of all of the determinations of such net asset value during such quarter at the close of business on each business day during such quarter while this Contract is in effect. Such fee shall be payable for each fiscal quarter within 30 days after the close of such quarter. The fees payable by the Fund to the Manager pursuant to this Section 3 shall be reduced by any commissions, fees, brokerage or similar payments received by the Manager or any affiliated person of the Manager in connection with the purchase and sale of portfolio investments of the Fund, less any direct expenses approved by the Trustees incurred by the Manager or any affiliated person of the Manager in connection with obtaining such payments. In the event that expenses of the Fund for any fiscal year should exceed the expense limitation on investment company expenses imposed by any statute or regulatory authority of any jurisdiction in which shares of the Fund are qualified for offer and sale, the compensation due the Manager for such fiscal year shall be reduced by the amount of such excess by a reduction or refund thereof. If the Manager shall serve for less than the whole of a quarter, the foregoing compensation shall be prorated. 4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT. This Contract shall automatically terminate, without the payment of any penalty, in the event of its assignment; and this Contract shall not be amended unless such amendment be approved at a meeting by the affirmative vote of a majority of the outstanding shares of the Fund, and by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager. 5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This Contract shall become effective upon its execution, and shall remain in full force and effect continuously thereafter (unless terminated automatically as set forth in Section 4) until terminated as follows: (a) Either party hereto may at any time terminate this Contract by not more than sixty days' nor less than thirty days' written notice delivered or mailed by registered mail, postage prepaid, to the other party, or (b) If (i) the Trustees of the Fund or the shareholders by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Trustees of the Fund who are not interested persons of the Fund or of the Manager, by vote cast in person at a meeting called for the purpose of voting on such approval, do not specifically approve at least annually the continuance of this Contract, then this Contract shall automatically terminate at the close of business on the second anniversary of its execution, or upon the expiration of one year from the effective date of the last such continuance, whichever is later. Action by the Fund under (a) above may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty. 6. CERTAIN DEFINITIONS. For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares of the Fund" means the affirmative vote, at a duly called and held meeting of shareholders of the Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at such meeting, whichever is less. For the purposes of this Contract, the terms "affiliated person", "control", "interested person" and "assignment" shall have their respective meanings defined in the Investment Company Act of 1940 (the "1940 Act") and the Rules and Regulations thereunder, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; the term "specifically approve at least annually" shall be construed in a manner consistent with the 1940 Act, and the Rules and Regulations thereunder; and the term "brokerage and research services" shall have the meaning given in the Securities Exchange Act of 1934 and the Rules and Regulations thereunder. 7. NONLIABILITY OF MANAGER. In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund, for any act or omission in the course of, or connected with, rendering services hereunder. 8. TERMINATION OF PRIOR CONTRACT. This Contract shall become effective as of its date, and supersedes the Management Contract dated December 21, 1988. 9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS AND SHAREHOLDERS. A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the Fund. IN WITNESS WHEREOF, THE GEORGE PUTNAM FUND OF BOSTON and PUTNAM INVESTMENT MANAGEMENT, INC. have caused this instrument to be signed in duplicate on its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written. THE GEORGE PUTNAM FUND OF BOSTON /s/ Charles E. Porter By: -------------------------------- Charles E. Porter Executive Vice President PUTNAM INVESTMENT MANAGEMENT, INC. /s/ Gordon H. Silver By: -------------------------------- Gordon H. Silver Senior Managing Director EX-99.B14 5 RETMT PLAN Putnam Retirement Plans: Basic Plan Document Putnam Standard Profit Sharing Plan - "Keogh" Putnam Standard Profit Sharing and 401 (k) Plan Putnam Standard Money Purchase Pension Plan - "Keogh" Putnam Variable Profit Sharing and 401 (k) Plan Putnam Variable Money Purchase Pension Plan Boston London Tokyo Contents I. Putnam Basic Plan Document Article I: Introduction 2 Article II: Definitions 2 Article III: Participation 6 Article IV: Contributions 7 Article V: Cash or Deferred Arrangement under Section 401(k) (CODA) 9 Article VI: Limitations on Allocations 15 Article VII: Eligibility for Distribution of Benefits 17 Article VIII: Vesting 18 Article IX: Payment of Benefits 19 Article X: Joint and Survivor Annuity Requirements 20 Article XI: Minimum Distribution Requirements 22 Article XII: Withdrawals and Loans 25 Article XIII: Trust Fund and Investments 26 Article XIV: Insurance Policies 27 Article XV: Top-Heavy Plans 28 Article XVI: Administration of the Plan 30 Article XVII: Trustee and Insurance Trustee 31 Article XVIII: Amendment 33 Article XIX: Termination of Plan and Trust 34 Article XX: Transfers from Other Qualified Plans; Mergers 35 Article XXI: Miscellaneous 35 II. IRS Opinion Letters The Putnam Standard Profit sharing and 401(k) Plan Opinion Letter 38 The Putnam Standard Money Purchase Pension Plan Opinion Letter 39 The Putnam Variable Profit Sharing and 401 (k) Plan Opinion Letter 40 Putnam Variable Money Purchase Pension Plan Opinion Letter 41 I. Putnam Basic Plan Document Article I: Introduction 2 Article II: Definitions 2 Article III: Participation 6 Article IV: Contributions 7 Article V: Cash or Deferred Arrangement under Section 401 (k) (CODA) 9 Article VI: Limitations on Allocations 15 Article VII: Eligibility for Distribution of Benefits 17 Article VIII: Vesting 18 Article IX: Payment of Benefits 19 Article X: Joint and Survivor Annuity Requirements 20 Article XI: Minimum Distribution Requirements 22 Article XII: Withdrawals and Loans 25 Article XIII: Trust Fund and Investments 26 Article XIV: Insurance Policies 27 Article XV: Top-Heavy Plans 28 Article XVI: Administration of the Plan 30 Article XVII: Trustee and Insurance Trustee 31 Article XVIII: Amendment 33 Article XIX: Termination of Plan and Trust 34 Article XX: Transfers from Other Qualified Plans; Mergers 35 Article XXI: Miscellaneous 35 The Putnam Basic Plan Document ARTICLE 1: Introduction By executing the Plan Agreement, the Employer has established a retirement plan (the "Plan") according to the terms and conditions of the Plan Agreement and this Putnam Basic Plan Document, for the purpose of providing a retirement fund for the benefit of Participants and Beneficiaries. ARTICLE II: Definitions The terms defined in Sections 2.1 through 2.50 appear generally throughout the document. Sections 2.51 through 2.63 and Article V contain definitions of terms used only in a CODA or in a Variable Plan which permits nondeductible Participant Contributions pursuant to Section 5.9 and Section 10.4 contains additional definitions related to distributions from the Plan. Articles VI and XI contain additional definitions of terms used only in those Articles. 2.1 Account means any of, and Accounts means all of, a Participant's Employer contribution Account, Participant Contribution Account, Rollover Account, and if the Plan contains a CODA, the accounts maintained for the Participant pursuant to Article V. 2.2 Affiliated Employer, for purposes of the Plan other than Article VI, means the Employer and a trade or business, whether or not incorporated, which is any of the following: (a) A member of a group of controlled corporations (within the meaning of Section 414(b) of the Code) which includes the Employer; or (b) A trade or business under common control (within the meaning of Section 414(c) of the Code) with the Employer; or (c) A member of an affiliated service group (within the meaning of Section 414(m) of the Code) which includes the Employer; or (d) An entity otherwise required to be aggregated with the Employer pursuant to Section 414(o) of the Code. In determining an Employee's service for vesting and for eligibility to participate in the Plan, all employment with Affiliated Employers will be treated as employment by the Employer. In a Variable Plan, in addition to the Employer, any Affiliated Employer may adopt the Plan for the benefit of its Employees by executing a Plan Agreement. For purposes of Article VI only, the definitions in paragraphs (a) and (b) of this Section 2.2 shall be modified by adding at the conclusion of the parenthetical phrase in each such paragraph the words "as modified by Section 415(h) of the Code." 2.3 Authorized Leave of Absence means a leave of absence from employment granted in writing by an Affiliated Employer. Authorized Leave of Absence shall be granted on account of military service for any period during which an Employee's right to re-employment is guaranteed by law, and for such other reasons and periods as an Affiliated Employer shall consider proper, provided that Employees in similar situations shall be similarly treated. 2.4 Base Contribution Percentage means the percentage so specified in the Plan Agreement. 2.5 Beneficiary means a person entitled to receive benefits under the Plan upon the death of a Participant, in accordance with Section 7.2 and Articles 10 and 11. 2.6 CODA means a cash or deferred arrangement that meets the requirements of Section 401(k) of the Code, adopted as part of a profit sharing plan. 2.7 Code means the Internal Revenue Code of 1986, as amended. 2.8 Compensation means all of an Employee's compensation determined in accordance with the definition elected by the Employer in the Plan Agreement. For purposes of that election, "Form W-2 earnings" means "wages" as defined in Section 3401(a) of the Code in connection with income tax withholding at the source, and all other compensation paid to the Employee by the Employer in the course of its trade or business, for which the Employer is required to furnish the Employee with a written statement under sections 6041(d), 6051(a)(3), and 6052 of the Code, determined without regard to exclusions based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in section 3401(a)(2) of the Code). 2.9 Date of Employment means the first date on which an Employee performs an Hour of Service; or, in the case of an Employee who has incurred one or more One-Year Eligibility Breaks and who is treated as a new Employee under the rules of Section 3.3, the first date on which he performs an Hour of Service after his return to employment. 2.10 Deductible Employee Contribution Account means an account maintained on the books of the Plan on behalf of a Participant, in which are recorded amounts contributed by him to the Plan on a tax-deductible basis under prior law, and the income, expenses, gains and losses thereon. 2.11 Disabled means unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. The permanence and degree of such impairment shall be supported by medical evidence. 2.12 Earned Income means a Self-Employed Individual's net earnings from self-employment in the trade or business with respect to which the Plan is established, excluding items not included in gross income and the deductions allocable such items, and reduced by (i) contributions by the Employer to qualified plans, to the extent deductible under Section 404 of the Code, and (ii) the deduction allowed to the Employer under Section 164(f) of the Code for taxable years beginning after December 31, 1989. 2.13 Earnings, effective for all Plan Years beginning after December 31, 1988, means the first $200,000 (as adjusted by the Secretary of the Treasury at the same time and in the same manner as under Section 415(d) of the Code) of the sum of the Compensation and the Earned Income received by an Employee during a Plan Year. In determining the Earnings of a Participant, the rules of Section 414(q)(6) of the Code shall apply, except that in applying those rules the term "family" shall include only the Participant's spouse and the Participant's lineal descendants who have not reached age 19 by the last day of the Plan Year. If, as a result of the application of such rules the adjusted $200,000 limitation is exceeded, then (except for purposes of determining the portion of compensation up to the Integration Level), the limitation shall be prorated among the affected individuals in proportion to each such individual's compensation as determined under this section prior to the application of this limitation. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual compensation of each Employee taken into account under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. if a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For plan years beginning on or after January 1, 1994, any reference in this Plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit set forth in this provision. If compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year, the compensation for that prior determination period is subject to the OBRA '93 annual compensation limit for that prior determination period. For this purpose, for determination periods beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual compensation limit is $150,000. 2.14 Effective Date means the date so designated in the Plan Agreement. If the Plan Agreement indicates that the Employer is adopting the Plan as an amendment of an existing plan, the provisions of the existing plan apply to all events preceding the Effective Date, except as to specific provisions of the Plan which set forth a retroactive effective date in accordance with Section 1140 of the Tax Reform Act of 1986. 2.15 Eligibility Period means a period of 12 consecutive months beginning on an Employee's most recent Date of Employment or any anniversary thereof, in which he is credited with at least 1,000 Hours of Service; provided that if the Employer has elected in the Plan Agreement to establish a number less than 1,000 as the requisite for crediting an Eligibility Period, that number shall be substituted for 1,000, and provided further that in the case of an Employee in a seasonal industry (as defined under regulations prescribed by the Secretary of Labor) in which the customary extent of employment during a calendar year is fewer than 1,000 Hours of Service, the number specified in any regulations prescribed by the Secretary of Labor dealing with years of service shall be substituted for 1,000. 2.16 Employee means a common law Employee of an Affiliated Employer; in the case of an Affiliated Employer which is a sole proprietorship, the sole proprietor thereof; in the case of an Affiliated Employer which is a partnership, a partner thereof; and a Leased Employee of an Affiliated Employer. The term "Employee" includes an individual on Authorized Leave of Absence, a Self-employed Individual and an Owner-Employee. 2.17 Employer means the Employer named in the Plan Agreement and any successor to all or the major portion of its assets or business which assumes the obligations of the Employer under the Plan Agreement. 2.18 Employer Contribution Account means an account maintained on the books of the Plan on behalf of a Participant, in which are recorded the amounts allocated for his benefit from contributions by the Employer (other than contributions pursuant to Article 5), Forfeitures by former Participants (if the Plan provides for reallocation of Forfeitures), amounts reapplied under Section 6.1(d), and the income, expenses, gains and losses incurred thereon. 2.19 ERISA means the Employee Retirement Income Security Act of 1974, as amended. 2.20 Excess Earnings means a Participant's Earnings in excess of the Integration Level of the Plan. 2.21 Forfeiture means a nonvested amount forfeited by a former Participant in a Variable Plan, pursuant to Section 8.3; or an amount forfeited by a former Participant or Beneficiary who cannot be located, pursuant to Section 9.5; or a Qualified Matching Contribution or Employer Matching Contribution forfeited pursuant to Section 5.8. 2.22 Hour of Service means each hour described in paragraphs (a), (b), (c), (d) or (e) below, subject to paragraphs (f) and (g) below. (a) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Affiliated Employer. These hours shall be credited to the Employee for the computation period or periods in which the duties are performed. (b) Each hour for which an Employee is paid, or entitled to payment, by an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service shall be credited under this paragraph for any single continuous period of absence (whether or not such period occurs in a single computation period) unless the Employee's absence in not an Authorized Leave of Absence. Hours under this paragraph shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations, which are incorporated herein by this reference. (c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Affiliated Employer. The same Hours of Service shall not be credited under both paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c); and no more than 501 Hours of Service shall be credited under this paragraph (c) with respect to payments of back pay, to the extent that such pay is agreed to or awarded for a period of time described in paragraph (b) during which the Employee did not perform or would not have performed any duties. These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made. (d) Each hour during an Authorized leave of Absence. Such hours shall be credited at the rate of a customary full work week for an Employee. (e) Solely for purposes of determining whether a One-Year Vesting Break or a One-Year Eligibility Break has occurred, each hour which otherwise would have been credited to an Employee but for an absence from work by reason of: the pregnancy of the Employee, the birth of a child of the Employee, the placement of a child with the Employee in connection with the adoption of the child by the Employee, or caring for a child for a period beginning immediately after its birth or placement. If the Plan Administrator cannot determine the fours which would normally have been credited during such an absence, the Employee shall be credited with eight Hours of Service for each day of absence. No more than 501 Hours of Service shall be credited under this paragraph by reason of any pregnancy or placement. Hours credited under this paragraph shall be treated as Hours of Service only in the Plan Year or Eligibility Period or both, as the case may be, in which the absence from work begins, if necessary to prevent the Participant's incurring a One-Year Vesting Break or One-Year Eligibility Break in that Period, or, if not, in the period immediately following that in which the absence begins. The Employee must timely furnish to the Employer information reasonably required to establish (i) that an absence from work is for a reason specified above, and (ii) the number of days for which the absence continued. (f) Hours of Service shall be determined on the basis of actual hours for which an Employee is paid or entitled to payment, or as otherwise specified in the Plan Agreement. (g) If the Employer maintains the plan of a predecessor employer, service for the predecessor Employer shall be treated as service for the Employer. 2.23 Insurance Trustee means the person named in the Plan Agreement as Insurance Trustee, and any successor thereto. 2.24 Integration Level means the Earnings amount selected by the Employer in the Plan Agreement. 2.25 Investment Company means an open-end registered investment company for which Putnam Financial Services, Inc., or its affiliate acts a principal underwriter, or for which The Putnam Management Company, Inc., or its affiliate serves as an investment adviser; provided that its prospectus offers its shares under the Plan. 2.26 Investment Company Shares means shares issued by an Investment Company. 2.27 Investment Products means any of the investment products specified by the Employer in accordance with Section 13.2, fro the group of those products sponsored, underwritten or managed by Putnam as shall be made available by Putnam under the Plan, and such other products as shall be accepted in writing by Putnam for availability under the Plan. The term "Investment Products" does not include any Policy selected pursuant to Article XIV. 2.28 Leased Employee means any person (other than an Employee of the recipient) who pursuant to an agreement between the recipient and any other person ("leasing organization") has performed services for the recipient (or for the recipient and related persons determined in accordance with Section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by Employees in the business field of the recipient Employer. The compensation of a Leased Employee for purposes of the Plan means the Compensation (as defined in Section 2.8) of the Leased Employee attributable to services performed for the recipient Employer. Contributions or benefits provided to a leased Employee by the leasing organization which are attributable to services performed for the recipient Employer shall be treated as provided by the recipient Employer. Provided that leased Employees do not constitute more than 20 percent of the recipient's nonhighly compensated workforce, a leased Employee shall not be considered an Employee of the recipient if he is covered by a money purchase pension plan providing; (1) a nonintegrated Employer contribution rate of at least 10 percent of compensation (as defined in Section 415(c)(3) of the Code, but including amounts contributed pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code), (2) immediate participation, and (3) full and immediate vesting. 2.29 One-Year Eligibility Break means an Eligibility Period during which an individual is not credited with more than 500 Hours of Service; provided, however, that in the case of an Employee in a seasonal industry, there shall be substituted for 500 the number of Hours of Service specified in any regulations of the Secretary of Labor dealing with breaks in service, and provided further that if the Employer has elected in the Plan Agreement to establish a number less than 500 as the requisite Hours of Service for crediting an Eligibility Period, that number shall be substituted for 500. 2.30 One-Year Vesting Break means a Plan Year during which an individual is not credited with more than 500 Hours of Service; provided, however, that in the case of an Employee in a seasonal industry, there shall be substituted for the 500 the number of Hours of Service specified in any regulations for the Secretary of Labor dealing with breaks in service, and provided further that if the Employer has elected in the Plan Agreement to establish a number less than 500 as the requisite Hours of Service for crediting a Year of Service, that number shall be substituted for 500. 2.31 Owner-Employee means the sole proprietor of an Affiliated Employer that is a sole proprietorship, or a partner owning more than 10 percent of either the capital or profits interest of an Affiliated Employer that is a partnership. 2.32 Participant means each Employee who has met the requirements for participation in Article III. 2.33 Participant Contribution Account means an account maintained on the books of the plan, in which are recorded non deductible contributions by a Participant in accordance with Section 4.2(e) or a similar provision in effect under the Plan or a predecessor plan for periods before the first Plan Year beginning after December 31, 1986, and any income, expenses, gains or losses incurred thereon. 2.34 Plan means the form of defined contribution retirement plan and trust agreement adopted by the Employer, consisting of the Plan Agreement and the Putnam Basic Plan Document as set forth herein, together with any and all amendments and supplements thereto. 2.35 Plan Administrator means the Employer or its appointee pursuant to Section 16.1. 2.36 Plan Agreement means the separate agreement entered into between the Employer and the Trustee (and the Insurance Trustee, if any) and accepted by Putnam, under which the Employer adopts the Plan and selects among its optional provisions. 2.37 Plan Year means the period of 12 consecutive months specified by the Employer in the Plan Agreement; provided that if the Effective Date is not the first day of the Employer's taxable year, the initial Plan Year shall begin on the Effective Date and end on the last day of the Employer's taxable year. 2.38 Policy means an ordinary life insurance, term insurance, retirement income or endowment policy or an individual or group annuity contract issued by a life insurance company in connection with the Plan, or an interest therein. An ordinary life insurance policy within the meaning of this definition provides non-decreasing death benefits and non-increasing premiums. 2.39 Putnam means Putnam Financial Services, Inc., or a company affiliated with it which Putnam Financial Services, Inc. has designated as its agent to perform specified actions or procedures in connection with the prototype Plan. 2.40 Qualified Participant means (i) in a Standard Plan, any Participant who is an active Employee on the last day of the Plan Year in question or who is credited with more than 500 Hours of Service during the Plan Year in question or whose Retirement or death occurred during the Plan Year in question; and (ii) in a Variable Plan, any Participant who meets the requirements specified by the Employer in the Plan Agreement. If the Plan is not adopted to replace an existing plan, this Section 2.40 is effective on the Effective Date. If the Plan replaces an existing plan, this Section 2.40 is effective on the first day of the first Plan Year that begins after December 31, 1988, or if later, on the Effective Date, and the provision of the existing plan that this Section 2.40 replaces shall continue to apply until that time. 2.41 Recordkeeper means the person or entity designated by the Employer in the Plan Agreement to perform the duties described in Section 16.4, and any successor thereto. 2.42 Retirement means ceasing to be an Employee in accordance with Section 7.1. 2.43 Rollover Account means an account established for an Employee who makes a rollover contribution to the Plan pursuant to Section 4.5. 2.44 Self-Employed Individual means an individual whose personal services are a material income-producing factor in the trade or business for which the Plan is established, and who has Earned Income for the taxable year from that trade or business, or would have Earned Income but for the fact that the trade or Business had no net profits for the taxable year. 2.45 Shareholder-Employee means any officer or Employee of an electing small business corporation, within the meaning of Section 1362 of the Code, who on any day during a taxable year of the Employer owns (or is considered as owning under Section 318(a)(1) of the Code) more than 5% of the outstanding stock of the Employer. 2.46 Social Security Wage Base means the maximum amount considered as wages under Section 3121(a)(1) of the Code as in effect on the first day of the Plan Year. 2.47 Standard Plan means a Plan adopted by execution of a Putnam Standard Profit Sharing Plan Agreement #001 (including such a Plan with a CODA) or a Putnam Standard Money Purchase Pension Plan Agreement #002. 2.48 Trust and Trust Fund means the trust fund established under Section 13.1. 2.49 Trustee means the person, or the entity with trustee powers, named in the Plan Agreement as trustee, and any successor thereto. 2.50 Valuation Date means (i) for a Standard Plan, each business day, and (ii) for a Variable Plan, the last day of each Plan Year, and such other dates as the Employer may designate by written agreement with the Recordkeeper. 2.51 Variable Plan means a Plan adopted by execution of a Putnam Variable Profit Sharing Plan Agreement #003 or a Putnam Variable Money Purchase Pension Plan Agreement #004. 2.52 Year of Service means a Plan Year in which an Employee is credited with at least 1,000 Hours of Service; provided, however, that if the Employer has elected in the Plan Agreement to establish a number less than 1,000 as the requisite for crediting a Year of Service, that number shall be substituted for 1,000, and provided further that in the case of an Employee in a seasonal industry (as defined under regulations prescribed by the Secretary of Labor) in which the customary extent of employment during a calendar year is fewer than 1,000 Hours of Service, the number specified in any regulations prescribed by the Secretary of Labor dealing with years of service shall be substituted for 1,000. An Employee's Years of Service shall include service credited prior to the Effective Date under any predecessor plan. If the initial Plan Year is shorter than 12 months, each Employee who is credited with at least 1,000 Hours of Service in the 12-month period ending on the last day of the initial Plan Year shall be credited with a Year of Service with respect to the initial Plan Year. (a) Service in any Plan Year (or comparable period prior to the Effective Date) completed before the Employee reached age 18; (b) Service completed during a period in which the Employer did not maintain the Plan or any predecessor plan (as defined under regulations prescribed by the Secretary of the Treasury). The following definitions apply only to cash or deferred arrangements under Section 401(k)(CODA) and to Variable Plans which permits nondeductible Participant contributions pursuant to Section 5.9: 2.53 Deferral Agreement means an Employee's agreement to make one or more Elective Deferrals in accordance with Section 5.2. 2.54 Elective Deferral means any contribution made to the Plan by the Employer at the election of a Participant, in lieu of cash compensation, including contributions made pursuant to a Deferral Agreement or other deferral mechanism. 2.55 Elective Deferral Account means an account maintained on the books of the Plan, in which are recorded a Participant's Elective Deferrals and the income, expenses, gains and losses incurred thereon. 2.56 Employer Matching contribution means a contribution made by the Employer (i) to the Plan pursuant to Section 5.,8 or (ii) to another defined contribution plan on account of a Participant's "elective deferrals" or "employee contributions," as those terms are defined in Section 401(m)(4) of the Code. 2.57 Employer Matching Account means an account maintained on the books of the Plan, in which are recorded the Employer Matching Contributions made on behalf of a Participant and the income, expenses, gains and losses incurred thereon. 2.58 Highly Compensated Employee means any highly compensated active Employee or highly compensated former Employee, as defined in this Section 2.58. For this purpose, the "determination year" shall be the Plan Year, and the "look-back year" shall be the 12-month period immediately preceding the determination year; provided, however, that in a Variable Plan for which the Plan Year is the calendar year, the current Plan Year shall be both the "determination year" and the "look-back year" if the Employer so elects in the Plan Agreement. A highly compensated active Employee includes any Employee who performs service for the Employer during the determination year and who during the look-back year: (i) received compensation from the Employer in excess of $75,000 (as adjusted pursuant to Section 415(d) of the Code); (ii) received compensation from the Employer in excess of $50,000 (as adjusted pursuant to Section 415(d) of the Code) and was a member of the top-paid group for such year; or (iii) was an officer of the Employer and received compensation during such year that is greater than 50 percent of the dollar limitation in effect under Section 415(b)(1)(A) of the Code. The term also includes (i) Employees who are both described in the preceding sentence if the term "determination year" is substituted for the term "look-back year," and among the 100 Employees who received the most compensation from the Employer during the determination year; and (ii) Employees who are 5 percent owners at any time during the look-back year or determination year. If no officer has satisfied the compensation requirement of (iii) above during either a year or a look-back year, the highest paid officer for such year shall be treated as a Highly Compensated Employee. A highly compensated former Employee includes any Employee who separated from service (or was deemed to have separated) before the determination year, performed no service for the Employer during the determination year, and was a highly compensated active Employee for either the year of separation from service or any determination year ending on or after the Employee's 55th birthday. If during a determination year or look-back year an Employee is a family member of either a 5 percent owner who is an active or former Employee, or a Highly Compensated Employee who is one of the 10 most highly paid Highly Compensated Employees ranked on the basis of compensation paid by the Employer during the year, then the family member and the 5 percent owner or top-ten Highly Compensated Employee shall be treated as a single Employee receiving compensation and plan contributions or benefits equal to the sum of the compensation and contributions or benefits of the family member and the 5 percent owner or top-ten highly compensated Employee. For purposes of this Section 2.58, family members include the spouse, lineal ascendants and descendants of the Employee or former Employee and the spouses of such lineal ascendants and descendants. The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, the top 100 Employees, the number of Employees treated as officers and the compensation that is considered, will be made in accordance with Section 414(q) of the Code and the regulations thereunder. 2.59 Non-Highly Compensated Employee means an Employee who is not a Highly Compensated Employee. 2.60 Qualified Matching Contribution means a contribution made by the Employer that: (i) is allocated in proportion to a Participant's Elective Deferrals or Participant Contributions, as specified by the Employer in the Plan Agreement; (ii) is fully vested at all times, and (iii) is distributable only in accordance with Section 5.13. 2.61 Qualified Matching Account means an account maintained on the books of the Plan, in which are recorded the Qualified Matching Contributions on behalf of a Participant and the income, expense, gain and loss attributable thereto. 2.62 Qualified Nonelective Contribution means a contribution (other than an Employer Matching contribution or Qualified Matching Contribution) made by the Employer, that: (i) a Participant may no elect to receive in cash until it is distributed from the plan; (ii) is fully vested at all times; and (iii) is distributable only in accordance with Section 5.13. 2.63 Qualified Nonelective Contribution Account means an account maintained on the books of the Plan, in which are recorded the Qualified Nonelective Contributions on behalf of a Participant and the income, expense, gain and loss attributable thereto. ARTICLE III: Participation 3.1 Initial Participation. An Employee shall become a Participant in the Plan as of the first day of the month in which he first satisfies the age and service requirements specified by the Employer in the Plan Agreement, or as of the Effective Date, whichever is later; provided, however, that: (a) If the Plan is adopted as an amendment of a predecessor plan of the Employer, every Employee who was participating under the predecessor plan when it was so amended shall become a Participant in the Plan as of the Effective Date, whether or not he has satisfied the age and service requirements specified in the Plan Agreement; and (b) Unless the Employer specifies otherwise in the Plan Agreement, any individual who is (i) a nonresident alien receiving no earned income from an Affiliated Employer which constitutes income from sources within the United States, or (ii) included in a unit of Employees covered by a collective bargaining agreement between the Employer and Employee representatives if retirement benefits were the subject of good faith bargaining (unless the collective bargaining agreement specifically provides for coverage by the Plan or involves as an employee representative an organization more than one-half of whose members are Employees who are owners, officers or executives of the Employer) shall not participate in the Plan; and (c) If the Plan is a Variable Plan and is not adopted as an amendment of a predecessor plan of the Employer, all Employees on the Effective Date shall become Participants on the Effective Date; if the Employer so elects in the Plan Agreement; and (d) If the Plan is a Variable Plan, (i) only Employees in the eligible classes specified by the Employer in the Plan Agreement shall participate in the Plan; and (ii) eligible Employees will begin participation on the entry date specified in the Plan Agreement. Notwithstanding paragraphs (c) and (d), the Plan must comply with the coverage and participation rules of Sections 410(b) and 401(a)(26) of the Code and the regulations thereunder. 3.2 Special Participation Rule. With respect to a Standard Plan, or a Variable Plan in which the Employer has specified full and immediate vesting in the Plan Agreement, and Employee who incurs a One-Year Eligibility Break before completing the number of Eligibility Periods required under Section 3.1 shall not thereafter be credited with any Eligibility Period completed before the One-Year Eligibility Break. 3.3 Resumed Participation. A former Employee who incurs a One-Year Eligibility Break after having become a Participant shall participate in the Plan as of the date on which he again become an Employee, if (i) his Employer Contribution Account of Employer Matching Account had become partially or fully vested before he incurred a One-Year Vesting Break, or (ii) he incurred fewer than five consecutive One-Year Eligibility Breaks. In any other case, when he again becomes an Employee he shall be treated as a new Employee under Section 3.1. 3.4 Changes in Classification (Variable Plans Only). If a Participant in a Variable Plan ceases to be a member of a classification of Employees eligible to participate in the Plan, but does not incur a One-Year Eligibility Break, he will continue to b e credited with Eligibility Periods while he remains an Employee, and he will resume participation as of the date on which he again becomes a member of a classification of Employees eligible to participate in the Plan. If such a Participant incurs a One-Year Eligibility Break, Section 3.3 will apply. If an Employee who is not a member of a classification of Employees eligible to participate in the Plan satisfies the age and service requirements specified in the Plan Agreement, he will begin to participate immediately upon becoming a member of an eligible classification. 3.5 Benefits for Owner-Employees. If the Plan provides contributions or benefits for one or more Owner-Employees who control both the trade or business with respect to which the Plan is established and one or more other trades or businesses, the Plan and plans established with respect to such other trades or businesses must, when looked at as a single plan, satisfy Sections 401(a) and (d) of the Code with respect to the Employees of this and all such other trades or businesses. If the Plan provides contributions or benefits for one or more Owner Employees who control one or more other trades or businesses, the Employees of each such other trade or business must be included in a plan which satisfies Sections 401(a) and (d) of the Code and which provides contributions and benefits not less favorable than those provided for such Owner-Employees under the Plan. If an individual is covered as an Owner-Employee under the plans of two or more trades or businesses which he does not control and such individual controls a trade or business, then the contributions or benefits of the Employees under the plan of the trade or business which he does control must be as favorable as those provided for him under the most favorable plan of the trade or business which he does not control. For purposes of this Section 3.5, an Owner-Employee, or two or more Owner-Employees, shall be considered to control a trade or business if such Owner-Employee, or such two or more Owner-Employees together: (a) own the entire interest in an unincorporated trade or business, or (b) in the case of a partnership, own more than 50 percent of either the capital interest or the profits interest in such partnership. For purposes of the preceding sentence, an Owner-Employee or two or more Owner-Employees shall be treated as owning any interest in a partnership which is owned, directly or indirectly, by a partnership which such Owner-Employees are considered to control within the meaning of the preceding sentence. ARTICLE IV: Contributions 4.1 Provisions Applicable to All Plans. (a) Payment and Crediting of Employer Contributions. the Employer shall pay to the order of the Trustee the aggregate contribution to the Trust Fund (other than the premium payments on any Policy) for each Plan Year. Each contribution shall be accompanied by written instructions from the Employer, in the manner prescribed by Putnam. Neither the Trustee nor Putnam shall be under any duty to inquire into the correctness of the amount or the timing of any contribution, or to collect any amount if the Employer fails to make a contribution as provided in the Plan. (b) Responsibility for Premium Payments. Contributions to be applied to the payment of the premiums on any Policy shall be paid by the Employer directly to the insurer in cash. In determining the amount of any premium due under any Policy with respect to any Participant, the Employer and the Insurance Trustee may rely conclusively upon information furnished by the provider of the Policy. For purposes of Sections 4.2(a), 4.3(a) and Article 5, all Employer contributions used to pay premiums on Policies shall be treated as contributions made to the appropriate Participant's Employer contribution Account. If the Employer omits any premium payment or makes any mistake concerning a premium payment, neither the Employer nor the Insurance Trustee shall have any liability in excess of the premium to be paid. (c) Time for Payment. The aggregate of all contributions with respect to a Plan Year shall be transferred in accordance with paragraphs (a) and (b) no later than the due date (including extensions) for filing the Employer's federal income tax return for that Plan Year. (d) Limitations on Allocations. All allocations shall be subject to the limitations in Article 6. (e) Establishments of Accounts. the employer will establish and maintain (or cause to be established and maintained) for each Participant individual accounts adequate to disclose his interest in the Trust Fund, including such of the following separate accounts as shall apply to the Participant: Deductible Employee Contribution Account, Employer Contribution Account, Participant Contribution Account, and rollover Account; and in a Plan with a CODA, Elective Deferral Account, Qualified Nonelective Account, Qualified Matching Account and Employer Matching Account. The maintenance of such accounts shall be only for recordkeeping purposes, and the assets of separate accounts shall not be required to be segregated for purposes of investment. (f) Restoration of Accounts (Variable Plans Only). Notwithstanding any other provision of the Pan, for any Plan Year in which it is necessary to restore any portion of a Participant's Account pursuant to Section 8.3(b) or 9.5, to the extent that the amount of Forfeitures available is insufficient to accomplish such restoration, the Employer shall contribute the amount necessary to eliminate the insufficiency, regardless or whether the contribution is currently deductible by the Employer under Section 404 of the Code. Forfeitures shall be considered available for allocation pursuant to Sections 4.2, 4.3, and 5.8 in a Plan Year only after all necessary restoration of Accounts has been accomplished. 4.2 Provisions Applicable Only to Profit Sharing Plans. (a) Amount of Annual Contribution. The Employer will contribute for each Plan Year an amount determined accordance with the formula specified by the Employer in the Plan Agreement, less any amount reapplied for the Plan Year under Section 6.1(d), not to exceed the amount deductible under Section 404 of the Code. In a Variable Plan, if the Employer so elects in the Plan Agreement, the amount of Forfeitures occurring a Plan Year shall be applied to reduce the Employer's contribution by a like amount, and such Forfeitures shall be treated as a portion of the Employer contribution for purposes of paragraphs (b) and (c). (b) Allocation of Contributions: General Rule. As of the last day of each Plan Year, the Employer's contribution (and any amounts reapplied under Section 6.1(d) for the Plan Year shall be allocated among the Employer Contribution Accounts of Qualified Participants in proportion to their Earnings. This general rule does not apply to a Plan that is integrated with Social Security or to allocations in a CODA. (c) Plans Integrated with Social Security. If the Employer elects in the Plan Agreement an allocation formula integrated with Social Security, Employer contributions (and any amounts reapplied under Section 6.1(d)) shall be allocated as of the last day of the Plan Year, as follows: (1) Top-Heavy Integration Formula. If the Plan is required to provide a minimum allocation for the Plan Year pursuant to the Top-Heavy Plan rules of Article 15, or if the Employer has specified in the Plan Agreement that this paragraph (1) will apply whether or not the Plan is Top-Heavy, then: (a) First, among the Employer Contribution Accounts of all Qualified Participants, in the ratio that each Qualified Participant's Earnings bears to all Qualified Participants' Earnings. The total amount allocated in this manner shall be equal to 3% of all Qualified Participants' Earnings (or, if less, the entire amount to be allocated). (b) Next, among the Employer Contribution Accounts of all Qualified Participants who have Excess Earnings, in the ration that each Qualified Participant's Excess Earnings bears to all Qualified Participants' Excess Earnings (or, if less, the entire amount remaining to be allocated). (c) Next, among the Employer Contribution Accounts of all Qualified Participants, in the ratio that the sum of each Qualified Participant's Earnings and Excess Earnings bears to the sum of all Qualified Participants; Earnings and Excess Earnings. the total amount allocated in this manner shall not exceed the lesser of (i) the sum of all Participants' Earnings and Excess Earnings multiplied by the Top-Heavy Maximum Disparity Percentage determined under subparagraph (1)(E), or (ii) the entire amount remaining to be allocated. (d) Finally, any mount remaining shall be allocated among he Employer Contribution Accounts of all Qualified Participants in the ratio that each Qualified Participant's Earnings bears to all Qualified Participants' Earnings. (e) The Top-Heavy Maximum Disparity Percentage shall be the lesser of (i) 2.7% or (ii) the applicable percentage from Table A on page 9. If the Plan's Integration Level is equal to the Social Security Wage Base, the Top-Heavy Maximum Disparity Percentage is 2.7%. (2) Non-Top-Heavy Integration Formula. If the Plan is not required to provide a minimum allocation for the Plan Year pursuant to the Top-Heavy Plan rules of Article 15, and the Employer has not specified in the Plan Agreement that paragraph (1) will apply whether or not the Plan is Top-Heavy, then: (a) An amount equal to (i) the Maximum Disparity Percentage determined under subparagraph (2)(C) multiplied by the sum of all Qualified Participants' Earnings and Excess Earnings, or (ii) if less, the entire amount to be allocated, shall be allocated among the Employer contribution Amounts of all Participants in the ratio that the sum of each Qualified Participant's Earnings and Excess Earnings bears to the sum of all Qualified Participants' Earnings and Excess Earnings. (b) Any amount remaining after the allocation in paragraph (2)(A) shall be allocated among the Employer contribution Accounts of all Qualified Participants in the ratio that each Qualified Participant's Earnings bears to all Qualified Participants' Earnings. (c) the Maximum Disparity percentage shall be the lesser of (i) 5.7% or (ii) the applicable percentage from Table B on page 9. If the Plan's Integration Level is equal to the Social Security Wage Base, the Maximum Disparity Percentage is 5.7%. (3) In this Section 4.2, Earnings means Earnings as defined in Section 2.13. (d) Allocation of Forfeitures. Forfeitures shall be allocated among the Employer Contribution Amounts of all Qualified Participants in accordance with paragraph (b) or (c), whichever applies to Employer contributions. Forfeitures may b allocated pursuant to paragraphs (c)(1)(B), (c)(1)(C) and (c)(2)(A) only to the extent that the limitation described therein has not been fully utilized by the allocation of Employer contributions and amounts reapplied under Section 6.1(d). (e) Participant Contributions. Except in the case of a Variable Plan in which the Employer has provided in the Plan Agreement for nondeductible Participant contributions, the Plan will accept no such contributions for any Plan Year beginning after the Plan Year in which the Employer adopts this Plan. Nevertheless, a Participant Contribution Account shall be maintained in any Plan which accepted nondeductible Participant contributions for any Plan Year beginning after December 31, 1986, and such contributions, together with any matching contributions (as defined in Section 401(m)(4) of the Code), shall be limited so as to meet the nondiscrimination test of Section 401(m) of the Code. Rules applicable to Participant contributions to a Variable Plan in Plan Years beginning after the adoption of this Plan are set froth in Section 5.9. All Participant Contribution Accounts will be fully vested at all times. 4.3 Provisions Applicable Only to Money Purchase Pension Plans. (a) Amount of Annual Contributions. The Employer will contribute for each Plan Year an amount described in paragraph (b) or (c) below, whichever is applicable, less any amounts reapplied for the Plan Year under Section 6.1(d), not to exceed the amount deductible under Section 404(c) of the Code. In a Variable Plan, if the Employer so elects in the Plan Agreement, the amount of Forfeitures occurring in a Plan year shall be applied to reduce the Employer's contribution by a like amount, and such Forfeitures shall be treated as a portion of the Employer contribution for purposes of paragraphs (b) and (c). (b) Allocation of Contributions: General Rule. The Employer shall contribute an amount equal to the product of the Earnings of all Qualified Participants and the Base Contribution Percentage, and the contribution shall be allocated as of the last day of the Plan Year among the Employer Contribution Accounts of all Qualified Participants in the ratio that the Earnings of each Qualified Participant bears to the Earnings of all Qualified Participants. This general rule does not apply to a plan that is integrated with Social Security. (c) Plans Integrated with Social Security. If the Employer has elected in the Plan Agreement to integrate the Plan with Social Security, the Employer shall contribute an amount equal to the sum of the following amounts, and the contribution shall be allocated as of the last day of the Plan Year as follows: (1) To the Employer Contribution Account of each Qualified Participant, an amount equal to the product of the Base Contribution Percentage and his Earnings, and (2) To the Employer Contribution Account of each Qualified Participant who has Excess Earnings, the product of his Excess Earnings, and the lesser of (i) the Base Contribution Percentage or (ii) the Money Purchase Maximum Disparity Percentage determined under paragraph (d). (3) The Base Contribution Percentage shall be no less than three percent in either of the following circumstances: (i) any Plan Year of a Standard Plan for which the Plan Agreement does not specify that the Employer will perform annual Top-Heavy testing,, or (ii) any Plan Year in which the plan is required to provide a minimum allocation for the Plan Year pursuant to the Top-Heavy Plan rules of Article 15. (d) The Money Purchase Maximum Disparity Percentage is equal to the lesser of (i) 5.7% or (ii) the applicable percentage from Table C on this page. If the Plan's Integration level is equal to the Social Security Wage Base, the Money Purchase Maximum Disparity Percentage is 5.7%. (e) In this Section 4.3, Earnings means Earnings as defined in Section 2.13. (f) Separate Allocation of Forfeitures. If the Employer has not elected in the Plan Agreement to use Forfeitures to reduce the amount of its contributions, Forfeitures shall be allocated among the Employer Contribution Accounts of all Qualified Participants in proportion to their earnings. 4.4 Paired Plans. An Employer may adopt as paired pans Putnam Standard Profit Sharing Plan (Plan Agreement #001) and Putnam Standard Money Purchase Pension Plan (Plan Agreement #002). Only one of the two paired plans may be integrated with Social Security. In any Plan Year in which Putnam Standard paired plans are top-heavy, each non-key employee who is eligible to participate in both plans will have allocated to his Account in the Putnam Standard Money Purchase Pension Plan a minimum contribution that meets the requirements of Section 12.3. 4.5 Rollover Contributions. An Employee in an eligible class may contribute at any time cash or other property (which is not a collectible within the meaning of Section 408(m) of the Code) acceptable to the Trustee representing qualified rollover amounts under Sections 402,403, or 408 of the code. Amounts so contributed shall be credited to a Rollover Account for the Participant. 4.6 No Deductible Employee contributions. The Plan Administrator shall not accept deductible employee contributions for a taxable year beginning after December 31, 1986. In the event that the Plan is adopted as an amendment of a plan which previously accepted such contributions for any Participant, the Employer will establish and maintain (or cause to be established and maintained) a separate account in which shall be recorded the amount of such contributions and the income, expenses, gains and losses incurred thereon. Such an account shall be nonforfeitable at all times and shall in no event be used to pay premiums on any life insurance policy. Subject to Article 10, Joint and Survivor Annuity Requirements, the Participant may withdraw any part of such an account at any time upon written request to the Plan Administrator. Table A If the Plan s Integration Level is more than: $0 The greater of $10,000 or 20% of the Social Security Wage Base 80% of the Social Security Wage Base But not more than: The greater of $10,000 or 20% of the social Security Wage Base 80% of the social Security Wage Base Less than the Social Security Wage Base The applicable percentage is: 2.7% 1.3% 2.4% Table B If the Plan s Integration Level is more than: $0 The greater of $10,000 or 20% of the Social Security Wage Base 80% of the Social Security Wage Base But not more than: The greater of $10,000 or 20% of the social Security Wage Base 80% of the social Security Wage Base Less than the Social Security Wage Base The applicable percentage is: 5.7% 4.3% 5.4% Table C If the Plan s Integration Level is more than: $0 The greater of $10,000 or 20% of the Social Security Wage Base 80% of the Social Security Wage Base But not more than: The greater of $10,000 or 20% of the social Security Wage Base 80% of the social Security Wage Base Less than the Social Security Wage Base The applicable percentage is: 5.7% 4.3% 5.4% ARTICLE V: Cash or Deferred Arrangement under Section 401(k)(CODA) 5.1 Applicability; Allocations. this Article 5 applies to any profit sharing plan for which the Employer has elected in the Plan Agreement to include a CODA. The Employer may specify in the Plan Agreement that contributions will be made to the Plan only under the CODA, or that contributions may be made under Section 4.2 as well as under the CODA. Allocations to Participants' Accounts of contributions made pursuant to this Article 5 shall be made as soon as administratively feasible after their receipt by the Trustee, but in any case no later than as of the last day of the Plan Year for which the contributions were made. 5.2 CODA Participation. Each Employee who has met the eligibility requirements of Article 3 may make Elective Deferrals to the Plan by completing and returning to the Plan Administrator a Deferral Agreement form which provides that the Participant's cash compensation from the Employer will be reduced by the amount indicated in the Deferral Agreement, and that the Employer will contribute an equivalent amount to the Trust on behalf of the Participant.. The following rules will govern Elective Deferrals: (a) Subject to the limits specified in the Plan Agreement and set forth in Section 5.3, a Deferral Agreement may apply to any amount or percentage of either or both of the Earnings payable to a Participant in each regular payroll period of the Employer, or one or more bonuses payable to a Participant from time to time as specified by the Employer. (b) In accordance with such reasonable rules as the Plan Administrator shall specify, a Deferral Agreement will become effective as soon as is administratively feasible after the Deferral Agreement is returned to the Plan Administrator, and will remain effective until it is modified or terminated. no Deferral Agreement may become effective retroactively. (c) A Participant may modify his Deferral Agreement by competing and returning to the Plan Administrator a new Deferral Agreement form as of any of the dates specified in the Plan Agreement, and any such modification will become effective as described in paragraph (b). (d) A Participant may terminate his Deferral Agreement at any time upon advance written notice to the Plan Administrator, and any such termination will become effective as described in paragraph (b). 5.3 Annual Limit on Elective Deferrals. During any taxable year of a Participant, his Elective Deferrals under the Plan and any other qualified plan of an Affiliated Employer shall not exceed the dollar limit contained in Section 402(g) of the Code in effect at the beginning of the taxable year, a Participant's Elective Deferrals for purposes of this Section 5.3 include all Employer contributions made on his behalf pursuant to an election to defer under any qualified CODA as described in Section 401(k) of the Code, any simplified employee pension cash or deferred arrangement (SARSEP) as described in Section 401(h)(1)(B) of the Code, any plan described under Section 501(c)(18) of the Code, and any Employer contributions made on behalf of the Participant for the purchase of an annuity contract under Section 403(b) of the Code pursuant to a salary reduction agreement. The amount of Elective Deferrals of a Participant who receives a hardship distribution pursuant to Section 5.14 shall be reduced, for the taxable year next following the distribution, by the amount of Elective Deferrals made in the taxable year of the hardship distribution. 5.4 Distribution of Excess Elective Deferrals. "Excess Elective Deferrals" means those Elective Deferrals described in Section 5.3 that are incredible in a Participant's gross income under Section 402(g) of the Code, to the extent that the Participant's aggregate elective deferrals for a taxable year exceed the dollar limitation under that Code Section. Excess Elective Deferrals shall be treated as Annual Additions under the Plan, whether or not they are distributed under this Section 5.4 . A Participant may designate to the Plan any Excess Elective Deferrals made during his taxable year by notifying the Employer on or before the following March 15 of the amount of the Excess Elective Deferrals to be so designated. A Participant who has Excess Elective Deferrals for a taxable year, taking into account only his Elective Deferrals under the Plan and any other plans of the Affiliated Employers, shall be deemed to have designated the entire amount of such Excess Elective Deferrals. Notwithstanding any other provision of the Plan, Excess Elective Deferrals, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose Account Excess Elective Deferrals were designated or deemed designated for the preceding year. The income or loss allocable to Excess Elective Deferrals is the income or loss allocable to the Participant's Elective Deferral Account for the taxable year multiplied by a fraction, the numerator of which is the Participant's Account balance attributable to Elective Deferrals without regard to any income or loss occurring during the year. To the extent that the return to a Participant of his Elective Deferrals would reduce an Excess Amount (as defined in Section 6.5(f)), such Excess Deferrals shall be distributed to the Participant in accordance with Article 6. 5.5 Satisfaction of ADP and ACP Tests. In each Plan Year, the Plan must satisfy the ADP test described in Section 5.11. the Employer may cause the Plan to satisfy the ADP or ACP test or both test for a Plan Year by any of the following methods or by any combination of them: (a) By the distribution of Excess Contributions in accordance with Section 5.7, or the distribution of Excess Aggregate Contributions in accordance with Section 5.12, or both; (b) In a Variable Plan that permits all Participants to make Participant Contributions, by recharacterization of Excess Contributions in accordance with Section 5.10; or (c) If the Employer has so elected in the Plan Agreement, by making Qualified Nonelective Contributions or Qualified Matching Contributions or both, in accordance with the Plan Agreement and this Section 5.5. 5.6 Actual Deferral Percentage Test Limit. The Actual Deferral Percentage (hereinafter "ADP") for Participants who are Highly Compensated Employees for each Plan Year and the ADP for Participants who are Non-Highly Compensated Employees for the same Plan Year must satisfy one of the following tests: (a) The ADP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Participants who are Non-Highly Compensated Employees for the same Plan Year multiplied by 1.25; or (b) The ADP for Participant who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Participants who are Non-Highly Compensated Employees for the same plan Year multiplied by 2.0, provided that the ADP for Participants who are Highly compensated Employees does not exceed the ADP for Participants who are Non-Highly Compensated employees by more than two percentage points. The following special rules shall apply to the computation of the ADP: (c) Actual Deferral Percentage means, for a specified group of Participants for a Plan Year, the average of the ratios (calculated separately for each Participant in the group) of (1) the amount of Employer contributions actually paid over to the Trust on behalf of the Participant for the Plan Year to (2) the Participant s Earnings for the Plan Year (or, provided that the Employer applies this method to all Employees for a Plan Year the Participant s Earnings for that portion of the Plan Year during which he was eligible to participant in the Plan). Employer contributions on behalf of any Participant shall include: (i) his Elective Deferrals, including Excess Elective Deferrals, but excluding Elective Deferrals that are taken into account in the Average contribution Percentage test described in Section 5.11 (provided the ADP test is satisfied both with and without exclusion of these Elective Deferrals), and excluding Elective Deferrals returned to a Participant to reduce an Excess Amount as defined in Section 6.5(f); and (ii) if the Employer has elected to make Qualified Nonelective Contributions, such amount of Qualified Nonelective Contributions, if any, as shall be necessary to enable the Plan to satisfy the ADP test; and (iii) if the Employer has elected to make Qualified Matching Contributions, such amount of Qualified Matching Contributions, if any, as shall be necessary to enable the Plan to satisfy the ADP. For purposes of computing Actual Deferral Percentages, an Employee who would be a Participant but for his failure to make Elective Deferrals shall be treated as a Participant on whose behalf no Elective Deferrals are made. (d) In the event that the Plan satisfies the requirement of Sections 401(k), 401(a)(4), or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirement s of such sections of the Code only if aggregated with the Plan, then this Section 5.6 shall be applied by determining the ACP of Employees as if all such plans were a single plan. For Plan years beginning after December 31, 1989, plans may be aggregated in order to satisfy Section 401(k) of the Code only if they have the same Plan Year. (e) The ADP for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Elective Deferrals (and Qualified Nonelective contributions or Qualified Matching Contributions, or both, if these are treated as Elective Deferrals for purposes of the ADP test) allocated to his Accounts under two or more CODAs described in Section 401(k) of the Code that are maintained by the Affiliated Employers shall be determined as if such Elective Deferrals (and, if applicable, such Qualified Nonelective Contributions or Qualified Matching Contributions, or both) were made under a single CODA. If a Highly Compensated Employee participates in two or more CODAs that have different Plan Years, all CODAs ending with or within the same calendar year shall be treated as a single CODA. (f) For purposes of determining the ADP of a Participant who is a 5-percent owner or one of the ten most highly-paid Highly Compensated Employees, the Elective Deferrals (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if these are treated as Elective Deferrals for purposes of the ADP test) and the Compensation for the Plan Year of his Family Members (as defined in section 414(q)(6) of the Code). Family Members of such Highly Compensated Employees shall be disregarded as separate employees in determining the ADP both for Participants who are Non-Highly Compensated Employees and for Participants who are Highly Compensated Employees. (g) For purposes of the ADP test, Elective Deferrals , Qualified Nonelective Contributions and Qualified Matching Contributions must be made before the last day of the 12 moth period immediately following the Plan Year to which those contributions relate. (h) The Employer shall maintain records sufficient to demonstrate satisfaction of the ADP test and the amount of Qualified Nonelective Contributions and Qualified Matching Contributions, or both, used in satisfying the test. (i) The determination and treatment of the ADP amounts of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 5.7 Distribution of Excess Contributions. "Excess Contributions" means, with respect to any Plan Year, the excess of: (a) The aggregate amount of employer contributions actually taken into account in computing the ADP of Highly Compensated Employees for the Plan Year, over (b) The maximum amount of Employer contributions permitted by the ADP test, determined by reducing contributions made on behalf of Highly Compensated Employees in order of their ADPs, beginning with the highest of such percentages. Notwithstanding any other provision of the Plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of each Plan Year to Participants to whose Accounts Excess Contributions were allocated for the preceding Plan Year; provided, however, that in the case of a Variable Plan in which the Employer has elected in the Plan agreement to re characterize Excess contributions pursuant to Section 5.10, distribution shall be made pursuant to this Section 5.7 to the extent that excess contributions are not so recharacterized. If such excess amounts are distributed more than two an one-half months after the last day of the Plan Year in which the excess amounts arose, an excise tax equal to ten percent of the excess amounts will be imposed on the Employer maintaining the Plan. Such distributions shall be made to Highly Compensated Employees on the basis of the respective portions of the Excess Contributions attributable to each of them. Excess Contributions shall be allocated to Participants who are subject to the family member aggregation rules of Section 414(q)(6) of the Code in the manner prescribed by the regulations under that Section. Excess Contributions (including any amounts recharacterized in accordance with Section 5.10) shall be treated as Annual Additions under the Plan. the income or loss allocable to Excess Contributions is the income or loss allocable to the Participant s Elective Deferral Account (and, if applicable, his Qualified Nonelective Account or Qualified Matching Account or both) for the Plan Year multiplied by a faction, the numerator of which is the Participant s Excess Contributions for the year and the denominator of which is the Participant s account balance attributable to Elective Deferrals (and Qualified Nonelective contributions or Qualified Matching Contributions, or both, if any of these are included in the ADP test) without regard to any income or loss occurring during such Plan Year. Excess Contributions shall be distributed from the Participant's Elective Deferral Account and Qualified Matching Account (if applicable) in proportion to the Participant's Elective Deferrals and Qualified Matching Contributions (to the extent used in the ADP test) for the Plan Year. Excess Contributions shall be distributed from the Participant's Qualified Nonelective Account only to the extent that such Excess Contributions exceed the balance in the Participant's Elective Deferral Account and Qualified Matching Account. 5.8 Matching Contributions. If so specified in the Plan Agreement, the Employer will make Matching Contributions to the Plan in accordance with the Plan Agreement, but no Matching Contribution shall be made with respect to an Elective Deferral that is returned to a Participant because it represents an Excess Elective Deferral, an Excess Contribution or an Excess Amount (as defined in Section 6.5(f)); or with respect to a Participant contribution that is returned to a Participant because it represents an Excess Aggregate Contribution or an Excess Amount (as defined in Section 6.5(f); and if a Matching Contribution has nevertheless been made with respect to such an Elective Deferral or Participant contribution, the Matching Contribution shall become a Forfeiture as of the end of the Plan Year of which it was contributed, notwithstanding any other provision of the Plan. (a)Employer Matching Contribution (Variable Plans Only). Matching Contributions will be allocated among the employer Matching Accounts of Participants in proportion to their Elective Deferrals or their Participant Contributions, as specified by the Employer in the Plan Agreement. Employer Matching Accounts shall become vested According to the vesting schedule specified in the Plan Agreement, but regardless of that schedule shall be fully vested upon the Participant s Retirement (or, if earlier, his fulfillment of he requirements for early retirement, if any, or attainment of the normal retirement age specified in the Plan Agreement), his death during employment with an Affiliated Employer, an in accordance with Section 19.3. Forfeitures of Employer Matching Contributions, other than Excess Aggregate Contributions, shall be made in accordance with Section 8.3. Forfeitures of Employer Matching Accounts for a Plan Year shall be applied to reduce the total Employer Matching Contribution for the Plan Year, or allocated among the Employer Matching Accounts of Participants in addition to the Employer Matching Contribution for the Plan Year, as elected by the Employer in the Plan Agreement. (b) Qualified Matching Contributions. Qualified Matching Contributions will be allocated among the Qualified Matching contribution Accounts of Participant as specified by the Employer in the Plan Agreement. In a Standard Plan, a Qualified Matching Contribution forfeited pursuant to the first sentence of this Section 5.8 will be applied to reduce the aggregate Matching Contributions otherwise required of the Employer. 5.9 Participant Contributions (Variable Plans Only). If so specified in the Plan Agreement for a Variable Plan, a Participant may make nondeductible Participant contributions to the Plan in accordance with the Plan Agreement and subject to the terms and conditions of this Article 5. Participant Contributions will be allocated to the Participant Contributions Account of the contributing Participant. All Participant Contribution Accounts will be fully vested at all times. 5.10 Recharacterization of Excess Contributions (Variable Plans Only). Provided that the Plan Agreement permits all Participants to make Participant Contributions, the Employer may treat a Participant's Excess Contributions to a Variable Plan as an amount distributed to the Participant and then contributed by the Participant to the Plan as a Participant Contribution. Recharacterized amounts will remain nonforfeitable and subject to the same distribution requirements as Elective Deferrals. Amounts may not be recharacterized by a highly compensated Employee to the extent that a recharacterized amount in combination with other Participant contributions made by that Employee would exceed any stated limit under the Plan on Participant Contributions. Recharacterization must occur no later than two and one-half months after the last day of the Plan Year in which the Excess contributions arose, and is deemed to occur no earlier than the date the last Highly Compensated employee is informed in writing by the Employer of the amount recharacterized and the consequences thereof. Recharacterized amounts will be taxable to the Participant for his tax year in which the Participant would have received them in cash. 5.11 Average Contribution Percentage Test Limit and Aggregate Limit. the Average Contribution Percentage (hereinafter "ACP") for Participants who are High Compensated Employees for each Plan year and the ACP for Participants who are Non-Highly Compensated Employees for the same Plan Year must satisfy one of the following tests: (a) The ACP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Participants who are Non-Highly Compensated Employees for the same Plan Year multiplied by 1.25; or (b) The ACP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Participants who are Non-Highly Compensated Employees for the same Plan year multiplied by two(2), provided that the ACP for Participants who are Highly compensated Employees does not exceed the ACP for Participants who are Non-Highly Compensated Employees by more than two percentage points. The following rules shall apply to the computation of the ACP: (c) Average Contribution Percentage means the average of the Contribution Percentages of the Eligible Participants in a group. (d) Contribution Percentage means the ratio (expressed as a percentage) of a Participant's Contribution Percentage Amounts to the Participant's Earnings for the Plan Year (or, provided that the Employer applies this method to all Employees for a Plan Year, the Participant's Earnings for that portion of the Plan Year during which he was eligible to participate in the Plan). (e) Contribution Percentage Amounts means the sum of the Participant Contributions, Employer Matching Contributions, and Qualified Matching Contributions (to the extent not taken into account for purposes of the ADP test) made under the Plan on behalf of the Participant for the Plan Year. such Contribution Percentage Amounts shall include Forfeitures of Excess Aggregate Contributions or Employer Matching Contributions allocated to the Participant's Account, taken into account in the year in which the allocation is made. If the Employer has elected in the Plan Agreement to make Qualified Nonelective Contributions, such amount of Qualified Nonelective Contributions, if any, as shall be necessary to enable the Plan to satisfy the ACP test shall be included in the Contribution Percentage Amounts. Elective Deferrals shall also be included in the contribution Percentage Amounts to the extent, if any, needed to enable the Plan to satisfy the ACP test, so long as the ADP test is met before the Elective Deferrals are used in the ACP test, and continues to be met following the exclusion of those Elective Deferrals that are used to meet the ACP test. (f) Eligible Participant means any Employee who is eligible to make a Participant Contribution (or an Elective Deferral, if Elective Deferrals are taken into account in the calculation of the Contribution Percentage), or to receive an Employer Matching Contribution (or a Forfeiture thereof) or a Qualified Matching contribution. If a Participant Contribution is required as a condition of participation in the Plan, any Employee who would be a Participant in the Plan if he made such a contribution shall be treated as an Eligible Participant on behalf of whom no Participant Contributions are made. (g) Aggregate Limit means the sum of (i) 125 percent of the greater of the ADP of the Non-Highly Compensated Employees for the Plan Year, or the ACP of Non-Highly Compensated Employees under the Plan subject to Code Section 401(m) for the Plan Year of the CODA, and (ii) the lesser of 200 percent of, or two plus, the lesser of the ADP or ACP. (h) If one or more Highly Compensated Employees participate in both a CODA and a plan subject to the ACP test maintained by an Affiliated Employer, and the sum of the ADP and ACP of those Highly Compensated Employees subject to either or both test s exceeds the Aggregate Limit, then the ACP of those Highly Compensated Employees who also participate in a CODA will be reduced (beginning with the Highly Compensated Employee whose ACP is the highest) so that the Aggregate Limit is not exceeded. The amount by which each Highly Compensated Employee's Contribution Percentage Amounts is reduced shall be treated as an Excess Aggregate contribution. In determining the Aggregate Limit, the ADP and ACP of Highly Compensated Employees are determined after any corrections required to meet the ADP and ACP tests. The Aggregate Limit will be considered satisfied if both the ADP and ACP of the Highly compensated Employees does not exceed 1.25 multiplied by the ADP and ACP of the Non-Highly Compensated Employees. (i) For purposes of this section, the Contribution Percentage for any Participant who is a Highly Compensated Employee and who is eligible to have Contribution Percentage Amounts allocated to his account under two or more plans described in Section 401(k) of the Code, that are maintained by an Affiliated Employer, shall be determined as if the total of such Contribution Percentage Amounts was made under each plan. If a Highly Compensated Employee participates in two or more CODAs that have different plan years, all CODAs ending with or within the same calendar year shall be treated as a single CODA. (j) In the event that the Plan satisfies the requirements of Sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such sections of the Code only if aggregated with the Plan, then this Section 5.10 shall be applied by determining the contribution Percentage of Employees as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated in order to satisfy Section 401(m) of the Code only if they have the same Plan Year. (k) For purposes of determining the Contribution Percentage of a Participant who is a five-percent owner or one of the ten most highly-paid Highly Compensated Employers, the Contribution Percentage Amounts and Compensation of the Participant shall include the Contribution Percentage Amounts and Compensation for the Plan Year of Family Members (as defined in Section 414(q)(6) of the Code). Family Members of such Highly Compensated Employees shall be disregarded as separate employees in determining the Contribution Percentage both for Participants who are Non-Highly Compensated Employees and for Participants who are Highly Compensated Employees. (l) For purposes of the ACP test, Participant Contributions are considered to have been made in the Plan Year in which they were contributed to the Trust. Matching Contributions and Qualified Nonelective Contributions will be considered made for a Plan Year if made no later than the end of the 12-month period beginning on the day after the close of the Plan Year. (m) The Employer shall maintain records sufficient to demonstrate satisfaction of the ACP test and the amount of Qualified Nonelective Contributions or Qualified Matching Contributions, or both, used in the ACP test. (n) The determination and treatment of the Contribution Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 5.12 Distribution of Excess Aggregate Contributions. Notwithstanding any other provision of the Plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be forfeited if forfeitable, or if not forfeitable, distributed no later than the last day of each Plan Year to Participants to whose accounts such Excess Aggregate Contributions were allocated for the preceding Play Year. Excess Aggregate Contributions shall be allocated to Participants whoa re subject to the family member aggregation rules of Section 414(q)(6) of the Code in the manner prescribed by the regulations. If excess amounts attributable to Excess Aggregate Contributions are distributed more than two and on-half months after the last day of the Plan Year in which such excess amounts arose, an excise tax equal to ten percent of the excess amount will be imposed on the Employer maintaining the Plan. j Excess Aggregate Contributions shall be treated as Annual Additions under the Plan. The income or loss allocable to Excess Aggregate Contributions is the income or loss allocable to the Participant's Participant Contribution Account, Employer Matching Contribution Account (if any, and if all amounts therein are not used in the ADP test), and, if applicable, Qualified Nonelective Account and Elective Deferral Account for the Plan Year, multiplied by a fraction, the numerator of which is the Participant's Excess Aggregate Contributions for the year and the denominator of which is the Participant's account balance(s) attributable to Contribution Percentage Amounts without regard to any income or loss occurring during the Plan Year. Forfeitures of Excess Aggregate Contributions shall either be reallocated to the accounts of Non-Highly Compensated Employees or applied to reduce Employer contributions, as elected by the Employer in the Plan Agreement. Excess Aggregate Contributions shall be forfeited if forfeitable, or distributed on a prorata basis form the Participant's Participant Contribution Account, Employer Matching Account, and Qualified Matching Account (and, if applicable, the Participant's Qualified Nonelective Account or Elective Deferral Account, or both). Excess Aggregate Contributions means, with respect to any Plan Year, the Excess of: (a) The aggregate Contribution Percentage Amounts taken into account in computing the numerator of the Contribution Percentage and actually mad on behalf of Highly Compensated Employees for the Plan Year, over (b) The maximum Contribution Percentage Amounts permitted by the ACP test (determined by reducing contributions made on behalf of Highly Compensated Employees in order of their Contribution Percentages, beginning with the highest of such percentages). Such determination shall be made after first detraining Excess Elective Deferrals pursuant to Section 5.4, and then determining Excess Contributions pursuant to Section 5.7. 5.13 Restriction on Distributions. No distribution may be made from a Participant's Elective Deferral Account, Qualified Nonelective Account or Qualified Matching Account until the occurrence of one of the following events: (a) The Participant's Disability, death or termination of employment with the Affiliated Employer; (b) Termination of the Plan without the establishment of another defined contribution plan; (c) If the Plan is a profit sharing plan, the Participant's attainment of age 591/2 (if the Employer has elected in the Plan Agreement t permit such distributions); or (d) In the case of an Employer that is a corporation, the disposition by the Employer to an unrelated entity of (i) substantially all of the assets (within the meaning of Section 409(d)(2) of the Code) used in a trade or business of the Employer, if the Employer continues to maintain the Plan after the disposition, but only with respect to Employees who continue employment with the entity acquiring such assets; or (ii) the Employer's interest in a subsidiary (within the meaning of Section 409(d)(3) of the Code), if the Employer continues to maintain the Plan after the disposition, but only with respect to Employees who continue employment with such subsidiary. In addition, if the Employer has elected in the Plan Agreement to permit such distributions, a distribution may be made from a Participant's Elective Deferral Account in the event of his financial hardship as described in Section 5.14. All distributions upon any of the events listed above are subject to the conditions of Article 10, Joint and Survivor Annuity Requirements. 5.14 Hardship Distributions. If the Employer has so elected in the Plan Agreement, upon a Participant's written request the Employer may permit a distribution from his Elective Deferral Account (and, in a Variable Plan, from his Employer Matching Account). The terms and conditions of Section 12.2 and the special vesting rule contained in Section 8.4 shall apply to hardship distributions from an Employer Contribution Account or and Employer Matching Account. The further terms of this Section 5.14 shall apply to hardship distributions from an Elective Deferral Account. No hardship distribution shall be made from a Qualified Nonelective Account or Qualified Matching Account. (a) The maximum amount that may be distributed on account of hardship from an Elective Deferral Account after December 31, 1988, shall not exceed the sum of (1) the amount credited to the Account as of December 31, 1988, and (2) the aggregate amount of the Elective Deferrals made by the Participant after December 31, 1988, and before the hardship distribution. (b) Hardship distributions shall be permitted only on account of the following financial needs: (1) Expenses for medical care described in section 213(d) of the Code for the Participant, his spouse, children, and dependents, or necessary for these persons to obtain such care; (2) Purchase of the principal residence of the Participant (excluding regular mortgage payments); (3) Payment of tuition and related educational fees for the upcoming 12 months of postsecondary education for the Participant, his spouse, children, or dependents; or (4) Payments necessary to prevent the Participant's eviction from, or the foreclosure of a mortgage on, his principal residence. (c) Hardship distributions shall be subject to the spousal consent requirements contained in Sections 401(a)(11) and 417 of the Code, to the same extent that those requirements apply to a Participant pursuant to Section 10.1. (d) A hardship distribution will be made to a Participant only upon satisfaction of the following conditions: (1) The Participant has obtained all nontaxable loans and all distributions other than hardship distributions available to him form all plans maintained by the Affiliated Employers; (2) The hardship distribution does not exceed the amount of the Participant's financial need as described in paragraph (b) plus any amounts necessary to pay federal, state, and local income taxes and penalties reasonably anticipated to result from the distribution; (3) All plans maintained by the Affiliated Employers provide that the Participant's Elective Deferrals and Participant contributions will be suspended for a period of 12 months following his receipt of a hardship distribution; and (4) All plans maintained by the Affiliated Employers provide that the amount of Elective Deferrals that the Participant may make in his taxable year immediately following the year of a hardship distribution will not exceed the applicable limit under Section 402(g) of the Code for the taxable year, reduced by the amount of Elective Deferrals made by the Participant in the taxable year of the hardship distribution. 5.15 Special Effective Dates. If the Plan is adopted as an amendment of an existing plan, the provisions of Sections 5.3 and Section 5.7 through 5.11 are effective as of the first day of the first Plan Year beginning after December 31, 1986. ARTICLE VI: Limitations on Allocations 6.1 No Additional Plan. If the Participant doe not participate in and has never participated in another qualified plan, or a welfare benefit fund, (as defined in Section 419(e) of the Code), or an individual medical account (as defined in Section 415(1)(2) of the Code) which provides an Annual Addition as defined in Section 6.5(a), maintained by an Affiliated Employer: (a) The amount of Annual Additions which may be credited to the Participant's accounts for any Limitation Year will to exceed the lesser of the Maximum Annual Additions or any other limitation contained in this Plan. If the Employer contribution that would otherwise be contributed or allocated to the Participant Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Annual Additions, the amount contributed or allocated will be reduced so that the Annual Additions for the Limitation Year will equal the Maximum Annual Additions. (b) Before determining a Participant's actual Section 415 compensation for a Limitation Year, the Employer may determine the Maximum Annual Additions for the Participant on the basis of a reasonable estimation of the Participant's Section 415 Compensation for the Limitation Year, uniformly determined for all Participants similarly situated. (c) As soon as is administratively feasible after the end of the Limitation Year, the Maximum Annual Additions for the Limitation Year will be determined on the basis of the Participant's actual Section 415 compensation for the Limitation Year. (d) If pursuant to paragraph 6.1(c), or as a result of the reallocation of Forfeitures, or as a result of a reasonable error in determining the amount of Elective Deferrals that may be made by a Participant, the Annual Additions exceed the Maximum Annual Additions, the Excess Amount will be disposed of as follows: (1) any nondeductible voluntary Participant Contributions and Elective Deferrals, to the extent they would reduce the Excess Amount, will be returned to the Participant. (2) If after the application of (1) above an Excess Amount still exists, and the Participant is covered by the Plan at the end of the Limitation Year, the Excess Amount in the Participant's Accounts will be used to reduce Employer contributions (including any allocation of Forfeitures) for such Participant in the next Limitation Year, and each succeeding Limitation Year if necessary. (3) If after the application of (1) above an Excess Amount still exists, and the Participant is not covered by the Plan at the end of a Limitation Year, the Excess Amount will be held unallocated in a suspense account. The suspense account will be applied to reduce future Employer contributions (including allocation of any Forfeitures) for all remaining Participants in the next Limitation Year, and each succeeding Limitation Year if necessary. (4) If a suspense account is in existence at any time during a Limitation Year pursuant to this Section 6.1(d), it will participate in the allocation of the Trust's investment gains and losses. If a suspense account is in existence at any time during a particular Limitation Year, all amounts in the suspense account must be allocated and reallocated to Participants' Accounts before any employer or any Employee contributions may be made to the Plan for that Limitation Year. Excess amounts may not be distributed to Participants or former Participants. 6.2 Additional Master or Prototype Plan. If in addition to this Plan a Participant is covered under another qualified Master or Prototype defined contribution plan or a welfare benefit fund (as defined in Section 419(e) of the Code), or an individual medical account (as defined in Section 415(1)(2) of the Code) which provides and Annual Addition as defined in Section 6.5(a), maintained by an Affiliated Employer during any Limitation Year: (a) the annual Additions which may be credited to a Participant's Accounts under this Plan for any such Limitation Year will not exceed the Maximum Annual Additions reduced by the Annual Additions credited to a Participant's accounts under the other plans and welfare benefit funds for the same Limitation year. If the annual Additions with respect to the Participant under other defined contribution plans and welfare benefit funds maintained by an Affiliated Employer are less than the Maximum Annual Additions, an the Employer contribution that would otherwise be contributed or allocated to the Participant's Accounts under this Plan would cause the Annual Additions for the Limitation year to exceed this limitation, the amount contributed or allocated will be reduced so that the Annual Additions under all such plans an funds for the Plan Year will equal the Maximum Annual Additions. If the Annual Additions with respect to the Participant under such other defined contribution plans and welfare benefit fund in the aggregate are equal to or greater than the Maximum Annual Additions, no amount will be contributed or allocated to the Participant's Accounts under this Plan for the Limitation Year. (b) Before determining a Participant's actual Section 415 Compensation for a Limitation Year, the Employer may determine the Maximum Annual Additions for the Participant in the manner described in Section 6.1(b). (c) As soon as is administratively feasible after the end of the Plan Year, the Maximum Annual Additions for the Plan Year will b determined on the basis of the Participant's actual Section 415 Compensation for the Plan Year. (d) If, pursuant to Section 6.2(c) or as a result of the allocation of Forfeitures, or as a result of a reasonable error in determining the amount of Elective Deferrals that may be made by a Participant, a Participant's Annual Additions under this Plan and such other plans would result in an Excess Amount for a Limitation Year, the Excess Amount will be deemed to consist of the Annual Additions last allocated under any qualified Master or Prototype defined contribution plan, except that Annual Additions to any welfare benefit fund or individual medical account will be deemed to have been allocated first regardless of the actual allocation date. (e) If an Excess Amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the Excess Amount attributed to this Plan will be the product of X and Y, where (X) is the total Excess Amount allocated as of such date, and (Y) is the ratio of (1) the Annual Additions allocated to the Participant for the Limitation Year as of such date under this Plan to (2) the total Annual Additions allocated to the Participant for the Limitation Year as of such date under the is and all the other qualified Master or Prototype defined contribution plans. (f) Any Excess Amount attributed to this Plan will be disposed of in the manner described in Section 6.1(d). 6.3 Additional Non-Master or Non-Prototype Plan. If the Participant is covered under another qualified defined contribution plan maintained by an Affiliated employer which is not a Master or Prototype plan, Annual Additions which may be credited to the Participant's Accounts under this Plan for any Limitation year will be limited in accordance with Section 6.2 as though the other plan were a Master or Prototype plan, unless the Employer provides other limitations in the Plan Agreement. 6.4 Additional Defined Benefit Plan. If an Affiliated Employer maintains, or at any time maintained, a qualified defined benefit plan covering any Participant in this Plan, the sum of the Participant's Defined Benefit Plan Fraction will not exceed 1.0 in any Limitation Year. The Annual Additions which may be credited to the Participant's Accounts under this Plan for any Limitation Year will be limited in accordance with the Plan Agreement. 6.5 Definitions (a) Annual Additions means the sum of the following amounts credited to a Participant's Accounts for the Limitation Year: (1) Employer contributions; (2) For any Limitation Year beginning after December 31, 1986, after-tax Employee contributions; (3) Forfeitures; (4) Amounts allocated after March 31, 1984, to any individual medical account, as defined in Section 415(1)(2) of the Code, which is part of a pension or annuity plan maintained by an Affiliated Employer; (5) Amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to past-retirement medical benefits allocated to the separate account of a key Employee, as defined in Section 419(d)(3) of the Code, under a welfare benefit fund as defined in Section 419(e) of the Code, maintained by an Affiliated Employer; and (6) In a Plan that includes a CODA, Excess Elective Deferrals, Excess Contributions (including recharacterized Elective Deferrals) and Excess Aggregate Contributions. For this purpose, any Excess Amount applied under Sections 6.1(d) or 6.2(e) in the Limitation Year to reduce Employer contributions will be considered Annual Additions for such Limitation Year. any rollover contribution will not be considered an Annual Addition. (b) Section 415 Compensation means, for a self-employed person, his Earned Income; and for any other Participant, his "Form W-2 earnings" as defined in Section 2.8, if the Employer has elected in item 4 of the Plan Agreement a definition of compensation based on "Form W-2 earning"; or if the Employer has not so elected, his wages, salaries, and fees for professional services and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited to , commissions paid salesmen, compensation for services o the basis of a percentage of profits, commissions on insurance premiums, tips, and bonuses), and excluding the following: (1) Employer contributions to a plan of deferred compensation which are not includible in the Participant's gross income for the taxable year in which contributed, or Employer contributions under a simplified Employee pension plan t the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensations; (2) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by the Participant either becomes freely transferable or is not longer subject to a substantial risk of forfeiture; (3) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) toward the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Participant). For purposes of applying the limitations of this Article 6, Section 415 Compensation for a Limitation year is the Section 415 compensation actually paid or includible in gross income during such Limitation Year. (c) Defined Benefit Fraction means a fraction, the numerator of which is the sum of the Participant's Projected Annual Benefits under al the defined benefit plans (whether or not terminated) maintained by the Affiliated Employers, and the denominator of which is the lesser of 125 percent of the dollar limitation in effect for the Limitation Year under Sections 415(b) and (d) of the Code, or 140 percent of the Participant's Highest Average Compensation including any adjustments under Section 415(b) of the Code. Notwithstanding the foregoing, if the Participant was a Participant as of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined benefit plans maintained by an Affiliated Employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125 percent of the sum of the annual benefits under such plans which the Participant had accrued as of the close of the last Limitation Year beginning before January 1, 1987, disregarding any change in the terms and conditions of the Plan after May 5, 1986,. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Section 415 of the Code for all Limitation Years beginning before January 1, 1987. (d) Defined Contribution Dollar Limitation means $30,000 or if greater, one-fourth of the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code as in effect for the Limitation Year. (e) Defined Contribution Faction means a fraction, the numerator of which is the sum of the Annual Additions to the Participant's accounts under all the defined contribution plans (whether or not terminated) maintained by Affiliated Employers for the current and all prior Limitation Years (including the Annual Additions attributable to the Participant's nondeductible Employee contributions to all defined benefit plans, whether or not terminated, maintained by the Affiliated Employers, and the Annual Additions Attributable to all welfare benefit funds, as defined in Section 419(e) of the Code, and individual medical accounts as defined in Section 415(1)(2) of the Code), and the denominator of which is the sum of the Maximum Annual Additions for the current and all prior Limitation Years of service with the Affiliated Employers (regardless of whether a defined contribution plans was maintained by any Affiliated employer). The Maximum Annual Additions in any Plan Year is the lesser of 125 percent of the dollar limitation determined under Section 415(b) and (d) of the Code in effect under Section 415(c)(1)(A) of the Code, or 35 percent of the Participant's Section 415 Compensation for such year. If the Employee was a Participant as of the end of the first day of the first Limitation Year beginning after December 31, 1986 in one or more defined contribution plans maintained by an Affiliated Employer which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of the excess of the sum of the fractions over 1.0, multiplied by the denominator of this fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would by computed as of the end of the last Limitation Year beginning before January 1, 1987, and disregarding any changes in the terms and conditions of the Plan after May, 5, 1986, but using the Section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987. The Annual Addition for any Limitation Year beginning before January 1, 1987, shall not be recomputed to treat 100% of nondeductible Employee contributions as Annual Additions. (f) Excess Amount means, with respect to any Participant, the amount by which Annual Additions exceed the Maximum Annual Additions. (g) Highest Average Compensation means the average compensation for the three consecutive Years of Service with the Employer that produces the highest average. A Year of Service with the Employer is the period of 12 consecutive months specified as the Limitation Year in the Plan Agreement. (h) Limitation Year means the period of 12 consecutive months specified in the Plan Agreement. All qualified plans maintained by the Employer must use the same Limitation Year. If the Limitation Year is amended to a different period of 12 consecutive months, the new Limitation year must begin on a date within the Limitation Year in which the amendment is made. (i) Master or Prototype Plan means a plan the form of which is the subject of a favorable opinion letter from the Internal Revenue Service. (j) Maximum Annual Additions, which is the maximum annual addition that my be contributed or allocated to a Participant's account under the plan for any Limitation year, means an amount not exceeding the lesser of (a) the Defined Contribution Dollar Limitation or (b) 25 percent of the Participant's Section 415 Compensation for the Limitation Year. The compensation limitation referred to in (b) shall not apply to any contribution for medical benefits (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition under Section 415 (1)(1) or Section 419A(d)(2) of the Code. If a short Limitation Year is created because of an amendment changing the Limitation Year to a different period of 12 consecutive months, the Maximum Annual Additions will not exceed the Defined contribution Dollar Limitation multiplied by the following fraction: number of months in the short Limitation Year 12 (k) Projected Annual Benefit means the annual retirement benefit (adjusted to an actuarially equivalent straight life annuity if such benefit is expressed in a form other than a straight life annuity or Qualified Joint and Survivor Annuity) to which the Participant would be entitled under the terms of the plan assuming: (1) the Participant will continue employment until normal retirement age under the Plan (or current age, if later), and (2) The Participant's Section 415 Compensation for the current Limitation year and all other relevant factors used to determine benefits under the plan will remain constant for al future Limitation Years. ARTICLE VII: Eligibility for Distribution of Benefits 7.1 Retirement. After his Retirement, the amount credited to a Participant's Accounts will be distributed to him in accordance with Article 9. The termination of a Participant's employment with the Affiliated Employers after he has (i) attained the normal retirement age specified in the Plan Agreement, (ii) in a Variable Plan, fulfilled the requirement for early retirement (if any) specified in the Plan Agreement, or (iii) become Disabled, will constitute his Retirement. In a Variable Plan, upon a Participant's Retirement (or, if earlier, his attainment of the normal retirement age specified in the Plan Agreement or fulfillment of the requirements for early retirement, if any, specified in the Plan Agreement the participant's Accounts shall become fully vested, regardless of the vesting schedule specified by the Employer in the Plan Agreement. In a Variable Plan, a Participant who separates from service with any vested balance in his Accounts, after satisfying the service requirements for early retirement (if any) is specified in the Plan Agreement) but before satisfying the age requirement (if any is specified in the Plan Agreement), shall be entitled to a fully vested early retirement benefit upon his satisfaction of such age requirement. 7.2 Death. If a Participant dies before the distribution of his Accounts has bee complete, his Beneficiary will be entitled to distribution of benefits in accordance with Article 9. In a Variable Plan, a Participant's Accounts will become fully vested upon his death before termination of his employment with the Affiliated Employers, regardless of the vesting schedule specified by the Employer in the Plan Agreement. A Participant may designate a Beneficiary by completing and returning to the Plan Administrator a form provided for this purpose. The form most recently complete and returned to the Plan Administrator before the Participant's death shall supersede any earlier form. If a Participant has not designated any Beneficiary before his death, or if no Beneficiary so designated survives the Participant, his Beneficiary shall be his surviving spouse, or if there is no surviving spouse, his estate. A married Participant in a profit sharing plan may designate a Beneficiary other an his spouse only if his spouse consents in writing to the designation, and the spouse's consent acknowledges the effect of the consent and is witnessed by a notary public or a representative of the Plan. The beneficiary or beneficiaries named in the designation to which the spouse has so consented may not be change without further written spousal consent unless the terms of the spouse's original written consent expressly permit such a change, and acknowledge that the spouse voluntarily relinquish the consent to a specific beneficiary. the marriage of a Participant shall nullify any designation of a beneficiary previously executed by the Participant. If it is established to the satisfaction of the Plan Administrator that the Participant has no spouse or that the spouse cannot be located, the requirement of spousal consent shall not apply. Any spousal consent, or establishment that spousal consent cannot be obtained, shall apply only to the particular spouse involved. 7.3 Other Termination of Employment. A Participant whose employment terminates for any reason other than his Retirement or death will be entitled to distribution, in accordance with Article 9, of benefits equal to the amount of the vested balance of his Accounts as determined under Article 8. ARTICLE VIII: Vesting 8.1 Vested Balance. The vested balance of a Participant's Accounts will be determined as follows: (a) General Rule. A Participant's Deductible Employee Contribution Account, Participant Contribution Account and Rollover Account, and in a Standard Plan, all of his Accounts, shall be fully vested at all times. The vested portion of his Employer Contribution Account in a Variable plan shall be equal to the percentage that corresponds, in the vesting schedule specified in the Plan Agreement (or, if the Plan has become top-heavy, the vesting schedule determined under Section 15.5), to the number of Years of Service credited to the Participant as of the end of the Plan Year in which his employment terminates. (b)Special Rules for CODA. In a Plan that includes a CODA, a Participant's Elective Deferral Account, Qualified Nonelective Account, and Qualified Matching Account shall be fully vested at all times. The vested portion of his Employer Matching Account in a Variable Plan shall be equal to the percentage that corresponds, in the vesting schedule specified in the Plan Agreement (or, if the Plan has become top-heavy, the vesting schedule determined under Section 15.5), to the number of Years of Service credited to the Participant as of the end of the Plan Year in which his employment terminates. (c) Retirement. In a Variable Plan, all of a Participant's Accounts shall become fully vested upon his Retirement or his earlier attainment of early retirement age (if any) or the normal retirement age elected by the Employer in the Plan Agreement. For so long as a former Employee does not receive a distribution (or a deemed distribution) of the vested portion of his accounts, the undistributed portion shall be held in a separate account which shall be invested pursuant to Section 13.3 and shall share in earning and losses of the Trust Fund pursuant to Section 13.4 in the same manner as the Accounts of active Participants. 8.2 Vesting of Accounts of Returned Former Employees (Variable Plans Only). the following rules apply in determining the vested portion of the Accounts of a Participant who incurs one or more consecutive One-Year Vesting Breaks and then returns to employment with an Affiliated Employer: (a) If the Participant incurred fewer than five consecutive One-Year Vesting Breaks, then all of his Years of Service will be taken into account in determining the vested portion of his Accounts, as soon as he has competed one Year of Service following his return to employment. (b) If the Participant incurred five or more consecutive One-Year Vesting Breaks, the: (1) No Year of Service competed after his return to employment will be taken into account in determining the vested portion of his Accounts as of any time before he incurred the first One-Year Vesting Break; (2) Years of Service completed before he incurred the first One-Year Vesting Break will not be taken into account in determining the vested portion of his Accounts as of any time after his return to employment (i) unless some portion of his Employer Contribution Account or Employer Matching Account had become vested before he incurred the first One-Year Vesting break, and (ii) until he has completed one Year of Service following his return to employment; and (3) Separate sub-accounts will be maintained for the Participant's pre-break and post-break Employer Contribution Account and Employer Matching Account, until both sub-accounts become fully vested. Both sub-accounts will share in the earnings and losses of the Trust Fund. 8.3 Forfeiture of Non-Vested Amounts (Variable Plans Only). The portion of a former Employee's Accounts that has not become vested under Section 8.1 shall become a Forfeiture in accordance wit the following rules, and shall be reallocated in accordance with Section 4.2 or 4.3 or Article 5 (whichever applies) no later than the end of the Plan Year in which it becomes a Forfeiture. (a) If Distribution Is Made. If any or all of the vested portion of a Participant's Accounts is distributed in accordance with Section 9.1 or 9.2 before the Participant incurs five consecutive One-Year Vesting Breaks, the nonvested portion of his Accounts shall become a Forfeiture in the Plan Year in which the distribution occurs. For purposes of the Section 8.3, if the value of the vested portion of a Participant's Accounts is zero, he shall be deemed to have received a distribution of the entire vested balance of his Accounts on the day his employment terminates. If the Participant elects to have distributed less than the entire vested portion of his Employer contribution Account or Employer Matching Accounts, the part of the nonvested portion that will become a Forfeiture is the total nonvested portion multiplied by a fraction, the numerator of which is the amount of the distribution and the denominator of which is the total value of the entire vested portion of such Accounts. (b) Right of Payment. If a Participant who receives a distribution pursuant to paragraph (a) returns to employment with an Affiliated Employer, the balance of his Employer Contribution Account and Employer Matching Account will be restored tot he amount of such balance on the date of distribution, if he repays to the Plan the full amount of the distribution, before the earlier of (i) the fifth anniversary of his return to employment or (ii) the date he incurs five consecutive One-Year Vesting Breaks following the date of distribution. If an Employee is deemed to receive a distribution pursuant to this Section 8.3, and he resumes employment covered under this Plan before the date he incurs 5 consecutive One-Year Vesting Breaks, upon his reemployment the Employer-derived account balance of the Employee will be restored to the amount on the date of such deemed distribution . Such restoration will be made, first, from the amount of any Forfeitures available for reallocation as the last day of the Plan Year in which repayment is made, to the extent thereof; and to the extent that Forfeitures are not available or are insufficient to restore the balance, from contributions made by the Employer pursuant to Section 4.1(f). (c) If No Distribution Is Made. If no distribution (or deemed distribution) is made to a Participant before he incurs five consecutive One-year Vesting Breaks, the nonvested portion of his Accounts shall become a Forfeiture in the Plan Year that constitutes his fifth consecutive One-year Vesting Break. (d) Adjustment of Accounts. Before a Forfeiture is incurred, a Participant's Accounts shall share in earning s and losses of the Trust Fund pursuant tot Section 13.4 in the same manner as the Accounts of active Participants. (e) Accumulated Deductible Contribution. For Plan Years beginning before January 1, 1989, a Participant's vested Account balance shall not include accumulated deductible contributions within the meaning of Section 72(o)(5)(BB) of the Code. 8.4 Special Rule in the Event of a Withdrawal (Variable Plans Only). If a withdrawal pursuant to Section 12.2 or 12.3 is made from a participant's Employer contribution Account or Employer Matching Account before the Account is fully vested, and the Participant may increase the vested percentage in the Account, then a separate account will be established at the time of the withdrawal, and at any relevant time after the withdrawal the vested portion of the separate account will be equal to the amount "X" determined by the following formula: X = P(AB + D) - D For purposes of the formula, P is the Participant's vested percentage at the relevant time, AB is the account balance at the relevant time, and D is the amount of the withdrawal. 8.5 Vesting Election. If the Plan is amended to change any vesting schedule, or is amended in any way that directly or indirectly affects he computation of a Participant's vested percentage, or is deemed amended by an automatic change to a top-heavy vesting schedule pursuant to Article 15, each Participant who has competed not less than three Years of Service may elect, within a reasonable period after the adoption of the amendment or change, in a writing files with the Employer to have his vested percentage computed under the Plan without regard to such amendment. For a Participant who is not credited with at least one Hours of Service in a Plan Year beginning after December 31, 1988, the preceding sentence shall be applied by substituting "five Years of Service " for "three years of Service." The period during which the election may be made shall commence with the date the amendment is adopted, or deemed to be made, and shall end on the latest of (a) 60 days after the amendment is adopted; (b) 60 days after the amendment becomes effective; or (c) 60 days after the Participant is issued written notice of the amendment by the Employer. ARTICLE IX: Payment of Benefits 9.1 Distribution of Accounts. A Participant or Beneficiary who has become eligible for a distribution of benefits pursuant to Article 7 may elect to receive such benefits at any time, subject to the terms and conditions of this Article 9, Article 10 and Article 11. Unless a Participant or Beneficiary elects otherwise, distribution of benefits will begin no later than the 60th day after the end of the Plan Year in which the latest of the following events occurs: (a) The Participant attains age 65 (or if earlier, the normal retirement age specified by the Employer in the Plan Agreement); or (b) The tenth anniversary of the year in which the Participant commenced participation in the Plan; or (c)The Participant's employment wit the Affiliated Employers terminates. A Beneficiary who is the surviving spouse of a Participant may elect to have distribution of benefits begin within the 90-day period following the Participant's death. For purposes of this Section 9.1, the failure of a Participant (and his spouse, if spousal consent is required pursuant to Article 10) to consent to a Distribution while a benefit is "immediately distributable" within the meaning of Section 9.2 shall be considered an election to defer commencement of payment. In a Variable Plan, if the Employer has so specified in the Plan Agreement, the vested portion of a Participant's Accounts will be distributed in a lump sum in cash no later than 60 days after the end of the plan Year in which his employment terminates, if at the time the Participant first became entitled to a distribution the value of such vested portion, derived from Employer and Employee contributions, does not exceed $3,500. Commencement of distributions in any case shall be subject to Section 9.4. 9.2 Restriction on Immediate Distributions. A Participant's account balance is considered "immediately distributable" if any part of the account balance could be distributed to the Participant (or his surviving spouse) before the Participant attains, or would have attained if not deceased, the later of the normal retirement age specified in the Plan Agreement or age 62. (a) If a distribution is one to which sections 401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution may commence less than 30 days after the notice required under section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that (1) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (2) the Participant, after receiving the notice, affirmatively elects a distribution. (b) Notwithstanding paragraph (a), only the Participant need consent to the commencement of a distribution in the form of a Qualified Joint and Survivor Annuity while the account balance is immediately distributable. furthermore, if payment in the form of a Qualified Joint and Survivor Annuity is not required with respect to the Participant pursuant to Section 10.1 (b) of the Plan, only the Participant need consent to the distribution of an account balance that is immediately distributable. Neither the consent of the Participant nor the spouse shall be required to the extent that a distribution is required to satisfy Section 401(a)(9) or Section 415 of the Code. In addition, upon termination of the Plan, if the Plan does not offer an annuity option (purchased from a commercial provider), a Participant';s account balance may be distributed to the Participant or transferred to another defined contribution plan (other than an Employee stock ownership plan as defined in Section 4975(e)(7) of the Code) maintained by an Affiliated Employer, without the Participant's consent. For purposes of determining the applicability of the foregoing consent requirements to distributions made before the first day of the first Plan Year beginning after December 31, 1988, the Participant's vested account balance shall not include amounts attributable to accumulated deductible employee contributions within the meaning of section 72(o)(5)(B) of the Code. 9.3 Optional Forms of Distribution. If at the time a Participant first becomes entitled t a distribution the value of his vested Account balance derived from Employer and Employee contributions does not exceed $3,500, distribution shall be made in a lump sum in cash. Subject to the preceding sentence and to the rule of Article 10 concerning joint and survivor annuities, a Participant or Beneficiary may elect to receive benefits in any of the following optional forms: (a) A lump sum payment in cash or in kind or in a combination of both; (b) A series of installments over a period certain that meets the requirements of Article 11; or (c) A nontransferable annuity contract, purchased for a commercial provider, with terms complying with the requirements of Article 11; provided, however, that an annuity for the life of any person shall be available as an optional form of distribution in a Profit Sharing Plan only if the Employer has so elected in the Plan Agreement. (d) In the event that the Plan is adopted as an amendment to an existing plan, each optional form of distribute available under the existing plan shall be made available under the Plan through the purchase of an appropriate annuity contract in accordance with paragraph (c). 9.4 Distribution Procedure. The Trustee shall make or commence distributions to or for the benefit of Participants only on receipt of a written order from the Employer certifying that a distribution of a Participant's benefits is payable pursuant to the Plan, and specifying the time and manner of payment. The amount to be distributed shall be determined as of the Valuation Date coincident with or next following the Employer's written order. The Trustee shall be fully protected in acting upon the written directions of the Employer in making benefit distributions, and shall have not duty to determine the rights or benefits of any person under the Plan or to inquire in to the right or power of the Employer to direct any such distribution. The Trustee shall be entitled to assume conclusively that any determination by the Employer with respect to a distribution meets the requirements of the Plan. The Trustee shall not be required to make any payment hereunder in excess of the net realizable value of the assets of the Account in question at the time of such payment, nor to make any payment in cash unless the Employer has furnished written instructions as to the assets to be converted to cash for the purposes of making payment. 9.5 Lost Distributee. In the event that the Plan Administrator is unable with reasonable effort to locate a person entitled to distribution under the Plan, the Accounts distributable to such a person shall become a Forfeiture at the end of the third Plan Year after the Plan Administrator's efforts to locate such person began; provided, however, that the amount of the Forfeiture shall be restored in the event that such person thereafter submits a claim for benefits under the Plan. such restoration will be made, first, from the Amman of Forfeitures available for reallocation as of the last day of the Plan Year in which the claim is made, to the extent thereof; and to the extent that Forfeitures are not available or are insufficient to restore the balance, from contributions made by the Employer pursuant to Section 4.1(f). In a Standard Plan, a Forfeiture occurring under this Section 9.5 shall be reallocated as though it were an Employer contribution. 9.6 Direct Rollovers. This Section 9.6 applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Section, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. For purposes of this Section 9.6, the following definitions shall apply: (a) Eligible rollover distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include any distribution that is on e of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's Designated Beneficiary, or for a specified period of 10 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 (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) Eligible retirement plan: An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 410(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (c) Distributee: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (d) Direct rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. ARTICLE X: Joint and Survivor Annuity Requirements 10.1 Applicability. (a) Generally. The provisions of Sections 10.2 thorough 10.5 shall generally apply to a Participant who is credited with at least one Hour of Service on or after August 23, 1984, and such other Participants as provided in Section 10.6. (b) Exception for Certain Profit Sharing Plans. The provisions of Sections 10.2 through 10.5 shall not apply to a Participant in a profit sharing plan if: (i) the Participant does not or cannot elect payment of benefits in the form of a life annuity, and (ii) on the death of the Participant, his Vested Account Balance will be paid to his surviving spouse (unless there is not surviving spouse, or the surviving spouse has consented to the designation of another Beneficiary in a manner conforming to a Qualified Election) and the surviving spouse may elect to have distribution of the Vested account Balance (adjusted in accordance with Section 13.4 for gains or losses occurring after the Participant's death) commence within the 90-day period following the date of the Participant's death. The Participant may waive the spousal death benefit described in this paragraph (b) at any time, provided that no such waiver shall be effective unless it satisfies the conditions applicable under Section 10.4(c) to a Participant's waiver of a Qualified Preretirement Survivor Annuity. The exception in this paragraph (b) shall not be operative with respect to a Participant in a profit sharing plan if the Plan: (1) Is a direct or indirect transferee of a defined benefit plan, money purchase pension plan, target benefit plan, stock bonus plan, or profit sharing plan which is subject to the survivor annuity requirement of Sections 401(a)(11) and 417 of the Code; or (2) Is adopted as an amendment of a plan that did not qualify for the exception in this paragraph (b) before the amendment was adopted. For purposes of this paragraph (b), Vested Account Balance shall have the meaning provided in Section 10.4(f). The provisions of Sections 10.2 through 10.6 set forth the survivor annuity requirements of Sections 401(a)(11) and 417 of the Code. (c) Exception for Certain Amounts. The provisions of Sections 10.2 through 10.5 shall not apply to any distribution mad on or after the first day of the first Plan Year beginning after December 31, 1988, from or under a separate account attributable solely to accumulated deductible employee contributions as defined in Section 72(o)(5)(B) of the Code, and maintained on behalf of a Participant in a money purchase pension plan or a target benefit plan, provided that the exceptions applicable to certain profit sharing plans under paragraph (b) are applicable with respect to the separate account (for this purpose, Vested Account Balance means the Participant's separate account balance attributable solely to accumulated deductible employee contributions within the meaning of Section 72(o)(5)(B) of the Code). 10.2 Qualified Joint and Survivor Annuity. Unless an optional form of benefit is selected pursuant to a Qualified election within the 90-day period ending on the Annuity Staring Date, a married Participant's Vested Account Balance will be paid in the form of a Qualified Joint and Survivor Annuity and an unmarried Participant's Vested Account Balance will be paid in the form of life annuity. In either case, the Participant may elect to have such an annuity distributed upon his attainment of the Earliest Retirement Age under the Plan. 10.3 Qualified Preretirement Survivor Annuity. Unless an optional form of benefit has been selected within the Election Period pursuant to a Qualified Election, the Vested Account Balance of a Participant who dies before the Annuity Staring Date shall be applied toward the purchase of an annuity for the life of his surviving spouse (a "Qualified Preretirement Survivor annuity"). The surviving spouse may elect to have such an annuity distributed within a reasonable period after the Participant's death. For purposes of this Article 10, the term "spouse" means the current spouse or surviving spouse of a Participant, except that a former spouse will be treated as the spouse or surviving spouse (and a current spouse will not be treated as the spouse or surviving spouse) to the extent provided under a qualified domestic relations order as described in Section 414(p0 of the Code. 10.4 Definitions. The following definitions apply: (a) Election Period means the period beginning on the first day of the Plan Year in which a Participant attains age 35 and ending on the date of the Participant's death. If a Participant separates from service before the first of the Plan Year in which he reaches age 35, the Election Period with respect to his account balance as of the date of separation shall begin on the date of separation. A Participant who will not attain age 35 as of the end of a Plan Year may make a special Qualified Election to waive the Qualified Preretirement Survivor Annuity for the period beginning on the date of such election and ending on the first day of the Plan Year in which the Participant will attain age 35. Such an election shall not be valid unless the Participant receives a written explanation of the Qualified Preretirement Survivor Annuity in such terms as are comparable to the explanation required under Section 10.5. Qualified Preretirement Survivor Annuity coverage will be automatically reinstated as of the first day of the Plan Year in which the Participant attains age 35. any new waiver on or after that date shall be subject to the full requirements of this article. (b) Earliest Retirement Age means the earliest date on which the Participant could elect to receive Retirement benefits under the Plan. (c) Qualified Election means a waiver of a Qualified Joint and survivor Annuity or a Qualified Preretirement Survivor Annuity. any such waiver shall not be effective unless: (1) the Participant's spouse consents in writing to the waiver; (2) the waiver designates a specific Beneficiary, including any class of beneficiaries or any contingent beneficiaries, which may not be changed without spousal consent (unless the spouse's consent expressly permits designations by the Participant without any further spousal consent); (3) the spouse's consent acknowledges the effect of the waiver; and (4) the spouse's consent is witnessed by a plan representative or notary public., Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity shall not be effective unless the waiver designates a form of benefit payment which may not be change d without spousal consent (unless the spouse's consent expressly permits designations by the Participant without any further spousal consent). If it is established to the satisfaction of a plan representative that there is no souse or that the spouse cannot be located, a waiver will be deemed a Qualified Election. Any consent by a spouse obtained under these provisions (and any establishment that the consent of a spouse may not be obtained) shall be effective only with respect to the particular spouse involved. A consent that permits designations by the Participant without any requirement of further consent by the spouse must acknowledge that the spouse has the right to limit the consent to a specific Beneficiary and a specific form o f Benefit where applicable, and that the spouse voluntarily elects to relinquish either or both of those rights. a revocation of a prior waiver may be made by a Participant without the consent of the spouse at anytime before the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Participant has received notice as provided in Section 10.5. (d) Qualified Joint and Survivor Annuity means an immediate annuity for the life of a Participant, with a survivor annuity for the life of the spouse which is not less than 50 percent and not more than 100 percent of the amount of the annuity which is payable during the joint lives of the Participant and the spouse, and which is the amount of benefit that can be purchased with the Participant's Vested Account Balance. The percentage of the survivor annuity under the Plan shall be 50 percent. (e) Annuity Starting Date means he first day of the first period for which an amount is paid as an annuity (or any other form). (f) Vested Account Balance means the aggregate value of the Participant's vested account balance derived from Employer and Employee contributions (including rollover), whether vested before or upon death, including the proceeds of insurance contracts, if any on the Participant's life. The provisions of this Article 10 shall apply to a Participant who is vested in amounts attributable to Employer contributions, Employee contributions or both at the time of death or distribution. 10.5 Notice Requirements. In the case of a Qualified Joint and Survivor annuity, no less than 30 days and no more than 90 days before a Participant's Annuity Starting Date the Plan Administrator shall provide to him a written explanation of (i) the terms and conditions of a Qualified and Joint Survivor Annuity, (ii) the Participant's right to make, and the effect of, an election to waive the Qualified Joint and Survivor Annuity form of benefit, (iii) the rights of the Participant's spouse, and (iv) the right to make and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity. In the case of a Qualified Preretirement survivor Annuity, within the applicable period for a Participant the Plan Administrator provide to him a written explanation of the Qualified Preretirement Survivor Annuity, in terms and manner comparable to the requirements applicable to the explanation of a Qualified Joint and Survivor annuity as described in the preceding paragraph. The applicable period for a Participant is whichever of the following periods ends last: (i) the period beginning with the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35; (ii) a reasonable period ending after an individual becomes a Participant; (iii) a reasonable period ending after this Article 10 first applies to the Participant. Notwithstanding the foregoing, in the case of a Participant who separates from service before attaining age 35, notice must be provided within a reasonable period ending after his separation from service. For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in (ii) and (ii) is the end of the two-year period beginning one year before the date the applicable event occurs, and ending one year after that date. In the case of a Participant who separates from service before the Plan Year in which he reaches age 35, notice shall be provided within the two-year period beginning one year before the separation and ending one year after the separation . If such a Participant thereafter returns to employment with the Employer, the applicable period for the Participant shall be redetermined. 10.6 Transitional Rules. (a) Any living Participant not receiving benefits on August 23, 1984, who would otherwise not receive the benefits prescribed by the preceding sections of this Article 10, must be given the opportunity to elect to have those sections apply if the Participant is credited with at least one Hour of Service under the Plan or a predecessor plan in a Plan Year beginning on or after January 1, 1976, and the Participant had at least ten years of vesting service when he or she separated from service. (b) Any living Participant not receiving benefits on August 23, 1984, who was credited with at least one Hour of Service under the Plan or a predecessor plan on or after September 2, 1974, and who is not otherwise credited with any service in a Plan Year beginning on or after January 1, 1976, must be given the opportunity to have his benefits paid in accordance with paragraph (d) of this section 10.6. (c0 The respective opportunities to elect (as described in paragraphs (a) and (b) above) must be afforded to the appropriate Participants during the period commencing on August 23, 1984, and ending on the date benefits would otherwise commence to be paid to those Participants. (d) Any Participant who has so elected pursuant to paragraph (b) of this Section 10.6, an any Participant who does not elect under paragraph (a), or who meets the requirements of paragraph (a) except that he does not have at least ten years of vesting service when he separates from service, shall have his benefits distributed in accordance with all of the following requirements, if his benefits would otherwise have been payable in the form of a life annuity: (1) Automatic joint and survivor annuity. If benefits in the form of a life annuity become payable to a married Participant who: (i) begins to receive payments under the Plan on or after normal retirement age; or (ii) dies on or after normal retirement age while still working for the Employer; or (iii) begins to receive payments on or after the qualified early retirement age; or (iv) separates from service on or after attaining normal retirement age (or the qualified early retirement age) and after satisfying the eligibility requirement for the payment of benefits under the Plan and thereafter dies before beginning to receive such benefits; then such benefits will be received under the Plan in the form of a Qualified Joint and Survivor Annuity, unless they Participant has elected otherwise during the election period, which must begin at least six months before the Participant attains qualified early retirement age and end not more than 90 days before the commencement of benefits. Any election hereunder will be in writing and may be changed by the Participant at any time. (2) Election of early survivor annuity. A participant who is employed after attaining the qualified early retirement age will be given the opportunity to elect during the election period to have a survivor annuity payable on death. If the Participant elects the survivor annuity, payments under such annuity must not be less than the payments which would have been made to the spouse under the Qualified Joint and Survivor Annuity if the Participant had retired on the day before his death. Any election under this provision will be in writing and may be changed by the Participant at any time. The election period begins o the later of (i) the 90th day before the Participant attains the qualified early retirement age, or (ii) the date on which participation begins, and ends on the date the Participant terminates employment. (3) For purposes of this Section 10.6, qualified early retirement age is the latest of the earliest date under the Plan on which the Participant may elect to receive Retirement benefits, the first day of the 120th month not beginning before the Participant reaches normal retirement age, or the date the Participant begins participation. ARTICLE XI: Minimum Distribution Requirements 11.1 General Rules. Subject to Article 10, Joint and Survivor Annuity Requirements, the requirements of this Article 11 shall apply to any distribution of a Participant's interest and will take precedence over any inconsistent provisions of the Plan. Unless otherwise specified, the provisions of this Article 11 apply to calendar years beginning after December 31, 1984. All distributions required under this Article 11 shall be determined and made in accordance with the Income Tax Regulations issued under Section 401(a)(9) of the Code (including proposed regulations, until the adoption of final regulations), including the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed regulations. 11.2 Required Beginning Date. The entire interest of a Participant must be distributed, or begin to be distributed, no later than the Participant's required beginning date, determined as follows. (a) General Rule. The required beginning date of a Participant is the first day of April of the calendar year following the calendar year in which the Participant attains age 70 1/2. (b) Transitional Rules. The required beginning date of a Participant who attains age 70 /2 before January 1, 1988, shall be determined in accordance with (1) or (2) below: (1) Non-5-percent Owners. The required beginning date of a Participant who is not a 5-percent owner is the first day of April of the calendar year following the calendar year in which the later of his Retirement or his attainment of age 70 1/2 occurs. (2) 5-percent Owners. The required beginning date of a Participant who is a 5-percent owner during any year beginning after December 31, 1979, is the first day of April following the later of: (i) the calendar year in which the Participant attains age 70 1/2, or (ii) the earlier of the calendar year with or within which ends the Plan Year in which the Participant becomes a 5-percent owner, or the calendar year in which the Participant retires. The required beginning date of a Participant who is not a 5-percent owner, who attains age 70 1/2 during 1988 and who has not retired as of January 1, 1989, is April 1, 1990. (c) Rules for 5-percent Owners. A Participant is treated as a 5-percent owner for purposes of this Section 11.2 if he is a 5-percent owner as defined in Section 416(i) of the Code (determined in accordance with Section 416 but without regard to whether the Plan is top heavy) at nay time during the Plan Year ending with or within the calendar year in which he attains age 66 1/2, or any subsequent Plan Year. Once distributions have begun to a 5-percent owner under this Section 11.2, they must continue, even if the Participant ceases to be a 5-percent owner in a subsequent year. 11.3 Limits on Distribution Periods. As of the first Distribution Calendar Year, distributions not made in a single sum may be made only over one or a combination of the following periods: (a) the life of the Participant, (b) the life of the Participant and his Designated beneficiary, (c) a period certain not extending beyond the Life Expectancy of the Participant, or (d) a period certain not extending beyond the Joint and Last survivor Expectancy of the Participant and his Designated Beneficiary. Designated Beneficiary means the individual who is designated as the Beneficiary under the Plan in accordance with Section 401(a)(9) of the Code and the regulations issued thereunder (including proposed regulations, until the adoption of final regulations) and Section 7.2. Distribution Calendar Year means a calendar year for which a minimum distribution is required under Section 401(a)(9) of the Code and this Section 11.3. For distributions beginning before the Participant's death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant's required beginning date. For distributions beginning after the Participant's death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin pursuant to Section 11.5. Life Expectancy and Joint and Last Survivor Expectancy are computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise elected by the Participant (or his spouse, in the case of distributions described in Section 11.5(b)) by the time distributions are required to begin, Life Expectancies shall be recalculated annually. Any such election shall be irrevocable as to the Participant (or spouse) and shall apply to all subsequent years. The Life Expectancy of a nonspouse beneficiary may not be recalculated. 11.4 Determination of Amount To Be Distributed Each Year. If the Participant's interest is to be distributed in other than a single sum, the following minimum distribution rules shall apply on or after the required beginning date. Paragraphs (a) through (d) apply to distributions in forms other than the purchase of an annuity contract. (a) If a Participant's Benefit is to be distributed over (1) a period not extending beyond the Life Expectancy of the Participant or the Joint Life and Last Survivor Expectancy of the Participant and his Designated Beneficiary, or (2) a period not extending beyond the Life Expectancy of the Designated Beneficiary, the amount required to be distributed for each calendar year, beginning with distributions for the first Distribution Calendar Year, must at least equal the quotient obtained by dividing the Participant's Benefit by the Applicable Life Expectancy. (b) For calendar years beginning before January 1, 1989, if the Participant's spouse is not the Designated Beneficiary, the method of distribution selected must assure that at least 50 percent of the present value of the amount available for distribution is paid within the Life Expectancy of the Participant. (c) For calendar years beginning after December 31, 1988, the amount to be distributed each year, beginning with distributions for the first Distribution Calendar Year, shall not be less than the quotient obtained by dividing the Participant's Benefit by the lesser of (1) the Applicable Life Expectancy or (2) if the Participant's spouse is not the Designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations. Distributions after the death of the Participant shall be distributed using the Applicable Life Expectancy in paragraph (a) above as the relevant divisor, without regard to Proposed Regulations Section 1.401(a)(9)-2. (d) the minimum distribution required for the Participant's first Distribution Calendar Year must be made on or before the Participant's required beginning date. The minimum distribution for other calendar years, including the minimum distribution for the Distribution Calendar Year in which the Employee's required beginning date occurs, must be made on or before December 31 of that Distribution Calendar Year. (e) If the Participant's Benefit is distributed in the form of an annuity contract purchased from an insurance company, distributions thereunder shall be made in accordance with the requirements of Section 401(a)(9) of the Code and the regulations issued thereunder (including proposed regulations, until the adoption of final regulations). Applicable Life Expectancy means the Life Expectancy (or Joint and Last Survivor Expectancy) calculated using the attained age of the Participant (or Designated Beneficiary) as of the Participant's (or Designated Beneficiary's) birthday in the applicable calendar year, reduced by one for each calendar year which has elapsed since the date Life Expectancy was first calculated. If Life Expectancy is being recalculated, the Applicable Life Expectancy shall be the Life Expectancy as so recalculated. The applicable calendar year shall be the first Distribution Calendar Year, and if Life Expectancy is being recalculated, the Applicable Life Expectancy shall be the Life Expectancy as so recalculated. the applicable calendar year shall be the first Distribution Calendar Year, an if Life Expectancy is being recalculated such succeeding calendar year. If annuity payments commence in accordance with Section 11.4(e) before the required beginning date, the applicable calendar year is the year such payments commence. If distribution is in the form of an immediate annuity purchased after the Participant's death with the Participant's remaining interest in the Plan, the applicable calendar year is the year of purchase. Participant's Benefit means the account balance as of the last valuation date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year), increased by the amount of any contributions or Forfeitures allocated to the account balance as of date in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. For purposes of the preceding sentence, if any portion of the minimum distribution for the first Distribute Calendar Year is made in the second Distribution Calendar Year on or before the required Beginning date, the amount of the minimum distribution made in the second Distribution Calendar Year hall be treated as if it had been made in the immediately preceding Distribute Calendar Year. 1.5 Death Distribution Provisions. (a) Distribution Beginning before Death. If the Participant dies after distribution of his interest has begun, the remaining portion of his interest will continue to be distributed at least as rapidly as under the method of distribution being used before the participant' death. (b) Distribution Beginning after Death. If the Participant dies before distribution of his interest begins, distribution of his entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death, except to he extent that an election is made to receive distributions in accordance with (1) or (2) below: (1) If any portion of he Participant's interest is payable to a Designated Beneficiary, distributions may be mad over the Designated Beneficiary's life, or over a period certain not greater than the Life Expectancy of the Designated Beneficiary, commencing on or before December 31 of the calendar year immediately following the calendar year in which the Participant died; or (2) If the Designated Beneficiary is the Participant's surviving spouse, the date distributions are required to begin in accordance with (1) above shall not be earlier than the later of (i) December 31 of the calendar year immediately following the calendar year in which the Participant died, and (ii) December 31 of the calendar year in which the Participant would have attained age 70 1/2. If the Participant has not made an election pursuant to this Section 11.5 by the time of this death, the Participant's Designated Beneficiary must elect the method of distribution no later than the earlier of (i) December 31 of the calendar year in which distributions would be required to begin under this Section 11.5 or (ii) December 31 of the calendar year which contains the fifth anniversary of the date of death of the Participant. If the Participant has no Designated Beneficiary, or if the Designated Beneficiary does to elect a method of distribution, distribution of the Participant's entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. (c) For purposes of paragraph (b), if the surviving spouse dies after the Participant, but before payments to the souse begin , the provisions of paragraph (b), with the exception of subparagraph (2) therein, shall be applied as if the surviving spouse were the Participant. (d) For purposes of this Section 11.5, any amount paid to a child of the Participant will be treated as if it had been paid to the surviving spouse of the Participant if the amount becomes payable to the surviving spouse when the child reaches the age of majority. (e) For the purposes of this Section 11.5, distribution of a Participant's interest is considered to begin on the Participant's required beginning date (or, if paragraph (c) above is applicable the date distribution is required to begin to the surviving spouse pursuant to paragraph(b) above). If distribution in the form of an annuity contract described in Section 11.4(e) irrevocably commences to the Participant before the required beginning date, the date distribution is considered to begin is the date distribution actually commences. 11.6 Transitional Rule. Notwithstanding the other requirements of this Article 11, and subject to the requirements of Article 10, Joint and Survivor Annuity Requirement, distribution on behalf of any Participant, including a 5-percent owner, may be made in accordance with al of the following requirements (regardless of when such distribution commences): (a) The distribution is one which would not have disqualified the Trust under Section 401(a)(9) of the Internal Revenue code of 1954 as in effect before its amendment by the Deficit Reduction Act of 1984. (b) The distribution is in accordance with a method of distribution designated by the Employee whose interest in the Trust is being distributed of, if the Employee is deceased, by a Beneficiary of the Employee. (c) The designation specified in paragraph (b) was in writing, was signed by the Employee or the Beneficiary, and as made before January 1, 1984. (d) The Employee had accrued a benefit under the plan as of December 31, 1983. (e) The method of distribution designated by the Employee or the Beneficiary specifies the time at which distributor will commence, the period over which distributions will be made, an din the case of any distribution upon the Employee's death, the Beneficiaries of the Employee listed in order of priority. A distribution upon death will not be covered by this transitional rule unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the Employee. For any distribution which commences before January 1, 1984, but continues after December 31, 1983, the Employee or the Beneficiary to whom such distribution is being made will be presumed to have designated the method of distribute under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirements in paragraphs (a) and (e). If a designation is revoked, any subsequent distribution must satisfy the requirements of Section 401(a)(9) of the Code and the regulations thereunder. If a designation is revoked after the date distributions are required to begin, the Trust must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed which would have been required to have been distributed to satisfy Section 401(a)(9) of the Code and the regulations thereunder, but for the designation described in paragraphs (b) through (e). For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements in Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations. Any changes in the designation generally will be considered to be a revocation of the designation, but the mere substitution or addition of another beneficiary (one not name in the designation) under the designation will not be considered to be a revocation of the designation, so long as the substation or addition does not alter the peered over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life). In the case of an amount transferred or rolled over from one plan to another plan, the rules in Q&AJ-2 and Q&AJ-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax Regulations. ARTICLE XII: Withdrawals and Loans 12.1 Withdrawals from Participant Contribution Accounts. Subject to the requirements of Article 10, a Participant may upon written notice to the Employer withdraw any amount from his Participant Contribution Account. A withdrawn amount may not be repaid to the Plan. No forfeiture will occur solely as a result of an Employee's withdrawal of Participant contributions. 12.2 Withdrawals on Account of Hardship (Profit Sharing Plans Only). If the employer has so elected in the Plan Agreement for a profit sharing plan, upon a Participant's written request the Plan Administrator may permit a withdrawal fro the vested portion of the Participant's Accounts on account of the Participant's financial hardship, which must be demonstrated to the satisfaction of the Plan Administrator. In considering such requests, the Plan Administrator shall apply uniform standards that do not discriminate in favor of Highly Compensated Employees. In a Standard Plan with a Code, if hardship withdrawals are permitted from both the Employer Contribution Account and the Elective Deferral Account, they shall be made first from a participant's Employer Contribution Account and thereafter from a Participant's Elective Deferral Account, subject to the additional requirements set forth in Section 5.14. In a Standard Plan, the requirements of Section 5.14(b), (c), (d)(1) and (d)(2) shall also apply to hardship distributions from a Participant's Employer contribution Account. In a Variable Plan with a CODA, if hardship withdrawals are permitted from more than one of the Elective Deferral Account, Employer Matching Account, and Employer contribution Account , they shall be made first from a Participant's Employer contribution Account, and thereafter from the Employer Matching Account, and finally from the Elective Deferral Account, subject to the additional requirement of Section 5.14. A withdrawn amount may not be repaid to the Plan. 12.3 Withdrawals after Reaching Age 59 1/2 (Profit Sharing Plans Only). If so specified by the Employer in the Plan Agreement, a Participant who has reached age 59 1/2 may upon written request to the Employer withdraw during his employment any amount not exceeding the vested balance of his Accounts. A withdrawn amount may not be repaid to the Plan. 12.4 Loans (Variable Plans Only). If the Employer has so elected in the Plan Agreement, the Employer may direct the Trustee to make a loan to a Participant or Beneficiary from the vested portion of his Accounts, subject to the following terms and conditions: (a) The Plan Administrator shall administer the loan program subject to the terms and conditions of this Section 12.4 and to such reasonable additional rules and regulations as the Plan Administrator may establish for the orderly operation of the program. (b) A Participant's or Beneficiary's request for a loan shall be submitted to the Plan Administrator by means of a written application on a form supplied by the Plan Administrator. Applications shall be approved or denied by the Plan Administrator on the basis of its assessment of the borrower's ability to collateralize and repay the loan, as revealed in the loan application. (c) Loans shall be made to all Participants and Beneficiaries on a reasonable equivalent basis. Loans shall not be made available to highly compensated Employees (as defined in Section 414(q) of the Code) in amount greater than the amount made available to other employees (relative to the borrower s Account balance). (d) Loans must be adequately secured by assignment of fifty percent (50%) of the Participant s entire right, title, and interest in and to the Trust fund, evidenced by the Participant s collateral promissory not for the amount of the loan payable to the order of the Trustee. (e) Loans must bear a reasonable interest rate comparable tot he rate charged by commercial lenders in the geographical area for similar loans. The Plan Administrator shall not discriminate among Participants in the matter of interest rates, but loans may bear different interest rates if, in the opinion of the Plan Administrator, the difference in rates is justified by conditions that would customarily be taken into account by a commercial lender in the Employer s geographical area. (f) The period for repayment for any loan shall not exceed five years, except in the case of a loan used to acquire a dwelling unit which within a reasonable time is to be used as the principal residence of the Participant, in which case the repayment period shall not exceed ten years. The terms of a loan shall require that it be repaid in level payments of principal and interest not less frequently then quarterly throughout the repayment period, except that alternative arrangements for repayment may apply in the event that the borrower is on unpaid leave of absence for a period not to exceed one year. (g) To the extent that t Participant would be required under Article 10 to obtain the consent of his spouse to a distribution of an immediately distributable benefit other than a Qualified Joint and Survivor Annuity, the consent of the Participant s spouse shall be required for the u se of the Account as security for a loan. The spouse s consent must be obtained no earlier than the beginning of the 90-day period that ends on the date on which the loan is to be so secured, and obtained in accordance with the requirements of Section 10.4(c) for a Qualified Election. Any such consent shall thereafter be binding on the consenting spouse and any subsequent spouse of the Participant. a new consent shall be required for use of the Account as security for any extension, renewal, renegotiation or revision of the original loan. (h) If valid spousal consent has been obtained in accordance with Section 12.4(g), then notwithstanding any other provision of the Plan the portions of the Participant s account balance used as a security interest held by the Plan by reason of a loan outstanding to the Participant shall be taken into account for purposes of determining the amount of the account balance payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than 100% of the Participant s vested account balance (determined without regard to the preceding sentence) is payable to the surviving spouse, then the account balance shall be adjusted by fist reducing the vested account balance by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving spouse. (i) In the event of default on a loan by a Participant who is an active Employee, foreclosure on the Participant s Account as security will not occur until the Employer has reported to the Trustee the occurrence of an event permitting distribution from the Plan in accordance with Article 9 or Section 5.13. (j) No loan shall be made to an Owner-Employee or a Shareholder-Employee. (k) No loan to any Participant or Beneficiary can be made tot he extend that the amount of the loan, when added to the outstanding balance of all other loans to the Participant or Beneficiary, would exceed the lesser of (a) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans during the one year period ending on the day before the loan is made, over the outstanding balance of loans from the Plan on the date the loan is made, or (b) one-half the value of the vested account balance of the Participant. For the purpose of the above limitation, all loans from all qualified plans of the Affiliated Employers are aggregated. (l) Loans shall be considered investments directed by a Participant pursuant to Section 13.3. The amount loaned shall be charged solely against the Accounts of the Participant, and repaid amounts and interest shall be credited solely thereto. 12.5 Procedure; Amount Available. Withdrawals and loans shall be made subject to the terms and condition applicable to distributions pursuant to Section 9.4, except that the amount of any withdrawal or loan shall be determined by reference to the vested balance of the Participant s Account as of the most recent Valuation Date preceding the withdrawal or loan, and shall not exceed the amount of the vested account balance. ARTICLE XIII: Trust Fund and Investments 13.1 Establishment of Trust Fund. The Employer and the Trustee hereby agree to the establishment of a Trust Fund consisting of all amounts as shall be contributed or transferred from time to time to the Trustee pursuant to the Plan, and all earnings thereon. The Trustee shall hold the assets of the Trust Fund for the exclusive purpose of providing benefits to Participant and Beneficiaries and defraying the reasonable expenses of administering the Plan and no such assets shall ever revert to the Employer, except that: (a) contributions made by the Employer by mistake of fact may be returned to the Employer within one (1) year of the date of payment. (b) contributions that are conditioned on their deductibility under the Code may be returned to the Employer within one (1) year of the disallowance of the deduction, (c) contributions that are conditioned on the initial qualification of the Plan under the Code may be returned to the Employer within one (1) year after such qualification is denied by determination of the Internal Revenue Service, but only if an application for determination of such qualification is made within the time prescribed by law for filing the Employer s federal income tax return for its taxable year in which the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe, and (d) amounts held in a suspense account may be returned to the Employer on termination of the Plan, to the extent that they may not then be allocated to any Participant s Account in accordance with Article 6. All Employer contributions under the Plan other than those made pursuant to Section 4.1(f) are hereby expressly conditioned on the initial qualification of the Plan and their deductibility under the Code. 13.2 Management of Trust Fund. Except to the extent of any investment in Policies pursuant to Article 14, the assets of the Trust Fund shall be held in trust by the Trustee and accounted for in accordance with this Article 13, and shall be invested in accordance with Section 13.3 in the Investment Products specified by the Employer in the Plan Agreement and from time to time thereafter in writing. The Employer shall have the exclusive authority and discretion to select the Investment Products available under the Plan. In making that selection, the Employer shall use the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matter would use in the conduct of an enterprise of like character and with like aims. The Employer shall cause the available Investment Products be diversified sufficiently to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. It is especially intended that the Trustee shall have no discretionary authority to determine the investment of Trust assets. 13.3 Investment Instructions. Except as Article 14 may apply, all amounts held in the Trust Fund under the Plan shall be invested in Investment Products. If the Employer has elected in the Plan Agreement to make investment decisions for the Plan, investment instructions as to the Employer Contribution Accounts, Employer Matching Accounts, Qualified Matching Accounts, and Qualified Nonelective Contribution Accounts shall be the fiduciary responsibility of the Employer, and each of such Accounts shall have a pro rata interest in all assets of the Trust (other than life insurance policies under Article 14) to which the Employer s instructions apply. If the Employer has not elected to make investment decisions for the Plan, then assets of the Trust shall be invested solely in accordance with the instructions of the Participant w to whose Accounts they are allocable, as delivered by the Employer to Putnam in accordance with its service agreement with the Employer, if any. Instructions shall apply to future contributions, past accumulations, or both, according to their terms, and shall be communicated by the Employer to Putnam in accordance with procedures prescribed in the service agreement, if any, between the Employer and Putnam. Instructions shall be effective prospectively, coincident with or within a reasonable time after their receipt in good order by Putnam. An instruction once received shall remain in effect until it is changed by the provision of a new instruction. New instructions shall be accepted by Putnam at any Valuation Date. To the extent the assets of the Trust are to be invested solely in accordance with the instructions of the Participants, the Plan is intended to constitute a plan described in section 404 (cc) of ERISA and Title 29 of the Code of Federal Regulations section 2550.404c-1. In such case, the Employer shall be responsible for providing the Participant with all information required to be given pursuant to ERISA section 404(c) and Title 29 of the Code of Federal Regulations section 2550.404c-1. In the event that the Employer adopts a Putnam prototype plan as an amendment to or restatement of an existing plan, the Employer shall specify one or more Investment Products to serve as the sole investments for all Participants Accounts during the period in which existing records of the Plan are transferred to the Recordkeeper. During that period, new investment, instructions as to existing assets of the Plan cannot be carried out, not can distributions be made from the Plan except to the extent permitted under the terms of the service agreement between the Employer and Putnam. The Employer and the Recordkeeper shall use their best efforts to minimize the duration of the period to which the preceding sentence applies. Neither the Employer nor the Trustee nor Putnam shall be responsible for questioning any instructions of a Participant or for reviewing the investments selected therein, or for any loss resulting from instructions of a Participant or from the failure of a Participant to provide or to change instructions. Neither Putnam nor the Trustee shall have any duty to question any instructions received from the Employer or a Participant or to review the investments thus selected, nor shall Putnam or the Trustee be responsible for any loss resulting from instructions received from the Employer or a Participant or from the failure of the Employer or a Participant to provide or change instructions. In the event that Putnam or the Trustee receives a contribution under the Plan as to which no instructions are delivered, or such instructions as are delivered are unclear to Putnam or the Trustee, such contributions shall be invested until clear instructions are received in the default option set forth in the service agreement between the Employer an Putnam or if no such option is so set forth, in Putnam Daily Dividend Trust. neither Putnam nor the Trustee shall have any discretionary authority or responsibility in the investment of the assets of the Trust Fund. 13.4 Valuation of the Trust Fund. As of each Valuation Date, the Trustee shall determine the fair market value of the Trust Fund, and the net earnings or losses and expenses of the Trust Fund for the period elapsed since the most recent previous Valuation Date shall be allocated amount the Accounts of Participants. Earnings, losses and expenses which pertain to investments which are specifically held for a given Participant s Account shall be allocated solely to that Account. In the event that an investment is not specifically held for a given Participant s Account, the earnings, losses and expenses pertaining o that investment shall be allocated among all Participants Accounts in the ratio that each such Account bears to the total of all Accounts of all Participants. Each Participant s Accounts shall be adjusted pursuant to this Section 13.4 until such time as they are either fully distributed or forfeited, regardless of whether the Participant continues to be an Employee. 13.5 Distributions on Investment Company Shares. Subject to Section 9.3, all dividends and capital gains or other distributions received on any Investment company Shares credited to Participant s Account will (unless received in additional Investment Company Shares) be reinvested in full and fractional shares of the same Investment Company at the price determined as provided in the then current prospectus of the Investment Company. The shares so received or purchased upon such reinvestment will be credited to such accounts. If any dividends or capital gain or other distributions may be received on such Investment Company Shares at the elections of the shareholder in additional share or in cash or other property, the Trustee will elect to receive such dividends or distributions in additional Investment Company Shares. 13.6 Registration and Voting of Investment Company Shares. All Investment Company Shares shall be registered in the name of the Trustee or its nominee. Subject to any requirements of applicable law, the Trustee will transmit to Participants in a Standard Plan, and to the Employer in a Variable Plan, copies of any notices of shareholders meetings, proxies and proxy-soliciting material, prospectuses and the annual or other reports to shareholders, with respect to Investment Company Shares held in the Trust Fund. the Trustee shall act in accordance with directions received fro such Participants or Employer, as the case may be, with respect to matters to be voted upon by the shareholders of the Investment Company. Such directions must be in writing on a form approved by the Trustee, signed by the addressee and delivered to the Trustee within the time prescribed by it. The Trustee will not vote Investment Company Shares as to which it receives no written directions. 13.7 Investment Manager (Variable Plans Only). The Employer, with the consent of Putnam, may appoint an investment manager, as defined in Section 3(38) of the Employee Retirement Income Security Act of 1974, with respect to all or a portion of the assets of the Trust Fund. The Trustee shall have no liability in connection with any action or nonaction pursuant to directions of such an investment manager. ARTICLE XIV: Insurance Policies 14.1 Purchase of Insurance Products. At the time of establishment of the Plan, the Employer shall purchase for each Participant such Policy or Policies, if any, as a Participant shall request and annually thereafter such additional Policies as a Participant shall request, subject to the limitations of Section 14.2. All Policies shall have the same day and month of issue, insofar as reasonably possible. The premiums on all Policies shall be paid at the same intervals (for example, annually, semi-annually, quarterly or monthly) but the interval may be changed with respect to all Policies from time to time. 14.2 Limitation on Premiums. the premiums paid for Policies in respect of any Participants shall be limited so that premiums paid on any ordinary insurance Policies (that is, Policies with both nonincreasing premiums and nondecreasing death benefits) on the life of the Participant shall be 49 percent or less of the Employer s total contributions for the Participant (and Forfeitures allocated and amounts reapplied to his Employer Contribution Account), and premiums paid on term insurance Policies on the life of the Participant shall be less than 25 percent of such amount; provided that if both ordinary life insurance Policies and term Policies are purchased for any Participant, the total premiums on term Policies plus one-half the premiums on ordinary life Policies shall be less than 25 percent of such amount. If at any time the total premiums to be paid by the Employer for a Participant shall equal or exceed the above limitations, then the life insurance coverage of that Participant shall be reduced so that the total premiums shall not equal or exceed the limitations. The required reduction shall be made by changing all or a portion of the life insurance on the Participant to paid-up life insurance or by canceling all or a portion of any term life insurance. 14.3 Policy Options. At the election of the Participant covered hereunder, a Policy may contain a waiver of premium disability benefit provision or a provision for additional indemnity in the event of accidental death, or both, if available on the type of Policy selected and if permitted by the insurer. 14.4 Insurability. If any Participant who has elected that a Policy be purchased is found by the insurer not to be insurable at standard rates, the Employer shall, if permitted by the rules of the insurer, purchase a similar Policy which provides a lesser death benefit and which can be purchased for the same premium. 14.5 Dividends on Policies. Dividends payable on any Policy shall be applied tot he purchase of additional benefits under the Policy unless the Participant requests that they be applied in reduction of premiums. 14.6 Trustee of Policy. The Insurance Trustee shall apply for an be the owner of each Policy purchased under the terms of the Plan. Each Policy must provide that proceeds will be payable to the Insurance Trustee; however, the Insurance Trustee shall be required t pay over all such proceeds to the Participant s Designated Beneficiary in accordance with the distribution provisions of the Plan including, without limitation, Section 10.3. Under no circumstances shall the Trust retain any part of the proceeds. In the event of any conflict between the terms of the Plan and the terms of any Policy purchased hereunder, the Plan provisions shall control. 14.7 Obligations with Respect to Policies. Except as may be otherwise provided in any conditional or dinging receipt issued by an insurer, there shall be no coverage and no death benefit payable under any Policy to be purchased from such insurer until such Policy shall have been delivered and the premium therefor shall have been paid. The Employer and the Insurance Trustee shall not have any responsibility as to the effectiveness of any Policy purchased from an insurer, nor shall either of them have any liability or obligation to pay any amount to any Participant or his beneficiary by reason of any failure or refusal by the insurer to make such payment. 14.8 Distribution of Proceeds on Participant s Death. In the event of the death of a Participant before the conversion provided for in Section 14.9, there shall be payable to the beneficiary named in any Policy on his life the benefits provided by the terms of such Policy. 14.9 conversion of Policies. Except as provided in Section 19.3, if any Policies of a Participant ( other than retirement income, endowment or annuity Policies) are held for his benefit at the time distribution is to commence, the Policies may be converted by the Insurance Trustee into cash, paid to the Trustee, credited to the Employer contribution Account of the Participant, invested in accordance whit the written instructions of the Employer ( and if no such instructions have been given or if such instructions are not clear, invested in Investment Company Shares in the same proportion as the most recent contributions to the Participant s Accounts) and distributed pursuant to Article 9, subject to the terms and conditions of Article 10. Retirement income, endowment or annuity Policies will be distributed directly to the Participant at the time distribution is to commence. 14.10 Conflict with Policies. In the event of any conflict between the terms of the Plan and the terms of any Policies hereunder, the Plan provisions shall control. 14.11 Insurance Loans to Owner-Employees. If an Owner-Employee or Shareholder-Employee receives, either directly or indirectly, any amount from an Insurer as a loan under a Policy, the amount so received shall be considered a distribution under the Plan. Any assignment or pledge (or agreement to assign or pledge) by an Owner-Employee or Shareholder-Employee of any interest in the Plan shall be considered a distributions of such interest. ARTICLE XV: Top-Heavy Plans 15.1 Superseding Effect. For any Plan Year beginning after December 31, 1983, in which Plan is determined to be a Top-Heavy Plan under Section 15.2(b), the provisions of this Article 15 will supersede any conflicting provisions in the Plan or the Plan Agreement. These provisions will be deemed applicable to a Standard Plan at all times, unless the Employer has affirmatively elected in the Plan Agreement to perform top-heavy testing annually. 15.2 Definitions. For purposes of this Article 13, the terms below shall be defined as follows: (a) key Employee means any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the determination period was: (1) an officer of the Employer having annual compensation greater than 50 percent of the amount in effect under Section 415(b)(1)(A) of the Code; (2) an owner (or considered an owner under Section 318 of the Code) of one of the ten largest interests in the Employer having annual compensation of more than $150,000. Annual compensation means compensation as defined in Section 415(c)(3) of the Code, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee s gross income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code. The determination period is the Plan Year containing the Determination Date, and the four preceding Plan Years. The determination of who is a key Employee will be made in accordance with Section 416(i)(1) of the code and the Regulations thereunder. (b) Top-Heavy: The Plan is Top-Heavy for a Plan Year beginning after December 31, 1983, if any of the following conditions exists: (1) If the Top-Heavy Ratio for this Plan exceeds 60 percent and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans. (2) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of plans exceeds 60 percent. (3) If his Plan is part of a Required Aggregation Group and part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive Aggregation group exceeds 60 percent. (c) Top-Heavy Ratio means the following: (1) If the Employer maintains one or more qualified defined contribution plans (or any simplified employee pension plan) and the Employer has not maintained any qualified defined benefit plan which during the 5-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-Heavy Ratio for the Plan alone or for the Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the Determination Date(s) (including any part of any account distributed in the 5-year period ending on the Determination Date(s)), and the denominator of which is the sum of all account balances (including any part of any account balance distributed in the 5-year period ending on the Determination Date(s)), both computed in accordance with Section 416 of the Code and the regulations thereunder. Both the numerator and denominator of the Top-Heavy Ratio are increased to reflect any contribution not actually made as of the Determination Date, but which is required to be taken into account on that date under Section 416 of the Code and the regulations thereunder. (2) If the Employer maintains one or more qualified defined contribution plans (or any simplified employee pension plan) and the Employer maintains or has maintained one or more qualified defined benefit plans which during the 5-year period ending on the Determination Date(s) has or has had any accrued benefits, the Top-Heavy Ratio for any Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of account balance under the aggregated qualified defined contribution plan or plans for all Key Employees, determined in accordance with (1) above, and the Present Value of accrued benefits under the aggregated qualified defined benefit plan or plans for all Key Employees, as of the Determination Date(s), and the denominator of which is the sum of the account balances under the aggregated qualified defined contributions plan or plans for all Participants, determined in accordance with (1) above, and the Present Value of accrued benefits under the qualified defined benefit plan or plans for all Participants as of the Determination Date(s), all determined in accordance with Section 416 of the Code and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator an denominator of the Top-Heavy Ratio are increased for any distribution of an accrued benefit made in the 5-year period ending on the Determination Date. (3) For purposes of (1) and (2) above, the value of account balances and the Present Value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date; except as provided in Section 416 of the Code and the regulations thereunder for the first and second Plan Years of a defined benefit plan. The account balances and accrued benefits of a Participant(a) who is a not a Key Employee but who was a Key Employee in a prior Plan Year, or (b) who has not been credited with at least one Hour of Service for the Employer during the 5-year period ending on the Determination date, will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers and transfers are taken into account will be made in accordance with Section 416 of the Code and the regulations thereunder. Deductible Employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio. when aggregating plans, the value of account balances and accrued benefits will be calculated whit reference to the Determination Dates that fall within the same calendar year. The accrued benefit of a participant other than a Key Employee shall be determined under (a) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code. (d) Permissive Aggregation Group means the Required Aggregation Group of plans plus any other qualified plan or plans (or simplified employee pension plan) of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code. (e) Required Aggregation Group means: (i) each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the determination period (regardless of whether the Plan has terminated) and (ii) any other qualified plan of the Employer which enables a plan described in (i) to meet the requirements of Section 401(a)(4) or 410 of the Code. (f) Determination Date means, for any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year of the Plan, the Determination Date is the last day of that Plan Year. (g) Valuation Date means the last day of the Plan Year. (h) Present Value means present value based only on the interest and mortality rates specified in any defined benefit plan maintained by the Employer and set forth in the Plan Agreement. 15.3 Minimum Allocation. (a) Except as otherwise provided in paragraphs (c) and (d) below, the Employer contributions and Forfeitures allocated on behalf of any Participant who is not a Key Employee shall not be less than the lesser of three percent of such Participant s Earnings, or in the case here the Employer has not defined benefit plan which designates this Plan to satisfy Section 401 of the Code, the largest percentage of Employer contributions and Forfeitures, as a percentage of the first $200,000 of the Key Employee s Earnings, allocated on behalf of any Key Employee for that year. The minimum allocation is determined without regard to any Social Security contribution. This minimum allocation shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation of the Employer s contributions and Forfeitures for the Plan Year because of (1) the Participant s failure to be credited with at least 1,000 Hours of Service, or (2) the Participant s failure to make mandatory Employee contributions to the Plan, or (3) the Participant s receiving Earnings less than a stated amount. Neither Elective Deferrals, Employer Matching Contributions nor Qualified Matching Contributions for non-key employees shall be taken into account for purpose of satisfying the requirement of this Section 15.3(a). (b) For purposes of computing the minimum allocation. Earnings will mean Earnings as defined in Section 2.13 of the Plan. (c) The provision in paragraph (a) above shall not apply to any Participant who was to employed by the Employer on the last day of the Plan Year. (d) The provision in paragraph (a) above shall not apply to any Participant to the extent he is covered under any other plan or plans of the Employer, and the Employer has provided in the Plan Agreement that the minimum allocation requirement applicable to Top-Heavy Plans will be met in the other plan or plans. (e) The minimum allocation required (to the extend required to be nonforfeitable under Section 416(b) of the Code) may not be forfeited under Sections 411(a)(3)(B) or (D) of the Code. 15.4 Earnings Limitation. For any Plan Year in which the Plan is Top-Heavy, only the first $200,000 (or such larger amount as may be prescribed by the Secretary of the Treasury or his delegate) of a Participant s annual Earnings shall be taken into account for purposes of determining Employer contributions under the Plan. 15.5 Minimum Vesting Schedules (Variable Plans Only). For any Plan Year in which this Plan is Top-Heavy and any subsequent Plan Year, a minimum vesting schedule will automatically apply to the Plan, as follows: (a) If the Employer has selected in the Plan Agreement as the Plan s regular vesting schedule the Tree Year Cliff, Five Year Graded or Six Year Graded schedule, then the schedule selected in the Plan Agreement shall continue to apply for any Plan Year to which this Section 15.5 applies. (b) If the Employer has selected in the Plan Agreement as the Plans regular vesting schedule the Five Year Cliff schedule, then the Three Year Cliff schedule shall apply in any Plan Year to which this Section 15.5 applies. (c) If the Employer has selected in the Plan Agreement as the Plan s regular vesting schedule the Seven Year Graded schedule, then the Six Year Graded schedule shall apply in any Plan Year to which this Section 15.5 applies. (d) If the Employer has selected in the Plan Agreement as the Plan s regular vesting schedule a schedule other than those described in paragraphs (a), (b) and (c), then the schedule specified by the Employer in the Plan Agreement for this purpose shall apply in any Plan Year to which this Section 15.5 applies. The minimum vesting schedule applies to all benefits within the meaning of Section 411(a)(7) of the Code except those attributable to Employee contributions, including benefits accrued before the effective date of Section 416 of the Code and benefits accrued before the Plan became Top-Heavy. Further, to reduction in a Participant s nonforfeitable percentage may occur in the event the Plan s status as Top-Heavy changes for any Plan Year. However, the vested portion of the Employer Contribution Account of any Employee who does not have an Hour of Service after the Plan has initially become Top-Heavy will be determined without regard to this Section 15.5. 15.6 Adjustment of Fractions. For any Plan Year in which the Plan is Top-Heavy, the Defined Benefit Fraction and the Defined Contribution Fraction in Article 6 shall each be computed using 100 percent of the dollar limitations specified in Sections 415(b)(1)(A) and 415(c)(1)(A) instead of 125 percent. In a Variable Plan, the foregoing requirement shall not apply if the Top-Heavy Ratio does not exceed 90 percent and the Employer has elected in the Plan Agreement to provide increased minimum allocations or benefits satisfying Section 416(h)(2) of the Code. ARTICLE XVI: Administration of the Plan 16.1 Plan Administrator. The Plan shall be administered by the Employer, as Plan Administrator and Named Fiduciary within the meaning of ERISA, under rules of uniform application; provided, however, that the Plan Administrator s duties and responsibilities may be delegated to a person appointed by the Employer or a committee established for that purpose, in which case the committee shall be the Plan Administrator and Named Fiduciary. The members of such a committee shall act by majority vote, and may by majority vote authorize any one or ones of their number to act for the committee. The person or committee (if any) initially appointed by the Employer may be named in the Plan Agreement, but the Employer may remove any such person or committee member by written notice to him, and any such person or committee may resign by written notice to the Employer, without the necessity of amending the Plan Agreement. To the extent permitted under applicable law, the Plan Administrator shall have the sole authority to enforce the terms hereof on behalf of any and all persons having or claiming any interest under the Plan, and shall be responsible for he operations of the Plan in accordance with its terms. The Pan Administrator shall have discretionary authority to determine all questions arising out of the administration, interpretation and application of the Plan, all of which determinations shall be conclusive and binding on all persons. The Plan Administrator in carrying out its responsibilities under the Plan , may rely upon the written opinions of its counsel and on certificates of physicians. Subject to the provisions of the Plan and applicable law, the Plan Administrator shall have no liability to any person as a result of any action taken or omitted hereunder by the Plan Administrator. 16.2 Claims Procedure. Claims for participation in or distribution under the Plan shall be made in writing to the Plan Administrator, or an agent designated by the Plan Administrator whose name shall have been communicated t all Participants and other persons as required by law. If any claim so made is denied in whole or in part, the claimant shall be furnished promptly by the Plan Administrator with a written notice: (a) setting forth the reason for the denial, (b) making reference to pertinent Plan provisions. (c) describing any additional material or information from the claimant which is necessary and why, and (d) explaining the claim review procedure set forth herein. Within 60 days after denial of any claim for participation or distribution under the Plan, the claimant may request in writing a review of the denial by the Plan Administrator. Any claimant seeking review hereunder shall be entitled to examine all pertinent documents and to submit issues and comments in writing. The Plan Administrator shall render a decision on review hereunder; provided, that if the Plan Administrator determines that a hearing would be appropriate, its decision on review shall be rendered within 120 days after receipt of the request for review. The decision on review shall be in writing and shall state the reason for the decision, referring to the Plan provisions upon which it is based. 16.3 Employer s Responsibilities. The Employer shall be responsible for: (a) Keeping record of employment and other matters containing all relevant data pertaining to any person affected hereby and his eligibility to participate, allocations to his Accounts, and his other rights under the Plan; (b) Periodic, timely filing of all statements, reports and returns required to be filed by ERISA; (c) Timely preparation and distribution of disclosure materials required by ERISA; (d) Providing notice to interested parties as required by Section 7476 of the Code; (e) Retention of records for periods required by law; and (f) Seeing that all persons required to be bonded on account of handling assets of the Plan are bonded. 16.4 Recordkeeper. The Recordkeeper is hereby designated as agent of the Employer under the Plan to perform directly or through agents certain ministerial duties in connection with the Plan, in particular: (a) To keep and regularly furnish to the Employer a detailed statement of each Participant s Accounts, showing contributions thereto by the Employer and the Participant, Investment Products purchased therewith, earnings thereon and Investment Products purchased therewith, and each redemption or distribution made for any reason, including fees or benefits; and (b) To the extent agreed between the Employer and the Recordkeeper, to prepare for the Employer or to assist the Employer to prepare such returns, reports or forms as the Employer shall be required to furnish to Participants and Beneficiaries or other interested persons and to the Internal Revenue Service or the Department of Labor; all as may be more fully set forth in a service agreement executed by the Employer and the Recordkeeper. If the Employer does not appoint another person or entity as Recordkeeper, the Employer itself shall be the Recordkeeper. 16.5 Prototype Plan. Putnam is the sponsor of the Putnam Basic Plan Document, a prototype plan approved as to form by the Internal Revenue Service. Provided that an Employer s adoption of the Plan is made known to and accepted by Putnam in accordance with the Plan Agreement, Putnam will inform the Employer of amendments to the prototype plan and provide such other services in connection with the Plan as may be agreed between Putnam and the Employer. Putnam may impose for its services as sponsor of the prototype plan such fees as it may establish from time to time in a fee schedule addressed to the Employer. Such fees shall, unless paid by the Employer, be paid from the Trust Fund, and shall in that case be charged pro rata against the Accounts of all Participants. The Trustee is expressly authorized to cause Investment Products to be sold or redeemed for the purpose of paying such fees. ARTICLE XVII: Trustee and Insurance Trustee 17.1 Powers and Duties of the Trustee. The Trustee shall have the authority, in addition to any authority given by law, to exercise the following powers in the administration of the Trust: (a) To invest all or a part of the Trust Fund in Investment Products in accordance with the investment instructions delivered by the Employer pursuant to Section 13.3, without restriction to investments authorized for fiduciaries, including without limitation any common, collective or commingled trust fund maintained by the Trustee (or any other such fund, acceptable to Putnam and the Trustee, that qualifies for exemption from federal income tax pursuant to Revenue Ruling 81-100). Any investment in, and any terms and conditions of, any such common, collective or commingled trust fund available only to employee trusts which meet the requirements of the Code, or corresponding provisions of subsequent income tax laws of the United States, shall constitute an integral part of this Agreement; (b) If this is a Variable Plan and Putnam and the Trustee have consented thereto in writing, to invest without limit in stock of the Employer or any affiliated company; (c) To dispose of all or part of the investments, securities or other property which may from time to time or at any time constitute the Trust Fund in accordance with the written directions furnished by the Employer for the investment of Participants separate Accounts or the payment of benefits or expenses of the Plan, and to make, execute and deliver to the purchasers thereof good and sufficient deeds of conveyance therefore, and all assignments, transfers and other legal instruments, either necessary or convenient for passing the title and ownership thereto, free and discharged of all trust and without liability on the part of such purchasers to see to the application of the purchase money; (d) To hold cash uninvested to the extent necessary to pay benefits or expenses of the Plan; (e) To follow the directions of an investment manager appointed pursuant to Section 13.7; (f) To cause any investment of the Trust Fund to be registered in the name of the Trustee or the name of its nominee or nominees or to retain such investment unregistered or in a form permitting transfer by delivery; provided that the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund: (g) Upon the written direction of or through the Employer, to vote in person or by proxy (in accordance with Section 13.6 and, in the case of stock of the Employer, at the direction of the Employer) with respect to all securities that are part of the Trust Fund; (h) To consult and employ any suitable agent to act on behalf of the Trustee and to contract for legal, accounting, clerical and other services deemed necessary by the Trustee to manage and administer the Trust Fund according to the terms of the Plan; (i) Upon the written direction of the Employer, to make loans from the Trust Fund to Participants in amounts and on terms approved by the Plan Administrator in accordance with the provisions of the Plan; provided that the Employer shall have the sole responsibility for computing and collecting all loan repayments required to be made under the Plan; and (j) To pay from the Trust Fund all taxes imposed or levied with respect to the Trust Fund or any part thereof under existing or future laws, and to contest the validity or amount of any tax assessment, claim or demand respecting the Trust Fund or nay part thereof. 17.2 Limitation of Responsibilities. Except as may otherwise be required under applicable law, neither the Trustee nor the Insurance Trustee nor any of their respective agents shall have any responsibility for: (a) Determining the correctness of the amount of any contribution for the sole collection or payment of contributions, which shall be the sole responsibility of the Employer; (b) Loss or breach caused by any Participant s exercise of control over his Accounts, which shall be the sole responsibility of the Participant; (c) Loss or breach caused by the Employer s exercise of control over Accounts pursuant to Section 13.3, which shall be the sole responsibility of the Employer; (d) Sums paid to an insurer or the validity of any Policy or the accuracy of information provided by an insurer, which shall be the sole responsibility of the insurer; (e) Performance of any other responsibilities not specifically allocated to them under the Plan. 17.3 Fees and Expenses. The Trustee s fees for performing its duties hereunder shall be such reasonable amounts as shall be established by the Trustee from time to time in a fee schedule addressed to the Employer. Such fees, any taxes of any kind which may be levied or assessed upon or in respect of the Trust Fund and any and all expenses reasonably incurred by the Trustee shall, unless paid by the Employer, be paid from the Trust Fund and shall, unless allocable to the Accounts of specific Participants, be charged pro rata against the Accounts of all Participants. The Trustee is expressly authorized to cause Investment Products to be sold or redeemed for the purpose of paying such amounts. Charges and expenses incurred in connection with a specific Investment Product, unless allocable to the Accounts of specific Participants, shall be charged pro rata against the Accounts of all Participants for whose benefit amounts have been invested in the specific Investment Product. 17.4 Reliance on Employer. The Trustee and its agents (and the Insurance Trustee, if any) shall rely upon any decision of the Employer, or of any person authorized by the Employer, purporting to be made pursuant to he terms of the Plan, and upon any information or statements submitted by the Employer or such person (including those relating to the entitlement of any Participant to benefits under the Plan), and shall to inquire as to the basis of any such decision or information or statements, and shall incur no obligation or liability for any action taken or omitted in reliance thereon. The Trustee and its agents shall be entitled to rely on the latest written instruction received from the Employer as to the person or persons authorized to act for the Employer hereunder, and to sign on behalf of the Employer any directions or instructions, until receipt from the Employer of written notice that such authority has been revoked. 17.5 Action Without Instructions. If the Trustee receives no instructions from the Employer in response to communications sent by registered or certified mail to the Employer at its last known address as shown on the books of the Trustee, then the Trustee may make such determinations with respect to administrative matters arising under the Plan as it considers reasonable, notwithstanding any prior instructions or directions given by or on behalf of the Employer, but subject to any instruction or direction given by or on behalf of the Participants. To the extent permitted by applicable law, any determination so made will be binding on all persons having or claiming any interest under the Plan or Trust, and the Trustee will incur no obligation or responsibility for any such determination made in good faith or for any action taken pursuant thereto. I making any such determination the Trustee may require that it be furnished with such relevant documents as it reasonably considers necessary. 17.6 Advice of Counsel. The Trustee and the Insurance Trustee may each consult with legal counsel (who may, but need not be, counsel for the Employer) concerning any questions which may arise with respect to their respective rights and duties under the Plan, and the opinion of such counsel shall be full and complete protection to the extent permitted by applicable law in the respect of any action taken or omitted by the Trustee or the Insurance Trustee, as the case may be, hereunder in accordance with the opinion of such counsel. 17.7 Accounts. The Trustee shall keep full accounts of all receipts and disbursement which pertain to investments in Investment Products, and the Trustee and the Insurance Trustee shall each keep accounts of such other transactions as it is required to perform hereunder. Within a reasonable time following the close of each Plan Year, or upon its removal or resignation or upon termination of the Trust and at such other times as may be appropriate, each shall render to the Employer and any other persons as may be required by law an account of its administration of the Plan and Trust during the period since the last previous such accounting, including such information as may be required by law. The written approval of any account by the Employer and all other persons to whom an account is rendered shall be final and binding as to all matters and transactions stated or shown therein, upon the Employer and Participants and all persons who then are or thereafter become interested in the Trust. The failure of the Employer or any other person to whom an account is rendered to notify the party rendering the account within 60 days after the receipt of any account of his or its objection to the account shall be the equivalent of written approval. If the Employer or any other person to whom an account is rendered files any objections within such 60-day period with respect to any matters or transactions stated or shown in the account and the Employer or such other person and the party rendering the account and the Employer or such person shall have the right to have such questions settled by judicial proceedings, although the Employer or such other person to whom an account is rendered shall have, to the extent permitted by applicable law, only 60 days from filing of written objection t the account to commence legal proceedings. Nothing herein contained shall be construed so as to deprive the Trustee or the Insurance Trustee of the right to have a judicial settlement of its accounts. In any proceeding for a judicial settlement of any account or for instructions, the only necessary parties shall be the Trustee, the Insurance Trustee, the Employer and persons to whom an account is required by law to be rendered. 17.8 Access to Records. The Trustee and the Insurance Trustee shall give access to their respective records with respect to the Plan at reasonable times and on reasonable notice to any persona required by law to have access to such records. 17.9 successors. any corporation into which the Trustee may merge or with which it may consolidate or any corporation resulting from any such merger or consolidation shall be the successor of the Trustee without the execution or filing of any additional instrument or the performance of any further act. 17.10 Persons Dealing With Trustee or Insurance Trustee. No person dealing with the Trustee or the Insurance Trustee shall be bound to see to the application of any money or property paid or delivered to such party or to inquire into the validity or propriety of any transactions. 17.11 Resignation and Removal; Procedure. The Trustee or the Insurance trustee may resign at any time by giving 60 days written notice to the Employer and to Putnam. The Employer may remove the Trustee or the Insurance Trustee at any time by giving 60 days written notice to the party removed and to Putnam. In any case of resignation or removal hereunder, the period of notice may be reduced to such shorter period as is satisfactory to the Trustee, the Insurance Trustee and the Employer. Notwithstanding anything to the contrary herein, any resignation hereunder shall take effect at the time notice hereof is given if the Employer may no longer participate in the prototype Plan and is deemed to have an individually designed plan at the time notice is given. 17.12 Action of Trustee Following Resignation or Removal. When the resignation or removal of the Trustee becomes effective, the Trustee shall perform all acts necessary to transfer the Trust Fund to its successor. However, the Trustee may reserve such portion of the Trust Fund as it may reasonably determine to be necessary for payment of its fees and any taxes and expenses, and any balance of such reserve remaining after payment of such fees, taxes and expenses shall be paid over to its successor. The Trustee shall have no responsibility for acts or omissions occurring after its resignation becomes effective. 17.13 Action of Insurance Trustee Following Resignation or Removal. when the Insurance Trustee s resignation or removal becomes effective, the Insurance Trustee shall perform all acts necessary to transfer ownership of the Policies to its successor. If no successor has accepted appointment, the Policies shall be held and owned by the Employer acting as Insurance Trustee until a successor is appointed. 17.14 Effect of Resignation or Removal. Resignation or removal of the Trustee or the Insurance Trustee shall to terminate the Trust. In the event of any vacancy in the position of Trustee (or, in a Plan having amounts invested in Policies, the position of Insurance Trustee), whether the vacancy occurs because of the resignation or removal of the Trustee (or the Insurance Trustee) the Employer shall appoint a successor to fill the vacant position. If the Employer does not appoint such a successor who accepts appointment by the later of 60 days after notice of resignation or removal is given or by such later date as the Trustee or the Insurance Trustee, as the case may be, and Employer may agree in writing to postpone the effective date of the Trustee or the Insurance Trustee s resignation or removal, the Trustee or Insurance Trustee may apply t a court of competent jurisdiction for such appointment of cause the Trust to be terminated, effective as of the date specified by the Trustee or Insurance Trustee, as the case may be, in writing delivered to the Employer. Each successor trustee so appointed and accepting a trusteeship hereunder shall have all of the rights and powers and all of the duties and obligations of the original Trustee or Insurance Trustee, as the case may be, under the provisions hereof, but shall have no responsibility for acts or omissions before he becomes a Trustee or Insurance Trustee. 17.15 Fiscal Year of Trust. The fiscal year of the Trust will coincide with the Plan Year. 17.16 Limitation of Liability. Except as may otherwise be required by law and other provisions of the Plan, no fiduciary of the Plan, within the meaning of Section 3(21) of ERISA, shall be liable for any losses incurred with respect to the management of this Plan nor shall he or it be liable for any acts or omissions except those caused by his or its own negligence or bad faith in failing to carry out his or its duties under the terms contained the Plan. 17.17 Indemnification. Subject to the limitations of applicable law, the Employer agrees to indemnify and hold harmless (i) all fiduciaries, within the meaning of ERISA Sections 3(21) and 404, and (ii) Putnam, for all liability occasioned by any act, of such party or omission to act, in good faith and without gross negligence, and for all expenses incurred by any such party in determining its duty or liability under ERISA with respect to any questions arising under the Plan. ARTICLE XVIII: Amendment 18.1 General. The Employer reserves the power at any time or times to amend the provisions of the Plan and the Plan Agreement to any extent and in any manner that it may deem advisable. If, however, the Employer makes any amendment (including an amendment occasioned by a waiver of the minimum funding requirement under Section 412 (d) of the Code) other than (a) a change in an election made in the Plan Agreement, (b) amendments stated in the Plan Agreement which allow the Plan to satisfy Section 415 and to avoid duplication of minimums under Section 416 of the Code because of the required aggregation of multiple plans, or (c) model amendments published by the Internal Revenue Service which specifically provide that their adoption will not cause the Plan to be treated a individually designed, the Employer shall cease to participate in this prototype Plan and will be considered to have an individually designed plan. In that event, Putnam shall have no further responsibility to provide to the Employer any amendments or other material incident to the prototype plan, and Putnam may resign immediately as Trustee and as Recordkeeper. Any amendment shall be made by delivery to the Trustee (and the Recordkeeper, if any) of a written instrument executed by the Employer providing for such amendment. Upon the delivery of such instrument to the Trustee, such instrument shall become effective in accordance with its terms as to all Participants and all person having or claiming any interest hereunder, provided, that the Employer shall not have the power: (1) To amend the Plan in such a manner as would cause or permit any part of the assets of the Trust to be diverted to purposes other than the exclusive benefit of Participants or their Beneficiaries, or as would cause or permit any portion of such assets to revert to or become the property of the Employer. (2) To amend the Plan retroactively in such a manner as would have the effect of decreasing a Participant s accrued benefit, except that Participant s Account balance may be reduced to the extent permitted under Section 412(c)(80 of the Code. For purposes of this paragraph (2), an amendment shall be treated as reducing a Participant s accrued benefit if it has the effect of reducing his Account balance, or of electing an optional form of benefit with respect to amount attributable to contributions made performed before the adoption of the amendment; or (3) To amend the Plan so as to decrease the portion of a Participant s Account balance that has become vested, as compared to the portion that was vested, under the terms of the Plan without regard to the amendment, as of the later of the date the amendment is adopted or the date it becomes effective. (4) To amend the Plan in such a manner as would increase the duties or liabilities of the Trustee or the Recordkeeper unless the Trustee or the Recordkeeper consents thereto in writing. 18.2 Delegation of Amendment Power. The Employer and all sponsoring organizations of the Putnam Basic Plan Document delegate to Putnam Financial Services, Inc., the power to amend the Plan (including the power to amend this Section 18.2 to name a successor to which such power of amendment shall be delegated), for he purpose of adopting amendments which are certified to Putnam Financial Services, Inc., by counsel satisfactory to it, as necessary or appropriate under applicable law, including any regulation or ruling issued by the United States Treasury Department or any other federal or state department or agency; provided that Putnam Financial Services, Inc., or such successor may amend the Plan only if it has mailed a copy of the proposed amendment to the Employer at its last known address as shown on its books by the date on which it delivers a written instrument providing for such amendment, and only if the same amendment is made on said date to all plans in this form as to which Putnam Financial Services, Inc., or such successor has a similar power of amendment. If a sponsoring organization does not adopt any amendment mad by Putnam Financial Services, Inc., such sponsoring organization shall cease to participate in this prototype Plan and will be considered to have an individually designed plan. ARTICLE XIX: Termination of the Plan and Trust 19.1 General. The Employer has established the Plan and the Trust with the bona fide intention and expectation that contributions will be continued indefinitely, but the Employer shall have not obligation or liability whatsoever to maintain the Plan for any given length of time and may discontinue contributions under the Plan or terminate the Plan at any time by written notice delivered to the Trustee and Insurance Trustee, without any liability whatsoever for any such discontinuance or termination. 19.2 Events of Termination. The Plan will terminate upon the happening of any of the following events: (a) Death of the Employer, if a sole proprietor, or dissolution or termination of the Employer, unless within 60 days thereafter provision is made by the successor to the business with respect to which the Plan was established for the continuation of the Plan, and such continuation is approved by the Trustee; (b) Merger, consolidation or reorganization of the Employer into one or more corporations or organizations, unless the surviving corporations or organizations adopt the Plan by an instrument in writing delivered to the Trustee within 60 days after such a merger, consolidation and reorganization; (c) Sale of all or substantially all of the assets of the Employer, unless the purchaser adopts the Plan by an instrument in writing delivered to the Trustee within 60 days after the sale; (d) the institution of bankruptcy proceedings by or against the Employer, or a general assignment by the Employer to or for the benefit of its creditors; or (e) Delivery of notice as provided in Section 19.1. 19.3 Effect of Termination. Notwithstanding any other provisions of this Plan, other than Section 19.4, upon termination of the Plan or complete discontinuance of contributions thereunder, each Participant s Accounts will become fully vested and nonforfeitable, and upon partial termination of the Plan, the Accounts of each Participant affected by the partial termination will become fully vested and nonforfeitable. The Employer shall notify the Trustee and the Insurance Trustee in writing of such termination, partial termination or complete discontinuance of contributions. In the events of the complete termination of the Plan or discontinuance of contributions, the Trustee will, after payment of all expenses of the Trust Fund, make distribution of the Trust assets to the Participants or other persons entitled thereto, in such form as the Employer may direct pursuant to Article 10 or, in the absence of such direction, in a single payment in cash or in kind. Upon completion of such distributions under this Article, the Trust will terminate, the Trustee and the Insurance Trustee will be relieved from their obligations under the Trust, and no Participant or other person will have any further claim thereunder. 19.4 Approval of Plan. Notwithstanding any other provision of the Plan, if the Employer fails to obtain or to retain the approval by the Internal Revenue Service of the Plan as a qualified plan under Section 401(a) of the Code, then (i) the Employer shall promptly notify the Trustee, and (ii) the Employer may no longer participate in the Putnam prototype plan, but will be deemed to have an individually designed plan. If it is determined by the Internal Revenue Service that the Plan upon its initial adoption does not qualify under Section 401(a) of the Code, all assets then held under the Plan will be returned within one year of the denial of initial qualification to the Participants and the Employer to the extent attributable to their respective contributions and any income earned thereon, but only if the application for qualification is made by the time prescribed by law for filing the Employer s federal income tax return for the taxable year in which the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe. Upon such distribution, the Plan will be considered to be rescinded and to be of no force or effect. ARTICLE XX: Transfers from Other Qualified Plans; Mergers 20.1 General. Notwithstanding any other provision hereof, subject to he approval of the Trustee there may be transferred to the Trustee all or any of the assets held (whether by a trustee, custodian or otherwise) in respect of any other plan which satisfies the applicable requirements of Section 401(a) of the Code and which is maintained for the benefit of any Employee (provided, however, that the Employee is not a member of a class of Employees excluded from eligibility to participate in the Plan) except that insurance policies held in respect of such other plan shall be transferred tot he Insurance Trustee as trustee if the Employer so determines. Any such assets so transferred shall be accompanied by written instructions from the Employer naming the persons for whose benefit such assets have been transferred and showing separately the respective contributions made by the Employer and by the Participants and the current value of the assets attributable thereto. 20.2 Amounts Transferred. The Employer shall credit any assets transferred pursuant to Section 201. to the appropriate Accounts of the persons for whose benefit such assets have been transferred. Any amounts credited as contributions previously made by an employer or by such persons under such other plan shall e treated as contributions previously made under the Plan by the Employer or by such persons, as the case may be. 20.3 Merger or Consolidation. The Plan shall not be merged or consolidated with any other plan, nor shall any assets or liabilities of the Trust Fund be transferred to any other plan, unless each Participant would receive a benefit immediately after the transaction, if the Plan then terminated, which is equal to or greater than the benefit he would have been entitled to receive immediately before the transaction if the Plan had then terminated. ARTICLE XXI: Miscellaneous 21.1 Notice of Plan. The Plan shall be communicated to all Participants by the Employer on or before the last day on which such communication may be made under applicable law. 21.2 No Employment Rights. Neither the establishment of the Plan and the Trust, nor any amendment thereof, nor the creation of any fund or account, nor the purchase of Policies, nor the payment of any benefits shall be construed as giving to any Participant or any other person any legal or equitable right against the Employer, the Trustee, or the Insurance Trustee, or the Insurance Trustee, except as provided herein or by ERISA; and in no event shall the terms of employment or service of any Participant be modified or in any way be affected hereby. 21.3 Distributions Exclusively From Plan. Participants and Beneficiaries shall look solely to the assets held in the trust and any Policies purchased pursuant to the Plan for the payment of any benefits under the Plan. 21.4 No Alienation. 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 as provided in Section 12.4 or in accordance with a Qualified domestic relations order within the meaning of Section 414(p) of the Code. The Plan Administrator shall determine whether a domestic relations order is qualified in accordance with written procedures adopted by the Plan Administrator. 21.5 Provision of Information. The Employer, Trustee and Insurance Trustee shall furnish to each other such information relating to the Plan and Trust as may be required under the Code or ERISA and any regulations issued or forms adopted by the Treasury Department or the Labor Department or otherwise thereunder. 21.6 no Prohibited Transactions. The Employer, Trustee, and Insurance Trustee shall, to the extent of their respective powers and authority under the Plan, prevent the Plan from engaging in any transaction known by that person to constitute a transaction prohibited by Section 4975 of the Code and any rules or regulations with respect thereto. 21.7 Governing Law. The Plan shall be construed, administered, regulated and governed in all respects under and by the laws of the United States, and to the extent permitted by such laws, by the laws of the Commonwealth of Massachusetts. 21.8 Gender. Whenever used herein, a pronoun in the masculine gender includes the feminine gender unless the context clearly indicates otherwise. II. IRS Opinion Letters II. IRS Opinion Letters Putnam Standard Profit Sharing and 401(k) Plan Opinion Letter 38 Putnam Standard Money Purchase Pension Plan Opinion Letter 39 Putnam Variable Profit Sharing and 401(k) Plan Opinion Letter 40 Putnam Variable Money Purchase Pension Plan Opinion Letter 41 Putnam Retirement Plans: Plan Agreements for the Simplified Retirement Plans Putnam Profit Sharing Plan (Keogh) Putnam Money Purchase Pension Plan (Keogh) Putnam Profit Sharing and 401(k) Plan Boston*London*Tokyo Contents Part I: Summary of Plan Services Summary of Plan Services 2 Part II: Adopting a Simplified Putnam Retirement Plan Step-by-Step Guide to Establishing a Putnam Profit Sharing Plan (Keogh) 4 Step-by-Step Guide to Establishing a Putnam Money Purchase Pension Plan (Keogh) 5 Step-by-Step Guide to Establishing a Putnam Profit Sharing and 401(k) Plan 6 Suggested Form of Board Resolution for a New Plan 7 Putnam Plan Agreement #001 9 Putnam Plan Agreement #002 19 Instructions for Completing and Distributing Notice to Interested Parties 27 Notice to Interested Parties 29 Plan Investment Form 33 Part III: Questions and Answers about the Simplified Putnam Retirement Plans General Comments 39 Key Definitions 40 Contributions 41 Plan Investments 45 Plan Distributions 45 Top-Heavy Testing 46 Plan Administration 47 Glossary of Terms 49 Part I: Summary of Plan Services Summary of Plan Services 2 Summary of Plan Services Putnam will provide the following administrative services listed below for each of the Simplified Putnam Retirement Plans. A. Plan Installation/Maintenance: 1 Putnam will provide the initial SUMMARY PLAN DESCRIPTION to the Employer for the Employer s completion, review, approval and submission to the Department of Labor and distribution to the Plan Participants and Beneficiaries. 2 Putnam will provide the NOTICE TO INTERESTED PARTIES (page 29 of this booklet) for the Employer s completion, review, approval and distribution to the Plan Participants. 3 Putnam will provide the Employer any PLAN AMENDMENTS necessary to comply with changes required by law. B. Employer and Employee Reports 1 Putnam will process Employer authorization for hardship withdrawals, if applicable, benefit payments, and investment change elections pursuant to Employer instructions in accordance with the Plan. 2 Putnam will allocate contributions to Participant accounts pursuant to Employer instructions in accordance with the Plan. 3 Putnam will provide Consolidated Quarterly Statements and confirmations of each fund transaction to Participants. 4 Putnam will provide the Employer with assistance with the preparation of a Summary Annual Report for distribution to Plan Participants. 5 Putnam will provide the Employer with a 401(k) Plan Group Investment Report, if applicable. 6 Putnam will provide the Employer with sample administrative forms. 7 Putnam will provide the Employer with a Form 5500 kit with instructions to assist the Employer with preparation of the applicable Form 5500 for filing with the IRS. 8 Putnam will provide the Employer with an information kit to assist the Employer in performing an annual TEFRA Top-Heavy Test, if applicable.* 9 Putnam will provide the Employer with an informational kit to assist the Employer in performing a Plan Year-end 401(k) Actual Deferral Percentage Test, if applicable.* 10 Putnam will process Plan distributions, including preparation and mailing of IRS Forms 1099-R. Plan distributions include all payments to Participants and Beneficiaries, and payments to the Employer or its designee. *Putnam will not be responsible for providing information necessary for aggregating tests with other plans maintained by the Employer or plans maintained by other companies under the same controlled group of companies or affiliated service group. Part II: Adopting a Simplified Putnam Retirement Plan Step-by-Step Guide to Establishing a Putnam Profit Sharing Plan (Keogh) 4 Step-by-Step Guide to Establishing a Putnam Money Purchase Pension Plan (Keogh) 5 Step-by-Step Guide to Establishing a Putnam Profit Sharing and 401(k) Plan 6 Suggested Form of Board Resolution for a New Plan 7 Putnam Plan Agreement #001 9 Putnam Plan Agreement #002 19 Notice to Interested Parties 29 Plan Investment Form 33 Step-by-Step Guide to Establishing a Putnam Profit Sharing Plan (Keogh) 1 Contact Putnam or your investment dealer to order Employee Enrollment Kits and the appropriate fund prospectuses for each of your employees. If you already have a retirement plan and will be transferring assets to Putnam, please request the Plan Transfer Booklet. 2 Before adopting the Putnam Plan, corporate employers must pass a Board Resolution. A suggested Form of Board Resolution for New Plan is on page 7. (If you are transferring from your current plan, please see the Suggested Form of Board Resolution provided in the Plan Transfer Booklet.) 3 Complete Plan Agreement #001 on pages 9-18. (You do not need to complete Item 12 of Plan Agreement #001 when adopting a Putnam Profit Sharing Plan.) If you wish to adopt a Paired Putnam Profit Sharing and Money Purchase Pension Plan, you must also complete Plan Agreement #002. 4 Complete and post the Notice to Interested Parties on page 29. 5 Enroll your employees. Each eligible employee must receive an employee enrollment kit and Buyer s Guides (prospectuses) for the Putnam funds that are being offered through your plan. All eligible employees should return a signed enrollment form to you. 6 Complete the Plan Investment Form on pages 33-37 using the employee enrollment forms. 7 Send the following items to Putnam Investor Services, ATTN: Investment Processing, P.O. Box 2701, Boston, MA 02208: * Board Resolution * Plan Agreement #001 * Employee Enrollment Forms * Plan Investment Form * Check payable to Putnam Fiduciary Trust Company for initial contribution and annual participant fee Be sure to keep copies of these forms for your files. 8 Putnam will review your Plan Agreement for acceptance. (Putnam must accept this Agreement in order for you to receive future amendments to the plan.) Putnam will provide you with a Summary Plan Description and Your Putnam Retirement Plan Kit. This kit contains the administrative forms associated with the operation of a Putnam plan. Step-by-Step Guide to Establishing a Putnam Money Purchase Pension Plan (Keogh) 1 Contact Putnam or your investment dealer to order Employee Enrollment Kits and the appropriate fund prospectuses for each of your employees. If you already have a retirement plan and will be transferring assets to Putnam, please request the Plan Transfer Booklet. 2 Before adopting the Putnam Plan, corporate employers must pass a Board Resolution. A suggested Form of Board Resolution for New Plan is on page 7. (If you are transferring from your current plan, please see the Suggested Form of Board Resolution provided in the Plan Transfer Booklet.) 3 Complete Plan Agreement #002 on pages 19-26. (If you wish to adopt a Paired Putnam Profit Sharing and Money Purchase Pension Plan, you must also complete Plan Agreement #001. 4 Complete and post the Notice to Interested Parties on page 29. 5 Enroll your employees. Each eligible employee must receive an employee enrollment kit and Buyers Guides (prospectuses) for the Putnam funds that are being offered through your plan. All eligible employees should return a signed enrollment form to you. 6 Complete the Plan Investment Form on pages 33-37 using the employee enrollment forms. 7 Send the following items to Putnam Investor Services, ATTN: Investment Processing, P.O. Box 2701, Boston, MA 02208: * Board Resolution * Plan Agreement #002 * Employee Enrollment Forms * Plan Investment Form * Check payable to Putnam Fiduciary Trust Company for initial contribution and annual participant fee Be sure to keep copies of these forms for your files. 8 Putnam will review your Plan Agreement for acceptance. (Putnam must accept this Agreement in order for you to receive future amendments to the plan.) Putnam will provide you with a Summary Plan Description and Your Putnam Retirement Plan Kit. This kit contains the administrative forms associated with the operation of a Putnam plan. Step-by-Step Guide to Establishing a Putnam Profit Sharing and 401(k) Plan 1 Contact Putnam or your investment dealer to order Employee Enrollment Kits and the appropriate fund prospectuses for each of your employees. If you already have a retirement plan and will be transferring assets to Putnam, please request the Plan Transfer Booklet. 2 Before adopting the Putnam Plan, corporate employers must pass a Board Resolution. A Suggested Form of Board Resolution for New Plan is on page 7. (If you are transferring from your current plan, please see the Suggested Form of Board Resolution provided in the Plan Transfer Booklet.) 3 Complete Plan Agreement #001 on pages 9-18. 4 Complete and post the Notice to Interested Parties on page 29. 5 Enroll your employees. Each eligible employee must receive an employee enrollment kit and Buyers Guides (prospectuses) for the Putnam funds that are being offered through your plan. All eligible employees should return a signed enrollment form to you. 6 Based on the information provided in your employee s Salary Reduction Agreements, perform the preliminary 401(k) Actual Deferral Percentage Test which is described on page 43 of this booklet. Once you are sure that your plan meets the Actual Deferral Percentage Test, begin payroll deduction procedures. 7 Complete the Plan Investment Form on pages 33-37 using the employee enrollment forms. 8 Send the following items to Putnam Investor Services, ATTN: Investment Processing, P.O. Box 2701, Boston, MA 02208: * Board Resolution * Plan Agreement #001 * Employee Enrollment Forms * Plan Investment Form * Check payable to Putnam Fiduciary Trust Company for initial contribution and annual participant fee Be sure to keep copies of these forms for your files. 9 Putnam will review your Plan Agreement for acceptance. (Putnam must accept this Agreement in order for you to receive future amendments to the plan.) Putnam will provide you with a Summary Plan Description and Your Putnam Retirement Plan Kit. This kit contains the administrative forms associated with the operation of a Putnam plan. For Corporate Employers Only Suggested Form of Board Resolution for New Plan THE UNDERSIGNED certifies that he/she is Secretary of , a corporation organized and existing under the laws of the State of , and that the following resolutions were adopted at a meeting of the Board of Directors of the Corporations called and held on the day of _______ , 19_______, and that the same have not been amended or rescinded and are in full force and effect: RESOLVED, that this Board authorizes and directs the proper officers of this Corporation in the name an on behalf of this Corporation to execute and deliver a Plan Agreement in the form now before this meeting, adopting, effective as of ______, 19____ , the Putnam _________________ Plan (insert type of plan); FURTHER RESOLVED, that this Board authorizes and directs the proper officers of this Corporation to do all such acts and things as they, in their discretion and with advice of counsel, find necessary or desirable to carry out the Plan, including making contributions out of funds of the Corporation in accordance with the Plan Agreement; FURTHER RESOLVED, that ______________ is appointed as Trustee to serve in accordance with the terms and conditions of the Plan, commencing on the effective date as designated in the foregoing resolution: FURTHER RESOLVED, that this Board authorizes and empowers any one of the following officers of this Corporation (insert designated officers): ___________________________________________ to represent this Corporation in all transactions with the Trustee under the terms and conditions of the Plan, and in the name of and on behalf of this Corporation to give all notices and instructions to the Trustee which are necessary or desirable to carry out the Plan, and to receive all communications for the Trustee pursuant thereto; FURTHER RESOLVED, that the President of this Corporation is authorized and directed to submit an application to the Internal Revenue Service for a determination that the Plan qualifies under the provisions of Section 401 of the Internal Revenue Code of 1986, as amended. (Note: IRS filing will not be necessary for most adopters of the Putnam Standard Plans.) THE UNDERSIGNED further certifies that the following are the names and authentic signatures of the officers of the Corporation referred to in the foregoing resolution. (Insert designated officers.) Title Name Signature ____________________ ________________________ IN WITNESS WHEREOF, the undersigned has hereunto set his hand and the corporate seal of the Corporation this ____________ day of___________, 19__________. Secretary _______________________________________ (Corporate Seal) Plan Agreement #001 Putnam Standard Profit Sharing and 401(k) Plan This is the Plan Agreement for a Putnam prototype profit sharing plan with optional Section 401(k) provisions. Please consult a tax or legal advisor and review the entire form before you sign it. If you fail to fill out this Putnam Plan Agreement properly, the Plan may be disqualified. You can get further information to help you complete the Plan Agreement from your investment dealer, or from Putnam at: Putnam Retirement Plan Services P.O. Box 2701 Boston, Ma 02208 Phone: 1-800-662-0019 By executing this Plan Agreement, the Employer establishes a profit sharing plan and trust upon the terms and conditions of Putnam Basic Plan document #01, as supplemented and modified by the provisions elected by the Employer in this Plan Agreement. This Plan Agreement must be accepted by Putnam in order for the Employer to receive future amendments to the Putnam Standard Profit Sharing and 401(k) Plan. All Employers complete items 1-11 below. Employers who wish to adopt Section 401(k) provisions also complete item 12. 1. Business Information A. Business Name B. Business Address Street City/State Zip Code Phone SIC Code Person for Putnam to Contact C. Federal Tax Identification Number D. Form of Organization (check one): _____Sole Proprietorship _____Corporation _____Partnership _____SCorporation E. Taxable Year of Business: _____Calendar Year _____Fiscal year ending on_____ 1 Provide the Information requested about the Employer. 2. Plan Information A. Plan Year The Plan Year of your Plan will be the same as the Taxable Year of your Business shown in 1.E. above. If you change the Taxable Year of your Business, the Plan Year will change accordingly. The Plan Year will also be your Plan s Limitation Year for purposes of the contribution limitation rules in Article 6 of the Plan. B. Effective Date of Adoption of Plan. Are you adopting this Plan to replace an existing plan? _____Yes _____No If you answered Yes in 2.B. above, the Effective Date of your adoption of this Plan will be the first day of the current Plan Year. Please complete the following: Name of the plan you are replacing Original Effective Date of the plan you are replacing If you answered No in 2.B. above, the Effective Date of your adoption of this Plan will be the later of the first day of the current Plan Year, or the first day your Business began. The Effective Date is (month/day/year) 2B Complete this section only if the adoption of this plan is an amendment to an existing plan. When signed, this document becomes the official plan agreement, superseding any previously signed plan agreements. NOTE: If you are adopting this Plan to replace an existing plan, certain retroactive dates shall apply to comply with the Tax Reform Act of 1986, provided that you adopt this Plan before the end of the 1994 Plan year. 3. Eligibility for Plan Participation (Plan Section 3.1) NOTE: Refer to the Affiliated Employer Determination section in the Putnam Retirement Planning, Easy-to-Follow Instructions Booklet. Employees will be eligible to participate in the Plan when they complete the requirements you select in A, B and C below. A. Classes of Eligible Employees The Plan requires coverage of all classes of employees of the Employer and any Affiliated Employer, except for union employees and nonresident aliens without U.S.source income. The general rules of the Plan exclude employees in those two groups, but if you want employees in one or both categories to be eligible for your Plan, check the appropriate space below. The following employees will be eligible to participate in the Plan: _____Members of the following collective bargaining unit(s) (give names of unions) _____Nonresident aliens with no U.S. source income B. Age Requirement (check one) _____No minimum age required for participation _____Employees must reach age_______(not over 21)to participate 3B Complete 3B to establish the age required (if any) before an employee can become a Plan Participant. C. Service Requirements 1. To become eligible, an employee must complete (check one) _____No minimum service requirement. Skip the rest of this part C if you select this rule. _____One Eligibility Period _____Two Eligibility Periods (may not be chosen if you adopt Section 401(k) provisions under item 12) An Eligibility Period is the 12 month period beginning on an employee s first day of work, and anniversaries of that day. 2. To receive credit for an Eligibility Period, an employee must complete during that period at least (check one) _____1,000 Hours of Service _____Hours of Service (may not exceed 1,000) 3C Complete 3C1 and 3C2 to establish the service required (if any) before an employee can become a Plan Participant. NOTE: A plan may not condition eligibility to participate in the plan on more than two years of service, and may require two years of eligibility service only if the plan provides for full and immediate vesting after two years of service. 3. Hours of Service will be credited to employees by the following method (check one) _____Actual hours for which an employee is paid _____Any employee who has one actual paid hour in the following period will be credited with the number of Hours of Service indicated (check one): _____Day(10 Hours of Service) _____Week(45 Hours of Service) _____Semi-monthly payroll period (95 Hours of Service) _____Month (190 Hours of Service) Complete 3C3 to indicate how Hours of Service will be measured. NOTE: An employee begins participation as of the first day of the month in which he first fulfills the eligibility requirements you have selected. If you are adopting this Plan to replace an existing plan, employees will be credited under this Plan with all service credited to them under the plan you are replacing. 4. Compensation (Plan Section 2.8) Compensation for purposes of the Plan will be the amount of the following that is actually paid by your Business to an employee during the Plan Year (check one) _____Form W-2 earnings as descried in Section 2.8 of the Plan _____Form W-2 earnings as described in Section 2.8 of the Plan plus any amounts withheld from the employee under a 401(k) plan, cafeteria plan, SARSEP, tax-sheltered 403(b) arrangement, Section 457 deferred compensation plan or contributions described in Section 414(h)(2) that are picked up by a governmental employer. _____All compensation included in the definition of Section 415 Compensation in Section 6.5(b) of the Plan _____All compensation included in the definition in Section 6.5(b) of the Plan, plus any amounts withheld from the employee under a 401(k) plan, cafeteria plan, SARSEP, tax-sheltered 403(b) arrangement, Section 457 deferred compensation plan or contributions described in Section 414(h)(2) that are picked up by a governmental employer. 4 Complete this section to define plan compensation for employees other than owner-employees or self-employed individuals. For owner-employees and self-employed individuals, compensation is earned income as defined in Section 2.12 of the Basic Plan Document. 5. Contributions (Plan Sections 4.1 and 4.2) A. Profit Limitation Will your contributions to the Plan be limited to the current and accumulated profits of your Business? (check one) _____Yes _____NO 5 NOTE: Refer to the Contribution Limits Worksheet contained in a separate booklet for a detailed explanation of contribution limits. You may limit Plan contributions to the profits of your business, but you are not required to do so. Employer Contributions under this plan include profit sharing contributions, Elective Deferrals, Qualified Nonelective Contributions and Qualified Matching Contributions. If you will make contributions only under the Section 401(k) provisions in item 12 of this Plan Agreement, skip the rest of this part 5. B. Amount The Employer will contribute to the Plan for each Plan Year (check one) _____An amount chosen by the Employer from year to year _____% (not more than 15%) of the Earnings of all Qualified Participants for the Plan Year Any Employee who has met the eligibility requirements in item 3 of this Plan Agreement is a Qualified Participant unless his employment terminates before the last day of the Plan Year for reasons other than his death or Retirement, and he is not credited with more than 500 Hours of Service in the Plan Year. C. Allocation to Qualified Participants Contributions under paragraph B will be shared by Qualified Participants in proportion to their Earnings, unless you check the following space to indicate that your Plan will be integrated with Social Security, as explained on page 41. You must choose the Top-Heavy Integration Formula unless you elect to perform annual top-heavy testing for your Plan. _____Contributions will be shared according to the Top-Heavy Integration Formula in Section 4.2(c)(1) of the Basic Plan Document in every Plan Year, whether or not the Plan is top-heavy. _____Contributions will be shared according to the Top-Heavy Integration Formula in Section 4.2(c)(1) of the Basic Plan Document only in Plan Years in which the Plan is top-heavy. In all other Plan Years, contributions will be shared according to the Non-Top-Heavy Integration Formula in Section 4.2(c)(2) of the Basic Plan Document. Complete 5B and 5C only if you wish to increase the amount of contributions allocated to Participants who earn more than the stated amount, by integrating your plan with Social Security. See page 41 for more information. NOTE: If you maintain any other qualified plan in addition to this Plan, only one plan may be integrated with Social Security. If you integrate this Plan with Social Security, see also the top-heavy provisions in item 10. D. Integration Level The Integration Level will be (check one) _____The Social Security Wage Base in effect at the beginning of the Plan Year. _____% (not more than 100%) of the Social Security Wage Base in effect at the beginning of the Plan Year. _____$_____(not more than the Social Security Wage Base). 5D Complete 5D only if you have elected in 5C to integrate your plan with Social Security. See page 41 for more information. 6. Investments (Plan Sections 13.2 and 13.3) The Employer selects in part A below the Investment Products that will be available under the Plan (in addition to life insurance policies selected under Plan Article 14, if any). All Investment Products must be sponsored, underwritten or managed by Putnam. From the group of available Investment Products selected by the Employer, each Participant chooses the investments for his own Accounts, unless the Employer elects differently in part B below. Investment instructions may be changed on any business day. A. Available Investment Products (Plan Section 13.2) The following investments will be available under the Plan (check one) _____Any Putnam funds _____Other Investment Products In the event that there is any amount in the Trust Fund for which no instructions or unclear instructions are delivered, it will be invested in Putnam Daily Dividend Trust until instructions are received in good order, and the Employer will be deemed to have selected Putnam Daily Dividend Trust as an available Investment Product for that purpose. 6A If you wish to offer Putnam Capital Manager a variable annuity issued by Hartford with underlying funds managed by Putnam through your plan, please call Putnam for more information, 1-800-662-0019. B. Instructions (Plan Section 13.3) Investment instructions for amounts held under the Plan generally will be given by each Participant for his own Accounts and delivered to Putnam by the Employer. Check below only if the Employer will make investment decisions under the Plan. _____The Employer will make investment decisions. 6B Place a check mark in the blank if the Employer will direct the investment of Employer Contributions. If you do not check the blank, the Plan provides that each Participant will direct the investment of Employer Contributions allocated to the Employee s account. 7. Distributions and Withdrawals. A. Retirement Distributions. 1. Retirement Age (Plan Section 7.1) Normal retirement age will be _____ (not over the lesser of 65 or any mandatory retirement age enforced by the Employer). 2. Annuities (Plan Section 9.3) Will your Plan permit a Participant to select a life annuity form of distribution? You must check Yes if this Plan replaces an existing Plan that permits distributions in life annuity form. (check one) _____Yes _____No 7A Enter the age (no later than 65) when an Employee may retire from the service of the Employer. B. Hardship Distributions (Plan Section 12.2) Will your Plan permit hardship distributions from Employer Contribution Accounts? You must check Yes if this Plan replaces an existing Plan that permits hardship distributions. (check one) _____Yes _____No C. Withdrawals after Age 59 1/2 (Plan Section 12.3) Will your Plan permit employees over age 59 1/2 to withdraw amounts upon request? You must check Yes if this Plan replaces an existing Plan that permits withdrawals after age 59 1/2. (check one) _____Yes _____No 8. Other Plans You must complete this section if you maintain or ever maintained another qualified plan (other than a Putnam Money Purchase Pension Plan under Plan Agreement #002) in which any Participant in this Plan is (or was) a participant or could become a participant, or if you maintain a welfare benefit fund (as defined in section 419(e) of the Code) or an individual medical account (as defined in section 415(1)(2) of the Code) under which amount are treated as annual additions with respect to any Participant in this Plan. 8 Skip this item 8 if the Plan is the only qualified plan your Business has ever had. The Plan and your other plan(s) combined will meet the contribution limitation rules in Article 6 of the Plan as you specify below: A. If a Participant in the Plan is covered under another qualified defined contribution plan maintained by your Business, other than a master or prototype plan (check one) _____The provisions of Section 6.2 of the Plan will apply as if the other plan were a master or prototype plan. _____The plans will limit total annual additions to the maximum permissible amount, and will properly reduce any excess amounts, in the manner you describe below. _____ _____ B. If a Participant in the Plan is or has ever been a participant in a defined benefit plan maintained by your Business, the plans will meet the limits of Article 6 in the manner you describe below: _____ _____ If your Business has ever maintained a defined benefit plan, state below the interest rate and mortality table to be used in establishing the present value of any benefit under the defined benefit plan, for purposes of computing the top-heavy ratio: Interest rate:_____% Mortality table 8A and 8B Complete 8A only if the Employer maintains or ever maintained any other defined contribution plan (other than a master or prototype plan) or any other defined benefit plan. Complete 8B only if the Employer maintains or ever maintained a defined benefit plan. If any of these factual situations exist, the Employer should consult with an attorney or actuary. Failure to complete this section when applicable may adversely affect the tax-qualified status of the Plan. NOTE: Your description under A or B above must not leave the selection of a method to your discretion from year to year. 9. Vesting All Accounts are fully vested at all times. 10. Top-Heavy Provisions (Plan Section 15.3) Federal tax laws require certain plans, called top-heavy plans, to provide a minimum contribution for every non-key employee covered by the plan. Whether a plan is top-heavy is determined by an annual test, explained on page 46. If the plan s regular contribution provisions already meet or exceed the top-heavy minimum contribution, no additional action is required when the plan is top-heavy, so there is no need to perform annual testing. If the plan s regular contribution provisions do not already meet or exceed the top-heavy minimum contribution, annual testing must be performed, and, if the plan proves to be top-heavy, an additional contribution must be made. Your Plan s regular contribution provisions will meet or exceed the top-heavy minimum, and you will not need to perform annual testing, if any of the following applies: (a) You will make contributions only under item 5 of this Plan Agreement (no Section 401(k)), and your Plan is not integrated with Social Security; or (b) Your Plan is integrated with Social Security and you have specified the Top-Heavy Integration Formula in item 5.C; or (c) You will make contributions under item 12 (Section 401(k)), and you have specified in item 12.C. a Qualified Nonelective Contribution of at least 3% on behalf of all Participants; or (d) You will make contributions under item 5 and item 12 (Section 401(k)), and you have specified in item 5.B a contribution of at least 3% of Earnings that will not be integrated with Social Security; or (e) You maintain paired Putnam plans, or you maintain any other qualified plan that automatically provides a minimum top-heavy contribution or benefit for every non-key employee covered by this Plan. NOTE: If you maintain a defined benefit plan in additions to this Plan, you cannot rely on categories (a) through (d). If you fit into any of the above categories, STOP HERE. You do not need to perform annual top-heavy testing. If you do not fit into any of the above categories, then unless you check this item 10 to indicate that you will perform annual top-heavy testing for your Plan, the requirement of a minimum contribution for each non-key employee, contained in Plan Section 15.3, will apply to your Plan at all times. If you check this item 10, Section 15.3 will apply only in Plan Years when you Plan fails the top-heavy test. _____The Employer will perform annual top-heavy testing for the Plan. 11. Plan Administrator (Plan Section 16.1) You may appoint a person or a committee to serve as Plan Administrator. You may remove and replace anyone you have appointed, and anyone you have appointed may resign, without the need to amend this Plan Agreement, provided that you notify Participants in writing of any such change. If you do not appoint a Plan Administrator, the Plan provides that the Employer will be the Plan Administrator. The initial Plan Administrator will be (check one) _____This person: _____A committee composed of these people: __________ __________ __________ 12. Section 401(k) Plan Provisions (Plan Article 5) 12 Complete item 12 below if your Plan will allow employees to elect pre-tax contributions under Section 401(k) of the Code. If you will make contributions to the Plan only under item 12, see also the top-heavy provisions in item 10. A. Elective Deferrals (Plan Section 5.2) 1. A Participant may make Elective Deferrals in an amount not to exceed (check one) _____% of his Earnings (not more than 15%) _____$_____(specify a dollar amount in each payroll period) 12A1 Complete section 12 only if you are adopting a Putnam Profit Sharing and 401(k) Plan. If you are adopting a Putnam Profit Sharing Plan (Keogh), go to section 13. By the option selected in 12A1, the Employee s Elective Deferral will be limited to a stated percentage of annual pay, or a stated amount for each pay period. You must state a percentage or an amount, as applicable. NOTE: Elective Deferrals may not exceed the annual dollar limit under Section 402(g) of the Internal Revenue Code. 2. A Participant may begin to make Elective Deferrals, or change the amount of his Elective Deferrals, as of the following dates (check one): _____First business day of each month (monthly). _____First business day of the first, fourth, seventh and tenth months of the Plan Year (quarterly). _____First business day of the first and sixth months of the Plan Year (semiannually). _____First business day of the Plan Year only (annually). 12A2 Complete this section by designating the periods during which employee elections to make Elective Deferral contributions will be permitted, the date such an election will become effective, the periods during which modifications can be made to employees Elective Deferral elections and the date such a modification will take effect. 3. May Participants make Elective Deferrals of bonuses? _____Yes _____No 12A3 If this option is checked, Employees will be entitled to contribute as Elective Deferrals to the Plan a percentage of (or an amount from) bonuses that would otherwise be paid in cash. B. Qualified Matching Contributions (Plan Section 2.60) 12B Skip this part B if you will not make Qualified Matching Contributions. 1. Qualified Matching contributions will be made with respect to (check one) _____Elective Deferrals by all Participants _____Elective Deferrals only by Non-Highly Compensated Participants 12B1 If this section is checked, the Employer will make Qualified Matching contributions (i.e., contributions that match employee Elective Deferrals and that can be used to assist in satisfying the special 401(k) non-discrimination test). These contributions must be fully vested at all times and must be subject to the distribution restrictions described in Section 5.13 of the Basic Plan Document. You must designate the class of employees on whose behalf Qualified Matching Contributions will be made. 2. The amount of Qualified Matching Contributions made with respect to a Participant will be: (Check the provision desired and fill in the % blank(s) in the provision you check. If you wish to determine the amount of Qualified Matching Contributions from year to year instead of specifying a fixed percentage, write V for variable in the % blank at the beginning of each provision you check.) _____% of his Elective Deferrals _____% of his Elective Deferrals that do not exceed _____% of his Compensation. 12B2 By completing this section, the Employer determines the degree to which Qualified Matching Contributions will match the Employees Elective Deferrals. Check one blank and provide the appropriate information for the sentence following the one that you check. C. Qualified Nonelective Contributions (Plan Section 2.62) 12C Skip this part C if you will not make Qualified Nonelective Contributions. If this section is checked, the Employer will be entitled to make Qualified Nonelective Contributions to the Plan, as described in Section 2.62 of the Basic Plan Document. These contributions can assist the Employer in meeting the special 401(k) non-discrimination test. If you complete 1, you must also check 2 (and provide percentage limits where appropriate), to determine the amount of Qualified Nonelective Contributions to be made. See page 42 for more information. Note: If you wish to avoid annual testing to determine whether your Plan is top-heavy, you may need to select a Qualified Nonelective Contribution of at least 3% for all Participants, because Elective Deferrals and Qualified Matching Contributions for non-key employees do not count toward the top-heavy minimum contribution requirement. See item 10 for more information. 1. Qualified Nonelective Contributions will be made on behalf of (check one): _____All Participants _____Only Participants who are not Highly Compensated Employees 2. The amount of Qualified Nonelective Contributions for a Plan Year will be (check one): _____% (not over 15%) of the Earnings of Participants on whose behalf Qualified Nonelective Contributions are made _____An amount determined by the Employer, to be shared in proportion to Compensation by Participants on whose behalf Qualified Nonelective Contributions are made D. Hardship Distributions from 401(k) Accounts (Plan Sections 12.2 and 5.14) Will your Plan permit hardship distributions from Elective Deferral Accounts? (check one) _____Yes _____No 13. Reliance on Opinion Letter You may rely on the opinion letter issued by the National Office of the Internal Revenue Service for this Plan, and avoid filing an application for an IRS determination letter, only if you never maintain or maintained at any time any other plan, except a Putnam Standard Money Purchase Pension Plan under Plan Agreement #002. If you even maintained or you later adopt any plan (including a welfare benefit fund, as defined in Section 419(e) of the Code, which provides post-retirement medical benefits allocated to separate account for key employees, as defined in section 419A(d)(3) of the Code; or an individual medical account, as defined in section 415(1)(2) of the Code) in addition to this plan (other than a Putnam Standard Money Purchase Pension Plan under Plan Agreement #002), you may not rely on the opinion letter issued by the National Office of the Internal Revenue Service as evidence that your Plan is qualified under Section 401 of the Internal Revenue Code. If you adopt or maintain multiple plans and you wish to obtain reliance that your plan(s) are qualified, you should apply to the appropriate Key District Director of Internal Revenue for a determination letter. Putnam will inform you of all amendments it makes to the prototype plan. If Putnam ever discontinues or abandons the prototype plan, Putnam will inform you. This Plan Agreement #001 may be used only in conjunction with Putnam s basic plan document #01. 13 Employers should review this section carefully. The adoption of the Putnam Standard Profit Sharing Plan should be reviewed with your legal counsel and tax advisor. Employers Adoption of Putnam Standard Profit Sharing Plan The Employer named below hereby adopts a PUTNAM STANDARD PROFIT SHARING PLAN, and appoints ___________ to serve as Trustee of the Plan. The Employer agrees to pay the fees as determined by completing the Plan Investment Form, in accordance with the terms of the Plan. The Employer acknowledges that it has received copies of the current prospectus for each Investment Product available under the Plan, and represents that it will deliver copies of the then-current prospectus for each such Investment Product to each Participant before each occasion on which the Participant makes an investment instruction as to his Account. The Employer further acknowledges that the Plan will be a Putnam Standard Profit Sharing Plan upon Putnam s acceptance of this Plan Agreement. Employer signature(s) to adopt Plan: _____ Date of signature: Provide a signature form an authorized representative of the Employer Please print name(s) of authorized person(s) signing above: _________ Phone: Phone: A new Plan must be signed by the last day of the Employer s Taxable Year in which the Plan is to be effective. Dealer Information (to be completed by investment dealer) Name of Investment Dealer Name and No. of Investment Dealer/Representative Name and No of Branch Office Signature of Investment Dealer/Representative Authorized Dealer Signature Representative Phone Number Acceptance of Trustee The Trustee accepts appointment in accordance with the terms and conditions of the Plan, effective as of the date of execution by the Employer set forth above. A. Putnam Fiduciary Trust Company, Trustee By _______________________________ B. Other Trustee By _________________________ Trustees Tax I.D. Number __ (Trustee) Address of Trustee ______________________________________ Person for Putnam to Contact ____ Phone ____________________ Complete Part B only if you have appointed a Trustee other than Putnam Fiduciary Trust Company. NOTE: Putnam may impose an annual maintenance fee as a condition of its acceptance of this plan as a Putnam Standard Profit Sharing Plan. C. Appointment and Acceptance of Insurance Trustee 1. Appointment to: Name of Insurance Trustee ________________________________ You are hereby designated as Insurance Trustee for Policies to be held in accordance with the terms and conditions of this Plan and Trust. Employer signature to appoint Insurance Trustee: By ___________________________________________________ (Authorized Signature) 2. Acceptance as Insurance Trustee is agreed to in accordance with the terms and conditions of the Plan, effective as of the date of execution by the Employer as set forth above. By _________________________ Trustee s Tax I.D. Number _____ Address of Insurance Trustee ______________________________ Person for Putnam to Contact ____ Phone ____________________ Complete Part C only if insurance Policies will be purchased under Article 14 of the Plan (in addition to Putnam investment Products). Acceptance by Putnam Putnam hereby accepts this Employer s Plan as a prototype established under the Putnam Defined Contribution Retirement Plan and Trust Agreement. Putnam Mutual Funds Corp. By ___________________________________________________ Plan Agreement #002 Putnam Standard Money Purchase Pension Plan This is the Plan Agreement for a Putnam prototype money purchase pension plan. Please consult a tax or legal advisor and review the entire form before you sign it. If you fail to fill out this Putnam Plan Agreement properly, the Plan may be disqualified. You can get further information to help you complete the Plan Agreement from your investment dealer, or from Putnam at: Putnam Retirement Plan Services P.O. Box 2701 Boston, MA 02208 Phone: 1-800-662-0019 By executing this Plan Agreement, the Employer establishes a money purchase pension plan and trust upon the terms and conditions of Putnam Basic Plan Document #01, as supplemented and modified by the provisions elected by the Employer in this Plan Agreement. This Plan Agreement must be accepted by Putnam in order for the Employer to receive future amendments to the Putnam Standard Money Purchase Pension Plan. 1. Business Information A. Business Name B. Business Address Street City/State Zip Code Phone SIC Code Person for Putnam to Contact C. Federal Tax Identification Number D. Form of Organization (check one): _____Sole proprietorship _____Corporation _____Partnership _____S Corporation E. Taxable Year of Business: _____Calendar Year _____Fiscal year ending on:_____ 1 Provide the information requested about the Employer. 2. Plan Information Plan Year The Plan Year of your Plan will be the same as the Taxable Year of your Business shown in 1.E. above. If you change the Taxable Year of your Business, the Plan Year will change accordingly. The Plan Year will also be your Plan s Limitation Year for purposes of the contribution limitation rules in Article 6 of the Plan. A. Effective Date of Adoption of Plan. Are you adopting this Plan to replace an existing plan? _____Yes _____No If you answered Yes in 2.A. above, the Effective Date of your adoption of this Plan will be the first day of the current Plan Year. Please complete the following: Name of the plan you are replacing: Original Effective Date of the plan you are replacing: If you answered No in 2.A. above, the Effective Date of your adoption of this Plan will be the later of the first day of the current Plan Year, or the first day your Business began. The Effective Date is (month/day/year) 2A Complete this section only if the adoption of this plan is an amendment to an existing Plan. When signed, this document becomes the official plan agreement, superseding any previously signed plan agreements. NOTE: If you are adopting this Plan to replace an existing Plan, certain retroactive dates shall apply to comply with the Tax Reform Act of 1986, provided that you adopt this Plan before the end of the 1994 Plan year. 3. Eligibility for Plan Participation (Plan Section 3.1) Employees will be eligible to participate in the Plan when they complete the requirements you select in A, B and C below. A. Classes of Eligible Employees The Plan requires coverage of all classes of employees of the Employer and any Affiliated Employer, except for union employees and nonresident aliens without U.S. source income. The general rules of the Plan exclude employees in those two groups, but if you want employees in one or both categories to be eligible for your Plan, check the appropriate space below. The following employees will be eligible to participate in the Plan: _____Members of the following collective bargaining unit(s) (give names of unions) _____Nonresident aliens with no U.S. source income NOTE: Refer to the Affiliated Employer Determination section in the Putnam Retirement Planning, Easy-to-Follow Instructions booklet. B. Age Requirement (check one) _____No minimum age required for participation _____Employees must reach age_______(not over 21) to participate 3B Complete 3B to establish the age required (if any) before an employee can become a Plan Participant. C. Service Requirements 1. To become eligible, an employee must complete (check one) _____No minimum service requirement. Skip the rest of this part C if you select this rule. _____One Eligibility Period _____Two Eligibility Periods An Eligibility Period is the 12 months beginning on an employees first day of work, and anniversaries of that day. 2. To receive credit for an Eligibility Period, an employee must complete during that period at least (check one) _____1,000 Hours of Service _____Hours of Service (may not exceed 1,000) 3C1 and 3C2 Complete 3C1 and 3C2 to establish the service required (if any) before an Employee can become a Plan Participant. NOTE: A plan may not condition eligibility to participate in the plan on more than two years of service and may require two years of eligibility service only if the plan provides for full and immediate vesting after two years of service. 3. Hours of Service will be credited to employees by the following method (check one) _____Actual hours for which an employee is paid _____Any employee who has one actual paid hour in the following period will be credited with the number of Hours of Service indicated (check one): _____Day(10 Hours of Service) _____Week(45 Hours of Service) _____Semi-monthly payroll period (95 Hours of Service) _____Month (190 Hours of Service) 3C3 Complete 3C3 to indicate how Hours of Service will be measured. NOTE: An employee begins participation as of the first day of the month in which he first fulfills the eligibility requirements you have selected. If you are adopting this Plan to replace an existing plan, employees will be credited under this Plan with all service credited to them under the plan you are replacing. 4. Compensation (Plan Section 2.8) Compensation for purposes of the Plan will be the amount of the following that is actually paid by your Business to an employee during the Plan Year (check one) _____Form W-2 earnings as descried in Section 2.8 of the Plan _____Form W-2 earnings as described in Section 2.8 of the Plan plus any amounts withheld from the employee under a 401(k) plan, cafeteria plan, SARSEP, tax-sheltered 403(b) arrangement, Section 457 deferred compensation plan or contributions described in Section 414(h)(2) that are picked up by a governmental employer. _____All compensation included in the definition of Section 415 Compensation in Section 6.5(b) of the Plan _____All compensation included in the definition of section 415 compensation in Section 6.5(b) of the Plan, plus any amounts withheld from the employee under a 401(k) plan, cafeteria plan, SARSEP, tax-sheltered 403(b) arrangement, Section 457 deferred compensation plan or contributions described in Section 414(h)(2) that are picked up by a governmental employer. 4 Complete this section to determine Plan compensation for Employees other than owner-employees or self-employed individuals. For owner-employees and self-employed individuals, Compensation is earned income as defined in Section 2.12 of the Basic Plan Document. 5. Contributions (Plan Section 4.3) A. Amount The Employer will contribute to the Plan for each Plan Year this Base Contribution Percentage _____ (not more than 25%) of the Earnings of all Qualified Participants for the Plan Year. Any Employee who has met the eligibility requirements in item 3 of this Plan Agreement is a Qualified Participant unless his employment terminates before the last day of the Plan Year for reasons other than his death or Retirement, and he is not credited with more than 500 Hours of Service in the Plan Year. 5 NOTE: Refer to the Contribution Limits Worksheet contained in a separate booklet for a detailed explanation of contribution limits. Enter the percentage of Compensation required to be contributed to the Plan each year. The contribution cannot exceed 25% of Compensation paid to all Participants during the Plan Year. If you accept both this Plan and a profit sharing plan, the combined percentages for the two must not exceed 25% of Compensation. If you wish to integrate your Plan, skip 5A and complete 5B and 5C. B. Allocation to Qualified Participants Contributions will be shared by Qualifed Participants in proportion to their Earnings, unless you check the following space to indicate that your Plan will be integrated with Social Security, as explained on page 41. _____The Plan will be integrated with Social Security, and the Base Contribution Percentage will be _____% (not less than 3% unless you will perform annual top-heavy testing for your Plan). C. Integration Level The Integration Level will be (check one) _____The Social Security Wage Base in effect at the beginning of the Plan Year. _____% (not more tan 100%) of the Social Security Wage Base in effect at the beginning of the Plan Year. _____$_____ (not more than the Social Security Wage Base). 5B and 5C Complete 5B and 5C only if you wish to increase the amount of contributions allocated to Participants who earn more than a stated amount by integrating your plan with Social Security. See page 41 for more information. NOTE: If you maintain any other qualified plan in addition to this Plan, only one plan may be integrated with Social Security. If you integrate this Plan with Social Security, see also the top-heavy provisions in item 10. 6. Investments (Plan Sections 13.2 and 13.3) The Employer selects in part A below the Investment Products that will be available under the Plan (in addition to life insurance policies selected under Plan Article 14, if any). All Investment Products must be sponsored, underwritten or managed by Putnam. From the group of available Investment Products selected by the Employer, each Participant chooses the investments for his own Accounts, unless the Employer elects differently in part B below. Investment instructions may be changed on any business day. A. Available Investment Products (Plan Section 13.2) The following investments will be available under the Plan (check one) _____Any Putnam funds _____Other Investment Products In the event that there is any amount in the Trust Fund for which no instructions or unclear instructions are delivered, it will be invested in Putnam Daily Dividend Trust until instructions are received in good order, and the Employer will be deemed to have selected Putnam Daily Dividend Trust as an available Investment Product for that purpose. 6A If you wish to offer Putnam Capital Manager a variable annuity issued by Hartford with underlying funds managed by Putnam through your plan, please call Putnam for more information, 1-800-662-0019. B. Instructions (Plan Section 13.3) Investment instructions for amounts held under the Plan generally will be given by each Participant for his own Accounts and delivered to Putnam by the Employer. Check below only if the Employer will make investment decisions under the Plan. _____The Employer will make investment decisions. 6B If you place a check mark in the blank the Employer will direct the investment of Employer contributions. If you do not check the blank, the Plan provides that each Participant will direct the investment of Employer contributions allocated to his account. 7. Retirement Age (Plan Section 7.1) Normal retirement age will be _____ (not over the lesser of 65 or any mandatory retirement age enforced by the Employer). 7 Enter the age (no later than 65) when an Employee may retire from the service of the Employer. 8. Other Plans You must complete this section if you maintain or ever maintained another qualified plan (other than a Putnam Profit Sharing Plan under Plan Agreement #001) in which any Participant in this Plan is (or was) a participant or could become a participant, or if you maintain a welfare benefit fund (as defined in section 419(e) of the Code) or an individual medical account (as defined in section 415(1)(2) of the Code) under which amounts are treated as annual additions with respect to any Participant in this Plan. 8 Skip this item 8 if the Plan is the only qualified plan your Business has ever had. The Plan and your other plan(s) combined will meet the contribution limitation rules in Article 6 of the Plan as you specify below: A. If a Participant in the Plan is covered under another qualified defined contribution plan maintained by your Business, other than a master or prototype plan (check one) _____The provisions of Section 6.2 of the Plan will apply as if the other plan were a master or prototype plan. _____The plans will limit total annual additions to the maximum permissible amount, and will properly reduce any excess amounts, in the manner you describe below. _____ _____ B. If a Participant in the Plan is or has ever been a participant in a defined benefit plan maintained by your Business, the plans will meet the limits of Article 6 in the manner you describe below: _____ _____ If your Business has ever maintained a defined benefit plan, state below the interest rate and mortality table to be used in establishing the present value of any benefit under the defined benefit plan, for purposes of computing the top-heavy ratio: Interest rate:_____% Mortality table:_________________________________________ 8A and 8B Complete 8A only if the Employer maintains or ever maintained any other defined contribution plan (other than a master or prototype plan) or any other defined benefit plan. Complete 8B only if the Employer maintains or ever maintained a defined benefit plan. If any of these factual situations exist, the Employer should consult with an attorney or actuary. Failure to complete this section when applicable may adversely affect the tax-qualified status of the Plan. NOTE: Your description under A or B above must not leave the selection of a method to your discretion from year to year. 9. Vesting All Accounts are fully vested at all times. 10. Top-Heavy Provisions (Plan Section 15.3) Federal tax laws require certain plans, called top-heavy plans, to provide a minimum contribution for every non-key employee covered by the plan. Whether a plan is top-heavy is determined by an annual test, explained on page 46. If the plan s regular contribution provisions already meet or exceed the top-heavy minimum contribution, no additional action is required when the plan is top-heavy, so there is no need to perform annual testing. If the plan s regular contribution provisions do not already meet or exceed the top-heavy minimum contribution, annual testing must be performed, and, if the plan proves to be top-heavy, an additional contribution must be made. Your Plan s regular contribution provisions will meet or exceed the top-heavy minimum, and you will not need to perform annual testing, if any of the following applies: (a) Your Plan is not integrated with Social Security; or (b) Your Plan is integrated with Social Security and you have specified in item 5.B. a Base Contribution Percentage of at least 3%; or (c) You maintain any other qualified plan that automatically provides a minimum top-heavy contribution or benefit for every non-key employee covered by this Plan. NOTE: If you maintain a defined benefit plan in addition to this Plan, you cannot rely on categories (a) or (b). If you fit into any of the above categories, STOP HERE. You do not need to perform annual top-heavy testing. If you do not fit into any of the above categories, then unless you check this item 10 to indicate that you will perform annual top-heavy testing for your Plan, the requirement of a minimum contribution for each non-key employee, contained in Plan Section 15.3, will apply to your Plan at all times. If you check this item 10, Section 15.3 will apply only in Plan Years when you Plan fails the top-heavy test. _____The Employer will perform annual top-heavy testing for the Plan. 11. Plan Administrator (Plan Section 16.1) You may appoint a person or a committee to serve as Plan Administrator. You may remove and replace anyone you have appointed, and anyone you have appointed may resign, without the need to amend this Plan Agreement, provided that you notify Participants in writing of any such change. If you do not appoint a Plan Administrator, the Plan provides that the Employer will be the Plan Administrator. The initial Plan Administrator will be (check one) _____This person: _____A committee composed of these people: __________ __________ __________ 12. Reliance on Opinion Letter You may rely on the opinion letter issued by the National Office of the Internal Revenue Service for this Plan, and avoid filing an application for an IRS determination letter, only if you never maintain or maintained at any time any other plan, except a Putnam Standard Profit Sharing Plan under Plan Agreement #001. If you ever maintained or you later adopt any plan (including a welfare benefit fund, as defined in Section 419(e) of the Code, which provides post-retirement medical benefits allocated to separate account for key employees, as defined in section 419A(d)(3) of the Code; or an individual medical account, as defined in section 415(1)(2) of the Code) in addition to this plan (other than a Putnam Standard Profit Sharing Plan under Plan Agreement #001), you may not rely on the opinion letter issued by the National Office of the Internal Revenue Service as evidence that your Plan is qualified under Section 401 of the Internal Revenue Code. If you adopt or maintain multiple plans and you wish to obtain reliance that your plan(s) are qualified, you should apply to the appropriate Key District Director of Internal Revenue for a determination letter. Putnam will inform you of all amendments it makes to the prototype plan. If Putnam ever discontinues or abandons the prototype plan, Putnam will inform you. This Plan Agreement #002 may be used only in conjunction with Putnam s basic plan document #01. 12 Employers should review this section carefully. Adoption of the Plan should be reviewed with your legal counsel and tax advisor. Employers Adoption of Putnam Standard Money Purchase Pension Plan The Employer named below hereby adopts a PUTNAM STANDARD MONEY PURCHASE PENSION PLAN, and appoints ___________ to serve as Trustee of the Plan. The Employer agrees to pay the fees as determined by completing the Plan Investment Form, in accordance with the terms of the Plan. The Employer acknowledges that it has received copies of the current prospectus for each Investment Product available under the Plan, and represents that it will deliver copies of the then-current prospectus for each such Investment Product to each Participant before each occasion on which the Participant makes an investment instruction as to his Account. The Employer further acknowledges that the Plan will be a Putnam Money Purchase Pension Sharing Plan upon Putnam s acceptance of this Plan Agreement. Employer signature(s) to adopt Plan: _____ Date of signature: Provide a signature from an authorized representative of the Employer. Please print name(s) of authorized person(s) signing above: _________ Phone: Phone: A new Plan must be signed by the last day of the Employer s Taxable Year in which the Plan is to be effective. Dealer Information (to be completed by investment dealer) Name of Investment Dealer ________________________________ Name and No. of Investment Dealer/Representative ______________ Name and No. of Branch Office ______________________________ Signature of Investment Dealer/Representative ________________ Authorized Dealer Signature _______________________________ Representative Phone Number ______________________________ Acceptance of Trustee The Trustee accepts appointment in accordance with the terms and conditions of the Plan, effective as of the date of execution by the Employer set forth above. A. Putnam Fiduciary Trust Company, Trustee By ___________________________________________________ B. Other Trustee ________________________________________ By (Trustee) _________________ Trustee s Tax I.D. Number _____ Address of Trustee ______________________________________ Person for Putnam to Contact ____ Phone ____________________ Complete Part B only if you have appointed a Trustee other than Putnam Fiduciary Trust Company. NOTE: Putnam may impose an annual maintenance fee as a condition of its acceptance of this plan as a Putnam Standard Money Purchase Pension Plan. C. Appointment and Acceptance of Insurance Trustee 1. Appointment to: Name of Insurance Trustee ________________________________ You are hereby designated as Insurance Trustee for Policies to be held in accordance with the terms and conditions of this Plan and Trust. Employer signature to appoint Insurance Trustee By (Authorized Signature) 2. Acceptance as Insurance Trustee is agreed to in accordance with the terms and conditions of the Plan, effective as of the date of execution by the Employer as set forth above. By Trustee s Tax I.D. Number Address of Insurance Trustee Person for Putnam to Contact Phone Complete Part C only if insurance Policies will be purchased under Article 14 of the Plan (in addition to Putnam Investment Products). Acceptance by Putnam Putnam hereby accepts this Employer s Plan as a prototype established under the Putnam Defined Contribution Retirement Plan and Trust Agreement. Putnam Mutual Funds Corp. By ___________________________________________________ Instructions for Completing and Distributing Notice to Interested Parties You must distribute the completed Notice to Interested Parties no less than 7 days and no more than 21 days after you sign the Plan Agreement for your Putnam Plan. For your current employees, you may simply post a copy of the Notice on a bulletin board or other space customarily used for announcements to your employees. If you adopt your Putnam Plan as an amendment to an existing plan, individuals who are not current employees but are entitled to benefits under your existing plan (for example, vested former employees or beneficiaries of deceased employees) should be sent a copy of the Notice by first class mail no less than 10 days and no more than 24 days after you sign your Putnam Plan Agreement. Portions of the Notice must be completed by you as described below. Item 1 Enter the name of your business. Item 2 Enter the name of your plan. Item 3 Enter the final digit of the plan number you have chosen for your plan. If this is the first plan you have ever adopted for your business, or if you have adopted the Putnam Plan as an amendment of your only existing plan, the correct number is 001. If your business has one or more other tax qualified retirement plans that were adopted before this plan, and you have not adopted the Putnam Plan as an amendment to any plan, the correct number for his plan is the next higher number after the number(s) of your existing plan(s); for example, 002 or 003. Enter the appropriate IRS opinion letter number. If you have adopted the Profit Sharing and 401(k) Plan, enter D240174a, if you have adopted the Money Purchase Pension Plan, D240175a. Item 4 Enter the name and address of your business and the nine-digit tax identification number assigned to your business for federal income tax and employment tax reporting; for example, 04-0010023. Item 5 If you have appointed a committee or a particular person as plan administrator, enter the name(s) and address of the person(s) appointed. If you have not selected a plan administrator enter the word "Employer." Item 6 Enter the minimum number of years of service and minimum age required for eligibility to participate in your plan, as selected by you in the Plan Agreement. If you selected no minimum requirement, enter "0". Item 7 Select from the attached address chart on page 28 the address of the IRS Key District office that applies to you, and enter that address in the space provided. Item 8 If you have fewer than 100 employees, enter the number equal to 10% of your employees, rounded up. For example, if you have 12 employees, enter "2." If you have 100 or more employees, enter "10." Item 9 Calculate the dates that are 45, 55, 75 and 90 days after the date you signed the Plan Agreement. Enter these dates in the blanks as marked on the Notice. Item 13 Enter the name of your business. IRS DISTRICT Albany, August, Boston, Brooklyn, Buffalo, Burlington, Hartford, Manhattan, Portsmouth, Providence KEY DISTRICT OFFICE Internal Revenue Service EP/EO Division P.O. Box 1680, GPO Brooklyn, NY 11202 IRS DISTRICT Baltimore, District of Columbia, Newark, Philadelphia, Pittsburgh, Richmond, Wilmington, any U.S. possession or foreign country KEY DISTRICT OFFICE Internal Revenue Service EP/EO Division P.O. Box 17010 Baltimore, MD 21203 IRS DISTRICT Cincinnati, Cleveland, Detroit, Indianapolis, Louisville, Parkersburg KEY DISTRICT OFFICE Internal Revenue Service EP/EO Division P.O. Box 3159 Cincinnati, OH 45201 IRS DISTRICT Albuquerque, Austin, Cheyenne, Dallas, Denver, Houston, Oklahoma City, Phoenix, Salt Lake City, Wichita KEY DISTRICT OFFICE Internal Revenue Service EP/EO Division Mail code 4950 DAL 1100 Commerce Street Dallas, TX 75242 IRS DISTRICT Atlanta, Birmingham, Columbia, Ft. Lauderdale, Greensboro, Jackson, Jacksonville, Little Rock, Nashville, New Orleans KEY DISTRICT OFFICE Internal Revenue Service EP/EO Division P.O. Box 941 Atlanta, GA 30370 IRS DISTRICT Honolulu, Laguna Niguel, Las Vegas, Los Angeles, San Jose KEY DISTRICT OFFICE Internal Revenue Service EP Application Receiving Room 5127 P.O. Box 536 Los Angeles, CA 90053-0536 IRS DISTRICT Aberdeen, Chicago, Des Moines, Fargo, Helena, Milwaukee, Omaha, St. Louis, St. Paul, Springfield KEY DISTRICT OFFICE Internal Revenue Service EP/EO Division 230 S. Dearborn DPN 20-6 Chicago, IL 60604 IRS DISTRICT Sacramento, San Francisco KEY DISTRICT OFFICE Internal Revenue Service EP Application Receiving Stop SF 4446 P.O. Box 36001 San Francisco, CA 94102 IRS DISTRICT Anchorage, Boise, Portland, Seattle KEY DISTRICT OFFICE Internal Revenue Service EP Application Receiving P.O. Box 21224 Seattle, WA 98111 Notice to Interested Parties 1. Notice to: All Employees of ______________________________ The employer named above has adopted the plan described in this notice, and had provided this notice as part of the automatic plan qualification process prescribed by the Internal Revenue Service. 2. Name of Plan: ________________________________________ 3. Plan Number: 00_______ Opinion Letter No.______ 4. Name and address of Plan Sponsor: Employer's Tax Identification No.: ________________________ 5. Name of Plan Administrator: ______ ______ 6. The employees eligible to participate under the Plan are those who have reached at least _____ years of age and completed at least _____ years of service. In addition, the following classifications of employees are included: 7. Address of Key District Director having jurisdiction of Plan: ___ ____ _____ _____Members of the following collective bargaining unit(s)(give names of unions): _____ _______ _____Nonresident aliens with no U.S. source of income. Requests for Comments by the Department of Labor 8. It is not contemplated that the Plan will be submitted to the Internal Revenue Service for an advanced determination as to whether or not it meets the qualification requirements of Section 401 or 403(a) of the Internal Revenue Code. 9. The Internal Revenue Service has not issued a determination letter with respect to the qualification of this Plan, which is a standardized prototype plan sponsored by Putnam Mutual Funds Corp. Plans in this category generally are entitled to automatic qualification and are not required to seek a determination letter. Rights of Interested Parties 10. You have the right to submit to the IRS Key District Director at the above address, either individually or jointly with other interested parties, your comments as to whether this Plan meets the qualification requirements of the Internal Revenue Code. You may instead, individually or jointly with other interested parties, request the Department of Labor to submit comments on your behalf to the Key District Director regarding qualification of the Plan. If the Department declines to comment on all or some of the matters you raise, you may individually or jointly (if your request was made to the Department jointly) submit your comments on these matters directly to the IRS Key District Director. 11. The Department of Labor may not comment on behalf of interested parties unless requested to do so by the lesser of ten employees or ten percent of the employees who qualify as interested parties. The number of persons needed for the Department to comment with respect to this Plan is _____ . If you request the Department to comment, your request must be in writing and must specify the matters upon which comments are requested, and must also include: (1) The information contained in items 2 through 5 of this Notice; and (2) the number of persons needed for the Department to comment. A request to the Department to comment should be addressed as follows: Assistant Secretary Pension and Welfare Benefit Administration U.S. Department of Labor 200 Constitution Avenue, N.W. Washington, D.C. 20216 Attn: 3001 Comment Request Comments to the Internal Revenue Service 12. Comments submitted by you to the IRS Key District Director must be in writing and received by him by _____ , 199_____ (75 days after Plan adoption). However, if there are matters that you request the Department of Labor to comment upon on your behalf, and the Department declines, you may submit comments on these matters to the Key District Director to be received by him within 15 days from the time the Department notifies you that it will not comment on a particular matter, or by ____ , 199_____ (75 days after Plan adoption), whichever is later, but in no event later than ___, 199__(90 days after Plan adoption). A request to the Department to comment on your behalf must be received by it by _____ , 199_____ (45 days after Plan adoption) if you wish to preserve your right to comment on a matter upon which the Department declines to comment, or by _____ , 199_____ (55 days after Plan adoption) if you wish to waive that right. Additional Information 13. Detailed instructions regarding the requirements for notification of interested parties may be found in sections 16, 17 and 18 of Revenue Procedure 91-10. Additional information concerning this application (including an updated copy of the Plan and related trust and copies of section 16 of Revenue Procedure 91-10) are available at the offices of ______________ during the hours of 9:00 a.m. to 5:00 p.m. for inspection and copying. (There may be a nominal charge for copying and/or mailing.) NOTE: Section 17 of Revenue Procedure 94-6 is included to provide plan participants with additional information. Section 17 of Revenue Procedure 94-6 WHAT RIGHTS TO NOTICE AND COMMENT DO INTERESTED PARTIES HAVE? * 01 Persons who qualify as interested parties under section 1.7476-1(b) of the regulations, have the following rights: (1) To receive notice, in accordance with section 18 below, that there will be filed an application for an advance determination regarding the qualification of plans described in sections 401, 403(a), 409 and 4975(e)(7) of the Code, or, with respect to plans described in section 7.05 above, to receive notice, in accordance with section 19 below, of the adoption or amendment of such plans; (2) To submit written comments with respect to the qualification of such plans to the Internal Revenue Service; (3) To request the Department of Labor to submit a comment to the Service on behalf of the interested parties; and (4) To submit written comments to the Service on matters with respect to which the Department of Labor was requested to comment but declined. * 02 comments submitted by interested parties must be received by the Key District Director by the 45th day after the date on which the application for determination is received by the Key District Director (see section 17.03 and 17.04 for filing deadlines where the Department of Labor has been requested to comment). Such comments must be in writing, signed by the interested parties or by an authorized representative of such parties (as provided in section 9.01(7) of Rev. Proc. 91-4), addressed to the Key District director to whom the application for determination was submitted, and contain the following information: (1) The names of the interested parties making the comments; (2) The name and taxpayer identification number of the applicant for a determination: (3) The name of the plan, the plan identification number, and the name of the plan administrator; (4) Whether the parties submitting the comment are: (a) Employees eligible to participate under the plan, (b) Employees with accrued benefits under the plan, or former employees with vested benefits under the plan, (c) Beneficiaries of deceased former employees who are eligible to receive or are currently receiving benefits under the plan, (d) Employees not eligible to participate under the plan. (5) The specific matters raised by the interested parties on the question of whether the plan meets the requirements for qualification involving sections 401 and 403(a) of the Code, and how such matters relate to the interests of the parties making the comment; and (6) The address of the interested party submitting the comment (or if a comment is submitted jointly by more than one party, the name and address of a designated representative) to which all correspondence, including a notice of the Service's final determination with respect to qualification, should be sent. (The address designated for notice by the Service will also be used by the Department of Labor in communicating with the parties submitting a request for comment.) The designated representative may be one of the interested parties submitting the comment or an authorized representative. If two or more interested parties submit a single comment and one person is not designated in the comment as the representative for receipt of correspondence, a notice of determination mailed to any interested party who submitted the comment shall be notice to all the interested parties who submitted the comment for purposes of section 7476(b)(5) of the Code. * 03 A request to the Department of Labor to submit to the Key District Director a comment pursuant to section 3001(b)(2) of the Employee Retirement Income Security Act of 1974 (ERISA) must be made in accordance with the following procedures: (1) The request must be received by the Department of Labor by the 25th day after the day the application is received by the Key District Director. However, if the parties requesting the Department to submit a comment wish to preserve the right to comment to the Key District Director in the event the Department declines to comment, the request must be received by the Department by the 15th day after the application is received by the Key District Director. (2) The request to the Department of Labor to submit a comment to the Key District Director must: (a) Be in writing; (b) Be signed as provided in section 17.02 above; (c) Contain the names of the interested parties requesting the Department to comment and the address of the interested party or designated representative to whom all correspondence with respect to the request should be sent. See also section 17.02(6) above; (d) Contain the information prescribed in section 17.02(2), (3), (4), above; (e) Contain the address of the Key District Director to whom the application was or will be submitted; (f) Contain a statement of the specific matters upon which the Department's comment is sought, as well as how such matters relate to the interested parties making the request; and (g) Be addressed as follows: Deputy Assistant Secretary Pension and Welfare Benefits Administration U.S. Department of Labor 200 Constitution Avenue, N.W. Washington, D.C. 20210 Attention: 3001 Comment Request 04 If a request described in 17.03 is made and the Department of Labor notifies the interested parties making the request that it declines to comment on a matter concerning qualification of the plan which was raised in the request, the parties submitting the request may still submit a comment to the Key District Director on such matter. The comment must be received by the later of the 45th day after the day the application for determination is received by the Key District Director or the 15th day after the day on which notification is given by the Department that it declines to submit a comment on such matter. (See section 17.07 for the date of notification.) In no event may the comment be received later than the 60th day after the application for determination was received. Such a comment must comply with the requirements of section 17.02 and include a statement that the comment is being submitted on matters raised in a request to the Department upon which the Department declined to comment. 05 For rules regarding the confidentiality of contents of written comments submitted by interested parties to the Service pursuant to section 17.02 or 17.04, see section 601.201(o)(5) of the Statement of Procedural Rules. 06 For rules regarding the availability to the application of copies of all comments on the application submitted pursuant to section 17.01(1), (2), or (3) of this revenue procedure, see section 601.201(o)(5) of the Statement of Procedural Rules. 07 An application for an advance determination, a comment to the Key District Director, or a request to the Department of Labor shall be deemed made when it is received by the Key District Director, or the Department. Notification by the Department that it declines to comment shall be deemed given when it is received by the interested party or designated representative. The notice described in section 18.01 below shall be deemed given when it is given in person, posted as prescribed in the regulations under section 7476 of the Code, or received through the mail. In any case where such an application, comment, request, notification, or notice is sent by mail, it shall be deemed received as of the date of the postmark (or if sent by certified or registered mail, the date of certification or registration), if it is deposited in the mail in the United States in an envelope or other appropriate wrapper, first class postage prepaid, properly addressed. However, if such an application, comment, request, notification, or notice is not received within a reasonable period from the date of postmark, the immediately preceding sentence shall not apply. Plan Investment Form Simplified Putnam Retirement Plans Please use this form to indicate your plan's initial investment in the Putnam Family of Funds, listing only one source of contribution per page. 1. Employer Phone No. ( ) Address City/State/Zip Employer's Name (Please Print) Authorized Employer Signature 2. Type of Simplified Putnam Retirement Plan (check one) _____ Putnam Profit Sharing Plan (Keogh) _____ Putnam Money Purchase Pension Plan (Keogh) _____ Paired Putnam Profit Sharing and Money Purchase Pension Plan (Keogh) _____ Putnam Profit Sharing and 401(k) Plan Note: If you have a Paired Putnam Profit Sharing and Money Purchase Pension Plan, you have two plans involving separate Plan contributions. Check this option and complete two Plan Investment Forms. To do this, make a copy of this Form, complete it accordingly and send both Forms with the plans' initial contribution checks. Remember, you only need to include one participant fee in one of your Plan contribution checks. 3. Dealer Representative Phone No. ( ) Dealer Firm Branch Location Representative's Signature 4. Participant Fee: $10.00 X _______ = ___________________ Number of Participants Annual Participant Fee Total Check Amount: Annual Participant Fee $ __________ Employer Contribution $ __________ (from final page) TOTAL $ __________ NOTE: Minimum contribution: $500 per plan; $25 per participant account. This plan does not allow for employee voluntary after-tax contributions. The following Putnam funds are available for retirement plan accounts. Please use these fund codes, listing only one fund per line, when completing the Plan Investment Form. A26 Putnam Adjustable Rate U.S. Government Fund A08 Putnam Convertible Income-Growth Trust A0A Putnam Daily Dividend Trust A43 Putnam Dividend Growth Fund A29 Putnam Diversified Income Trust B0H Putnam Energy-Resources Trust A44 Putnam Europe Growth Fund A02 The Putnam Fund for Growth and Income A01 The George Putnam Fund of Boston A18 Putnam Global Governmental Income Trust A05 Putnam Global Growth Fund A16 Putnam Federal Income Trust A0L Putnam Health Sciences Trust A10 Putnam American Government Income Fund A0D Putnam High Yield Trust A15 Putnam High Yield Advantage Fund A04 Putnam Income Fund A0U Putnam New Opportunities Trust A03 Putnam Investors Fund A0C Putnam Equity/Income Fund A19 Putnam OTC Emerging Growth Fund A0Y Putnam U.S. Government Income Trust A06 Putnam Vista Fund A07 Putnam Voyager Fund In addition to Putnam mutual funds, retirement investments may be made through the Putnam Capital Manager (PCM), a variable annuity. The PCM investment options are listed below. (Please call Putnam if you wish to use PCM in your retirement plan.) PCM Fixed Account PCM Money Market Account PCM U.S. Government and High Quality Bond Fund PCM High Yield Fund PCM Growth and Income Fund PCM International Equities Fund, a global fund PCM Voyager Fund PCM Multi-Strategy Fund Profit Sharing Plan Contributions Employer Date (Please list only one fund per line. Continue on an additional sheet if necessary.) Participant Participant Investment Employer Name Social Security Fund Selected Profit Sharing Plan Number (Please list only Contribution one fund per line) ___________ ______________ __________ $__________ ___________ ______________ __________ __________ Total Profit Sharing Plan Contributions: $ _____________ Money Purchase Pension Plan Contributions Employer Date (Please list only one fund per line. Continue on an additional sheet if necessary.) Participant Participant Investment Employer Name Social Security Fund Selected Money Purchase Number (Please list only Pension Plan one fund per line) Contribution ___________ _________ __________ $__________ ___________ _________ __________ __________ Total Money Purchase Pension Plan Contributions: $ ___________ Employee 401(k) Contributions Employer Date (Please list only one fund per line. Continue on an additional sheet if necessary.) Participant Participant Investment Name Social Security Fund Selected Employee Number (Please list only 401(k) one fund per line) Contribution ________ ____________ __________ $__________ ________ ____________ __________ __________ Total 401(k) Contributions: $ _____________ Part III: Questions and Answers about the Simplified Putnam Retirement Plans General Comments 39 Key Definitions 40 Contributions 41 Plan Investments 45 Plan Distributions 45 Top-Heavy Testing 46 Plan Administration 47 Glossary of Terms 49 Questions and Answers about the Simplified Putnam Retirement Plans While Putnam cannot give you legal or tax advice, our professionals have prepared these Questions and Answers to assist you in selecting among the many options presented in the Putnam Plan Agreements #001 and #002. If you have questions after reviewing them, consult your investment dealer or call Putnam Retirement Plan Services at 1-800-662-0019. Please remember that these Questions and Answers are only a general guide to help you make decisions in consultation with your legal and tax advisors. I. General Comments Q-1. Why should I adopt a Putnam Plan? A-1. Simplified Putnam Retirement Plans offer you and your Employees the opportunity to make retirement contributions on a tax-favored basis. The benefits to your business are twofold. First, a retirement plan will help you attract and retain good employees. Second, your Plan will qualify for tax-favored treatment. The tax laws generally do not allow employers to deduct wages until an employee includes those wages in income. But an employer can deduct its qualified retirement plan contributions when they are made, even though employees will not have to report those amounts as taxable income until the plan later distributes benefits. In the meantime, the plan contributions accumulate earnings tax-deferred. Q-2. What documents do I need? A-2. (1) A Putnam Basic Plan Document and (2) A Putnam Plan Agreement #001 (Standard Profit Sharing (Keogh) and Standard Profit Sharing and 401(k) Plan) or Putnam Plan Agreement #002 (Standard Money Purchase Pensions Plan (Keogh)). Q-3. What are these documents for? A-3. The Putnam Basic Plan Document contains the general rules for maintaining a Putnam Retirement Plan, and allows you to make certain choices for your own plan. You indicate your choices when you complete Putnam Plan Agreement #001 (for the Profit Sharing Plan (Keogh) or the Profit Sharing and 401(k) Plan) or #002 (for the Money Purchase Pension Plan Keogh). Q-4. Do terms beginning with capital letters have special meanings? A-4. Both the Putnam Basic Plan Document and the Plan Agreements contain terms that begin with capital letters because they have special definitions in the Basic Plan Document. These Questions and Answers also contain terms that begin with a capital letter because they have a special definition, either here or in Article 2 of the Basic Plan Document. All of these terms are defined in the Glossary of Terms at the end of these Questions and Answers. When the term "item" is used in these Questions and Answers, it refers to the numbered and lettered items to be completed in Putnam Plan Agreement #001 or #002. II. Key Definitions Q-5. What is an Affiliated Employer for purposes of the Plan? (Item 3.A) A-5. The term Affiliated Employer includes the business that is adopting or amending a Putnam plan, and any businesses related to that business as part of: * a "controlled group of corporations," as defined in Internal Revenue Code Section 414(b), * a group of businesses under "common control," as defined in Internal Revenue Code Section 414(c), or * an "affiliated service group," as defined in Internal Revenue Code Section 414(m). Generally, businesses that have 80% or more common ownership are Affiliated Employers, and businesses with as little as 10% common ownership may form an affiliated service group if one of them regularly performs services for or with the other. Your close relatives generally are considered to own any interest in a business that you own, and vice versa, for purposes of these rules. Please read the Affiliated Employers Worksheet (contained in a separate booklet) and consult your attorney or tax advisor if you suspect your business falls within any of the categories mentioned above. Q-6. How many Hours of Service should I specify as the minimum requirement for an Eligibility Period? (item 3.C.2) A-6. You may not require an Employee to complete more than 1,000 Hours of Service during the 12 months following his date of hire (or anniversaries of that date) in order to be credited with an Eligibility Period. Because 1,000 Hours of Service over 12 months equals approximately 20 hours per week, your election of the 1,000-hour option will prevent Employees who normally work less than 20 hours per week from becoming participants in your Plan. On the other hand, you could completely avoid counting Hours of Service by entering "1" in item 3.C.2 as the Hours of Service requirement. In that case, an individual who is paid for one Hour of Service will be credited with that Eligibility Period. You may require, in item 3.C.1, that an employee remain employed for one or two Eligibility Periods before he begins to participate in your Plan. (One Eligibility Period maximum for Elective Deferrals.) Q-7. How should "Compensation" be defined for purposes of my Plan? (Item 4) A-7. The definition of Compensation you choose will affect the amount you contribute to the Plan for you Employees. As a basic measure, you may elect either Form W-2 wages or the amount treated as compensation for purposes of Code Section 415, which is described in Section 6.5(b) of the Basic Plan Document. (The principal difference is that Form W-2 wages include all reimbursements for moving expenses, while the Code Section 415 amount includes reimbursements for moving expenses only if the reimbursed amount is not deductible by the Employee.) The term Earnings refers to both the Compensation paid to an Employee and the earned income of a self-employed worker. The Earnings of a self-employed worker include only his earned income from the trade or business with respect to which the Plan is established, and do not include contributions to the Plan (to the extent deductible under Code Section 404). See Section 2.13 of the Basic Plan Document. The definition of Compensation that you choose in the Plan Agreement will not affect the calculation of certain limits in the tax laws, for which special definitions apply regardless of the definition in the Plan. For an explanation of these limits and special definitions, see the Contribution Limits Worksheet contained in a separate booklet. Profit Sharing and 401(k) Plans Only: Both of the basic measures of compensation exclude any pre-tax contributions made by the Employee under a cafeteria (flexible compensation) plan, 401(k) plan, SARSEP, 403(b) plan, Section 457 deferred compensation plan or contributions described in Section 414(h)(2) that are "picked up" by a governmental employer. You may choose to add back these pre-tax amount for purposes of your Putnam Plan. For example, suppose Employee A has Form W-2 wages of $25,000, and he makes Elective Deferrals of $2,000 under a Putnam Profit Sharing and 401(k) Plan. If your business makes an Employer Contribution equal to 3% of each Plan Participant's Earnings, Employee A's allocation will be $750 (3% of 25,000) if the Plan counts only Form W-2 wages as Earnings, but $810 (3% of $27,000) if the Elective Deferral is added back. Q-8. Is there a limit on the amount of Earnings my Plan may take into account during a Plan Year? A-8. Yes. Regardless of the definition of Earnings you choose in item 4, for Plan Years beginning after December 31, 1993, only the first $150,000 of any Employee's Gross Earnings (including any pre-tax contributions) counts for your 1994 Plan Year for purposes of your Putnam Plan. The calculation is made on the basis of your Plan Year specified in item 2.A., which may or may not be the calendar year. If your Plan Year contains less than 12 months (for example, if you did not establish your Plan as of the first day of the Plan Year), you must limit each Employee's Earnings to the portion of the $150,000 limit that corresponds to the portion of 12 months represented by your Plan Year. The ceiling will be adjusted periodically for inflation. If your business employs the spouse or child (under age 19) of a 5% owner of the business, or of one of its ten most highly compensated employees, the combined Earnings of the spouse or child and those of the 5% owner or highly compensated employee may not exceed the current dollar limit. III. Contributions Q-9. What does it mean to "integrate" my Plan with Social Security? (Item 5.C and D of Plan Agreement #001, and Item 5.B and C of Plan Agreement #002). A-9. Generally, a Profit Sharing Plan or Money Purchase Pension Plan must allocate Employer Contributions pro rata according to the Earnings of Participants. For example, if the Earnings of all Participants total $200,000 for a given year, a Participant who earns $20,000 will be entitled to 10% ($20,000/$200,000) of the Employer Contribution. Integration represents a narrow exception to that general rule. By integrating, a plan may allocate extra contributions to Employees who have Earnings in excess of the Social Security Wage Base ("Wage Base"). This extra allocation is allowed because Social Security calls for no employer FICA tax payments on an employee's income in excess of the Wage Base, and thus prevents individuals who earn above the Wage Base from accruing Social Security retirement benefits in the same proportion to total pay as those earning below the Wage Base. Q-10. How does integration work? A-10. Section 4.2(c) of the Basic Plan Document sets forth the Integration Formula according to which Employer Contributions will be allocated among participants in an integrated Plan. Under that formula, the amount of Earnings at which a plan begins to make extra allocations is called its Integration Level. A related term is Excess Earnings, which means the amount of a Participant's Earnings above in Integration Level. For example, if a plan has an Integration Level of $16,000, an Employee whose Earnings are $20,000 a year has Excess Earnings of $4,000. Remember, the term Earnings includes amounts above and below the Integration Level. Putnam has designed its Integration Formula to adjust automatically each year so that the percentage of the extra Employer Contribution allocated in proportion to Excess Earnings is the maximum allowed by law. In general, the percentage rate of extra Employer Contributions allocated on the basis of Excess Earnings cannot exceed the percentage rate allocated on the basis of total Earnings, or 5.7% of Excess Earnings, whichever is less. For example, if your Plan requires an Employer Contribution sufficient to provide all Participants an allocation of 3% of their total Earnings, it may also allocate to the accounts of Participants who earn more than the Integration Level an extra amount equal to no more than 3% of their Excess Earnings. Thus, a Participant with Earnings of $20,000 will get a regular allocation of $600. If the Integration Level of the Plan is $16,000, he will also get an extra allocation of $120. On the other hand, if the Integration Formula results in an allocation to all Participants of an amount in excess of 5.7% of their total Earnings, the extra amount allocated to the Accounts of Participants who earn more than the Integration Level may not be more than 5.7% of their Excess Earnings. Q-11. How should I choose my Plan's Integration Level? (Item 5.D of Plan Agreement #001, and Item 5.C of Plan Agreement #002) A-11. You may select an Integration Level from among the three alternatives listed. The first choice presented is the Wage Base, which is adjusted annually to keep pace with the cost of living. Over recent years, the Wage Base has risen steadily: Year 1991 1992 1993 1994 Wage Base $53,400 $55,500 $57,600 $60,600 By defining your Plan's Integration Level as the Wage Base, or as a percentage of the Wage Base (the second option listed), you will build in an annual increase that you can expect to reflect the annual increase in pay levels. If instead you select a fixed dollar amount as your Integration Level (the third option), your formula is simpler, but it does not provide any hedge against annual wage inflation. To Maximize the extra allocations to Employees you want to benefit through integration, the Integration Level should be set as close as possible to the highest Earnings of the Participants you want to exclude from sharing in extra contributions. For example, suppose that your work force breaks down as follows for 1994: Class of Employee Executives Supervisors Rank and File Earnings Range Over $65,000 $30,000-$45,000 Under $20,000 If you want to make extra allocations only to your executives, the Wage Base ($60,600 for 1994) would be appropriate. An Integration Level equal to 50% of the Wage Base ($30,300 for 1994) would extend the benefits of integration to your supervisors as well as executives. Q-12. What types of contributions should I choose for my Profit Sharing and 401(k) Plan? (Items 5 and 12 of Plan Agreement #001) A-12. The various types of employer and employee contributions that may be made to your Putnam Profit Sharing and 401(k) Plan are described below. Employer Contributions (Item 5). Your business may make contributions in a discretionary amount that can vary from year to year, or you may specify a formula that will be used to calculate every year's contributions (for example, 5% of pay for the year). Generally, every Employee's share of each Employer Contribution will equal the percentage that his Earnings bear to the total Earnings of all Participants. Alternatively, you may elect to "integrate" your Plan with Social Security. Item 5.C presents this choice, and Q&A-9 and Q&A-10 explain how integration works. Elective Deferrals (Item 12.A). These contributions are often called 401(k) or before-tax contributions, because an Employee's taxable income will be reduced by the amount he chooses to contribute as an Elective Deferral. An active Employee under age 59 1/2 may withdraw elective Deferrals only in the event of financial hardship, and then only if you check "Yes" for item 12.D. Qualified Matching Contributions (Item 12.B). Qualified Matching Contributions cannot be withdrawn while a Participant remains an active Employee. You may use Qualified Matching Contributions to help your Plan pass the ADP Test, and thereby increase the Elective Deferrals allowed for Highly Compensated Employees. See Q&A-19. Qualified Nonelective Contributions (Item 12.C). Qualified Nonelective Contributions are subject to the same distribution restrictions as Qualified Matching Contributions. You may use Qualified Nonelective Contributions to help your Plan pass the ADP Test, and thereby increase the Elective Deferrals allowed for your Highly Compensated Employees. See Q&A-19. Q-13. Are there any overall limits on the amount that may be contributed to my Plan each year? A-13. Yes, there are two different limits. For a detailed explanation, refer to the Contribution Limits Worksheet contained in a separate Booklet. The first rule limits your overall contribution to the Plan for each Plan Year to the amount your business is allowed to deduct under section 404 of the Internal Revenue Code (see Section 4.2(a) of your Basic Plan Document). The deduction limit for Profit Sharing Plans is 15% of the total Earning paid during the Plan Year to all Plan Participants, excluding Elective Deferrals. For purposes of the 15% Profit Sharing Plan deduction limit, all of the following types of contributions are aggregated: * Employer Contributions * Qualified Matching contributions * Qualified Nonelective Contributions * Elective Deferrals The deduction limit for Money Purchase Pension Plans is 25% of the total Earnings paid during the Plan Year to all Plan Participants. The second overall Plan contribution limit applies on a Participant-by-Participant basis. This limit provides generally that the Annual Additions (as defined in the next paragraph) to each Participant's Account for a Plan Year may not exceed the lesser of: * 25% of the Participant's Earnings, excluding Elective Deferrals and pre-tax contributions under a cafeteria (flexible compensation) plan, SARSEP, 403(b) annuity or account, or a Section 457 deferred compensation plan, or * $30,000. The following types of contributions are considered to be Annual Additions: Employer Contributions, Qualified Matching Contributions, Qualified Nonelective Contributions, and Elective Deferrals. Rollover Contributions and investment earnings of all kinds are not Annual Additions. The Annual Additions limit applies on a combined basis to all plans of a single business, and to all plans of any businesses that would meet the definition of Affiliated Employers (in Q&A-3) if "50%" were substituted for "80%." Q-14. What is the deadline for making employer contributions for a Plan Year? A-14. In order to deduct the contributions your business makes for a Plan Year, the contributions must be paid to the Trustee no later than the due date (including any applicable extension) for filing the tax return for the taxable year of your business that corresponds to the Plan Year. In addition, ERISA requires that Elective Deferrals to a 401(k) plan be paid to the Trustee as soon as practicable after they are made or withheld, and in any event within 90 days. Q-15. For a Putnam Profit Sharing and 401(k) Plan, what is the current dollar limit on the amount of a Participant's annual Elective Deferrals, and how is that amount determined? (Item 12.A of Plan Agreement #001) A-15. For calendar year 1994, the dollar limit is $9,240. This amount is revised annually by the Internal Revenue Service to reflect the cost-of-living adjustments, and is published in an IRS announced issued early each year. The limits for the past four years have been as follows: Year 1991 1992 1993 1994 Deferral Limit $8,475 $8,728 $8,994 $9,240 For the current limit, please call Putnam Retirement Plan Services at 1-800-662-0019. Q-16. Is there any other limit on the amount of Elective Deferrals that my Employees may make? A-16. No, for your Non-Highly Compensated Employees ("NHCEs"). Yes, for your Highly Compensated Employees ("HCEs"), because the amount of their Elective Deferrals is subject to a second limit under the ADP Test contained in Section 401(k) of the Internal Revenue Code. "ADP," an abbreviation of the term "actual deferral percentage," means the average of the percentages of Earnings that a group of Employees contribute in the form of Elective Deferrals during the Plan Year. For example, suppose Widget Company's Plan covers two HCEs, who earn $75,000 and $100,000 respectively during the 1991 Plan Year. If the first HCE makes total Elective Deferrals of $7,500 for the year, his deferral percentage equals 10% ($7,500 deferred divided by $75,000 Earnings). If the other HCE makes no Elective Deferrals, her deferral percentage equals 0%. The actual deferral percentage, or ADP, for the HCEs as a group equals the average of 10% and 0%, or 5%. The same method applies when you calculate the ADP of your NHCEs. For each Plan Year, the ADP of your HCEs cannot exceed the ADP of your NHCEs by more than a certain percentage. That percentage varies as shown below: Actual ADP of NHCE Group 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% Maximum ADP of HCE Group 2% 4% 5% 6% 7% 8% 10% 2.5% 15% 17.5% 20% For example, the ADP of Widget's two HCEs was 5%. According to the above chart, the ADP of Widget's NHCEs must be at least 3% in order for Widget's Plan to satisfy the ADP test. Suppose the ADP of Widget's NHCEs was only 1%. The ADP of its HCEs would then be capped at 2%. If the ADP of Widget's HCEs exceeded 2% as of the end of the Plan Year being tested, Widget would have to reduce that ADP to 2% by following one of the two methods described in Q&A-18. The precise rules for ADP testing are set forth in Section 5.6 of your Basic Plan Document and a separate booklet. To protect the qualified status of your Plan, your Plan Administrator is responsible for performing the ADP Test each year to ensure that the ADP of your HCEs falls within the limits described above. The ADP Worksheet will guide you, step-by-step, through performance of this test. Q-17. Who is a Highly Compensated Employee? A-17. Your Highly Compensated Employees ("HCEs") include any Employee described in Section 2.58 of the Basic Plan Document. The HCE Worksheet contained in a separate booklet will help you identify your HCEs. Any Employee who is not an HCE is a Non-Highly Compensated Employee ("NHCE"). Q-18. What if my Plan fails the ADP Test for a Plan Year? A-18. If the ADP for HCEs for a Plan Year exceeds the maximum allowed under the ADP Test, then the difference between the ADP for HCEs and the ADP for NHCEs must be reduced by either lowering the ADP for HCEs, or raising the ADP for NHCEs, or both. To lower the ADP for HCEs, your Plan may refund sufficient Elective Deferrals to HCEs to bring their ADP down to the level that satisfies the ADP Test. Amounts refunded within the first 2-1/2 months after the end of a Plan Year, and the income attributable to the refunded Excess Contributions, will be included in the contributing HCEs' gross income in the taxable year when the Excess Contributions were made (not the year when the distribution occurs). Exception: If the total amount of Excess Contributions refunded to a Participant is less than $100, the refunded amount is taxable in the year of distribution. If the refunds are not made until after the 2-1/2 month deadline, the refunded amount and income will be taxable in the year of distribution. Section 5.4 of your Basic Plan Document sets forth the rules for calculating the income attributable to Excess Contributions by HCEs. Your business must take action to make the necessary refunds within 2-1/2 months after the Plan Year ends in order to avoid paying a nondeductible 10% excise tax on the Excess Contributions. If the excess is not corrected within 12 months after the Plan Year ends, the Elective Deferral portion of your Plan will be disqualified. An alternative way to correct a failed ADP Test is to raise the ADP of the NHCE group to the required level by making Qualified Nonelective Contributions for allocation to NHCEs only (see item 12.C.1). These contributions must be made by the due date (including extensions) for the Employer's tax return for its fiscal year that corresponds to the Plan Year to which the ADP Test applies. Q-19. How may Qualified Nonelective Contributions ("QNECs") and Qualified Matching Contributions help my Plan pass the ADP Test for a Plan Year? A-19. QNECs and Qualified Matching Contributions may be counted as Elective Deferrals by NHCEs in the ADP Test. IV. Plan Investments Q-20. Who should direct the investment of Employer contributions to my Plan? (Item 6.B) A-20. If your Plan is a 401(k) Plan, Participants always control the investment of Elective Deferrals themselves. With respect to all other contributions to a Profit Sharing or Money Purchase Pension Plan, you may choose in item 6.B of your Plan Agreement to make investment decisions for those contributions yourself. If you elect to direct your Plan's investments, you may be held personally liable for losses or for an inadequate rate of return. On the other hand, if you do not elect this option, the Plan provides that your Employees will direct the investment of all assets in their accounts. The Plan has been drafted to take advantage of the provisions of ERISA Section 404(c)1 if you choose. Generally you cannot be held responsible for the performance of the Plan's investments directed by Participants and Beneficiaries in an ERISA Section 404(c) plan, provided that: (1) Participants and Beneficiaries may choose from at least three diversified categories of investments, designated by you, having materially different risk and return characteristics; (2) Participants and Beneficiaries may change their investment instructions at least once in any three-month period, and more frequently if any investment with comparatively high market volatility is offered under the Plan; and (3) You provide Participants and Beneficiaries with sufficient information concerning the Plan's investment alternatives, such as prospectuses. Please call Putnam Retirement Plan Services at 1-800-662-0019 for more information regarding these requirements. Even if your Plan complies with the requirements described above for an ERISA Section 404(c) plan, you remain responsible for selecting and monitoring on an on-going basis the group of investments that will be available under the Plan, and for directing the investment of the account of a Participant or Beneficiary who gives no directions himself or who is legally incompetent. Putnam mutual funds and the separate investment portfolios available under PCM annuity contracts are considered "look-through" investments that provide diversification within a risk and return category, even for small accounts in a Plan. Of course, your Plan may offer more than three choices of investments. V. Plan Distributions Q-21. Should my Profit Sharing and 401(k) Plan permit Participants to choose life annuities as a form of distribution? (Item 7.A.2 of Plan Agreement #001) (Note: All Money Purchase Pension Plans are required to include life annuities as a form of distribution.) A-21. The life annuity option presented in item 7.A.2 allows Participants to use their Account balances to purchase an annuity contract such as the Putnam Capital Manager variable annuity. Under the annuity contract, a Participant will receive monthly payments for the remainder of his life, or for the Participant's life and that of another person. If a Participant who is married at the time of separation from service chooses a life annuity, then the Participant's spouse must give notarized, written consent to the election of any form of distribution other than a "joint and survivor" annuity providing income for the spouse's life, after the death of the Participant (see Article 11 of the Basic Plan Document). Spousal consent will also be required for any subsequent hardship distribution. If you are adopting your Putnam Plan as a replacement for a prior plan under which Participants had an option to receive their benefits in the form of a life annuity, you must check "Yes" for item 7.A.2. Q-22. What rules apply if my Profit Sharing (Keogh) or Profit Sharing and 401(k) Plan permits hardship distributions to Participants? (Items 7.B and 12.D of Plan Agreement #001) (Note: Money Purchase Pension Plans are not allowed to make hardship distributions.) A-22. Section 5.14 of the Basic Plan Document sets forth the precise standards for making hardship distributions to Employees from Putnam's Profit Sharing Plans. Generally, an applicant for a hardship distribution must fulfill two conditions to the satisfaction of the Plan Administrator. The purpose for the hardship distribution must be one of the following: (1) paying medical expenses of the Participant and his family, (2) making a down payment or paying closing costs for purchasing the Participant's primary residence, (3) paying tuition for the upcoming 12 months of post-secondary education for the Participant or his immediate family, or (4) paying an amount necessary to prevent the Participant's eviction form his principal residence, or foreclosure of the mortgage on it. In addition, the amount distributed must be limited to the amount of the expense that creates the hardship (plus taxes generated by the distribution), and in a Profit Sharing and 401(k) Plan the amount of a hardship distribution from any source other than the Employer Contribution Account cannot exceed the aggregate amount of Elective Deferrals he has made after December 31, 1988, plus the balance credited to the Participant's Elective Deferral Account as of December 31, 1988. Earnings that accrue on Elective Deferrals after that date may not be distributed on account of hardship. Q-23. What income tax withholding rules apply to distributions from the Plan? A-23. If a Participant's Account distributions will continue over a period of at least 10 years in substantially equal installments, the Participant may elect whether to have federal income tax withheld. If the Account will be distributed in any other form -- such as a single payment -- then the Plan must withhold federal income tax from the distribution unless the Participant elects to have the distribution transferred directly to an individual retirement account (IRA) or to another employer's qualified retirement plan. Each Participant who is entitled to a Plan distribution should receive the Special Tax Notice explaining the choices the Participant has with respect to income tax withholding. A copy of the Special Tax Notice is available by contacting ***** at 1-800-622-0019. VI. Top-Heavy Testing Q-24. Can I avoid annual top-heavy testing of my Plan? (Item 10). A-24. Yes, if you design the Plan to operate as though it is always top-heavy. To do that, you must select in item 5 of your Plan Agreement a contribution formula that meets the following requirements: If your Plan is a Profit Sharing Plan (Keogh), either leave item 5.C blank, or check the first blank in item 5.C. If your Plan is a Profit Sharing and 401(k) Plan, either complete the second blank in item 5.B with a percentage that is at least 3% AND leave item 5.C blank, or complete the first blank in item 12.C.2 with a percentage that is at least 3%. If your Plan is a Money Purchase Pension Plan, either complete item 5.A and leave items 5.B and 5.C blank, or leave item 5.A blank and complete the second blank in item 5.B with a percentage that is at least 3%. Q-25. What is a top-heavy Plan? (Item 10). A-25. Your Plan will be top-heavy for a Plan Year it its Top-Heavy Ratio exceeds 60%. Q&A-26 explains how to compute the Top-Heavy Ratio. The determination of whether your plan is top-heavy must be made separately for each Plan Year, because the top-heavy status of your Plan can change from Plan Year to Plan Year. Q-26. How is the Top-Heavy Ratio calculated? A-26. The Top-Heavy Ratio is a fraction, determined for a Plan Year, based on the Account balances in all qualified defined contribution plans of your business as of the last day of the preceding Plan Year. (In the first Plan Year of your Plan, these determinations are made as of its last day.) The numerator of the Top-Heavy Ratio fraction equals the sum of the Account balances of your Key Employees, as defined in Q&A-27. The denominator of the Top-Heavy Ratio fraction equals the sum of the Account balances of all of your Employees (including Key Employees). For purposes of determining the numerator and denominator of the Top-Heavy Ratio fraction, any part of any Account balance which has been distributed to a Participant in the five-year period ending on the calculation date is added back to the Participant's Account. Q-27. Who is a Key Employee? A-27. A person is a Key Employee of a business (corporation or unincorporated form) if he owns certain amounts of the business or has relatively large Gross Earnings from the business. Gross Earnings means Earnings plus Elective Deferrals plus any pre-tax contributions made by the Employee under a cafeteria (flexible compensation) plan, 401(k) plan, SARSEP, 403(b) plan, or a Section 457 deferred compensation plan. Your Key Employees for 1994 include any individual who, during your Plan Year beginning in 1994, falls into at least one of the following categories: receive more than $59,400 in Gross Earnings and is an officer of your business. receives more than $30,000 in Gross Earnings, and is one of the ten (or fewer) Employees who own the largest employee-owned interests in your business. owns at least a 5% interest in your business. receives more than $150,000 in Gross Earnings and owns at least a 1% interest in your business. Your Key Employees for 1994 also include anyone who was a Key Employee in any of the previous four Plan Years. The IRS annually adjusts the dollar amounts listed above according to cost-of-living increases. For the most current amounts, call Putnam Retirement Plan Services at 1-800-662-0019. any Employee who is not a Key Employee is a Non-Key Employee. Q-28. What are the consequences if my Plan is Top-Heavy? (Item 10) A-28. As explained in item 10 of your Plan Agreement, for any Plan Year in which your Plan is top-heavy, each Non-Key Employee who is employed on the last day of the Plan Year must have allocated to his account an Employer Contribution equal to the lesser of: (1) 3% of his Earnings, or (2) the highest percentage of Earnings allocated to any Key Employee (including the Key Employees' Elective Deferrals, if any). See the Top-Heavy Worksheet contained in a separate booklet for a detailed explanation. Q-29. Does this mean the contribution rules of my Plan may change form year to year, depending on whether it is top-heavy? A-29. Yes, unless you design the Plan to operate as though it is always top-heavy, as described in Q&A-24. VII. Plan Administration Q-30. Whom should I appoint to be my Plan Administrator? (Item 11) A-30. The person or entity you appoint as Plan Administrator bears legal responsibility for the operation of your Plan. A plan's administrator is a "fiduciary" under federal law, and is therefore subject to duties of prudence and loyalty to the Plan when acting as Plan Administrator. Frequently, the business that adopts a Plan acts in this capacity, although you may instead name a committee or individual by resolution or vote of the board of directors. The Plan Administrator has authority to interpret the provisions of the Plan and apply them to specific situations, a such as whether an Employee has become eligible to participate. All decisions of the Plan Administrator must follow the written rules of the Plan and must apply uniformly to all Participants in similar circumstances. Q-31. Do I have to obtain a special fidelity bond from an insurance company for my Plan? A-31. Yes, federal law requires a bond insuring the Plan against any fraud or dishonesty which may be committed by you or any of your officers or Employees who have access to the Plan's assets. Often the bond coverage can be obtained as a rider to your existing business insurance. Q-32. Should I submit my Plan to the Internal Revenue Service for a determination letter? A-32. The Internal Revenue Service has issued a favorable opinion letter as to the form of the Putnam Basic Plan Document, Plan Agreement #001, and Plan Agreement #002. This letter shows that Putnam's plan documents include all the terms required to qualify for tax-favored treatment under Section 401(a) of the Internal Revenue Code (see Q&A-1). You do not need to submit your Putnam Plan to the Internal Revenue Service, provided that: (1) you make only the choices presented in the Plan Agreement and do not modify the Plan in any other way; and (2) your business does not now have, and never has had, any other plan except for a Putnam paired plan, as explained in Q&A-33. Note: if you adopt a Putnam Plan as an amendment to an existing plan of the same type (profit sharing or money purchase), the existing plan is not an "other" plan for this purpose. If you now maintain or you have ever maintained any other plan except your Putnam Plan or a Putnam paired plan, you must file IRS Form 5307, "Application for Determination for Adopters of Master or Prototype, Regional Prototype or Volume Submitter Plans," with the Internal Revenue Service no later than the last day of your first Plan Year that begins after December 31, 1991. Please keep in mind that, even if you take the above steps, Putnam's opinion letter and your Plan's own determination letter do not control whether or not your Plan complies in operation with the Internal Revenue Code requirements described in the Putnam Basic Plan Document and Plan Agreement. Compliance in operation is your responsibility. We have prepared these Questions and Answers to assist you, but there is no substitute for individual attention to your particular situation. Therefore, we strongly encourage you to consult with your legal and tax advisors. Q-33. What are Putnam paired plans? A-33. Putnam paired plans are specially designed so that you can adopt both a Profit Sharing Plan and a Money Purchase Pension Plan, and not be required to submit either Putnam plan to the Internal Revenue Service for a determination letter. A Putnam Standard Money Purchase Pension Plan may be paired with either a Putnam Standard Profit Sharing Plan (Keogh) or a Putnam Standard Profit Sharing and 401(k) Plan. Only one of two paired plans may be integrated with Social Security. If paired plans are top-heavy, the top-heavy minimum contributions will be made in the Money Purchase Pension Plan. You might choose to adopt paired plans if you want to provide a minimum contribution every year (such as 5% of Earnings), but you also want to have the flexibility of making contributions greater than 15% of Earnings when your business has an especially profitable year. For example, if you adopt a Money Purchase Pension Plan with an annual contribution equal to 10% of Earnings and a Profit Sharing Plan with a discretionary contribution that varies from year to year, your business could contribute and deduct 10% of Earnings to the Money Purchase Pension Plan in any year regardless of profits or losses, but could also contribute and deduct up to 25% of Earnings in a profitable year (10% in the Money Purchase Pension Plan and 15% in the Profit Sharing Plan). Alternatively, you could use paired plans in order to have both a fixed rate of annual employer contributions (in a Money Purchase Pension Plan) and permit optional 401(k) contributions (in a Profit Sharing and 401(k) Plan). Part VIII. Glossary of Terms Account: All of a Participant s accounts. Basic Plan Document. ADP Test: A test limiting the Elective Deferrals that may be made on behalf of HCEs. (BPD5.6) Affiliated Employer: A member of a controlled group of corporations, or trades or businesses under common control, or an affiliated service group, with your business. (BPD2.2) Annual Additions: All of the following: Elective Deferrals, Employer Contributions, Qualified Matching Contributions, and Qualified Nonelective Contributions. (BPD Article 6) Actual Deferral Percentage Test: See ADP Test. Compensation: Whatever amount you designate in item 4. (BPD2.8) Earnings: Compensation of an employee or earned income of a self-employed worker, as limited (for 1994) to $150,000. Call Putnam Retirement Plan Services 1-800-662-0019 for the current limit. (BPD2.13) Elective Deferrals: Before-tax contributions made pursuant to an Employee s salary reduction agreement, according to the terms you select in item 12.A of your Plan Agreement. (BPD2.54) Eligibility Period: The 12-month periods beginning on an Employees first day of work and anniversaries of that date. (BPD2.15) Employee: An individual who performs services for your business. (BPD2.16) Employer Contributions: Contributions made pursuant to item 5 of your Plan Agreement. (BPD2.18) ERISA: The Employee Retirement Income Security Act of 1974, a federal law governing employee benefits, as amended from time to time. (BPD2.19) Family Member: An Employees spouse, children, grandchildren, parents or grandparents, and the spouse of an Employee s child or grandchild. A Family Member of an Employee who is one of the 10 highest paid Employees or is a 5% owner is not considered separately from the Employee for purposes of determining who are HCEs. (BPD2.58) Fidelity Bond: A bond, obtained from an insurance company, that protects the Plan against loss from the dishonesty of persons who handle contributions or distributions. Gross Earnings: Earnings plus Elective Deferrals plus any other pre-tax contributions to a cafeteria (flexible compensation) plan, SARSEP or 403(b) plan. Highly Compensated Employee (HCE): Generally, one who: Received more than $99,000 in Gross Earnings in the 1994 Plan Year or $96,368 the previous Plan Year. Received more than $66,000 in Gross Earnings in the 1994 Plan Year or $64,245 the previous Plan Year, and was in the top-paid 20% of your Employees. Received more than $59,400 in Gross Earnings in the 1994 Plan Year or $57,821 the previous Plan Year, and acted as an officer of your business. Owned at least a 5% interest in your business in the 1994 or 1993 Plan Year. These compensation limits are adjusted annually. Please call Putnam Retirement Plan Services at 1-800-662-0019 for the current limits. Hour of Service: Generally, any hour for which an Employee is paid or entitled to payment. (BPD2.22) Integration Level: The level of Earnings selected in item 5. Participants who earn in excess of the Integration Level receive an extra share of Employer Contributions. (BPD2.24) Key Employee: Generally, an Employee who during the current Plan Year falls into one of the following categories or was a Key Employee during any of the previous four years: Received more than $59,400 in Gross Earnings and acted as an officer of the business. Received more than $30,000 in Gross Earnings and was one of 10 Employees who owned the largest employee-owned interests in your business. Owned at least a 5% interest in your business. Received more than $150,000 in Gross Earnings and owned at least a 1% interest in your business. (BPD 15.2(a)) These compensation limits are adjusted annually. Please call Putnam Retirement Plan Services at 1-800-345-4000 for the current limits. Non-Key Employee: An Employee who is not a Key Employee. (BPD15.2(a)) Officer: For both corporate and non-corporate entities, officer includes any person who performs officer-like functions. Participant: An Employee who has satisfied the eligibility requirements specified in item 3 of your Plan Agreement. (BPD2.32) Plan: Your Putnam Profit Sharing Plan (Keogh), Putnam Profit Sharing and 401(k) Plan or Putnam Money Purchase Pension Plan (Keogh). (BPD2.34) Plan Administrator: The entity you appoint in item 11. The Plan Administrator has responsibility for enforcing the terms of the Plan. (Q&A-29; BPD2.35 and 16.1) Plan Year: Your Plans 12-month reporting year, as selected in item 2.A of your Plan Agreement. (BPD2.37) Qualified Matching Contributions: Contributions made pursuant to item 12.B. (BPD2.60) Qualified Nonelective Contributions: Contributions made pursuant to item 12.C. (BPD2.62) Top-Heavy Plan: A plan subject to special contribution rules because Key Employees Accounts hold 60% or more of Plan assets. (BPD15.3) Top-Heavy Ratio: The ratio of Key Employees Account balances to total assets of the Plan, used to determine whether a plan is top-heavy. (BPD15(c)) Wage Base: The maximum amount considered as wages for purposes of Social Security (FICA) tax, as in effect on the first day of the Plan Year. (BPD2.46) DRAFT OF 10/15/93 PUTNAM PROFIT SHARING AND 401(K) PLAN PLAN AGREEMENT #001 This is the Plan Agreement for a Putnam prototype profit sharing plan with optional Section 401(k) provisions. Please consult a tax or legal advisor and review the entire form before you sign it. If you fail to fill out this Putnam Plan Agreement properly, the Plan may be disqualified. You can get further information to help you complete the Plan Agreement from your investment dealer, or from Putnam at: Putnam Dedicated Corporate Services One Adams Place E2B Quincy, MA 02169 Phone: 1-800-752-9894 * * * * * By executing this Plan Agreement, the Employer establishes a profit sharing plan and trust upon the terms and conditions of Putnam Basic Plan Document #05, as supplemented and modified by the provisions elected by the Employer in this Plan Agreement. This Plan Agreement must be accepted by Putnam in order for the Employer to receive future amendments to the Putnam Profit Sharing and 401(k) Plan. * * * * * All Employers complete items 1-13 below. Employers who wish to adopt Section 401(k) provisions also complete item 14. 1. Business Information. The Employer adopting this Plan is: a. Business Name: ____________________________________ b. Business Address: _____________________________ ________________________SIC Code: _______ _______________________________ Person for Putnam to Contact: __________________________ Phone: __________________________ c. Federal Tax Identification Number: __________________ d. Form of Organization (check one): _____ Sole proprietorship _____ Corporation _____ Partnership _____ S Corporation e. Taxable Year of Business: ______ Calendar Year ______ Fiscal year ending on _______________________ 2. Plan Information. a. Plan Year. Check one: _____ The Plan Year will be the same as the Taxable Year of the Business shown in 1.E. above. If the Taxable Year of the Business changes, the Plan Year will change accordingly. _____ The Plan Year will be the period of 12 months beginning on the first day of __________________________ (month) and ending on the last day of __________________________ (month). The Plan Year will also be your Plan's Limitation Year for purposes of the contribution limitation rules in Article 6 of the Plan. If your Plan Year is the calendar year, do you wish to make the "calendar year election" for identifying your Highly Compensated Employees? _____ Yes _____ No b. Effective Date of Adoption of Plan. Are you adopting this Plan to replace an existing plan? _____ Yes _____ No If you answered Yes in 2.B. above, the Effective Date of your adoption of this Plan will be the first day of the current Plan Year. Please complete the following: ____________________________________________________________ Name of the plan you are replacing ____________________________________________________________ Original Effective Date of the plan you are replacing If you answered No in 2.B. above, the Effective Date of your adoption of this Plan will be the day you select below (not before the first day of the current Plan Year, and not before the day your Business began). The Effective Date is: _______________________ month/day/year 3. Eligibility for Plan Participation (Plan Section 3.1). Employees will be eligible to participate in the Plan when they complete the requirements you select in A, B and C below. a. Classes of Eligible Employees. The Plan requires coverage of all classes of employees of the Employer and any Affiliated Employer, except for union employees and nonresident aliens without U.S.-source income. The general rules of the Plan exclude employees in those two groups, but if you want employees in one or both categories to be eligible for your Plan, check the appropriate space below. The following employees will be eligible to participate in the Plan: _____ Members of the following collective bargaining unit(s) (give names of unions): ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ _____ Nonresident aliens with no U.S.-source income b. Age Requirement (check and complete one): _____ No minimum age required for participation _____ Employees must reach age __ (not over 21) to participate c. Service Requirements. i. To become eligible, an employee must complete (choose one): _____ a. No minimum service required. Skip the rest of this part C. _____ b. One 6-month Eligibility Period _____ c. One 12-month Eligibility Period _____ d. Two 12-month Eligibility Periods (may not be chosen if you adopt either Section 401(k) provisions under item 14 or a vesting schedule other than the first choice under item 8.A, which provides for 100% full and immediate vesting). ii. A 6-month Eligibility Period is a 6 month period beginning either on an employee's first day of work with the Employer, or on the date 6 months following the employee's first day of work and anniversaries of those dates. A 12-month Eligibility Period is the 12-month period beginning on an employee's first day of work with the Employer, and anniversaries of that date. If the Employer acquires a business, will the Eligibility Period for employees of the acquired business be the 12-month period beginning on the first day of work for the acquired business and anniversaries of that date (or the 6 month period beginning on the first day of work for the acquired business, the date 6 months following the first day of work and anniversaries of those dates, if applicable)? _____ Yes _____ No iii. a. To receive credit for a 6-month Eligibility Period, an employee must complete during it at least: _____ 500 Hours of Service _____ _____________ Hours of Service (under 500) Note: If you adopt a 6-month Eligibility Period, in any event, an employee will automatically receive credit for the Eligibility Period if the employee completes at least 1,000 Hours of Service during a 12-month consecutive month period following the first day of work. b. To receive credit for a 12-month Eligibility Period, an employee must complete during it at least: _____ 1,000 Hours of Service _____ _____________ Hours of Service (under 1,000) iv. Hours of Service will be credited to employees by the following method (check one): _____ a. Actual hours for which an employee is paid _____ b. Any employee who has one actual paid hour in the following period will be credited with the number of Hours of Service indicated (check one): _____ Day (10 Hours of Service) _____ Week (45 Hours of Service) _____ Semi-monthly payroll period (95 Hours of Service) _____ Month (190 Hours of Service) Note: If you are adopting this Plan to replace an existing plan, employees will be credited under this Plan with all service credited to them under the plan you are replacing. v. Entry Dates. Each Employee in an eligible class who completes the age and service requirements specified above will begin to participate in the Plan on (check one): _____ The first day of the month in which he fulfills the requirements _____ The first of the following dates occurring after he fulfills the requirements (or, if earlier, the first day of the first Plan Year that begins after the date he fulfills the requirements) (check one): _____ The first day of any month (monthly). _____ The first day of the first, fourth, seventh and tenth months in a Plan Year (quarterly). _____ The first day of the first month and the seventh month in a Plan Year (semiannually). d. (For New Plans Only) Will all Employees be required to meet the age and service requirements specified in B and C above? _____ Yes _____ No; all Employees on the Effective Date will be eligible as of the Effective Date, even if they have not met the age and service requirements. 4. Compensation (Plan Section 2.8). Compensation for purposes of the Plan will be the amount of the following that is actually paid by your Business to an employee during the Plan Year (check one): _____ Form W-2 earnings as defined in Section 2.8 of the Plan _____ Form W-2 earnings as defined in Section 2.8 of the Plan, plus any amounts withheld from the employee under a 401(k) plan, cafeteria plan, SARSEP, tax sheltered 403(b) arrangement, or Code Section 457 deferred compensation plan, or contributions described in Code Section 414(h)(2) that are picked up by a governmental employer _____ All compensation included in the definition of Code Section 415 Compensation in Section 6.5(b) of the Plan _____ All compensation included in the definition of Code Section 415 Compensation in Section 6.5(b) of the Plan, plus any amounts withheld from the employee under a 401(k) plan, cafeteria plan, SARSEP, tax sheltered 403(b) arrangement, or Code Section 457 deferred compensation plan, or contributions described in Code Section 414(h)(2) that are picked up by a governmental employer 5. Contributions (Plan Sections 4.1 - 4.3). a. Profit Limitation. Will Employer contributions to the Plan be limited to the current and accumulated profits of your Business? Check one: _____ Yes _____ No If you will make contributions only under the Section 401(k) provisions in item 14 of this Plan Agreement, skip the rest of this part 5. b. Amount. The Employer will contribute to the Plan for each Plan Year (check one): _____ An amount chosen by the Employer from year to year ______ ____% of the Earnings of all Qualified Participants for the Plan Year If you checked (2) above, will Forfeitures for a Plan Year be applied to reduce the amount of the contribution otherwise required? _____ Yes _____ No If you check No, Forfeitures will be allocated as though they were additional Employer Contributions. c. Allocations to Participants 1. Allocation to Qualified Participants. Any Employee who has met the eligibility requirements in item 3 of this Plan Agreement is a Qualified Participant unless, for reasons other than his death or Retirement, he is not an active Employee on the last day of the Plan Year, and he is not credited with more than 500 Hours of Service in the Plan Year. 2. Integration with Social Security. Contributions under paragraph B will be shared by Qualified Participants in proportion to their Earnings, unless you check one of the spaces below. _____ Each Qualified Participant's share will be a uniform dollar amount. _____ Contributions will be shared according to the Top-Heavy Integration Formula in Section 4.2(d)(1) of the Basic Plan Document in every Plan Year, whether or not the Plan if top-heavy. _____ Contributions will be shared according to the Top-Heavy Integration Formula in Section 4.2(d)(1) of the Basic Plan Document only in Plan Years in which the Plan is top-heavy. In all other Plan Years, contributions will be shared according to the Non-Top-Heavy Integration Formula in Section 4.2(d)(2) of the Basic Plan Document. 3. Integration Level. (Complete only if you have elected in 5C2 to integrate your Plan with Social Security). The Integration Level will be (check one): ____ The Social Security Wage Base in effect at the beginning of the Plan Year. ____ __% (not more than 100%) of the Social Security Wage Base in effect at the beginning of the Plan Year. ____ $__________ (not more than the Social Security Wage Base). D. Participant Contributions. Will your Plan allow Participants to make after-tax contributions? Yes No 6. Investments (Plan Sections 13.2 and 13.3). The Employer selects in part A below the Investment Products that will be available under the Plan (in addition to life insurance policies selected under Plan Article 14, if any). All Investment Products must be sponsored, underwritten, managed or expressly agreed to in writing by Putnam. From the group of available Investment Products selected by the Employer, each Participant chooses the investments for his own Accounts unless the Employer elects differently in B below. a. Available Investment Products (Plan Section 13.2). The following investments will be available under the Plan (check one): _____ The group of Putnam funds selected by the Employer and communicated to Participants in writing. A current list of the funds selected by the Employer from time to time shall be kept with the records of the Plan. The initial list of funds is as follows: ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ______ Putnam Fiduciary Trust Company GIC Fund ______ Other Investment Products (as defined in Section 2.26 of the Plan) In the event that there is any amount in the Trust Fund for which no instructions or unclear instructions are delivered, it will be invested in the default option selected by the Employer in its Service Agreement with Putnam (or if the Employer makes no such selection, in Putnam Daily Dividend Trust) until instructions are received in good order, and the Employer will be deemed to have selected the option indicated in its Service Agreement with Putnam (or if none, Putnam Daily Dividend Trust) as an available Investment Product for that purpose. b. Instructions (Plan Section 13.3). Investment instructions for amounts held under the Plan generally will be given by each Participant for his own Accounts and delivered to Putnam as indicated in the Service Agreement between Putnam and the Employer. Check below only if the Employer will make investment decisions under the Plan. _____ The Employer will make investment decisions. c. Changes. Investment instructions may be changed (check one): _____ on any Valuation Date (daily) _____ on the first day of any month (monthly) _____ on the first day of the first, fourth, seventh and tenth months in a Plan Year (quarterly) d. Voting of Employer Stock. Section 13.8 of the Plan provides that Employer Stock held as an investment under the Plan will be voted in accordance with the Employer's instructions unless the Employer elects that Participants will direct the voting of Employer Stock to the extent described in Section 13.8. Check below only if Participants will direct the voting of Employer Stock. _____ Participants are hereby appointed named fiduciaries for the purpose of voting of Employer Stock in accordance with Section 13.8. 7. Distributions and Withdrawals. a. Retirement Distributions. i. Normal Retirement Age (Plan Section 7.1). Normal retirement age will be _______ (not over the lesser of 65 or any mandatory retirement age enforced by the Employer). ii. Early Retirement (Plan Section 7.1). Check and complete the item below only if you want Participants to become fully vested upon fulfilling specified age and service requirements before reaching normal retirement age: _____ Early retirement will be permitted at age ____ with at least ________ Years of Service. iii. Annuities (Plan Section 9.3). Will your Plan permit a Participant to select a life annuity form of distribution? You must check Yes if this Plan replaces an existing Plan that permits distributions in life annuity form. Check one: _____ Yes _____ No b. Hardship Distributions (Plan Section 12.2). Will your Plan permit hardship distributions from Employer Contribution Accounts? You must check Yes if this Plan replaces an existing Plan that permits hardship distributions. Check one: _____ Yes _____ No c. Withdrawals after Age 59 1/2 (Plan Section 12.3). Will your Plan permit employees over age 59 1/2 to withdraw amounts upon request? You must check Yes if this Plan replaces an existing Plan that permits withdrawals after age 59 1/2. Check one: _____ Yes _____ No 8. Vesting. a. Time of Vesting. The provision checked below will determine a Participant's vested percentage in his Employer Contribution Account and, if you adopt the Section 401(k) provisions in item 14 and will make Employer Matching Contributions, his Employer Matching Contribution Account (check one): _____ 100% vesting immediately upon participation in the Plan. If you check this option, skip the rest of this part 8. _____ Six Year Graded Schedule: Vested Percentage 20% 40% 60% 80% 100% Years of Service 2 3 4 5 6 _____ Three Year Cliff Schedule: Vested Percentage 0% 100% Years of Service 0-2 3 _____ Other Schedule (must be at least as favorable as Six Year Graded Schedule or Three Year Cliff Schedule): Vested Percentage __% __% __% __% __% Years of Service ___ ___ ___ ___ ___ b. Service. Skip this part B if your Plan will include all of an employee's service in determining his Years of Service for vesting. Years of Service for vesting will exclude (check one or more): _____ Service before the Effective Date of the Plan, if this is a new plan, or service before the effective date of your existing plan, if this Plan replaces an existing plan _____ Service before the Plan Year in which an employee reached age 18 _____ Service for a business acquired by the Employer, before the date of acquisition c. Hours of Service. The number of Hours of Service required for crediting a Year of Service for vesting will be (check one): _____ 1,000 Hours of Service _____ ___________________ Hours of Service (under 1,000) d. Year of Service Measuring Period (Plan Section 2.49). The periods of 12 months used for measuring Years of Service will be (check one): _____ Plan Years _____ 12-month Eligibility Periods Note: If you are adopting this Plan to replace an existing plan, employees will be credited under this Plan with all service credited to them under the plan you are replacing. 9. Loans. Will your Plan permit loans to employees from their Accounts? _____ Yes _____ No 10. Automatic Distribution of Small Accounts (Plan Section 9.1). Will your Plan automatically distribute vested account balances not exceeding $3,500, within 60 days after the end of the Plan Year in which a Participant separates from employment? _____ Yes _____ No Note: The time for distribution cannot be left to the discretion of the Employer or the Plan Administrator. If you check No above, small accounts will be distributable at the time selected by the Participant. 11. Top-Heavy Minimum Contributions (Plan Section 15.3). For any Plan Year in which the Plan is top-heavy, you must provide for each Participant who is a non-key employee and who is employed on the last day of the Plan Year an allocation equal to 3% of his Earnings (or if less, the highest percentage allocated to any key employee). Neither Elective Deferrals, nor Employer Matching Contributions nor Qualified Matching Contributions for a non-key employee may be taken into account for purposes of this requirement. Skip paragraphs A and B below if you do not maintain any other qualified plan in addition to this Plan. a. If you maintain another qualified plan in addition to this Plan, specify below whether a non-key employee who participates in both plans will receive a top-heavy minimum contribution (or benefit) in this Plan or the other plan (check one): The top-heavy minimum contribution (or benefit) for non-key employees participating both in this Plan and another qualified plan maintained by the Employer will be provided in: _____ This Plan _____ The plan named here: ______________________ b. (Skip this paragraph if you do not maintain a defined benefit plan.) If you maintain a defined benefit plan in addition to this Plan, and the Top-Heavy Ratio (as defined in Plan Section 15.2(c)) for the combined plans is between 60% and 90%, you may elect to provide an increased minimum allocation or benefit pursuant to Plan Section 15.4. Specify your election by completing the statement below: The Employer will provide an increased (specify contribution or benefit) __________________________________ in its (specify defined contribution or defined benefit) ______________________ plan as required under Plan Section 15.4. 12. Other Plans. Skip this item 12 if the Plan is the only qualified plan your Business has ever had. You must complete this section if you maintain or ever maintained another qualified plan in which any Participant in this Plan is (or was) a participant or could become a participant. The Plan and your other plan(s) combined will meet the contribution limitation rules in Article 6 of the Plan as you specify below: a. If a Participant in the Plan is covered under another qualified defined contribution plan maintained by your Business, other than a master or prototype plan (check one): _____ The provisions of Section 6.2 of the Plan will apply as if the other plan were a master or prototype plan. _____ The plans will limit total annual additions to the maximum permissible amount, and will properly reduce any excess amounts, in the manner you describe below. _________________________________________________________________ _________________________________________________________________ B. If a Participant in the Plan is or has ever been a participant in a defined benefit plan maintained by your Business, the plans will meet the limits of Article 6 in the manner you describe below: _________________________________________________________________ _________________________________________________________________ Note: Your description under A or B above must not leave the selection of a method to your discretion from year to year. 13. Administration. a. Plan Administrator (Plan Section 16.1). You may appoint a person or a committee to serve as Plan Administrator. You may remove and replace anyone you have appointed, and anyone you have appointed may resign, without the need to amend this Plan Agreement, provided that you notify Participants in writing of any such change. If you do not appoint a Plan Administrator, the Plan provides that the Employer will be the Plan Administrator. The initial Plan Administrator will be (check one): _____ This person: _______________________________ _____ A committee composed of these people: ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ b. Recordkeeper (Plan Section 16.3). Unless Putnam expressly permits otherwise, you must appoint Putnam as Recordkeeper to perform certain routine services determined upon execution of a written Service Agreement between Putnam and you. The initial Recordkeeper will be: _______________________________________________________ Name _______________________________________________________ Address Complete item 14 below if your Plan will allow employees to elect pre-tax contributions under Section 401(k) of the Code. 14. Section 401(k) Plan Provisions (Plan Article 5). a. Elective Deferrals (Plan Section 5.2). i. A Participant may make Elective Deferrals in an amount not to exceed (check one): _____ (a) ___% of his Earnings _____ (b) $_______ (specify a dollar amount) for each payroll period Note: Elective Deferrals may not exceed the annual dollar limit under Section 402(g) of the Internal Revenue Code. ii. A Participant may begin to make Elective Deferrals, or change the amount of his Elective Deferrals, as of the following dates (check one): _____ First business day of each month (monthly). _____ First business day of the first, fourth, seventh and tenth months of the Plan Year (quarterly). _____ First business day of the first and seventh months of the Plan Year (semiannually). _____ First business day of the Plan Year only (annually). iii. May Participants make Elective Deferrals of bonuses? _____ Yes _____ No Note: You may choose to make Employer Matching Contributions or Qualified Matching Contributions, or neither, or both. Qualified Matching Contributions are always fully vested and cannot be distributed from the Plan before a Participant reaches age 59 1/2 or leaves employment. They will be used, to the extent needed, to help the Plan pass the ADP test explained on page __ of the Q & As. Employer Matching Contributions are subject to the vesting schedule elected in item 8 of this Plan Agreement, and can be withdrawn during employment in the event of financial hardship (as defined in Section 12.2 of the Plan) if you so elect in part F below. b. Employer Matching Contributions (Plan Section 5.8). Skip this part B if you will not make Employer Matching Contributions. i. The Employer will contribute and will allocate to each Participant's Employer Matching Account an amount equal to: (Check the provision(s) desired, and fill in the % blank(s) in each provision you check. If you wish to determine the amount of Employer Matching Contributions from year to year instead of specifying a fixed percentage, write "V" for variable in the % blank at the beginning of each provision you check.) _____ ___% of Elective Deferrals _____ ___% of Elective Deferrals that do not exceed ___% of Earnings _____ ___% of Elective Deferrals that do not exceed ___% of Earnings plus ___% of Elective Deferrals that do not exceed ___% of Earnings _____ ___% of Elective Deferrals that do not exceed ___% of Earnings plus ___% of Elective Deferrals that do not exceed ___% of Earnings plus ___% of Elective Deferrals that do not exceed ___% of Earnings ii. Will forfeited Employer Matching Contributions be applied to reduce the total contribution specified in B.(1) above? _____ Yes _____ No If you check No, forfeited Employer Matching Contributions will be allocated as though they were additional Employer Matching Contributions. c. Qualified Matching Contributions (Plan Section 2.58). Skip this part C if you will not make Qualified Matching Contributions. i. Qualified Matching Contributions will be made with respect to (check one): _____ Elective Deferrals by all Participants _____ Elective Deferrals only by Non-Highly Compensated Participants ii. The amount of Qualified Matching Contributions made with respect to a Participant will be: (Check the provision desired and fill in the % blank(s) in the provision you check. If you wish to determine the amount of Qualified Matching Contributions from year to year instead of specifying a fixed percentage, write "V" for variable in the % blank at the beginning of each provision you check.) _____ ___% of his Elective Deferrals _____ ___% of his Elective Deferrals that do not exceed ___% of his Earnings _____ ___% of his Elective Deferrals that do not exceed ___% of Earnings, plus ___% of Elective Deferrals that do not exceed ___% of Earnings _____ ___% of his Earnings d. Qualified Nonelective Contributions (Plan Section 2.60): Skip this part D if you will not make Qualified Nonelective Contributions. i. Qualified Nonelective Contributions will be made on behalf of (check one): _____ All Participants _____ Only Participants who are not Highly Compensated Employees ii. The amount of Qualified Nonelective Contributions for a Plan Year will be (check one): _____ ___% (not over 15%) of the Earnings of Participants on whose behalf Qualified Nonelective Contributions are made _____ An amount determined by the Employer from year to year, to be shared in proportion to Earnings by Participants on whose behalf Qualified Nonelective Contributions are made Note: Qualified Nonelective Contributions will be used, to the extent needed, to help the Plan pass the ADP test, explained on page __ of the Q & As. e. ACP Test. Every plan that has after-tax Participant Contributions, Employer Matching Contributions or Qualified Matching Contributions must pass an annual test called the ACP test, which is explained on page __ of the Q & As. Elective Deferrals and Qualified Nonelective Contributions will be used to help the Plan pass the ACP test, to the extent needed. f. Hardship Distributions from 401(k) Accounts (Plan Sections 12.2 and 5.14). i. Will your Plan permit hardship distributions from Elective Deferral Accounts? Check one: _____ Yes _____ No ii. If your Plan has Employer Matching Contributions, will it permit hardship distributions from Employer Matching Accounts? You must check Yes if this Plan replaces an existing plan that permits hardship distributions. Check one: _____ Yes _____ No 15. Reliance on Opinion Letter. If you ever maintained or you later adopt any plan (including a welfare benefit fund, as defined in Section 419(e) of the Code, which provides post-retirement medical benefits allocated to separate accounts for key employees, as defined in Section 419A(d)(3) of the Code; or an individual medical account, as defined in Section 415(l)(2) of the Code) in addition to this plan, you may not rely on an opinion letter issued to Putnam by the National Office of the Internal Revenue Service as evidence that the Plan is qualified under Section 401 of the Internal Revenue Code. If you maintain or adopt multiple plans, in order to obtain reliance with respect to plan qualification of the Plan, you must receive a determination letter from the appropriate Key District Office of Internal Revenue. Putnam will prepare an application for such a letter upon your request at a fee agreed upon by the parties. The Employer may not rely on the opinion letter issued by the National Office of the Internal Revenue Service as evidence that this plan is qualified under Section 401 of the Code unless the terms of the plan, as herein adopted or amended, that pertain to the requirements of Section 401(a)(4), 401(a)(17), 401(1), 401(a)(5), 410(b) and 414(s) of the Code, as amended by the Tax Reform Act of 1986 or later laws, (a) are made effective retroactively to the first day of the first Year beginning after December 31, 1988 (or such later date on which these requirements first become effective with respect to this plan); or (b) are made effective no later than the first day on which the Employer is no longer entitled, under regulations, to rely on a reasonable, good faith interpretation of these requirements, and the prior provisions of the plan constitute such an interpretation. Putnam will inform you of all amendments it makes to the prototype plan. If Putnam ever discontinues or abandons the prototype plan, Putnam will inform you. This Plan Agreement #001 may be used only in conjunction with Putnam's basic plan document #05. * * * * * EMPLOYER'S ADOPTION OF PUTNAM PROFIT SHARING AND 401(k) PLAN The Employer named below hereby adopts a PUTNAM PROFIT SHARING AND 401(k) PLAN, and appoints __________________ to serve as Trustee of the Plan. (Note: you may appoint a trustee other than Putnam Fiduciary Trust Company only with Putnam's express permission.) The Employer acknowledges that it has received copies of the current prospectus for each Investment Product available under the Plan, and represents that it will deliver copies of the then current prospectus for each such Investment Product to each Participant before each occasion on which the Participant makes an investment instruction as to his Account. The Employer further acknowledges that the Plan will be acknowledged by Putnam as a Putnam Profit Sharing and 401(k) Plan only upon Putnam's acceptance of this Plan Agreement. Employer signature(s) to adopt Plan: Date of signature: _________________________________________________________________ _________________________________________________________________ Please print name(s) of authorized person(s) signing above: _________________________________________________________________ Phone:____________________ _________________________________________________________________ Phone:____________________ A new Plan must be signed by the last day of the Plan Year in which the Plan is to be effective. INVESTMENT DEALER INFORMATION Firm: _________________________________________________________________ Branch: ________________________________________________________________ Address: _________________________________________________________________ Registered Representative: ___________________________________ Name _________________________________________ Phone * * * * * ACCEPTANCE OF TRUSTEE The Trustee accepts appointment in accordance with the terms and conditions of the Plan, effective as of the date of execution by the Employer set forth above. A. Putnam Fiduciary Trust Company, Trustee By: _________________________________________________________________ Complete Part B only if you have appointed a Trustee other than Putnam Fiduciary Trust Company. Note: Putnam may impose an annual maintenance fee as a condition of its acceptance of this plan as a Putnam Prototype Profit Sharing and 401(k) Plan. B. _________________________________, Trustee By: _________________________________ Trustee's Tax I.D. Number _______________ (Trustee) _________________________________________________________________ Address of Trustee Person for Putnam to Contact: ________________________________ P h o n e : _______________ Complete Part C only if insurance Policies will be purchased under Article 14 of the Plan (in addition to Putnam Investment Products). C. Appointment and Acceptance of Insurance Trustee 1. Appointment to: _________________________________________________________________ Name of Insurance Trustee You are hereby designated as Insurance Trustee for Policies to be held in accordance with the terms and conditions of this Plan and Trust. Employer signature to appoint Insurance Trustee: By:______________________________________________________________ (Authorized Signature) 2. Acceptance as Insurance Trustee is agreed to in accordance with the terms and conditions of the Plan, effective as of the date of execution by the Employer as set forth above. By:_____________________________________ Trustee's Tax I.D. Number _________________ _________________________________________________________________ Address of Insurance Trustee Person for Putnam to Contact: ________________________________ Phone: _______________ * * * * * ACCEPTANCE BY PUTNAM Putnam hereby accepts this Employer's Plan as a prototype established under Putnam Basic Plan Document #05. Putnam Mutual Funds Corp. By: ______________________________ DRAFT OF 10/18/93 PUTNAM MONEY PURCHASE PLAN PLAN AGREEMENT #002 This is the Plan Agreement for a Putnam prototype money purchase plan. Please consult a tax or legal advisor and review the entire form before you sign it. If you fail to fill out this Putnam Plan Agreement properly, the Plan may be disqualified. You can get further information to help you complete the Plan Agreement from your investment dealer, or from Putnam at: Putnam Dedicated Corporate Services One Adams Place E2B Quincy, MA 02169 Phone: 1-800-752-9894 * * * * * By executing this Plan Agreement, the Employer establishes a money purchase plan and trust upon the terms and conditions of Putnam Basic Plan Document #05, as supplemented and modified by the provisions elected by the Employer in this Plan Agreement. THIS PLAN AGREEMENT MUST BE ACCEPTED BY PUTNAM IN ORDER FOR THE EMPLOYER TO RECEIVE FUTURE AMENDMENTS TO THE PUTNAM MONEY PURCHASE PLAN. * * * * * 16. Business Information. The Employer adopting this Plan is: a. Business Name: ____________________________________ b. Business Address: ______________________________ _______________________________ SIC Code: ______ _______________________________ Person for Putnam to Contact: __________________________ Phone: __________________________ c. Federal Tax Identification Number: _____________ d. Form of Organization (check one): _____ Sole proprietorship _____ Corporation _____ Partnership _____ S Corporation e. Taxable Year of Business: ______ Calendar Year ______ Fiscal year ending on ________________________ 17. Plan Information. a. Plan Year. Check one: _____ The Plan Year will be the same as the Taxable Year of the Business shown in 1.E. above. If the Taxable Year of the Business changes, the Plan Year will change accordingly. _____ The Plan Year will be the period of 12 months beginning on the first day of __________________________ (month) and ending on the last day of __________________________ (month). The Plan Year will also be your Plan's Limitation Year for purposes of the contribution limitation rules in Article 6 of the Plan. If your Plan Year is the calendar year, do you wish to make the "calendar year election" for identifying your Highly Compensated Employees? _____ Yes _____ No b. Effective Date of Adoption of Plan. Are you adopting this Plan to replace an existing plan? _____ Yes _____ No If you answered Yes in 2.B. above, the Effective Date of your adoption of this Plan will be the first day of the current Plan Year. Please complete the following: _____________________________________________________________ Name of the plan you are replacing ______________________________________________________________ Original Effective Date of the plan you are replacing If you answered No in 2.B. above, the Effective Date of your adoption of this Plan will be the day you select below (not before the first day of the current Plan Year, and not before the day your Business began). The Effective Date is: _______________________ month/day/year 18. Eligibility for Plan Participation (Plan Section 3.1). Employees will be eligible to participate in the Plan when they complete the requirements you select in A, B and C below. a. Classes of Eligible Employees. The Plan requires coverage of all classes of employees of the Employer and any Affiliated Employer, except for union employees and nonresident aliens without U.S.-source income. The general rules of the Plan exclude employees in those two groups, but if you want employees in one or both categories to be eligible for your Plan, check the appropriate space below. The following employees will be eligible to participate in the Plan: _____ Members of the following collective bargaining unit(s) (give names of unions): ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ _____ Nonresident aliens with no U.S.-source income b. Age Requirement (check and complete one): _____ No minimum age required for participation _____ Employees must reach age __ (not over 21) to participate c. Service Requirements. i. To become eligible, an employee must complete (choose one): _____ a. No minimum service required. Skip the rest of this part C. _____ b. One 6-month Eligibility Period _____ c. One 12-month Eligibility Period _____ d. Two 12-month Eligibility Periods (may not be chosen if you adopt either Section 401(k) provisions under item 14 or a vesting schedule other than the first choice under item 8.A, which provides for 100% full and immediate vesting). ii. A 6-month Eligibility Period is a 6-month period beginning either on an employee's first day of work with the Employer or on the date 6-months following the employee's first day of work, and anniversaries of those dates. A 12-month Eligibility Period is the 12-month period beginning on an employee's first day of work with the Employer, and anniversaries of that date. If the Employer acquires a business, will the Eligibility Period for employees of the acquired business be the 12-month period beginning on the first day of work for the acquired business and anniversaries of that date (or the 6-month period beginning on the first day of work for the acquired business, the date 6 months following the first day of work and anniversaries of those dates, if applicable)? _____ Yes _____ No iii. a. To receive credit for a 6-month Eligibility Period, an employee must complete during it at least: _____ 500 Hours of Service _____ _____________ Hours of Service (under 500) Note: If you adopt a 6-month Eligibility Period, in any event, an employee will automatically receive credit for the Eligibility Period if the employee completes at least 1,000 Hours of Service during a 12-month consecutive month period following the first day of work. b. To receive credit for a 12-month Eligibility Period, an employee must complete during it at least: _____ 1,000 Hours of Service _____ _____________ Hours of Service (under 1,000) iv. Hours of Service will be credited to employees by the following method (check one): _____ a. Actual hours for which an employee is paid _____ b. Any employee who has one actual paid hour in the following period will be credited with the number of Hours of Service indicated (check one): _____ Day (10 Hours of Service) _____ Week (45 Hours of Service) _____ Semi-monthly payroll period (95 Hours of Service) _____ Month (190 Hours of Service) Note: If you are adopting this Plan to replace an existing plan, employees will be credited under this Plan with all service credited to them under the plan you are replacing. v. Entry Dates. Each Employee in an eligible class who completes the age and service requirements specified above will begin to participate in the Plan on (check one): _____ The first day of the month in which he fulfills the requirements. _____ The first of the following dates occurring after he fulfills the requirements (or, if earlier, the first day of the first Plan Year that begins after the date he fulfills the requirements) (check one): _____ The first day of any month (monthly). _____ The first day of the first, fourth, seventh and tenth months in a Plan Year (quarterly). _____ The first day of the first month and the seventh month in a Plan Year (semiannually). d. (For New Plans Only) Will all Employees be required to meet the age and service requirements specified in B and C above? _____ Yes _____ No; all Employees on the Effective Date will be eligible as of the Effective Date, even if they have not met the age and service requirements. 19. Compensation (Plan Section 2.8). Compensation for purposes of the Plan will be the amount of the following that is actually paid by your Business to an employee during the Plan Year (check one): _____ Form W-2 earnings as defined in Section 2.8 of the Plan. _____ Form W-2 earnings as defined in Section 2.8 of the Plan, plus any amounts withheld from the employee under a 401(k) plan, cafeteria plan, SARSEP, tax sheltered 403(b) arrangement, or Code Section 457 deferred compensation plan, or contributions described in Code Section 414(h)(2) that are picked up by a governmental employer. _____ All compensation included in the definition of Code Section 415 Compensation in Section 6.5(b) of the Plan. _____ All compensation included in the definition of Code Section 415 Compensation in Section 6.5(b) of the Plan, plus any amounts withheld from the employee under a 401(k) plan, cafeteria plan, SARSEP, tax sheltered 403(b) arrangement, or Code Section 457 deferred compensation plan, or contributions described in Code Section 414(h)(2) that are picked up by a governmental employer. 20. Contributions (Plan Section 4.3). a. Amount. The Employer will contribute to the Plan for each Plan Year this Basic Contribution Percentage (not more than 25%) ____% of the Earnings of all Qualified Participants for the Plan Year. b. Allocations to Participants 1. Allocation to Qualified Participants. Any Employee who has met the eligibility requirements in item 3 of this Plan Agreement is a Qualified Participant unless, for reasons other than his death or Retirement, he is not an active Employee on the last day of the Plan Year, and he is not credited with more than 500 Hours of Service in the Plan Year. 2. Integration with Social Security. Contributions under paragraph B will be shared by Qualified Participants in proportion to their Earnings, unless you check the following space to indicate that your Plan will be integrated with Social Security, as explained on page 3 of the Qs & As. The Plan will be integrated with Social Security, and the Base Contribution Percentage will be ___% (not less than 3% unless you will perform annual top-heavy testing for your Plan). 3. Integration Level. (Complete only if you have elected in 5.B.2. to integrate your Plan with Social Security). The Integration Level will be (check one): ____ The Social Security Wage Base in effect at the beginning of the Plan Year. ____ __% (not more than 100%) of the Social Security Wage Base in effect at the beginning of the Plan Year. ____ $__________ (not more than the Social Security Wage Base). c. Participant Contributions. Will your Plan allow Participants to make after-tax contributions? Yes No 21. Investments (Plan Sections 13.2 and 13.3). The Employer selects in part A below the Investment Products that will be available under the Plan (in addition to life insurance policies selected under Plan Article 14, if any). All Investment Products must be sponsored, underwritten, managed or expressly agreed to in writing by Putnam. From the group of available Investment Products selected by the Employer, each Participant chooses the investments for his own Accounts unless the Employer elects differently in B below. a. Available Investment Products (Plan Section 13.2). The following investments will be available under the Plan (check one): _____ The group of Putnam funds selected by the Employer and communicated to Participants in writing. A current list of the funds selected by the Employer from time to time shall be kept with the records of the Plan. The initial list of funds is as follows: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ______ Putnam Fiduciary Trust Company GIC Fund ______ Other Investment Products (as defined in Section 2.26 of the Plan) In the event that there is any amount in the Trust Fund for which no instructions or unclear instructions are delivered, it will be invested in the default option selected by the Employer in its Service Agreement with Putnam (or if the Employer makes no such selection, in Putnam Daily Dividend Trust) until instructions are received in good order, and the Employer will be deemed to have selected the option indicated in its Service Agreement with Putnam (or if none, Putnam Daily Dividend Trust) as an available Investment Product for that purpose. b. Instructions (Plan Section 13.3). Investment instructions for amounts held under the Plan generally will be given by each Participant for his own Accounts and delivered to Putnam as indicated in the Service Agreement between Putnam and the Employer. Check below only if the Employer will make investment decisions under the Plan. _____ The Employer will make investment decisions. c. Changes. Investment instructions may be changed (check one): _____ on any Valuation Date (daily) _____ on the first day of any month (monthly) _____ on the first day of the first, fourth, seventh and tenth months in a Plan Year (quarterly) d. Voting of Employer Stock. Section 13.8 of the Plan provides that Employer Stock held as an investment under the Plan will be voted in accordance with the Employer's instructions unless the Employer elects that Participants will direct the voting of Employer Stock to the extent described in Section 13.8. Check below only if Participants will direct the voting of Employer Stock. _____ Participants are hereby appointed named fiduciaries for the purpose of voting of Employer Stock in accordance with Section 13.8. 22. Retirement Age. a. Normal Retirement Age (Plan Section 7.1). Normal retirement age will be _______ (not over the lesser of 65 or any mandatory retirement age enforced by the Employer). b. Early Retirement (Plan Section 7.1). Check and complete the item below only if you want Participants to become fully vested upon fulfilling specified age and service requirements before reaching normal retirement age: _____ Early retirement will be permitted at age ____ with at least ________ Years of Service. 23. Vesting. a. Time of Vesting. The provision checked below will determine a Participant's vested percentage in his Employer Contribution Account. _____ 100% vesting immediately upon participation in the Plan. If you check this option, skip the rest of this part 8. _____ Six Year Graded Schedule: Vested Percentage 20% 40% 60% 80% 100% Years of Service 2 3 4 5 6 _____ Three Year Cliff Schedule: Vested Percentage 0% 100% Years of Service 0-2 3 _____ Other Schedule (must be at least as favorable as Six Year Graded Schedule or Three Year Cliff Schedule): Vested Percentage __% __% __% __% __% Years of Service ___ ___ ___ ___ ___ b. Service. Skip this part B if your Plan will include all of an employee's service in determining his Years of Service for vesting. Years of Service for vesting will exclude (check one or more): _____ Service before the Effective Date of the Plan, if this is a new plan, or service before the effective date of your existing plan, if this Plan replaces an existing plan _____ Service before the Plan Year in which an employee reached age 18 _____ Service for a business acquired by the Employer, before the date of acquisition c. Hours of Service. The number of Hours of Service required for crediting a Year of Service for vesting will be (check one): _____ 1,000 Hours of Service _____ ___________________ Hours of Service (under 1,000) d. Year of Service Measuring Period (Plan Section 2.49). The periods of 12 months used for measuring Years of Service will be (check one): _____ Plan Years _____ 12-month Eligibility Periods NOTE: IF YOU ARE ADOPTING THIS PLAN TO REPLACE AN EXISTING PLAN, EMPLOYEES WILL BE CREDITED UNDER THIS PLAN WITH ALL SERVICE CREDITED TO THEM UNDER THE PLAN YOU ARE REPLACING. 24. Loans. Will your Plan permit loans to employees from their Accounts? _____ Yes _____ No 25. Automatic Distribution of Small Accounts (Plan Section 9.1). Will your Plan automatically distribute vested account balances not exceeding $3,500, within 60 days after the end of the Plan Year in which a Participant separates from employment? _____ Yes _____ No Note: The time for distribution cannot be left to the discretion of the Employer or the Plan Administrator. If you check No above, small accounts will be distributable at the time selected by the Participant. 26. Top-Heavy Minimum Contributions (Plan Section 15.3). For any Plan Year in which the Plan is top-heavy, you must provide for each Participant who is a non-key employee and who is employed on the last day of the Plan Year an allocation equal to 3% of his Earnings (or if less, the highest percentage allocated to any key employee). Skip paragraphs A and B below if you do not maintain any other qualified plan in addition to this Plan. a. If you maintain another qualified plan in addition to this Plan, specify below whether a non-key employee who participates in both plans will receive a top-heavy minimum contribution (or benefit) in this Plan or the other plan (check one): The top-heavy minimum contribution (or benefit) for non-key employees participating both in this Plan and another qualified plan maintained by the Employer will be provided in: _____ This Plan (Check this if the other plan is another Putnam prototype plan.) _____ The plan named here: ______________________ b. (Skip this paragraph if you do not maintain a defined benefit plan.) If you maintain a defined benefit plan in addition to this Plan, and the Top-Heavy Ratio (as defined in Plan Section 15.2(c)) for the combined plans is between 60% and 90%, you may elect to provide an increased minimum allocation or benefit pursuant to Plan Section 15.4. Specify your election by completing the statement below: The Employer will provide an increased (specify contribution or benefit) __________________________________ in its (specify defined contribution or defined benefit) ______________________ plan as required under Plan Section 15.4. 27. Other Plans. Skip this item 12 if the Plan is the only qualified plan your Business has ever had. You must complete this section if you maintain or ever maintained another qualified plan in which any Participant in this Plan is (or was) a participant or could become a participant. The Plan and your other plan(s) combined will meet the contribution limitation rules in Article 6 of the Plan as you specify below: a. If a Participant in the Plan is covered under another qualified defined contribution plan maintained by your Business, other than a master or prototype plan (check one): _____ The provisions of Section 6.2 of the Plan will apply as if the other plan were a master or prototype plan. _____ The plans will limit total annual additions to the maximum permissible amount, and will properly reduce any excess amounts, in the manner you describe below. _________________________________________________________________ ________________________________________________________________ B. If a Participant in the Plan is or has ever been a participant in a defined benefit plan maintained by your Business, the plans will meet the limits of Article 6 in the manner you describe below: _________________________________________________________________ ________________________________________________________________ NOTE: YOUR DESCRIPTION UNDER A OR B ABOVE MUST NOT LEAVE THE SELECTION OF A METHOD TO YOUR DISCRETION FROM YEAR TO YEAR. If your Business has ever maintained a defined benefit plan, state below the interest rate and mortality table to be used in establishing the present value of any benefit under the defined benefit plan for purposes of computing the top-heavy ratio: Interest rate: %______________________________________ Mortality table: __________________________________ 28. Administration. a. Plan Administrator (Plan Section 16.1). You may appoint a person or a committee to serve as Plan Administrator. You may remove and replace anyone you have appointed, and anyone you have appointed may resign, without the need to amend this Plan Agreement, provided that you notify Participants in writing of any such change. If you do not appoint a Plan Administrator, the Plan provides that the Employer will be the Plan Administrator. The initial Plan Administrator will be (check one): _____ This person: _______________________________ _____ A committee composed of these people: ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ b. Recordkeeper (Plan Section 16.3). Unless Putnam expressly permits otherwise, you must appoint Putnam as Recordkeeper to perform certain routine services determined upon execution of a written Service Agreement between Putnam and you. The initial Recordkeeper will be: ______________________________________________________ Name ______________________________________________________ Address 29. Reliance on Opinion Letter. If you ever maintained or you later adopt any plan (including a welfare benefit fund, as defined in Section 419(e) of the Code, which provides post-retirement medical benefits allocated to separate accounts for key employees, as defined in Section 419A(d)(3) of the Code; or an individual medical account, as defined in Section 415(l)(2) of the Code) in addition to this plan, you may not rely on an opinion letter issued to Putnam by the National Office of the Internal Revenue Service as evidence that the Plan is qualified under Section 401 of the Internal Revenue Code. If you maintain or adopt multiple plans, in order to obtain reliance with respect to plan qualification of the Plan, you must receive a determination letter from the appropriate Key District Office of Internal Revenue. Putnam will prepare an application for such a letter upon your request at a fee agreed upon by the parties. The Employer may not rely on the opinion letter issued by the National Office of the Internal Revenue Service as evidence that this plan is qualified under Section 401 of the Code unless the terms of the plan, as herein adopted or amended, that pertain to the requirements of Section 401(a)(4), 401(a)(17), 401(1), 401(a)(5), 410(b) and 414(s) of the Code, as amended by the Tax Reform Act of 1986 or later laws, (a) are made effective retroactively to the first day of the first Year beginning after December 31, 1988 (or such later date on which these requirements first become effective with respect to this plan); or (b) are made effective no later than the first day on which the Employer is no longer entitled, under regulations, to rely on a reasonable, good faith interpretation of these requirements, and the prior provisions of the plan constitute such an interpretation. Putnam will inform you of all amendments it makes to the prototype plan. If Putnam ever discontinues or abandons the prototype plan, Putnam will inform you. This Plan Agreement #002 may be used only in conjunction with Putnam's basic plan document #05. * * * * * EMPLOYER'S ADOPTION OF PUTNAM MONEY PURCHASE PLAN The Employer named below hereby adopts a PUTNAM MONEY PURCHASE PLAN, and appoints __________________ to serve as Trustee of the Plan. (Note: you may appoint a trustee other than Putnam Fiduciary Trust Company only with Putnam's express permission.) The Employer acknowledges that it has received copies of the current prospectus for each Investment Product available under the Plan, and represents that it will deliver copies of the then current prospectus for each such Investment Product to each Participant before each occasion on which the Participant makes an investment instruction as to his Account. The Employer further acknowledges that the Plan will be acknowledged by Putnam as a Putnam Money Purchase Plan only upon Putnam's acceptance of this Plan Agreement. Employer signature(s) to adopt Plan: Date of signature: ____________________________________________________ ____________________________________________________ Please print name(s) of authorized person(s) signing above: ____________________________________________________ Phone:____________________ ____________________________________________________ Phone:____________________ A new Plan must be signed by the last day of the Plan Year in which the Plan is to be effective. INVESTMENT DEALER INFORMATION Firm: ____________________________________________________________ Branch: __________________________________________________________ Address: ________________________________________________________ Registered Representative:__________________________________ Name ______________________________________ Phone * * * * * ACCEPTANCE OF TRUSTEE The Trustee accepts appointment in accordance with the terms and conditions of the Plan, effective as of the date of execution by the Employer set forth above. A. Putnam Fiduciary Trust Company, Trustee By: ______________________________________________________________ Complete Part B only if you have appointed a Trustee other than Putnam Fiduciary Trust Company. Note: Putnam may impose an annual maintenance fee as a condition of its acceptance of this plan as a Putnam Prototype Money Purchase Plan. B. _________________________________, Trustee By: _________________________________ Trustee's Tax I.D. Number _______________ (Trustee) _________________________________________________________________ Address of Trustee Person for Putnam to Contact: ________________________________ P h o n e : _______________ Complete Part C only if insurance Policies will be purchased under Article 14 of the Plan (in addition to Putnam Investment Products). C. Appointment and Acceptance of Insurance Trustee 1. Appointment to: _________________________________________________________________ Name of Insurance Trustee You are hereby designated as Insurance Trustee for Policies to be held in accordance with the terms and conditions of this Plan and Trust. Employer signature to appoint Insurance Trustee: By:_____________________________________________________________ (Authorized Signature) 2. Acceptance as Insurance Trustee is agreed to in accordance with the terms and conditions of the Plan, effective as of the date of execution by the Employer as set forth above. By:___________________ Trustee's Tax I.D. Number ________ _______________________________________________________________ Address of Insurance Trustee Person for Putnam to Contact: ________________________________ Phone: _____________ * * * * * ACCEPTANCE BY PUTNAM Putnam hereby accepts this Employer's Plan as a prototype established under Putnam Basic Plan Document #05. Putnam Mutual Funds Corp. By: ______________________________ PUTNAM PROFIT SHARING AND 401(K) PLAN PLAN AGREEMENT #003 This is the Plan Agreement for a Putnam prototype profit sharing plan with optional Section 401(k) provisions. Please consult a tax or legal advisor and review the entire form before you sign it. If you fail to fill out this Putnam Plan Agreement properly, the Plan may be disqualified. You can get further information to help you complete the Plan Agreement from your investment dealer, or from Putnam at: Putnam Defined Contribution Plans Attn: Trust Administration/Level 3 859 Willard St. E3D Quincy, MA 02269 Phone: 1-800-752-5766 * * * * * By executing this Plan Agreement, the Employer establishes a profit sharing plan and trust upon the terms and conditions of Putnam Basic Plan Document #05, as supplemented and modified by the provisions elected by the Employer in this Plan Agreement. THIS PLAN AGREEMENT MUST BE ACCEPTED BY PUTNAM IN ORDER FOR THE EMPLOYER TO RECEIVE FUTURE AMENDMENTS TO THE PUTNAM PROFIT SHARING AND 401(K) PLAN. * * * * * All Employers complete items 1-11 below. Employers who wish to adopt Section 401(k) provisions also complete item 12. 30. Business Information. The Employer adopting this Plan is: a. Business Name: ____________________________________ b. Business Address: ______________________________ _______________________________ _______________________________ Person for Putnam to Contact: __________________________ Phone: __________________________ c. Federal Tax Identification Number: _____________ d. Form of Organization (check one): _____ Sole proprietorship _____ Corporation _____ Partnership _____ S Corporation e. Taxable Year of Business: _____ Calendar Year _____ Fiscal year ending on _______________________ 31. Plan Information. a. Plan Year. Check one: _____ The Plan Year will be the same as the Taxable Year of the Business shown in 2.A. above. If the Taxable Year of the Business changes, the Plan Year will change accordingly. _____ The Plan Year will be the period of 12 months beginning on the first day of __________________________ (month) and ending on the last day of __________________________ (month). The Plan Year will also be your Plan's Limitation Year for purposes of the contribution limitation rules in Article 6 of the Plan. b. Effective Date of Adoption of Plan. Are you adopting this Plan to replace an existing plan? _____ Yes _____ No If you answered Yes in 2.B. above, please complete the following: _____________________________________________________________ Name of the plan you are replacing ______________________________________________________________ Original Effective Date of the plan you are replacing The Effective Date of your adoption of this Plan will be the day you select below (not before the first day of the current Plan Year, and not before the day your Business began). The Effective Date is: _______________________ month/day/year c. Identifying Highly Compensated Employees. Check One: _____ The Plan will use the regular method under Plan Section 2.56 for identifying Highly Compensated Employees. If your Plan Year is the calendar year, do you wish to make the regular method's "calendar year election" for identifying your Highly Compensated Employees? _____ Yes _____ No _____ The Plan will use the simplified method under Plan Section 2.56 for identifying Highly Compensated Employees. 32. Eligibility for Plan Participation (Plan Section 3.1). Employees will be eligible to participate in the Plan when they complete the requirements you select in A, B and C below. a. Classes of Eligible Employees. The Plan requires coverage of all classes of employees of the Employer and any Affiliated Employer, except for union employees and nonresident aliens without U.S.-source income. The general rules of the Plan exclude employees in those two groups, but if you want employees in one or both categories to be eligible for your Plan, check the appropriate space below. The following employees will be eligible to participate in the Plan: _____ Members of the following collective bargaining unit(s) (give names of unions): _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _____ Nonresident aliens with no U.S.-source income b. Age Requirement (check and complete one): _____ No minimum age required for participation _____ Employees must reach age ___ (not over 21) to participate c. Service Requirements. A 6-month Eligibility Period is a 6-month period beginning either on an employee's first day of work with the Employer or on the date 6 months following the employee's first day of work, and anniversaries of those dates. A 12-month Eligibility Period is the 12- month period beginning on an employee's first day of work with the Employer, and anniversaries of that date. i. To become eligible, an employee must complete (choose one): _____ a. No minimum service required. Skip the rest of this part C. _____ b. One 6-month Eligibility Period _____ c. One 12-month Eligibility Period _____ d. Two 12-month Eligibility Periods (may not be chosen if you adopt either the Section 401(k) provisions under item 12 or a vesting schedule other than the first choice under item 8.A, which provides for 100% full and immediate vesting). ii. If the Employer acquires a business, will the Eligibility Period for employees of the acquired business be the 12-month period beginning on the first day of work for the acquired business, and anniversaries of that date (or the 6-month period beginning on the first day of work for the acquired business, the date 6 months following the first day of work and anniversaries of those dates, if applicable)? _____ Yes _____ No iii. a. To receive credit for a 6-month Eligibility Period, an employee must complete during it at least: _____ 500 Hours of Service _____ _____________ Hours of Service (must be 1 hour or more) (under 500) Note: If you adopt a 6-month Eligibility Period, in any event, an employee will automatically receive credit for the Eligibility Period if the employee completes at least 1,000 Hours of Service during a 12 consecutive month period following the first day of work. b. To receive credit for a 12-month Eligibility Period, an employee must complete it during at least: _____ 1,000 Hours of Service _____ _____________ Hours of Service (must be 1 hour or more) (under 1,000) iv. Hours of Service will be credited to employees by the following method (check one): _____ a. Actual hours for which an employee is paid _____ b. Any employee who has one actual paid hour in the following period will be credited with the number of Hours of Service indicated (check one): _____ Day (10 Hours of Service) _____ Week (45 Hours of Service) _____ Semi-monthly payroll period (95 Hours of Service) _____ Month (190 Hours of Service) Note: If you are adopting this Plan to replace an existing plan, employees will be credited under this Plan with all service credited to them under the plan you are replacing. v. Entry Dates. Each Employee in an eligible class who completes the age and service requirements specified above will begin to participate in the Plan on (check one): _____ The first day of the month in which he fulfills the requirements. _____ The first of the following dates occurring after he fulfills the requirements (check one): _____ The first day of the month following the date he fulfills the requirements (monthly). _____ The first day of the first, fourth, seventh and tenth months in a Plan Year (quarterly). _____ The first day of the first month and the seventh month in a Plan Year (semiannually). d. (For New Only) Will all Employees be required to meet the age and service requirements specified in B and C above? _____ Yes _____ No; all Employees on the Effective Date will be eligible as of the Effective Date, even if they have not met the age and service requirements. 33. Compensation (Plan Section 2.8). Compensation for purposes of the Plan will be the amount of the following that is actually paid by your Business to an employee during the Plan Year (check one): _____ Form W-2 earnings as defined in Section 2.8 of the Plan. _____ Form W-2 earnings as defined in Section 2.8 of the Plan, plus any amounts withheld from the employee under a 401(k) plan, cafeteria plan, SARSEP, tax sheltered 403(b) arrangement, or Code Section 457 deferred compensation plan, or contributions described in Code Section 414(h)(2) that are picked up by a governmental employer. _____ All compensation included in the definition of Code Section 415 Compensation in Section 6.5(b) of the Plan. _____ All compensation included in the definition of Code Section 415 Compensation in Section 6.5(b) of the Plan, plus any amounts withheld from the employee under a 401(k) plan, cafeteria plan, SARSEP, tax sheltered 403(b) arrangement, or Code Section 457 deferred compensation plan, or contributions described in Code Section 414(h)(2) that are picked up by a governmental employer. 34. Contributions (Plan Sections 4.1 and 4.2). a. Profit Limitation. Will Employer contributions to the Plan be limited to the current and accumulated profits of your business? (check one): _____ Yes _____ No If you will make contributions only under the Section 401(k) provisions in item 12 of this Plan Agreement, skip the rest of this part 5. b. Amount. The Employer will contribute to the Plan for each Plan Year (check one): _____ An amount chosen by the Employer from year to year ______ ____% of the Earnings of all Qualified Participants for the Plan Year ______ $____ for each Qualified Participant How will Forfeitures of Employer Contributions (Profit Sharing) be applied? _____ to reduce the amount of the contribution otherwise required _____ to reallocate as an additional Employer Contribution to current participants c. Allocations to Participants 1. Allocation to Qualified Participants. Any Employee who has met the eligibility requirements in item 3 of this Plan Agreement is a Qualified Participant unless, for reasons other than his death or Retirement, he is not an active Employee on the last day of the Plan Year, and he is not credited with more than 500 Hours of Service in the Plan Year. How will contributions be allocated? _______ Prorata (percentage based on compensation) _______ Uniform Dollar (specific dollar amount for each participant) $ _______. _______ Integrated With Social Security (complete (2) and (3) below) 2. Integration with Social Security. Contributions under paragraph B will be shared by Qualified Participants in proportion to their Earnings, unless you check one of the spaces below. _____ Contributions will be shared according to the Top-Heavy Integration Formula in Section 4.2(d)(1) of the Basic Plan Document in every Plan Year, whether or not the Plan is top-heavy. _____ Contributions will be shared according to the Top-Heavy Integration Formula in Section 4.2(d)(1) of the Basic Plan Document only in Plan Years in which the Plan is top-heavy. In all other Plan Years, contributions will be shared according to the Non-Top-Heavy Integration Formula in Section 4.2(d)(2) of the Basic Plan Document. 3. Integration Level. (Complete only if you have elected in 5.C.2 to integrate your Plan with Social Security. The Integration Level will be (check one): ____ The Social Security Wage Base in effect at the beginning of the Plan Year. ____ __% (not more than 100%) of the Social Security Wage Base in effect at the beginning of the Plan Year. ____ $__________ (not more than the Social Security Wage Base). NOTE: The Social Security Wage Base is indexed annually to reflect increases in the cost of living. D. Participant Contributions (Plan Section 4.2(f)). Will your Plan allow Participants to make after-tax contributions? Yes No 35. Investments (Plan Sections 13.2 and 13.3). The Employer selects in part A below the Investment Products that will be available under the Plan. All Investment Products must be sponsored, underwritten, managed or expressly agreed to in writing by Putnam. From the group of available Investment Products selected by the Employer, each Participant chooses the investments for his own Accounts unless the Employer elects differently in B below. a. Available Investment Products (Plan Section 13.2). The following investments will be available under the Plan (check one): Mutual Funds _____ The group of Putnam funds selected by the Employer and communicated to Participants in writing. A current list of the funds selected by the Employer from time to time shall be kept with the records of the Plan. The initial list of funds is as follows (up to six (6) funds may be selected): _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ Other Investment Options ______ Putnam Stable Value Fund ______ Existing Guaranteed Investment Contract ("GIC") ______________________________ Note: You may include an existing GIC option above, provided that the entire balance of the contract(s) mature within three years of the date your assets are transferred to Putnam. In the event that there is any amount in the Trust Fund for which no instructions or unclear instructions are delivered, it will be invested in the default option selected by the Employer in its Service Agreement with Putnam (or if the Employer makes no such selection, in Putnam Daily Dividend Trust) until instructions are received in good order, and the Employer will be deemed to have selected the option indicated in its Service Agreement with Putnam (or if none, Putnam Daily Dividend Trust) as an available Investment Product for that purpose. b. Instructions (Plan Section 13.3). Investment instructions for amounts held under the Plan generally will be given by each Participant for his own Accounts and delivered to Putnam as indicated in the Service Agreement between Putnam and the Employer. Check below only if the Employer will make investment decisions under the Plan with respect to the following contributions made to the Plan. _____ The Employer will make all investment decisions. _____ The Employer will make investment decisions with respect to Employer Matching Contributions made pursuant to Section 12.B and C of this Plan Agreement. _____ The Employer will make investment decisions with respect to Qualified Nonelective Contributions made pursuant to Section 12.D of this Plan Agreement. _____ The Employer will make investment decisions with respect to Employer profit sharing contributions made pursuant to Section 5.B. of this Plan Agreement. c. Changes. Investment instructions may be changed (check one): _____ on any Valuation Date (daily) _____ on the first day of any month. _____ on the first day of the first, fourth, seventh and tenth months in a Plan Year (quarterly) 36. Distributions and Withdrawals. a. Retirement Distributions. i. Normal Retirement Age (Plan Section 7.1). Normal retirement age will be _______ (not over age 65). ii. Early Retirement (Plan Section 7.1). Check and complete the item below only if you want Participants to become fully vested upon fulfilling specified age and service requirements before reaching normal retirement age: _____ Early retirement will be permitted at age ____ with at least ________ Years of Service. iii. Annuities (Plan Section 9.3). Will your Plan permit a Participant to select a life annuity form of distribution? You must check Yes if this Plan replaces an existing plan that permits distributions in life annuity form. Check one: _____ Yes _____ No b. Hardship Distributions (Plan Section 12.2). Will your Plan permit hardship distributions from Employer Contribution Accounts? You must check Yes if this Plan replaces an existing plan that permits hardship distributions from Employer Contribution Accounts. Check one: _____ Yes _____ No c. Withdrawals after Age 59 1/2 (Plan Section 12.3). Will your Plan permit employees over age 59 1/2 to withdraw amounts upon request? You must check Yes if this Plan replaces an existing plan that permits withdrawals after age 59 1/2. (check one): _____ Yes _____ No d. Loans. Will your Plan permit loans under the Putnam Loan Program to employees from their Accounts? (Note: no other loan program may be used) _____ Yes _____ No e. Automatic Distribution of Small Accounts (Plan Section 9.1). Will your Plan automatically distribute vested account balances not exceeding $3,500, within 60 days after the end of the Plan Year in which a Participant separates from employment? _____ Yes _____ No Note: If you check No above, the time for distribution cannot be left to the discretion of the Employer or the Plan Administrator. Small accounts will be distributable at the time selected by the Participant. 37. Vesting (Plan Article 8). a. Time of Vesting. The provision checked below will determine a Participant's vested percentage in his Employer Contribution Account and, if you adopt the Section 401(k) provisions in item 12 and will make Employer Matching Contributions, in his Employer Matching Account (check one): _____ 100% vesting immediately upon participation in the Plan. If you check this option, skip the rest of this part 8. _____ Six Year Graded Schedule: Vested Percentage 20% 40% 60% 80% 100% Years of Service 2 3 4 5 6 _____ Three Year Cliff Schedule: Vested Percentage 0% 100% Years of Service 0-2 3 _____ Other Schedule (must be at least as favorable as Six Year Graded Schedule or Three Year Cliff Schedule): Vested Percentage __% __% __% __% __% Years of Service ___ ___ ___ ___ ___ b. Service for Vesting. Skip this part B if your Plan will include all of an employee's service in determining his Years of Service for vesting. Years of Service for vesting will exclude (check one or more): _____ Service before the Effective Date of the Plan, if this is a new plan, or service before the effective date of your existing plan, if this Plan replaces an existing plan _____ Service before the Plan Year in which an employee reached age 18 _____ Service for a business acquired by the Employer, before the date of acquisition c. Hours of Service for Vesting. The number of Hours of Service required for crediting a Year of Service for vesting will be (check one): _____ 1,000 Hours of Service _____ ___________________ Hours of Service (under 1,000) d. Year of Service Measuring Period for Vesting (Plan Section 2.50). The periods of 12 months used for measuring Years of Service will be (check one): _____ Plan Years _____ 12-month Eligibility Periods Note: If you are adopting this Plan to replace an existing plan, employees will be credited under this Plan with all service credited to them under the plan you are replacing. 38. Top-Heavy Minimum Contributions (Plan Section 15.3). For any Plan Year in which the Plan is top-heavy, you must provide for each Participant who is a non-key employee and who is employed on the last day of the Plan Year an allocation equal to 3% of his Earnings (or if less, the highest percentage allocated to any key employee). Neither Elective Deferrals, Employer Matching Contributions nor Qualified Matching Contributions for a non-key employee may be taken into account for purposes of this requirement. Skip paragraphs A and B below if you do not maintain any other qualified plan in addition to this Plan. a. If you maintain another qualified plan in addition to this Plan, specify below whether a non-key employee who participates in both plans will receive a top-heavy minimum contribution (or benefit) in this Plan or the other plan (check one): The top-heavy minimum contribution (or benefit) for non-key employees participating both in this Plan and another qualified plan maintained by the Employer will be provided in: _____ This Plan _____ The plan named here: ______________________ b. (Skip this paragraph if you do not maintain a defined benefit plan.) If you maintain a defined benefit plan in addition to this Plan, and the Top-Heavy Ratio (as defined in Plan Section 15.2(c)) for the combined plans is between 60% and 90%, you may elect to provide an increased minimum allocation or benefit pursuant to Plan Section 15.4. Specify your election by completing the statement below: The Employer will provide an increased (specify contribution or benefit) __________________________________ in its (specify defined contribution or defined benefit) ______________________ plan as required under Plan Section 15.4. 39. Other Plans. Skip this item 10 if this Plan is the only qualified plan your Business has ever had or if the only other plan your Business ever maintained was a defined contribution master or prototype plan. You must complete this section if you maintain or ever maintained another qualified plan in which any Participant in this Plan is (or was) a participant or could become a participant. The Plan and your other plan(s) combined will meet the contribution limitation rules in Article 6 of the Plan as you specify below: a. If a Participant in the Plan is covered under another qualified defined contribution plan maintained by your Business, other than a master or prototype plan (check one): _____ The provisions of Section 6.2 of the Plan will apply as if the other plan were a master or prototype plan. _____ The plans will limit total annual additions to the maximum permissible amount, and will properly reduce any excess amounts, in the manner you describe below. _________________________________________________________________ _________________________________________________________________ B. If a Participant in the Plan is or has ever been a participant in a defined benefit plan maintained by your Business, the plans will meet the limits of Article 6 in the manner you describe below: ________________________________________________________________ ________________________________________________________________ Note: Your description under A or B cannot be left to discretion changed from year to year. If you want to amend it from year to year, you must execute a new plan agreement. If your Business has ever maintained a defined benefit plan, state below the interest rate and mortality table to be used in establishing the present value of any benefit under the defined benefit plan for purposes of computing the top-heavy ratio: Interest rate: %__________________________ Mortality Table: __________________________ 40. Administration. a. Plan Administrator (Plan Section 16.1). You may appoint a person or a committee to serve as Plan Administrator. You may remove and replace anyone you have appointed, and anyone you have appointed may resign, without the need to amend this Plan Agreement, provided that you notify Participants in writing of any such change. If you do not appoint a Plan Administrator, the Plan provides that the Employer will be the Plan Administrator. The initial Plan Administrator will be (check one): _____ This person: _______________________________ _____ A committee composed of these people: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ b. Recordkeeper (Plan Section 16.4). You must appoint Putnam as Recordkeeper to perform certain routine services determined upon execution of a written Service Agreement between Putnam and you. _______________________________________________________ Name _______________________________________________________ Address COMPLETE ITEM 12 BELOW IF YOUR PLAN WILL ALLOW EMPLOYEES TO ELECT PRE-TAX CONTRIBUTIONS UNDER SECTION 401(K) OF THE CODE. 41. Section 401(k) Plan Provisions (Plan Article 5). a. Elective Deferrals (Plan Section 5.2). i. A Participant may make Elective Deferrals for each year in an amount not to exceed (check one): _____ (a) _______% of his Earnings _____ (b) $______ (specify a dollar amount) _____ (c) _______% of his Earnings up to $_______ (specify dollar amount) Note: Elective Deferrals may not exceed the annual dollar limit under Section 402(g) of the Internal Revenue Code. ii. A Participant may begin to make Elective Deferrals, or change the amount of his Elective Deferrals, as of the following dates (check one): _____ First business day of each month (monthly). _____ First business day of the first, fourth, seventh and tenth months of the Plan Year (quarterly). _____ First business day of the first and seventh months of the Plan Year (semiannually). _____ First business day of the Plan Year only (annually). iii. May Participants make Elective Deferrals of bonuses? _____ Yes _____ No b. Employer Matching Contributions of Employee Elective Deferrals (Plan Section 5.8). Skip this part B if you will not make Employer Matching Contributions. Employer Matching Contributions are subject to the vesting schedule elected in item 8 of this Plan Agreement, and can be withdrawn during employment in the event of financial hardship (as defined in Section 12.2 of the Plan) if you so elect in part F below. i. The Employer will contribute and will allocate to each Participant's Employer Matching Account an amount equal to: (Check the provision(s) desired, and fill in the % blank(s) in each provision you check. If you wish to determine the amount of Employer Matching Contributions from year to year instead of specifying a fixed percentage, write "V" for variable in the % blank at the beginning of each provision you check. Also write "V" for variable in the % blank for earnings.) _____ ___% of Elective Deferrals _____ ___% of Elective Deferrals that do not exceed ___% of Earnings _____ Additionally, in applying the above limitation(s), Elective Deferrals shall not exceed $__________. (2) How will Forfeitures for Employer Matching Contributions be applied? _____ to reduce the amount of the contribution otherwise required _____ to reallocate as an additional Employer Matching Contribution to current participants c. Hardship Distributions from 401(k) Accounts (Plan Sections 12.2 and 5.14). (1) Will your Plan permit hardship distributions from Elective Deferral Accounts? (check one): _____ Yes _____ No (2) If your Plan has Employer Matching Contributions, will it permit hardship distributions from Employer Matching Accounts? _____ Yes _____ No 42. QNEC and QMACs. Note: Qualified Matching Contributions are always fully vested and cannot be distributed from the Plan before a Participant reaches age 59 1/2 or leaves employment. They will be used to the extent needed, to help the Plan pass the ADP test explained on page 8 of the Qs & As. a. Qualified Matching Contributions (Plan Section 2.58). Skip this part A if you will not make Qualified Matching Contributions. i. Qualified Matching Contributions will be made with respect to (check one): _____ Elective Deferrals by all Participants _____ Elective Deferrals only by Non-Highly Compensated Participants ii. The amount of Qualified Matching Contributions made with respect to a Participant will be: (Check the provision desired and fill in the % blank(s) in the provision you check. If you wish to determine the amount of Qualified Matching Contributions from year to year instead of specifying a fixed percentage, write "V" for variable in the % blank at the beginning of each provision you check.) _____ ___% of his Elective Deferrals _____ ___% of his Elective Deferrals that do not exceed ___% of his Earnings _____ ___% of his Earnings _____ Additionally, in applying the above limitation(s), Qualified Matching Contributions shall not exceed $________. b. Qualified Nonelective Contributions (Plan Section 2.60). i. Qualified Nonelective Contributions will be made on behalf of (check one): _____ All Participants _____ Only Participants who are not Highly Compensated Employees ii. The amount of Qualified Nonelective Contributions for a Plan Year will be (check one). If you wish to determine the amount of Qualified Nonelective Contributions from year to year instead of specifying a fixed percentage, write "V" for variable in the % blank at the beginning of each provision you check: _____ ___% (not over 15%) of the Earnings of Participants on whose behalf Qualified Nonelective Contributions are made _____ An amount determined by the Employer from year to year, to be shared in proportion to Earnings by Participants on whose behalf Qualified Nonelective Contributions are made Note: Qualified Nonelective Contributions will be used, to the extent needed, to help the Plan pass the ADP test, explained on page 8 of the Qs & As. c. ACP Test. Every plan that has after-tax Participant Contributions, Employer Matching Contributions or Qualified Matching Contributions must pass an annual test called the ACP test, which is explained on page 10 of the Qs & As. Elective Deferrals and Qualified Nonelective Contributions will be used to help the Plan pass the ACP test, to the extent needed. 43. Reliance on Opinion Letter. If you ever maintained or you later adopt any plan (including a welfare benefit fund, as defined in Section 419(e) of the Code, which provides post-retirement medical benefits allocated to separate accounts for key employees, as defined in Section 419A(d)(3) of the Code; or an individual medical account, as defined in Section 415(l)(2) of the Code) in addition to this plan, you may not rely on an opinion letter issued to Putnam by the National Office of the Internal Revenue Service as evidence that the Plan is qualified under Section 401 of the Internal Revenue Code. If you maintain or adopt multiple plans, in order to obtain reliance with respect to plan qualification of the Plan, you must receive a determination letter from the appropriate Key District Office of Internal Revenue. Putnam will prepare an application for such a letter upon your request at a fee agreed upon by the parties. The Employer may not rely on the opinion letter issued by the National Office of the Internal Revenue Service as evidence that this plan is qualified under Section 401 of the Code unless the terms of the plan, as herein adopted or amended, that pertain to the requirements of Sections 401(a)(4), 401(a)(5), 401(a)(17), 401(l), 410(b) and 414(s) of the Code, as amended by the Tax Reform Act of 1986 or later laws, (a) are made effective retroactively to the first day of the first Year beginning after December 31, 1988 (or such later date on which these requirements first become effective with respect to this plan); or (b) are made effective no later than the first day on which the Employer is no longer entitled, under regulations, to rely on a reasonable, good faith interpretation of these requirements, and the prior provisions of the plan constitute such an interpretation. Putnam will inform you of all amendments it makes to the prototype plan. If Putnam ever discontinues or abandons the prototype plan, Putnam will inform you. This Plan Agreement #001 may be used only in conjunction with Putnam's basic plan document #05. * * * * * EMPLOYER'S ADOPTION OF PUTNAM PROFIT SHARING AND 401(k) PLAN The Employer named below hereby adopts a PUTNAM PROFIT SHARING AND 401(k) PLAN, and appoints Putnam Fiduciary Trust Company to serve as Trustee of the Plan. The Employer acknowledges that it has received copies of the current prospectus for each Investment Product available under the Plan, and represents that it will deliver copies of the then current prospectus for each such Investment Product to each Participant before each occasion on which the Participant makes an investment instruction as to his Account. The Employer further acknowledges that the Plan will be acknowledged by Putnam as a Putnam Profit Sharing and 401(k) Plan only upon Putnam's acceptance of this Plan Agreement. Employer signature(s) to adopt Plan: Date of signature: ____________________________________________________ ____________________________________________________ Please print name(s) of authorized person(s) signing above: ____________________________________________________ Phone:____________________ ____________________________________________________ Phone:____________________ A new Plan must be signed by the last day of the Plan Year in which the Plan is to be effective. INVESTMENT DEALER INFORMATION Firm: ___________________________________________________________ Branch: _________________________________________________________ Address: ________________________________________________________ Registered Representative: ___________________________________ Name _________________________________________ Phone * * * * * ACCEPTANCE OF TRUSTEE The Trustee accepts appointment in accordance with the terms and conditions of the Plan, effective as of the date of execution by the Employer set forth above. A. Putnam Fiduciary Trust Company, Trustee By: ______________________________________________________________ ACCEPTANCE BY PUTNAM Putnam hereby accepts this Employer's Plan as a prototype established under Putnam Basic Plan Document #05. Putnam Mutual Funds Corp. By: ______________________________ PUTNAM BASIC PLAN DOCUMENT #05 TABLE OF CONTENTS PAGE ARTICLE 1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2 2.1 Account. . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 Affiliated Employer. . . . . . . . . . . . . . . . . . . . 2 2.3 Authorized Leave of Absence. . . . . . . . . . . . . . . . 2 2.4 Base Contribution Percentage . . . . . . . . . . . . . . . 3 2.5 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 CODA . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.8 Compensation . . . . . . . . . . . . . . . . . . . . . . . 3 2.9 Date of Employment . . . . . . . . . . . . . . . . . . . . 3 2.10 Disabled . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.11 Earned Income. . . . . . . . . . . . . . . . . . . . . . . 4 2.12 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.13 Effective Date . . . . . . . . . . . . . . . . . . . . . . 4 2.14 Eligibility Period . . . . . . . . . . . . . . . . . . . . 4 2.15 Employee . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 Employer . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.17 Employer Contribution Account. . . . . . . . . . . . . . . 5 2.17(a) Employer Stock . . . . . . . . . . . . . . . . . . . . 5 2.18 Excess Earnings. . . . . . . . . . . . . . . . . . . . . . 6 2.19 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.20 Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . 6 2.21 Hour of Service. . . . . . . . . . . . . . . . . . . . . . 6 2.22 Insurance Trustee. . . . . . . . . . . . . . . . . . . . . 7 2.23 Integration Level. . . . . . . . . . . . . . . . . . . . . 7 2.24 Investment Company . . . . . . . . . . . . . . . . . . . . 8 2.25 Investment Company Shares. . . . . . . . . . . . . . . . . 8 2.26 Investment Products. . . . . . . . . . . . . . . . . . . . 8 2.27 Leased Employee. . . . . . . . . . . . . . . . . . . . . . 8 2.28 One-Year Eligibility Break . . . . . . . . . . . . . . . . 8 2.29 One-Year Vesting Break . . . . . . . . . . . . . . . . . . 9 2.30 Owner-Employee . . . . . . . . . . . . . . . . . . . . . . 9 2.31 Participant. . . . . . . . . . . . . . . . . . . . . . . . 9 2.32 Participant Contribution Account . . . . . . . . . . . . . 9 2.33 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.34 Plan Administrator . . . . . . . . . . . . . . . . . . . . 9 2.35 Plan Agreement . . . . . . . . . . . . . . . . . . . . . . 9 2.36 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . 9 2.37 Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.38 Putnam . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.39 Qualified Domestic Relations Order . . . . . . . . . . . . 10 2.40 Qualified Participant. . . . . . . . . . . . . . . . . . . 10 2.41 Recordkeeper . . . . . . . . . . . . . . . . . . . . . . . 10 2.42 Retirement . . . . . . . . . . . . . . . . . . . . . . . . 10 2.43 Rollover Account . . . . . . . . . . . . . . . . . . . . . 10 2.44 Self-Employed Individual . . . . . . . . . . . . . . . . . 10 2.45 Shareholder-Employee . . . . . . . . . . . . . . . . . . . 11 2.46 Social Security Wage Base. . . . . . . . . . . . . . . . . 11 2.47 Trust and Trust Fund . . . . . . . . . . . . . . . . . . . 11 2.48 Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.49 Valuation Date . . . . . . . . . . . . . . . . . . . . . . 11 2.50 Year of Service. . . . . . . . . . . . . . . . . . . . . . 11 2.51 Deferral Agreement . . . . . . . . . . . . . . . . . . . . 12 2.52 Elective Deferral. . . . . . . . . . . . . . . . . . . . . 12 2.53 Elective Deferral Account. . . . . . . . . . . . . . . . . 12 2.54 Employer Matching Contribution . . . . . . . . . . . . . . 12 2.55 Employer Matching Account. . . . . . . . . . . . . . . . . 12 2.56 Highly Compensated Employee. . . . . . . . . . . . . . . . 12 2.57 Non-Highly Compensated Employee. . . . . . . . . . . . . . 15 2.58 Qualified Matching Contribution. . . . . . . . . . . . . . 15 2.59 Qualified Matching Account . . . . . . . . . . . . . . . . 15 2.60 Qualified Nonelective Contribution . . . . . . . . . . . . 15 2.61 Qualified Nonelective Contribution Account . . . . . . . . 16 ARTICLE 3. PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . 17 3.1 Initial Participation. . . . . . . . . . . . . . . . . . . 17 3.2 Special Participation Rule . . . . . . . . . . . . . . . . 17 3.3 Resumed Participation. . . . . . . . . . . . . . . . . . . 18 3.4 Benefits for Owner-Employees . . . . . . . . . . . . . . . 18 3.5 Changes in Classification. . . . . . . . . . . . . . . . . 18 ARTICLE 4. CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . 20 4.1 Provisions Applicable to All Plans . . . . . . . . . . . . 20 4.2 Provisions Applicable Only to Profit Sharing Plans . . . . 21 4.3 Provisions Applicable Only to Money Purchase Pension Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.4 Rollover Contributions . . . . . . . . . . . . . . . . . . 26 4.5 No Deductible Employee Contributions . . . . . . . . . . . 26 4.6 Paired Plans . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE 5. CASH OR DEFERRED ARRANGEMENT UNDER SECTION 401(k) (CODA) . . . . . . . . . . . . . . . . . . . . . . . . 28 5.1 Applicability; Allocations . . . . . . . . . . . . . . . . 28 5.2 CODA Participation . . . . . . . . . . . . . . . . . . . . 28 5.3 Annual Limit on Elective Deferrals . . . . . . . . . . . . 28 5.4 Distribution of Certain Elective Deferrals . . . . . . . . 29 5.5 Satisfaction of ADP and ACP Tests. . . . . . . . . . . . . 30 5.6 Actual Deferral Percentage Test Limit. . . . . . . . . . . 30 5.7 Distribution of Excess Contributions . . . . . . . . . . . 32 5.8 Matching Contributions . . . . . . . . . . . . . . . . . . 33 5.9 Participant Contributions. . . . . . . . . . . . . . . . . 34 5.10 Recharacterization of Excess Contributions . . . . . . . . 34 5.11 Average Contribution Percentage Test Limit and Aggregate Limit . . . . . . . . . . . . . . . . . . . . . . . . 35 5.12 Distribution of Excess Aggregate Contributions . . . . . . 38 5.13 Restriction on Distributions . . . . . . . . . . . . . . . 39 5.14 Hardship Distributions . . . . . . . . . . . . . . . . . . 40 5.15 Special Effective Dates. . . . . . . . . . . . . . . . . . 41 ARTICLE 6. LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . . . . 42 6.1 No Additional Plan . . . . . . . . . . . . . . . . . . . . 42 6.2 Additional Master or Prototype Plan. . . . . . . . . . . . 43 6.3 Additional Non-Master or Non-Prototype Plan. . . . . . . . 44 6.4 Additional Defined Benefit Plan. . . . . . . . . . . . . . 45 6.5 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE 7. ELIGIBILITY FOR DISTRIBUTION OF BENEFITS . . . . . . . . . . 50 7.1 Retirement . . . . . . . . . . . . . . . . . . . . . . . . 50 7.2 Death. . . . . . . . . . . . . . . . . . . . . . . . . . . 50 7.3 Other Termination of Employment. . . . . . . . . . . . . . 51 ARTICLE 8. VESTING. . . . . . . . . . . . . . . . . . . . . . . . . . . 52 8.1 Vested Balance . . . . . . . . . . . . . . . . . . . . . . 52 8.2 Vesting of Accounts of Returned Former Employees . . . . . 52 8.3 Forfeiture of Non-Vested Amounts . . . . . . . . . . . . . 53 8.4 Special Rule in the Event of a Withdrawal. . . . . . . . . 54 8.5 Vesting Election . . . . . . . . . . . . . . . . . . . . . 55 ARTICLE 9. PAYMENT OF BENEFITS. . . . . . . . . . . . . . . . . . . . . 56 9.1 Distribution of Accounts . . . . . . . . . . . . . . . . . 56 9.2 Restriction on Immediate Distributions . . . . . . . . . . 56 9.3 Optional Forms of Distribution . . . . . . . . . . . . . . 58 9.4 Distribution Procedure . . . . . . . . . . . . . . . . . . 58 9.5 Lost Distributee . . . . . . . . . . . . . . . . . . . . . 59 9.6 Direct Rollovers . . . . . . . . . . . . . . . . . . . . . 59 9.7 Distributions Required by a Qualified Domestic Relations Order. . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE 10. JOINT AND SURVIVOR ANNUITY REQUIREMENTS . . . . . . . . . . 61 10.1 Applicability . . . . . . . . . . . . . . . . . . . . . . 61 10.2 Qualified Joint and Survivor Annuity. . . . . . . . . . . 62 10.3 Qualified Preretirement Survivor Annuity. . . . . . . . . 62 10.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . 62 10.5 Notice Requirements . . . . . . . . . . . . . . . . . . . 64 10.6 Transitional Rules. . . . . . . . . . . . . . . . . . . . 65 ARTICLE 11. MINIMUM DISTRIBUTION REQUIREMENTS . . . . . . . . . . . . . 68 11.1 General Rules . . . . . . . . . . . . . . . . . . . . . . 68 11.2 Required Beginning Date . . . . . . . . . . . . . . . . . 68 11.3 Limits on Distribution Periods. . . . . . . . . . . . . . 69 11.4 Determination of Amount to Be Distributed Each Year. . . 70 11.5 Death Distribution Provisions . . . . . . . . . . . . . . 71 11.6 Transitional Rule . . . . . . . . . . . . . . . . . . . . 73 ARTICLE 12. WITHDRAWALS AND LOANS . . . . . . . . . . . . . . . . . . . 75 12.1 Withdrawals from Participant Contribution Accounts . . . 75 12.2 Withdrawals on Account of Hardship. . . . . . . . . . . . 75 12.3 Withdrawals After Reaching Age 59 1/2 . . . . . . . . . . 75 12.4 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 75 12.5 Procedure; Amount Available . . . . . . . . . . . . . . . 78 ARTICLE 13. TRUST FUND AND INVESTMENTS. . . . . . . . . . . . . . . . . 79 13.1 Establishment of Trust Fund . . . . . . . . . . . . . . . 79 13.2 Management of Trust Fund. . . . . . . . . . . . . . . . . 79 13.3 Investment Instructions . . . . . . . . . . . . . . . . . 80 13.4 Valuation of the Trust Fund . . . . . . . . . . . . . . . 82 13.5 Distributions on Investment Company Shares. . . . . . . . 82 13.6 Registration and Voting of Investment Company Shares . . 83 13.7 Investment Manager. . . . . . . . . . . . . . . . . . . . 83 13.8 Employer Stock. . . . . . . . . . . . . . . . . . . . . . 83 13.9 Insurance Contracts . . . . . . . . . . . . . . . . . . . 86 ARTICLE 14. INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . 88 14.1 Purchase of Insurance Products. . . . . . . . . . . . . . 88 14.2 Limitation on Premiums. . . . . . . . . . . . . . . . . . 88 14.3 Policy Options. . . . . . . . . . . . . . . . . . . . . . 88 14.4 Insurability. . . . . . . . . . . . . . . . . . . . . . . 88 14.5 Dividends on Policies . . . . . . . . . . . . . . . . . . 88 14.6 Trustee of Policy . . . . . . . . . . . . . . . . . . . . 89 14.7 Obligations with Respect to Policies. . . . . . . . . . . 89 14.8 Distribution of Proceeds on Participant's Death . . . . . 89 14.9 Conversion of Policies. . . . . . . . . . . . . . . . . . 89 14.10 Conflict with Policies. . . . . . . . . . . . . . . . . . 90 14.11 Insurance Loans to Owner-Employees. . . . . . . . . . . . 90 ARTICLE 15. TOP-HEAVY PLANS . . . . . . . . . . . . . . . . . . . . . . 91 15.1 Superseding Effect. . . . . . . . . . . . . . . . . . . . 91 15.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . 91 15.3 Minimum Allocation. . . . . . . . . . . . . . . . . . . . 94 15.4 Adjustment of Fractions . . . . . . . . . . . . . . . . . 95 ARTICLE 16. ADMINISTRATION OF THE PLAN. . . . . . . . . . . . . . . . . 96 16.1 Plan Administrator. . . . . . . . . . . . . . . . . . . . 96 16.2 Claims Procedure. . . . . . . . . . . . . . . . . . . . . 96 16.3 Employer's Responsibilities . . . . . . . . . . . . . . . 97 16.4 Recordkeeper. . . . . . . . . . . . . . . . . . . . . . . 97 16.5 Prototype Plan. . . . . . . . . . . . . . . . . . . . . . 98 ARTICLE 17. TRUSTEE AND INSURANCE TRUSTEE . . . . . . . . . . . . . . . 99 17.1 Powers and Duties of the Trustee. . . . . . . . . . . . . 99 17.2 Limitation of Responsibilities. . . . . . . . . . . . . .100 17.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . .101 17.4 Reliance on Employer. . . . . . . . . . . . . . . . . . .101 17.5 Action Without Instructions . . . . . . . . . . . . . . .101 17.6 Advice of Counsel . . . . . . . . . . . . . . . . . . . .102 17.7 Accounts. . . . . . . . . . . . . . . . . . . . . . . . .102 17.8 Access to Records . . . . . . . . . . . . . . . . . . . .103 17.9 Successors. . . . . . . . . . . . . . . . . . . . . . . .103 17.10 Persons Dealing with Trustee or Insurance Trustee. . . .103 17.11 Resignation and Removal; Procedure. . . . . . . . . . . .103 17.12 Action of Trustee Following Resignation or Removal . . .103 17.13 Action of Insurance Trustee Following Resignation or Removal. . . . . . . . . . . . . . . . . . . . . . . . . .103 17.14 Effect of Resignation or Removal. . . . . . . . . . . . .103 17.15 Fiscal Year of Trust. . . . . . . . . . . . . . . . . . .104 17.16 Limitation of Liability . . . . . . . . . . . . . . . . .104 17.17 Indemnification . . . . . . . . . . . . . . . . . . . . .104 ARTICLE 18. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . .105 18.1 General . . . . . . . . . . . . . . . . . . . . . . . . .105 18.2 Delegation of Amendment Power . . . . . . . . . . . . . .106 ARTICLE 19. TERMINATION OF THE PLAN AND TRUST . . . . . . . . . . . . .107 19.1 General . . . . . . . . . . . . . . . . . . . . . . . . .107 19.2 Events of Termination . . . . . . . . . . . . . . . . . .107 19.3 Effect of Termination . . . . . . . . . . . . . . . . . .107 19.4 Approval of Plan. . . . . . . . . . . . . . . . . . . . .108 ARTICLE 20. TRANSFERS TO OR FROM OTHER QUALIFIED PLANS; MERGERS. . . . . . . . . . . . . . . . . . . . . . . . . . .109 20.1 General . . . . . . . . . . . . . . . . . . . . . . . . .109 20.2 Amounts Transferred . . . . . . . . . . . . . . . . . . .109 20.3 Merger or Consolidation . . . . . . . . . . . . . . . . .109 ARTICLE 21. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . .110 21.1 Notice of Plan. . . . . . . . . . . . . . . . . . . . . .110 21.2 No Employment Rights. . . . . . . . . . . . . . . . . . .110 21.3 Distributions Exclusively From Plan . . . . . . . . . . .110 21.4 No Alienation . . . . . . . . . . . . . . . . . . . . . .110 21.5 Provision of Information. . . . . . . . . . . . . . . . .110 21.6 No Prohibited Transactions. . . . . . . . . . . . . . . .110 21.7 Governing Law . . . . . . . . . . . . . . . . . . . . . .110 21.8 Gender. . . . . . . . . . . . . . . . . . . . . . . . . .111 PUTNAM BASIC PLAN DOCUMENT #05 ARTICLE 44. INTRODUCTION By executing the Plan Agreement, the Employer has established a retirement plan (the "Plan") according to the terms and conditions of the Plan Agreement and this Putnam Basic Plan Document #05, for the purpose of providing a retirement fund for the benefit of Participants and Beneficiaries. ARTICLE 45. DEFINITIONS The terms defined in Sections 2.1 through 2.49 appear generally throughout the document. Sections 2.50 through 2.60 and Article 5 contain definitions of terms used only in a CODA and Section 10.4 contains additional definitions related to distributions from the Plan. Articles 6 and 11 contain additional definitions of terms used only in those Articles. 45..1 Account means any of, and Accounts means all of, a Participant's Employer Contribution Account, Participant Contribution Account, Rollover Account, and if the Plan contains a CODA, the accounts maintained for the Participant pursuant to Article 5. 45..2 Affiliated Employer, for purposes of the Plan other than Article 6, means the Employer and a trade or business, whether or not incorporated, which is any of the following: (a) A member of a group of controlled corporations (within the meaning of Section 414(b) of the Code) which includes the Employer; or (b) A trade or business under common control (within the meaning of Section 414(c) of the Code) with the Employer; or (c) A member of an affiliated service group (within the meaning of Section 414(m) of the Code) which includes the Employer; or (d) An entity otherwise required to be aggregated with the Employer pursuant to Section 414(o) of the Code. In determining an Employee's service for vesting and for eligibility to participate in the Plan, all employment with Affiliated Employers will be treated as employment by the Employer. For purposes of Article 6 only, the definitions in paragraphs (a) and (b) of this Section 2.2 shall be modified by adding at the conclusion of the parenthetical phrase in each such paragraph the words "as modified by Section 415(h) of the Code." 45..3 Authorized Leave of Absence means a leave of absence from employment granted in writing by an Affiliated Employer. Authorized Leave of Absence shall be granted on account of military service for any period during which an Employee's right to re-employment is guaranteed by law, and for such other reasons and periods as an Affiliated Employer shall consider proper, provided that Employees in similar situations shall be similarly treated. 45..4 Base Contribution Percentage means the percentage so specified in the Plan Agreement. 45..5 Beneficiary means a person entitled to receive benefits under the Plan upon the death of a Participant, in accordance with Section 7.2 and Articles 10 and 11. 45..6 CODA means a cash or deferred arrangement that meets the requirements of Section 401(k) of the Code, adopted as part of a profit sharing plan. 45..7 Code means the Internal Revenue Code of 1986, as amended. 45..8 Compensation means all of an Employee's compensation determined in accordance with the definition elected by the Employer in the Plan Agreement. For purposes of that election, "Form W-2 earnings" means "wages" as defined in Section 3401(a) of the Code in connection with income tax withholding at the source, and all other compensation paid to the Employee by the Employer in the course of its trade or business, for which the Employer is required to furnish the Employee with a written statement under Sections 6041(d), 6051(a)(3) and 6052 of the Code, determined without regard to exclusions based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2) of the Code). Compensation shall include only amounts actually paid to the Employee during the Plan Year, except that if the Employer so elects in the Plan Agreement, Compensation shall include any amount which is contributed to an employee benefit plan for the Employee by the Employer pursuant to a salary reduction agreement, and which is not includible in the gross income of the Employee under Section 125, 402(a)(8), 402(h) or 403(b) of the Code. (For a self-employed person, the relevant term is Earned Income, as defined in Section 2.11.) 45..9 Date of Employment means the first date on which an Employee performs an Hour of Service; or, in the case of an Employee who has incurred one or more One-Year Eligibility Breaks and who is treated as a new Employee under the rules of Section 3.3, the first date on which he performs an Hour of Service after his return to employment. 45..10 Disabled means unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. The permanence and degree of such impairment shall be supported by medical evidence. 45..11 Earned Income means a Self-Employed Individual's net earnings from self-employment in the trade or business with respect to which the Plan is established, excluding items not included in gross income and the deductions allocable to such items, and reduced by (i) contributions by the Employer to qualified plans, to the extent deductible under Section 404 of the Code, and (ii) the deduction allowed to the taxpayer under Section 164(f) of the Code for taxable years beginning after December 31, 1989. 45..12 Earnings, for determining all benefits provided under the Plan for all Plan Years beginning after December 31, 1988, means the first $200,000 (as adjusted by the Secretary of the Treasury at the same time and in the same manner as under Section 415(d) of the Code, except that the dollar increase effective on any January 1 is effective for all Plan Years beginning in the calendar year in which that January 1 occurs, and the first such dollar increase is effective on January 1, 1990) of the sum of the Compensation and the Earned Income received by an Employee during a Plan Year. Notwithstanding the foregoing, for Plan Years beginning after December 31, 1993, Earnings means the first $150,000 (as adjusted periodically by the Secretary of the Treasury for inflation) of the sum of the Compensation and Earned Income received by an Employee during a Plan Year. To calculate an allocation to a Participant's Account for any Plan Year shorter than 12 months, the dollar limit on Earnings must be multiplied by a fraction of which the denominator is 12 and the numerator is the number of months in the Plan Year. In determining the Earnings of a Participant, the rules of Section 414(q)(6) of the Code shall apply, except that in applying those rules the term "family" shall include only the Participant's spouse and the Participant's lineal descendants who have not reached age 19 by the last day of the Plan Year. If as a result of the application of such rules the applicable Earnings limitation described above is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each such individual's Earnings as determined under this Section prior to the application of this limitation. 45..13 Effective Date means the date so designated in the Plan Agreement. If the Plan Agreement indicates that the Employer is adopting the Plan as an amendment of an existing plan, the provisions of the existing plan apply to all events preceding the Effective Date, except as to specific provisions of the Plan which set forth a retroactive effective date in accordance with Section 1140 of the Tax Reform Act of 1986. 45..14 Eligibility Period means a period of service with the Employer which an Employee is required to complete in order to commence participation in the Plan. A 12-month Eligibility Period is a period of 12 consecutive months beginning on an Employee's most recent Date of Employment or any anniversary thereof, in which he is credited with at least 1,000 Hours of Service. A 6-month Eligibility Period is a period of 6 consecutive months beginning on an Employee's most recent Date of Employment or any anniversary thereof, or on the 6-month anniversary of such Date of Employment or any anniversary thereof, in which he is credited with at least 500 Hours of Service; provided, however, that if he is credited with 1,000 Hours of Service during a 12-consecutive-month period following his Date of Employment or any anniversary thereof, he shall be credited with an Eligibility Period. Notwithstanding the foregoing, if the Employer has elected in the Plan Agreement to establish a number less than 1,000 as the requisite for crediting a 12-month Eligibility Period or less than 500 a 6-month Eligibility Period, that number shall be so substituted, and in the case of an Employee in a seasonal industry (as defined under regulations prescribed by the Secretary of Labor) in which the customary extent of employment during a calendar year is fewer than 1,000 Hours of Service in the case of a 12-month Eligibility Period, the number specified in any regulations prescribed by the Secretary of Labor dealing with years of service shall be substituted for 1,000. If the Employer so elects in the Plan Agreement, an Employee's most recent Date of Employment for purposes of this Section 2.14 shall be the first date on which he performed services for a business acquired by the Employer. 45..15 Employee means a common law Employee of an Affiliated Employer; in the case of an Affiliated Employer which is a sole proprietorship, the sole proprietor thereof; in the case of an Affiliated Employer which is a partnership, a partner thereof; and a Leased Employee of an Affiliated Employer. The term "Employee" includes an individual on Authorized Leave of Absence, a Self- Employed Individual and an Owner-Employee. 45..16 Employer means the Employer named in the Plan Agreement and any successor to all or the major portion of its assets or business which assumes the obligations of the Employer under the Plan Agreement. 45..17 Employer Contribution Account means an account maintained on the books of the Plan on behalf of a Participant, in which are recorded the amounts allocated for his benefit from contributions by the Employer (other than contributions pursuant to Article 5), Forfeitures by former Participants (if the Plan provides for reallocation of Forfeitures), amounts reapplied under Section 6.1(d), and the income, expenses, gains and losses incurred thereon. 2.17(a) Employer Stock means securities constituting "qualifying employer securities" of an Employer within the meaning of Section 407(d)(5) of ERISA. 45..18 Excess Earnings means a Participant's Earnings in excess of the Integration Level of the Plan. 45..19 ERISA means the Employee Retirement Income Security Act of 1974, as amended. 45..20 Forfeiture means a nonvested amount forfeited by a former Participant, pursuant to Section 8.3, or an amount forfeited by a former Participant or Beneficiary who cannot be located, pursuant to Section 9.5. 45..21 Hour of Service means each hour described in paragraphs (a), (b), (c), (d) or (e) below, subject to paragraphs (f) and (g) below. (a) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Affiliated Employer. These hours shall be credited to the Employee for the computation period or periods in which the duties are performed. (b) Each hour for which an Employee is paid, or entitled to payment, by an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service shall be credited under this paragraph for any single continuous period of absence (whether or not such period occurs in a single computation period) unless the Employee's absence is not an Authorized Leave of Absence. Hours under this paragraph shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations, which are incorporated herein by this reference. (c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Affiliated Employer. The same Hours of Service shall not be credited under both paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c); and no more than 501 Hours of Service shall be credited under this paragraph (c) with respect to payments of back pay, to the extent that such pay is agreed to or awarded for a period of time described in paragraph (b) during which the Employee did not perform or would not have performed any duties. These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made. (d) Each hour during an Authorized Leave of Absence. Such hours shall be credited at the rate of a customary full work week for an Employee. (e) Solely for purposes of determining whether a OneYear Vesting Break or a One-Year Eligibility Break has occurred, each hour which otherwise would have been credited to an Employee but for an absence from work by reason of: the pregnancy of the Employee, the birth of a child of the Employee, the placement of a child with the Employee in connection with the adoption of the child by the Employee, or caring for a child for a period beginning immediately after its birth or placement. If the Plan Administrator cannot determine the hours which would normally have been credited during such an absence, the Employee shall be credited with eight Hours of Service for each day of absence. No more than 501 Hours of Service shall be credited under this paragraph by reason of any pregnancy or placement. Hours credited under this paragraph shall be treated as Hours of Service only in the Plan Year or Eligibility Period or both, as the case may be, in which the absence from work begins, if necessary to prevent the Participant's incurring a One-Year Vesting Break or One-Year Eligibility Break in that period, or, if not, in the period immediately following that in which the absence begins. The Employee must timely furnish to the Employer information reasonably required to establish (i) that an absence from work is for a reason specified above, and (ii) the number of days for which the absence continued. (f) Hours of Service shall be determined on the basis of actual hours for which an Employee is paid or entitled to payment, or as otherwise specified in the Plan Agreement. (g) If the Employer maintains the plan of a predecessor Employer, service for the predecessor Employer shall be treated as service for the Employer. If the Employer does not maintain the plan of a predecessor Employer, service for the predecessor Employer shall be treated as service for the Employer only to the extent that the Employer so elects in the Plan Agreement. (h) Hours of Service shall be credited to a Leased Employee as though he were an Employee. 45..22 Insurance Trustee means the person named in the Plan Agreement as Insurance Trustee, and any successor thereto. 45..23 Integration Level means the Earnings amount selected by the Employer in the Plan Agreement. 45..24 Investment Company means an open-end registered investment company for which Putnam Mutual Funds Corp., or its affiliate acts as principal underwriter, or for which Putnam Investment Management, Inc., or its affiliate serves as an investment adviser; provided that its prospectus offers its shares under the Plan. 45..25 Investment Company Shares means shares issued by an Investment Company. 45..26 Investment Products means any of the investment products specified by the Employer in accordance with Section 13.2, from the group of those products sponsored, underwritten or managed by Putnam as shall be made available by Putnam under the Plan, and such other products as shall be expressly agreed to in writing by Putnam for availability under the Plan. The term "Investment Products" does not include any Policy selected pursuant to Article 14. 45..27 Leased Employee means any person (other than an Employee of the recipient) who pursuant to an agreement between the recipient and any other person ("leasing organization") has performed services for the recipient (or for the recipient and related persons determined in accordance with Section 414(n)(6) of the Code) on a substantially full time basis for a period of at least one year, and such services are of a type historically performed by Employees in the business field of the recipient Employer. The compensation of a Leased Employee for purposes of the Plan means the Compensation (as defined in Section 2.8) of the Leased Employee attributable to services performed for the recipient Employer. Contributions or benefits provided to a leased Employee by the leasing organization which are attributable to services performed for the recipient Employer shall be treated as provided by the recipient Employer. Provided that leased Employees do not constitute more than 20% of the recipient's nonhighly compensate workforce, a leased Employee shall not be considered an Employee of the recipient if he is covered by a money purchase pension plan providing: (1) a nonintegrated Employer contribution rate of at least 10% of compensation (as defined in Section 415(c)(3) of the Code, but including amounts contributed pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code), (2) immediate participation, and (3) full and immediate vesting. 45..28 One-Year Eligibility Break means a 12-month Eligibility Period during which an individual is not credited with more than 500 Hours of Service; provided, however, that in the case of an Employee in a seasonal industry, there shall be substituted for 500 the number of Hours of Service specified in any regulations of the Secretary of Labor dealing with breaks in service, and provided further that if the Employer has elected in the Plan Agreement to establish a number less than 500 as the requisite Hours of Service for crediting a 12-month Eligibility Period, that number shall be substituted for 500. 45..29 One-Year Vesting Break means a Year of Service measuring period, as elected by the Employer in the Plan Agreement, during which an individual is not credited with more than 500 Hours of Service; provided, however, that in the case of an Employee in a seasonal industry, there shall be substituted for 500 the number of Hours of Service specified in any regulations for the Secretary of Labor dealing with breaks in service, and provided further that if the Employer has elected in the Plan Agreement to establish a number less than 500 as the requisite Hours of Service for crediting a Year of Service, that number shall be substituted for 500. 45..30 Owner-Employee means the sole proprietor of an Affiliated Employer that is a sole proprietorship, or a partner owning more than 10% of either the capital or profits interest of an Affiliated Employer that is a partnership. The Plan Administrator shall be responsible for identifying Owner-Employees to the Recordkeeper. 45..31 Participant means each Employee who has met the requirement for participation in Article 3. An Employee is not a Participant for any period before the entry date applicable to him. 45..32 Participant Contribution Account means an account maintained on the books of the Plan, in which are recorded nondeductible contributions by a Participant pursuant to Sections 4.2(f), 4.3(e) and 5.9, and any income, expenses, gains or losses incurred thereon. 45..33 Plan means the form of defined contribution retirement plan and trust agreement adopted by the Employer, consisting of the Plan Agreement and the Putnam Basic Plan Document #05 as set forth herein, together with any and all amendments and supplements thereto. 45..34 Plan Administrator means the Employer or its appointee pursuant to Section 16.1. 45..35 Plan Agreement means the separate agreement entered into between the Employer and the Trustee (and the Insurance Trustee, if any) and accepted by Putnam, under which the Employer adopts the Plan and selects among its optional provisions. 45..36 Plan Year means the period of 12 consecutive months specified by the employer in the Plan Agreement. 45..37 Policy means an ordinary life insurance, term insurance, retirement income or endowment policy or an individual or group annuity contract issued by a life insurance company in connection with the Plan, or an interest therein. An ordinary life insurance policy within the meaning of this definition provides non-decreasing death benefits and non-increasing premiums. Policy shall also include any other insurance policy expressly agreed to in writing by Putnam. 45..38 Putnam means Putnam Mutual Funds Corp., or a company affiliated with it which Putnam Mutual Funds Corp. has designated as its agent to perform specified actions or procedures in connection with the prototype Plan. 45..39 Qualified Domestic Relations Order means any judgment, decree or order (including approval of a property settlement agreement) which constitutes a "qualified domestic relations order" within the meaning of Code Section 414(p). A judgment, decree or order shall not fail to be a Qualified Domestic Relations Order merely because it requires a distribution to an alternate payee (or the segregation of accounts pending distribution to an alternate payee) before the Participant is otherwise entitled to a distribution under the Plan. 45..40 Qualified Participant means any Participant who is an active Employee on the last day of the Plan Year in question or who is credited with more than 500 Hours of Service during the Plan Year in question or whose Retirement or death occurred during the Plan Year in question. If the Plan is not adopted to replace an existing plan, this Section 2.39 is effective on the Effective Date. If the Plan replaces an existing plan, this Section 2.39 is effective on the first day of the first Plan Year that begins after December 31, 1988, or if later, on the Effective Date, and the provision of the existing plan that this Section 2.39 replaces shall continue to apply until that time. 45..41 Recordkeeper means the person or entity designated by the Employer in the Plan Agreement to perform the duties described in Section 16.4, and any successor thereto. If Putnam is the Recordkeeper, the terms and conditions of its service will be as specified in a service agreement between the Employer and Putnam. 45..42 Retirement means ceasing to be an Employee in accordance with Section 7.1. 45..43 Rollover Account means an account established for an Employee who makes a rollover contribution to the Plan pursuant to Section 4.4. 45..44 Self-Employed Individual means an individual whose personal services are a material income-producing factor in the trade or business for which the Plan is established, and who has Earned Income for the taxable year from that trade or business, or would have Earned Income but for the fact that the trade or business had no net profits for the taxable year. 45..45 Shareholder-Employee means any officer or Employee of an electing small business corporation, within the meaning of Section 1362 of the Code, who on any day during a taxable year of the Employer owns (or is considered as owning under Section 318(a)(1) of the Code) more than 5% of the outstanding stock of the Employer. The Plan administrator shall be responsible for identifying Shareholder-Employees to the Recordkeeper. 45..46 Social Security Wage Base means the maximum amount considered as wages under Section 3121(a)(1) of the Code as in effect on the first day of the Plan Year. 45..47 Trust and Trust Fund mean the trust fund established under Section 13.1. 45..48 Trustee means the person, or the entity with trustee powers, named in the Plan Agreement as trustee, and any successor thereto. 45..49 Valuation Date means each day when the New York Stock Exchange is open, or such other date or dates as the Employer may designate by written agreement with the Recordkeeper. 45..50 Year of Service means a Plan Year or an 12-month Eligibility Period, as elected by the Employer in the Plan Agreement, in which an Employee is credited with at least 1,000 Hours of Service; provided, however, that if the Employer has elected in the Plan Agreement to establish a number less than 1,000 as the requisite for crediting a Year of Service, that number shall be substituted for 1,000, and provided further that in the case of an Employee in a seasonal industry (as defined under regulations prescribed by the Secretary of Labor) in which the customary extent of employment during a calendar year is fewer than 1,000 Hours of Service, the number specified in any regulations prescribed by the Secretary of Labor dealing with years of service shall be substituted for 1,000. An Employee's Years of Service shall include service credited prior to the Effective Date under any predecessor plan. If the initial Plan Year is shorter than 12 months, each Employee who is credited with at least 1,000 Hours of Service in the 12-month period ending on the last day of the initial Plan Year shall be credited with a Year of Service with respect to the initial Plan Year. If the Employer has so elected in the Plan Agreement, Years of Service for vesting shall not include: (a) Service in any Plan Year (or comparable period prior to the Effective Date) completed before the Employee reached age 18; (b) Service completed during a period in which the Employer did not maintain the Plan or any predecessor plan (as defined under regulations prescribed by the Secretary of the Treasury). If the Employer has so elected in the Plan Agreement, Years of Service for vesting shall include employment by a business acquired by the Employer, before the date of the acquisition. The following definitions apply only to cash or deferred arrangements under Section 401(k) (CODA): 45..51 Deferral Agreement means an Employee's agreement to make one or more Elective Deferrals in accordance with Section 5.2. 45..52 Elective Deferral means any contribution made to the Plan by the Employer at the election of a Participant, in lieu of cash compensation, including contributions made pursuant to a Deferral Agreement or other deferral mechanism. 45..53 Elective Deferral Account means an account maintained on the books of the Plan, in which are recorded a Participant's Elective Deferrals and the income, expenses, gains and losses incurred thereon. 45..54 Employer Matching Contribution means a contribution made by the Employer (i) to the Plan pursuant to Section 5.8, or (ii) to another defined contribution plan on account of a Participant's "elective deferrals" or "employee contributions," as those terms are used in Section 401(m)(4) of the Code. 45..55 Employer Matching Account means an account maintained on the books of the Plan, in which are recorded the Employer Matching Contributions made on behalf of a Participant and the income, expenses, gains and losses incurred thereon. 45..56 Highly Compensated Employee means any highly compensated active Employee or highly compensated former Employee as defined in subsection (a) below; provided, however, that if the Employer so elects in the Plan Agreement, Highly Compensated Employee means any highly compensated Employee under the simplified method described in subsection (b) below. (a) Regular Method. A highly compensated active Employee includes any Employee who performs service for the Employer during the determination year and who during the look-back year: (i) received compensation from the Employer in excess of $75,000 (as adjusted pursuant to Section 415(d) of the Code); (ii) received compensation from the Employer in excess of $50,000 (as adjusted pursuant to Section 415(d) of the Code) and was a member of the top-paid group for such year; or (iii) was an officer of the Employer and received compensation during such year that is greater than 50% of the dollar limitation in effect under Section 415(b)(1)(A) of the Code. The term also includes (i) Employees who are both described in the preceding sentence if the term "determination year" is substituted for the term "look-back year," and among the 100 Employees who received the most compensation from the Employer during the determination year; and (ii) Employees who are 5% owners at any time during the look-back year or determination year. If no officer has satisfied the compensation requirement of (iii) above during either a determination year or look-back year, the highest paid officer for such year shall be treated as a Highly Compensated Employee. A highly compensated former Employee includes any Employee who separated from service (or was deemed to have separated) before the determination year, performed no service for the Employer during the determination year, and was a highly compensated active Employee for either the year of separation from service or any determination year ending on or after the Employee's 55th birthday. If during a determination year or look-back year an Employee is a family member of either a 5% owner who is an active or former Employee, or a Highly Compensated Employee who is one of the 10 most highly paid Highly Compensated Employees ranked on the basis of compensation paid by the Employer during the year, then the family member and the 5% owner or top-ten Highly Compensated Employee shall be treated as a single Employee receiving compensation and Plan contributions or benefits equal to the sum of the compensation and contributions or benefits of the family member and the 5% owner or top-ten Highly Compensated Employee. For purposes of this Section 2.56(a), family members include the spouse, lineal ascendants and descendants of the Employee or former Employee and the spouses of such lineal ascendants and descendants. For purposes of this subsection (a), the "determination year" shall be the Plan Year, and the "look-back year" shall be the 12-month period immediately preceding the determination year; provided, however, that in a Plan for which the Plan Year is the calendar year, the current Plan Year shall be both the "determination year" and the "look-back year" if the Employer so elects in the Plan Agreement. (b) Simplified Method. An Employee is a Highly Compensated Employee under this simplified method if (i) the Employee is a 5-percent owner during the Plan Year; (ii) the Employee's compensation for the Plan Year exceeds $75,000 (as adjusted pursuant to Section 415(d) of the Code); (iii) the Employee's compensation for the Plan Year exceeds $50,000 (as adjusted pursuant to Section 415(d) of the Code) and the Employee is in the top-paid group of Employees; or (iv) the Employee is an officer of the Employer and received compensation during the Plan Year that is greater than 50% of the dollar limitation under Code Section 415(b)(1)(A). The lookback provisions of Code Section 414(q) do not apply to determining Highly Compensated Employees under this simplified method. An Employer that applies this simplified method for determining Highly Compensated Employees may choose to apply this method on the basis of the Employer's workforce as of a single day during the Plan Year ("snapshot day"). In applying this simplified method on a snapshot basis, the Employer shall determine who is a Highly Compensated Employee on the basis of the data as of the snapshot day. If the determination of who is a Highly Compensated Employee is made earlier than the last day of the Plan Year, the Employee's compensation that is used to determine an Employee's status must be projected for the Plan Year under a reasonable method established by the Employer. Notwithstanding the foregoing, in addition to those Employees who are determined to be highly compensated on the Plan's snapshot day, as described above, where there are Employees who are not employed on the snapshot day but who are taken into account for purposes of testing under Section 5.6 or 5.11, the Employer must treat as a Highly Compensated Employee any Eligible Employee for the Plan Year who: (1) terminated prior to the snapshot day and was a Highly Compensated Employee in the prior year; (2) terminated prior to the snapshot day and (i) was a 5-percent owner, (ii) had compensation for the Plan Year greater than or equal to the projected compensation of any Employee who is treated as a Highly Compensated Employee on the snapshot day (except for Employees who are Highly Compensated Employees solely because they are 5-percent owners or officers), or (iii) was an officer and had compensation greater than or equal to the projected compensation of any other officer who is a Highly Compensated Employee on the snapshot day solely because that person is an officer; or (3) becomes employed subsequent to the snapshot day and (i) is a 5-percent owner, (ii) has compensation for the Plan Year greater than or equal to the projected compensation of any Employe who is treated as a Highly Compensated Employee on the snapshot day (except for Employees who are Highly Compensated Employees solely because they are 5-percent owners or officers), or (iii) is an officer and has compensation greater than or equal to the projected compensation of any other officer who is a Highly Compensated Employee on the snapshot day solely because that person is an officer. If during a Plan Year an Employee is a family member of either a 5-percent owner who is an Employee, or a Highly Compensated Employee who is one of the ten most highly paid Highly Compensated Employees ranked on the basis of compensation paid by the Employees during the year, then the family member and the 5-percent owner or top-ten-Highly- Compensated-Employee shall be treated as a single Employee receiving compensation and Plan contributions or benefits equal to the sum of the compensation and contributions or benefits of the family member and the 5-percent owner or top- ten-Highly-Compensated-Employee. For purposes of this Section 2.56(b), family members include the spouse, lineal ascendants and descendants of the Employee and the spouses of such lineal ascendants and descendants. The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, the top 100 Employees, the number of Employees treated as officers and the compensation that is considered, will be made in accordance with Section 414(q) of the Code and the regulations thereunder. 45..57 Non-Highly Compensated Employee means an Employee who is not a Highly Compensated Employee. 45..58 Qualified Matching Contribution means a contribution made by the Employer that: (i) is allocated in proportion to a Participant's Elective Deferrals, (ii) is fully vested at all times and (iii) is distributable only in accordance with Section 5.11. 45..59 Qualified Matching Account means an account maintained on the books of the Plan, in which are recorded the Qualified Matching Contributions on behalf of a Participant and the income, expense, gain and loss attributable thereto. 45..60 Qualified Nonelective Contribution means a contribution (other than an Employer Matching Contribution or Qualified Matching Contribution) made by the Employer, that: (i) a Participant may not elect to receive in cash until it is distributed from the Plan; (ii) is fully vested at all times; and (iii) is distributable only in accordance with Section 5.11. 45..61 Qualified Nonelective Contribution Account means an account maintained on the books of the Plan, in which are recorded the Qualified Nonelective Contributions on behalf of a Participant and the income, expense, gain and loss attributable thereto. ARTICLE 46. PARTICIPATION 46..1 Initial Participation. An Employee shall begin participation in the Plan as of the entry date specified in the Plan Agreement, or as of the Effective Date, whichever is later; provided, however, that: (a) If the Plan is adopted as an amendment of a predecessor plan of the Employer, every Employee who was participating under the predecessor plan when it was so amended shall become a Participant in the Plan as of the Effective Date, whether or not he has satisfied the age and service requirements specified in the Plan Agreement; and (b) Unless the Employer specifies otherwise in the Plan Agreement, any individual who is (i) a nonresident alien receiving no earned income from an Affiliated Employer which constitutes income from sources within the United States, or (ii) included in a unit of Employees covered by a collective bargaining agreement between the Employer and Employee representatives (excluding from the term "Employee representatives" any organization of which more than half of the members are Employees who are owners, officers, or executives of an Affiliated Employer), if retirement benefits were the subject of good faith bargaining and no more than 2% of the Employees covered by the collective bargaining agreement are professionals as defined in Section 1.410(b)-9 of the Income Tax Regulations, shall not participate in the Plan until the later of the date on which he ceases to be described in clause (i) or (ii), whichever is applicable, or the entry date specified by the Employer in the Plan Agreement; and (c) If the Plan is not adopted as an amendment of a predecessor plan of the Employer, all Employees on the Effective Date shall begin participation on the Effective Date, if the Employer so elects in the Plan Agreement; and (d) A Participant shall cease to participate in the Plan when he becomes a member of a class of Employees ineligible to participate in the Plan, and shall resume participation immediately upon his return to a class of Employees eligible to participate in the Plan. 46..2 Special Participation Rule. With respect to a Plan in which the Employer has specified full and immediate vesting in the Plan Agreement, an Employee who incurs a One-Year Eligibility Break before completing the number of Eligibility Periods required under Section 3.1 shall not thereafter be credited with any Eligibility Period completed before the One-Year Eligibility Break. 46..3 Resumed Participation. A former Employee who incurs a One-Year Eligibility Break after having become a Participant shall participate in the Plan as of the date on which he again becomes an Employee, if (i) his Employer Contribution Account or Employer Matching Account had become partially or fully vested before he incurred a One-Year Vesting Break, or (ii) he incurred fewer than five consecutive One-Year Eligibility Breaks. In any other case, when he again becomes an Employee he shall be treated as a new Employee under Section 3.1. 46..4 Benefits for Owner-Employees. If the Plan provides contributions or benefits for one or more Owner-Employees who control both the trade or business with respect to which the Plan is established and one or more other trades or businesses, the Plan and plans established with respect to such other trades or businesses must, when looked at as a single plan, satisfy Sections 401(a) and (d) of the Code with respect to the Employees of this and all such other trades or businesses. If the Plan provides contributions or benefits for one or more Owner Employees who control one or more other trades or businesses, the Employees of each such other trade or business must be included in a plan which satisfies Sections 401(a) and (d) of the Code and which provides contributions and benefits not less favorable than those provided for such Owner-Employees under the Plan. If an individual is covered as an Owner-Employee under the plans of two or more trades or businesses which he does not control and such individual controls a trade or business, then the contributions or benefits of the Employees under the plan of the trade or business which he does control must be as favorable as those provided for him under the most favorable plan of the trade or business which he does not control. For purposes of this Section 3.4, an Owner-Employee, or two or more Owner-Employees, shall be considered to control a trade or business if such Owner-Employee, or such two or more Owner- Employees together: (a) own the entire interest in an unincorporated trade or business, or (b) in the case of a partnership, own more than 50% of either the capital interest or the profits interest in such partnership. For purposes of the preceding sentence, an Owner-Employee or two or more Owner-Employees shall be treated as owning any interest in a partnership which is owned, directly or indirectly, by a partnership which such Owner-Employee or such two or more Owner-- Employees are considered to control within the meaning of the preceding sentence. 46..5 Changes in Classification. If a Participant ceases to be a member of a classification of Employees eligible to participate in the Plan, but does not incur a One-Year Eligibility Break, he will continue to be credited with Years of Service for vesting while he remains an Employee, and he will resume participation as of the date on which he again becomes a member of a classification of Employees eligible to participate in the Plan. If such a Participant incurs a One-Year Eligibility Break, Section 3.3 will apply. If a Participant who ceases to be a member of a classification of Employees eligible to participate in the Plan becomes a member of a classification of Employees eligible to participate in another plan of the Employer, his Account, if any, under the Plan shall, upon the Administrator's direction, be transferred to the plan in which he has become eligible to participate, if such plan permits receipt of such Account. If an Employee who is not a member of a classification of Employees eligible to participate in the Plan satisfies the age and service requirements specified in the Plan Agreement, he will begin to participate immediately upon becoming a member of an eligible classification. If such an Employee has account balances under another plan of the Employer, such account balances shall be transferred to the Plan upon the Employee's commencement of participation in the Plan, if such other plan permits such transfer. ARTICLE 47. CONTRIBUTIONS 47..1 Provisions Applicable to All Plans. (a) Payment and Crediting of Employer Contributions. The Employer shall pay to the order of the Trustee the aggregate contribution to the Trust Fund (other than the premium payments on any Policy) for each Plan Year. Each contribution shall be accompanied by written instructions from the Employer, in the manner prescribed by Putnam. Neither the Trustee nor Putnam shall be under any duty to inquire into the correctness of the amount or the timing of any contribution, or to collect any amount if the Employer fails to make a contribution as provided in the Plan. (b) Responsibility for Premium Payments. Contributions to be applied to the payment of the premiums on any Policy shall be paid by the Employer directly to the insurer in cash. In determining the amount of any premium due under any Policy with respect to any Participant, the Employer and the Insurance Trustee may rely conclusively upon information furnished by the provider of the Policy. For purposes of Sections 4.2, 4.3 and Article 5, all Employer contributions used to pay premiums on Policies shall be treated as contributions made to the appropriate Participant's Employer Contribution Account. If the Employer omits any premium payment or makes any mistake concerning a premium payment, neither the Employer nor the Insurance Trustee shall have any liability in excess of the premium to be paid. (c) Time for Payment. The aggregate of all contributions with respect to a Plan Year shall be transferred to the Trustee or the insurer no later than the due date (including extensions) for filing the Employer's federal income tax return for that Plan Year. (d) Limitations on Allocations. All allocations shall be subject to the limitations in Article 6. (e) Establishment of Accounts. The Employer will establish and maintain (or cause to be established and maintained) for each Participant individual accounts adequate to disclose his interest in the Trust Fund, including such of the following separate accounts as shall apply to the Participant: Employer Contribution Account, Participant Contribution Account, and Rollover Account; and in a Plan with a CODA, Elective Deferral Account, Qualified Nonelective Account, Qualified Matching Account and Employer Matching Account. The maintenance of such accounts shall be only for recordkeeping purposes, and the assets of separate accounts shall not be required to be segregated for purposes of investment. (f) Restoration of Accounts. Notwithstanding any other provision of the Plan, for any Plan Year in which it is necessary to restore any portion of a Participant's Account pursuant to Section 8.3(b) or 9.5, to the extent that the amount of Forfeitures available is insufficient to accomplish such restoration, the Employer shall contribute the amount necessary to eliminate the insufficiency, regardless of whether the contribution is currently deductible by the Employer under Section 404 of the Code. Forfeitures shall be considered available for allocation pursuant to Sections 4.2 and 5.8 in a Plan Year only after all necessary restoration of Accounts has been accomplished. 47..2 Provisions Applicable Only to Profit Sharing Plans. (a) Amount of Annual Contribution. The Employer will contribute for each Plan Year an amount determined in accordance with the formula specified by the Employer in the Plan Agreement, less any amounts reapplied for the Plan Year under Section 6.1(d), not to exceed the amount deductible under Section 404 of the Code. If the Employer so elects in the Plan Agreement, the amount of Forfeitures occurring in a Plan Year shall be applied to reduce the Employer's contribution by a like amount, and such Forfeitures shall be treated as a portion of the Employer contribution for purposes of paragraphs (b) and (c). (b) Allocation of Contributions: General Rule. As of the last day of each Plan Year, the Employer's contribution (and any amounts reapplied under Section 6.1(d)) for the Plan Year shall be allocated among the Employer Contribution Accounts of Qualified Participants in proportion to their Earnings, unless the Employer elects in the Plan Agreement to allocate contributions in a uniform dollar amount to the Account of each Qualified Participant. This rule does not apply to a Plan that is integrated with Social Security or to allocations in a CODA. (c) Per Capita Allocation. An Employer may elect in the Plan Agreement to allocate Employer Contributions and any amounts reapplied under Section 6.1(d) (but not allocations in a CODA) in a uniform dollar amount to the Account of each Qualified Participant. (d) Plans Integrated with Social Security. Subject to Section 4.6 and if the Employer elects in the Plan Agreement an allocation formula integrated with Social Security, Employer contributions (and any amounts reapplied under Section 6.1(d)) shall be allocated as of the last day of the Plan Year, as follows: (1) Top-Heavy Integration Formula. If the Plan is required to provide a minimum allocation for the Plan Year pursuant to the Top-Heavy Plan rules of Article 15, or if the Employer has specified in the Plan Agreement that this paragraph (1) will apply whether or not the Plan is Top-Heavy, then: (A) First, among the Employer Contribution Accounts of all Qualified Participants, in the ratio that each Qualified Participant's Earnings bears to all Qualified Participants' Earnings. The total amount allocated in this manner shall be equal to 3% of all Qualified Participants' Earnings (or, if less, the entire amount to be allocated). (B) Next, among the Employer Contribution Accounts of all Qualified Participants who have Excess Earnings, in the ratio that each Qualified Participant's Excess Earnings bears to all Qualified Participants' Excess Earnings. The total amount allocated in this manner shall be equal to 3% of all Qualified Participants' Excess Earnings (or, if less, the entire amount remaining to be allocated). (C) Next, among the Employer Contribution Accounts of all Qualified Participants, in the ratio that the sum of each Qualified Participant's Earnings and Excess Earnings bears to the sum of all Qualified Participants' Earnings and Excess Earnings. The total amount allocated in this manner shall not exceed the lesser of (i) the sum of all Participants' Earnings and Excess Earnings multiplied by the Top-Heavy Maximum Disparity Percentage determined under subparagraph (1)(E), or (ii) the entire amount remaining to be allocated. (D) Finally, any amount remaining shall be allocated among the Employer Contribution Accounts of all Qualified Participants in the ratio that each Qualified Participant's Earnings bears to all Qualified Participants' Earnings. (E) The Top-Heavy Maximum Disparity Percentage shall be the lesser of (i) 2.7% or (ii) the applicable percentage from the following table: If the Plan's Integration Level is More than: But not more than: The applicable percentage is: $0 The greater of $10,000 or 20% of the Social Security Wage Base 2.7% The greater of $10,000 or 20% of the Social Security Wage Base 80% of the Social Security Wage Base 1.3% 80% of the Social Security Wage Base Less than the Social Security Wage Base 2.4% If the Plan's Integration Level is equal to the Social Security Wage Base, the Top-Heavy Maximum Disparity Percentage is 2.7%. (2) Non-Top Heavy Integration Formula. If the Plan is not required to provide a minimum allocation for the Plan Year pursuant to the Top-Heavy Plan rules of Article 15, and the Employer has not specified in the Plan Agreement that paragraph (1) will apply whether or not the Plan is Top-Heavy, then: (A) An amount equal to (i) the Maximum Disparity Percentage determined under subparagraph (2)(C) multiplied by the sum of all Qualified Participants' Earnings and Excess Earnings, or (ii) if less, the entire amount to be allocated, shall be allocated among the Employer Contribution Account of all Participants in the ratio that the sum of each Qualified Participant's Earnings and Excess Earnings bears to the sum of all Qualified Participants' Earnings and Excess Earnings. (B) Any amount remaining after the allocation in paragraph (2)(A) shall be allocated among the Employer Contribution Accounts of all Qualified Participants in the ratio that each Qualified Participant's Earnings bears to all Qualified Participants' Earnings. (C) The Maximum Disparity Percentage shall be the lesser of (i) 5.7% or (ii) the applicable percentage from the following table: If the Plan's Integration Level is more than: But not more than: The applicable percentage is: $0 The greater of $10,000 or 20% of the Social Security Wage Base 5.7% The greater of $10,000 or 20% of the Social Security Wage Base 80% of the Social Security Wage Base 4.3% 80% of the Social Security Wage Base Less than the Social Security Wage Base 5.4% If the Plan's Integration Level is equal to the Social Security Wage Base, the Maximum Disparity Percentage is 5.7%. (3) In this Section 4.2, Earnings means Earnings as defined in Section 2.12. (e) Allocation of Forfeitures. Forfeitures shall be allocated among the Employer Contribution Accounts of all Qualified Participants in accordance with paragraph (a) or (b), whichever applies to Employer Contributions. Forfeitures may be allocated pursuant to paragraphs (d)(1)(B), (d)(1)(C) and (d)(2)(A) only to the extent that the limitation described therein has not been fully utilized by the allocation of Employer Contributions and amounts reapplied under Section 6.1(d). (f) Participant Contributions. If so specified in the Plan Agreement, a Participant may make nondeductible contributions to the Plan in accordance with the Plan Agreement. Such contributions shall be limited so as to meet the nondiscrimination test of Section 401(m) of the Code, as set out in Section 5.11 of the Plan. Participant contributions will be allocated to the Participant Contributions Account of the contributing Participant. All Participant Contributions Accounts will be fully vested at all times. 47..3 Provisions Applicable Only to Money Purchase Pension Plans. (a) Amount of Annual Contributions. The Employer will contribute for each Plan Year an amount described in paragraph (b) or (c) below, whichever is applicable, less any amounts reapplied for the Plan Year under Section 6.1(d), not to exceed the amount deductible under Section 404(c) of the Code. If the Employer so elects in the Plan Agreement, the amount of Forfeitures occurring in a Plan Year shall be applied to reduce the Employer's contribution by a like amount, and such Forfeitures shall be treated as a portion of the Employer Contribution for purposes of paragraphs (b) and (c). (b) Allocation of Contributions; General Rule. The Employer shall contribute an amount equal to the product of the Earnings of all Qualified Participants and the Base Contribution Percentage, and the contribution shall be allocated as of the last day of the Plan Year among the Employer Contribution Accounts of all Qualified Participants in the ratio that the Earnings of each Qualified Participant bears to the Earnings of all Qualified Participants. This general rule does not apply to a Plan that is integrated with Social Security. (c) Plans Integrated with Social Security. Subject to Section 4.6 and if the Employer has elected in the Plan Agreement to integrate the Plan with Social Security, the Employer shall contribute an amount equal to the sum of the following amounts, and the contribution shall be allocated as of the last day of the Plan Year as follows: (1) To the Employer Contribution Account of each Qualified Participant, an amount equal to the product of the Base Contribution Percentage and his Earnings, and (2) To the Employer Contribution Account of each Qualified Participant who has Excess Earnings, the product of his Excess Earnings and the lesser of (i) the Base Contribution Percentage or (ii) the Money Purchase Maximum Disparity Percentage determined under paragraph (d). (3) The Base Contribution Percentage shall be no less than three percent in either of the following circumstances: (i) any Plan Year of a Plan for which the Plan Agreement does not specify that the Employer will perform annual Top-Heavy testing, or (ii) any Plan Year in which the Plan is required to provide a minimum allocation for the Plan Year pursuant to the Top-Heavy Plan rules of Article 15. (d) The Money Purchase Maximum Disparity Percentage is equal to the lesser of (i) 5.7% or (ii) the applicable percentage from the following table: If the Plan's Integration Level is more than: But not more than: The applicable percentage is: $0 The greater of $10,000 or 20% of the Social Security Wage Base 5.7% The greater of $10,000 or 20% of the Social Security Wage Base 80% of the Social Security Wage Base 4.3% 80% of the Social Security Wage Base Less than the Social Security Wage Base 5.4% If the Plan's Integration Level is equal to the Social Security Wage Base, the Money Purchase Maximum Disparity Percentage is 5.7%. (e) Participant Contributions. If so specified in the Plan Agreement, a Participant may make nondeductible contributions to the Plan in accordance with the Plan Agreement. Such contributions shall be limited so as to meet the nondiscrimination test of Section 401(m) of the Code, as set out in Section 5.11 of the Plan. Participant contributions will be allocated to the Participant Contributions Account of the contributing Participant. All Participant Contributions Accounts will be fully vested at all times. (f) Separate Allocation of Forfeitures. If the Employer has not elected in the Plan Agreement to use Forfeitures to reduce the amount of its contribution, Forfeitures shall be allocated among the Employer Contribution Accounts of all Qualified Participants in proportion of their Earnings. 47..4 Rollover Contributions. An Employee in an eligible class may contribute at any time cash or other property (which is not a collectible within the meaning of Section 408(m) of the Code) acceptable to the Trustee representing qualified rollover amounts under Sections 402, 403, or 408 of the Code. Amounts so contributed shall be credited to a Rollover Account for the Participant. 47..5 No Deductible Employee Contributions. The Plan Administrator shall not accept deductible employee contributions. 47..6 Paired Plans. An Employer may adopt as paired plans Putnam Profit Sharing and 401(k) Plan (Plan Agreement #001) and Putnam Money Purchase Pension Plan (Plan Agreement #002). Only one of the two paired plans may be integrated with Social Security. In any Plan Year in which Putnam paired plans are top-heavy, each non- key employee who is eligible to participate in both plans will have allocated to his account in the Putnam Money Purchase Pension Plan a minimum contribution that meets the requirements of Section 15.3. ARTICLE 48. CASH OR DEFERRED ARRANGEMENT UNDER SECTION 401(k) (CODA) 48..1 Applicability; Allocations. This Article 5 applies to any plan for which the Employer has elected in the Plan Agreement to include a CODA. The Employer may specify in the Plan Agreement that contributions will be made to the Plan only under the CODA, or that contributions may be made under Section 4.2 as well as under the CODA. Allocations to Participants' Accounts of contributions made pursuant to this Article 5 shall be made as soon as administratively feasible after their receipt by the Trustee, but in any case no later than as of the last day of the Plan Year for which the contributions were made. 48..2 CODA Participation. Each Employee who has met the eligibility requirements of Article 3 may make Elective Deferrals to the Plan by completing and returning to the Plan Administrator a Deferral Agreement form which provides that the Participant's cash compensation from the Employer will be reduced by the amount indicated in the Deferral Agreement, and that the Employer will contribute an equivalent amount to the Trust on behalf of the Participant. The following rules will govern Elective Deferrals: (a) Subject to the limits specified in the Plan Agreement and set forth in Section 5.3, a Deferral Agreement may apply to any amount or percentage of either or both of the Earnings payable to a Participant in each regular payroll period of the Employer, or one or more bonuses payable to a Participant from time to time as specified by the Employer. (b) In accordance with such reasonable rules as the Plan Administrator shall specify, a Deferral Agreement will become effective as soon as is administratively feasible after the Deferral Agreement is returned to the Plan Administrator, and will remain effective until it is modified or terminated. No Deferral Agreement may become effective retroactively. (c) A Participant may modify his Deferral Agreement by completing and returning to the Plan Administrator a new Deferral Agreement form as of any of the dates specified in the Plan Agreement, and any such modification will become effective as described in paragraph (b). (d) A Participant may terminate his Deferral Agreement at any time upon advance written notice to the Plan Administrator, and any such Termination will become effective as described in paragraph (b). 48..3 Annual Limit on Elective Deferrals. During any taxable year of a Participant, his Elective Deferrals under the Plan and any other qualified plan of an Affiliated Employer shall not exceed the dollar limit contained in Section 402(g) of the Code in effect at the beginning of the taxable year. With respect to any taxable year, a Participant's Elective Deferrals for purposes of this Section 5.3 include all Employer contributions made on his behalf pursuant to an election to defer under any qualified CODA as described in Section 401(k) of the Code, any simplified employee pension cash or deferred arrangement (SARSEP) as described in Section 402(h)(1)(B) of the Code, any eligible deferred compensation plan under Section 457 of the Code, any plan described under Section 501(c)(18) of the Code, and any Employer contributions made on behalf of the Participant for the purchase of an annuity contract under Section 403(b) of the Code pursuant to a salary reduction agreement. The amount of Elective Deferrals of a Participant who receives a hardship distribution pursuant to Section 5.14 shall be reduced, for the taxable year next following the distribution, by the amount of Elective Deferrals made in the taxable year of the hardship distribution. 48..4 Distribution of Certain Elective Deferrals. "Excess Elective Deferrals" means those Elective Deferrals described in Section 5.3 that are includible in a Participant's gross income under Section 402(g) of the Code, to the extent that the Participant's aggregate elective deferrals for a taxable year exceed the dollar limitation under that Code Section. Excess Elective Deferrals shall be treated as Annual Additions under the Plan, whether or not they are distributed under this Section 5.4. A Participant may designate to the Plan any Excess Elective Deferrals made during his taxable year by notifying the Employer on or before the following March 15 of the amount of the Excess Elective Deferrals to be so designated. A Participant who has Excess Elective Deferrals for a taxable year, taking into account only his Elective Deferrals under the Plan and any other plans of the Affiliated Employers, shall be deemed to have designated the entire amount of such Excess Elective Deferrals. Notwithstanding any other provision of the Plan, Excess Elective Deferrals, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose Account Excess Elective Deferrals were so designated or deemed designated for the preceding year. The income or loss allocable to Excess Elective Deferrals is the income or loss allocable to the Participant's Elective Deferral Account for the taxable year multiplied by a fraction, the numerator of which is the Participant's Excess Elective Deferrals for the year and the denominator of which is the Participant's Account balance attributable to Elective Deferrals without regard to any income or loss occurring during the year. To the extent that the return to a Participant of his Elective Deferrals would reduce an Excess Amount (as defined in Section 6.5(f)), such Excess Deferrals shall be distributed to the Participant in accordance with Article 6. 48..5 Satisfaction of ADP and ACP Tests. In each Plan Year, the Plan must satisfy the ADP test described in Section 5.6 and the ACP test described in Section 5.9. The Employer may cause the Plan to satisfy the ADP or ACP test or both tests for a Plan Year by any of the following methods or by any combination of them: (a) By the distribution of Excess Contributions in accordance with Section 5.7, or the distribution of Excess Aggregate Contributions in accordance with Section 5.12, or both; or (b) If the Employer has so elected in the Plan Agreement, by making Qualified Nonelective Contributions or Qualified Matching Contributions or both, in accordance with the Plan Agreement and this Section 5.5. 48..6 Actual Deferral Percentage Test Limit. The Actual Deferral Percentage (hereinafter "ADP") for Participants who are Highly Compensated Employees for each Plan Year and the ADP for Participants who are Non-Highly Compensated Employees for the same Plan Year must satisfy one of the following tests: (a) The ADP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Participants who are Non-Highly Compensated Employees for the same Plan Year multiplied by 1.25; or (b) The ADP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Participants who are Non-Highly Compensated Employees for the same Plan Year multiplied by 2.0, provided that the ADP for Participants who are Highly Compensated Employees does not exceed the ADP for Participants who are Non-Highly Compensated Employees by more than two percentage points. The following special rules shall apply to the computation of the ADP: (c) "Actual Deferral Percentage" means, for a specified group of Participants for a Plan Year, the average of the ratios (calculated separately for each Participant in the group) of (1) the amount of Employer contributions actually paid over to the Trust on behalf of the Participant for the Plan Year to (2) the Participant's Earnings for the Plan Year (or, provided that the Employer applies this method to all Employees for a Plan Year, the Participant's Earnings for that portion of the Plan Year during which he was eligible to participate in the Plan). Employer contributions on behalf of any Participant shall include: (i) his Elective Deferrals, including Excess Elective Deferrals of Highly Compensated Employees, but excluding (A) Excess Elective Deferrals of Non- Highly Compensated Employees that arise solely from Elective Deferrals made under the Plan or another plan maintained by an Affiliated Employer, and (B) Elective Deferrals that are taken into account in the Average Contribution Percentage test described in Section 5.11 (provided the ADP test is satisfied both with and without exclusion of these Elective Deferrals), and excluding Elective Deferrals returned to a Participant to reduce an Excess Amount as defined in Section 6.5(f); and (ii) if the Employer has elected to make Qualified Nonelective Contributions, such amount of Qualified Nonelective Contributions, if any, as shall be necessary to enable the Plan to satisfy the ADP test; and (iii) if the Employer has elected to make Qualified Matching Contributions, such amount of Qualified Matching Contributions, if any, as shall be necessary to enable the Plan to satisfy the ADP test. For purposes of computing Actual Deferral Percentages, an Employee who would be a Participant but for his failure to make Elective Deferrals shall be treated as a Participant on whose behalf no Elective Deferrals are made. (d) In the event that the Plan satisfies the requirements of Sections 401(k), 401(a)(4), or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Sections of the Code only if aggregated with the Plan, then this Section 5.6 shall be applied by determining the ADP of Employees as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated in order to satisfy Section 401(k) of the Code only if they have the same Plan Year. (e) The ADP for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Elective Deferrals (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if these are treated as Elective Deferrals for purposes of the ADP test) allocated to his Accounts under two or more CODAs described in Section 401(k) of the Code that are maintained by the Affiliated Employers shall be determined as if such Elective Deferrals (and, if applicable, such Qualified Nonelective Contributions or Qualified Matching Contributions, or both) were made under a single CODA. If a Highly Compensated Employee participates in two or more CODAs that have different Plan Years, all CODAs ending with or within the same calendar year shall be treated as a single CODA, except that CODAs to which mandatory disaggregation applies in accordance with regulations issued under Section 401(k) of the Code shall be treated as separate CODAs. (f) For purposes of determining the ADP of a Participant who is a 5% owner or one of the ten most highly-paid Highly Compensated Employees, the Elective Deferrals (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if these are treated as Elective Deferrals for purposes of the ADP test) and the Compensation of such a Participant shall include the Elective Deferrals (and, if applicable, Qualified Nonelective Contributions and Qualified Matching Contributions, or both) and Compensation for the Plan Year of his Family Members (as defined in Section 414(q)(6) of the Code). Family Members of such Highly Compensated Employees shall be disregarded as separate employees in determining the ADP both for Participants who are Non-Highly Compensated Employees and for Participants who are Highly Compensated Employees. (g) For purposes of the ADP test, Elective Deferrals, Qualified Nonelective Contributions and Qualified Matching Contributions must be made before the last day of the 12-month period immediately following the Plan Year to which those contributions relate. (h) The Employer shall maintain records sufficient to demonstrate satisfaction of the ADP test and the amount of Qualified Nonelective Contributions or Qualified Matching Contributions, or both, used in satisfying the test. (i) The determination and treatment of the ADP amounts of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 48..7 Distribution of Excess Contributions. "Excess Contributions" means, with respect to any Plan Year, the excess of: (a) The aggregate amount of Employer contributions actually taken into account in computing the ADP of Highly Compensated Employees for the Plan Year, over (b) The maximum amount of Employer contributions permitted by the ADP test, determined by reducing contributions made on behalf of Highly Compensated Employees in order of their ADPs, beginning with the highest of such percentages. Notwithstanding any other provision of the Plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of each Plan Year to Participants to whose Accounts Excess Contributions were allocated for the preceding Plan Year. The income or loss allocable to Excess Contributions is the income or loss allocable to the Participant's Elective Deferral Account (and, if applicable, his Qualified Nonelective Account or Qualified Matching Account or both) for the Plan Year multiplied by a fraction, the numerator of which is the Participant's Excess Contributions for the year and the denominator is the Participant's account balance attributable to Elective Deferrals (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if any of these are included in the ADP test) without regard to any income or loss occurring during the Plan Year. If such excess amounts are distributed more than 2 1/2 months after the last day of the Plan Year in which the excess amounts arose, an excise tax equal to 10% of the excess amounts will be imposed on the Employer maintaining the Plan. Such distributions shall be made to Highly Compensated Employees on the basis of the respective portions of the Excess Contributions attributable to each of them. Excess Contributions shall be allocated to a Participant who is a family member subject to the family member aggregation rules of Section 414(q)(6) of the Code in the proportion that the Participant's Elective Deferrals (and other amounts treated as his Elective Deferrals) bear to the combined Elective Deferrals (and other amounts treated as Elective Deferrals) of all of the Participants aggregated to determine his family members' combined ADP. Excess Contributions shall be treated as Annual Additions under the Plan. Excess Contributions shall be distributed from the Participant's Elective Deferral Account and Qualified Matching Account (if applicable) in proportion to the Participant's Elective Deferrals and Qualified Matching Contributions (to the extent used in the ADP test) for the Plan Year. Excess Contributions shall be distributed from the Participant's Qualified Nonelective Account only to the extent that such Excess Contributions exceed the balance in the Participant's Elective Deferral Account and Qualified Matching Account. 48..8 Matching Contributions. If so specified in the Plan Agreement, the Employer will make Matching Contributions to the Plan in accordance with the Plan Agreement, but no Matching Contribution shall be made with respect to an Elective Deferral that is returned to a Participant because it represents an Excess Elective Deferral, an Excess Contribution or an Excess Amount (as defined in Section 6.5(f)); and if a Matching Contribution has nevertheless been made with respect to such an Elective Deferral, the Matching Contribution shall be forfeited, notwithstanding any other provision of the Plan. (a) Employer Matching Contributions. Employer Matching Contributions will be allocated among the Employer Matching Accounts of Participants in proportion to their Elective Deferrals. Employer Matching Accounts shall become vested according to the vesting schedule specified in the Plan Agreement, but regardless of that schedule shall be fully vested upon the Participant's Retirement (or, if earlier, his fulfillment of the requirements for early retirement, if any, or attainment of the normal retirement age specified in the Plan Agreement), his death during employment with an Affiliated Employer, and in accordance with Section 19.3. Forfeitures of Employer Matching Contributions, other than Excess Aggregate Contributions, shall be made in accordance with Section 8.3. Forfeitures of Employer Matching Accounts for a Plan Year shall be applied to reduce the total Employer Matching Contribution for the Plan Year, or allocated among the Employer Matching Accounts of Participants in addition to the Employer Matching Contribution for the Plan Year, as elected by the Employer in the Plan Agreement. (b) Qualified Matching Contributions. Qualified Matching Contributions will be allocated among the Qualified Matching Contribution Accounts of Participants as specified by the Employer in the Plan Agreement. 48..9 Participant Contributions. If so specified in the Plan Agreement, a Participant may make nondeductible contributions to the Plan in accordance with the Plan Agreement. Such contributions, together with any matching contributions (as defined in Section 401(m)(4) of the Code), shall be limited so as to meet the nondiscrimination test of Section 401(m) of the Code, as set forth in Section 5.11 of the Plan. Participant contributions will be allocated to the Participant Contributions Account of the contributing Participant. All Participant Contribution Accounts will be fully vested at all times. 48..10 Recharacterization of Excess Contributions. Provided that the Plan Agreement permits all Participants to make Participant Contributions, the Employer may treat a Participant's Excess Contributions as an amount distributed to the Participant and then contributed by the Participant to the Plan as a Participant Contribution. Recharacterized amounts will remain nonforfeitable and subject to the same distribution requirements as Elective Deferrals. Amounts may not be recharacterized by a Highly Compensated Employe to the extent that a recharacterized amount in combination with other Participant Contributions made by that Employee would exceed any stated limit under the Plan on Participant Contributions. Recharacterization must occur no later than two and one-half months after the last day of the Plan Year in which the Excess Contributions arose, and is deemed to occur no earlier than the date the last Highly Compensated Employee is informed in writing by the Employer of the amount recharacterized and the consequences thereof. Recharacterized amounts will be taxable to the Participant for his tax year in which the Participant would have received them in cash. 48..11 Average Contribution Percentage Test Limit and Aggregate Limit. The Average Contribution Percentage (hereinafter "ACP") for Participants who are Highly Compensated Employees for each Plan Year and the ACP for Participants who are Non-Highly Compensated Employees for the same Plan Year must satisfy one of the following tests: (a) The ACP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Participants who are Non-Highly Compensated Employees for the same Plan Year multiplied by 1.25; or (b) The ACP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Participants who are Non-Highly Compensated Employees for the same Plan Year multiplied by two (2), provided that the ACP for Participants who are Highly Compensated Employees does not exceed the ACP for Participants who are Non-Highly Compensated Employees by more than two percentage points. The following rules shall apply to the computation of the ACP: (c) Average Contribution Percentage means the average of the Contribution Percentages of the Eligible Participants in a group. (d) Contribution Percentage means the ratio (expressed as a percentage) of a Participant's Contribution Percentage Amounts to the Participant's Earnings for the Plan Year (or, provided that the Employer applies this method to all Employees for a Plan Year, the Participant's Earnings for that portion of the Plan Year during which he was eligible to participate in the Plan). (e) Contribution Percentage Amounts means the sum of the Participant Contributions, Employer Matching Contributions, and Qualified Matching Contributions (to the extent not taken into account for purposes of the ADP test) made under the Plan on behalf of the Participant for the Plan Year. Such Contribution Percentage Amounts shall include Forfeitures of Excess Aggregate Contributions or Employer Matching Contributions allocated to the Participant's Account, taken into account in the year in which the allocation is made. If the Employer has elected in the Plan Agreement to make Qualified Nonelective Contributions, such amount of Qualified Nonelective Contributions, if any, as shall be necessary to enable the Plan to satisfy the ACP test shall be in the Contribution Percentage Amounts. Elective Deferrals shall also be included in the Contribution Percentage Amounts to the extent, if any, needed to enable the Plan to satisfy the ACP test, so long as the ADP test is met before the Elective Deferrals are used in the ACP test, and continues to be met following the exclusion of those Elective Deferrals that are used to meet the ACP test. (f) Eligible Participant means any Employee who is eligible to make an Elective Deferral, if Elective Deferrals are taken into account in the calculation of the Contribution Percentage, or to receive an Employer Matching Contribution (or a Forfeiture thereof) or a Qualified Matching Contribution. (g) Aggregate Limit means the sum of (i) 125% of the greater of the ADP of the Non-Highly Compensated Employees for the Plan Year, or the ACP of Non-Highly Compensated Employees under the Plan subject to Code Section 401(m) for the Plan Year beginning with or within the Plan Year of the CODA, and (ii) the lesser of 200% of, or two plus, the lesser of the ADP or ACP. "Lesser" is substituted for "greater" in clause (i) of the preceding sentence, and "greater" is substituted for "lesser" after the phrase "two plus the" in clause (ii) of the preceding sentence, if that formulation will result in a larger Aggregate Limit. (h) If one or more Highly Compensated Employees participate in both a CODA and a plan subject to the ACP test maintained by an Affiliated Employer, and the sum of the ADP and ACP of those Highly Compensated Employees subject to either or both tests exceeds the Aggregate Limit, then the ACP of those Highly Compensated Employees who also participate in a CODA will be reduced (beginning with the Highly Compensated Employee whose ACP is the highest) so that the Aggregate Limit is not exceeded. The amount by which each Highly Compensated Employee's Contribution Percentage Amount is reduced shall be treated as an Excess Aggregate Contribution. In determining the Aggregate Limit, the ADP and ACP of Highly Compensated Employees are determined after any corrections required to meet the ADP and ACP tests. The Aggregate Limit will be considered satisfied if both the ADP and ACP of the Highly Compensated Employees does not exceed 1.25 multiplied by the ADP and ACP of the Non-Highly Compensated Employees. (i) For purposes of this section, the Contribution Percentage for any Participant who is a Highly Compensated Employee and who is eligible to have Contribution Percentage Amounts allocated to his account under two or more plans described in Section 401(a) of the Code, or CODAs described in Section 401(k) of the Code, that are maintained by an Affiliated Employer, shall be determined as if the total of such Contribution Percentage Amounts was made under each plan. If a Highly Compensated Employee participates in two or more CODAs that have different plan years, all CODAs ending with or within the same calendar year shall be treated as a single CODA, except that CODAs to which mandatory disaggregation applies in accordance with regulations issued under Section 401(k) of the Code shall be treated as separate CODAs. (j) In the event that the Plan satisfies the requirements of Sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Sections of the Code only if aggregated with the Plan, then this Section 5.11 shall be applied by determining the Contribution Percentage of Employees as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated in order to satisfy Section 401(m) of the Code only if they have the same Plan Year. (k) For purposes of determining the Contribution Percentage of a Participant who is a 5% owner or one of the ten most highly-paid Highly Compensated Employers, the Contribution Percentage Amounts and Compensation of the Participant shall include the Contribution Percentage Amounts and Compensation for the Plan Year of Family Members (as defined in Section 414(q)(6) of the Code). Family Members of such Highly Compensated Employees shall be disregarded as separate employees in determining the Contribution Percentage both for Participants who are Non-Highly Compensated Employees and for Participants who are Highly Compensated Employees. (l) For purposes of the ACP test, Matching Contributions and Qualified Nonelective Contributions will be considered made for a Plan Year if made no later than the end of the 12-month period beginning on the day after the close of the Plan Year. (m) The Employer shall maintain records sufficient to demonstrate satisfaction of the ACP test and the amount of Qualified Nonelective Contributions or Qualified Matching Contributions, or both, used in the ACP test. (n) The determination and treatment of the Contribution Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 48..12 Distribution of Excess Aggregate Contributions. Notwithstanding any other provision of the Plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be forfeited if forfeitable, or if not forfeitable, distributed no later than the last day of each Plan Year to Participants to whose accounts such Excess Aggregate Contributions were allocated for the preceding Plan Year. The income or loss allocable to Excess Aggregate Contributions is the income or loss allocable to the Participant's Employer Matching Contribution Account, Qualified Matching Contribution Account (if any, and if all amounts therein are not used in the ADP test) and, if applicable, Qualified Nonelective Account and Elective Deferral Account for the Plan Year, multiplied by a fraction, the numerator of which is the Participant's Excess Aggregate Contributions for the year and the denominator of which is the Participant's account balance(s) attributable to Contribution Percentage Amounts without regard to any income or loss occurring during the Plan Year. Excess Aggregate Contributions shall be allocated to a Participant who is subject to the family member aggregation rules of Section 414(q)(6) of the Code in the proportion that the Participant's Employer Matching Contributions (and other amounts treated as his Employer Matching Contributions) bear to the combined Employer Matching Contributions (and other amounts treated as Employer Matching Contributions) of all of the Participants aggregated to determine its family members' combined ACP. If excess amounts attributable to Excess Aggregate Contributions are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess amounts arose, an excise tax equal to 10% of the excess amounts will be imposed on the Employer maintaining the Plan. Excess Aggregate Contributions shall be treated as Annual Additions under the Plan. Forfeitures of Excess Aggregate Contributions that are Employer Matching Contributions shall either be reallocated to the accounts of Non-Highly Compensated Employees or applied to reduce Employer Contributions, as elected by the Employer in the Plan Agreement. Other forfeitures of Excess Aggregate Contributions shall be applied to reduce Employer contributions. Excess Aggregate Contributions shall be forfeited if forfeitable, or distributed on a pro-rata basis from the Participant's Participant Contribution Account, Employer Matching Account, and Qualified Matching Account (and, if applicable, the Participant's Qualified Nonelective Account or Elective Deferral Account, or both). Excess Aggregate Contributions means, with respect to any Plan Year, the excess of: (a) The aggregate Contribution Percentage Amounts taken into account in computing the numerator of the Contribution Percentage and actually made on behalf of Highly Compensated Employees for the Plan Year, over (b) The maximum Contribution Percentage Amounts permitted by the ACP test and the Aggregate Limit (determined by reducing contributions made on behalf of Highly Compensated Employees in order of their Contribution Percentages, beginning with the highest of such percentages). Such determination shall be made after first determining Excess Elective Deferrals pursuant to Section 5.4, and then determining Excess Contributions pursuant to Section 5.7. 48..13 Restriction on Distributions. No distribution may be made from a Participant's Elective Deferral Account, Qualified Nonelective Account or Qualified Matching Account until the occurrence of one of the following events: (a) The Participant's Disability, death or termination of employment with the Affiliated Employers; (b) Termination of the Plan without the establishment of another defined contribution plan other than an employee stock ownership plan as defined in Section 4975(e) or Section 409 of the Code, or a simplified employee pension plan as defined in Section 408(k) of the Code; (c) The Participant's attainment of age 59 1/2 (if the Employer has elected in the Plan Agreement to permit such distributions); or (d) In the case of an Employer that is a corporation, the disposition by the Employer to an unrelated entity of (i) substantially all of the assets (within the meaning of Section 409(d)(2) of the Code) used in a trade or business of the Employer, if the Employer continues to maintain the Plan after the disposition, but only with respect to Employees who continue employment with the entity acquiring such assets; or (ii) the Employer's interest in a subsidiary (within the meaning of Section 409(d)(3) of the Code), if the Employer continues to maintain the Plan after the disposition, but only with respect to Employees who continue employment with such subsidiary. In addition, if the Employer has elected in the Plan Agreement to permit such distributions, a distribution may be made from a Participant's Elective Deferral Account in the event of his financial hardship as described in Section 5.14. All distributions upon any of the events listed above are subject to the conditions of Article 10, Joint and Survivor Annuity Requirements. In addition, distributions made after March 31, 1988, on account of an event described in subSection (b) or (d) above must be made in a lump sum. 48..14 Hardship Distributions. If the Employer has so elected in the Plan Agreement, upon a Participant's written request the Employer may permit a distribution from his Elective Deferral Account and from his Employer Matching Account. The terms and conditions of Section 12.2 and the special vesting rule contained in Section 8.4 shall apply to hardship distributions from an Employer Contribution Account or an Employer Matching Account. The further terms of this Section 5.14 shall apply to hardship distributions from an Elective Deferral Account. No hardship distribution shall be made from a Qualified Nonelective Account or a Qualified Matching Account. (a) The maximum amount that may be distributed on account of hardship from an Elective Deferral Account after December 31, 1988, shall not exceed the sum of (1) the amount credited to the Account as of December 31, 1988, and (2) the aggregate amount of the Elective Deferrals made by the Participant after December 31, 1988, and before the hardship distribution. (b) Hardship distributions shall be permitted only on account of the following financial needs: (1) Expenses for medical care described in Section 213(d) of the Code for the Participant, his spouse, children and dependents, or necessary for these persons to obtain such care; (2) Purchase of the principal residence of the Participant (excluding regular mortgage payments); (3) Payment of tuition and related educational fees for the upcoming 12 months of post-secondary education for the Participant, his spouse, children or dependents; or (4) Payments necessary to prevent the Participant's eviction from, or the foreclosure of a mortgage on, his principal residence. (c) Hardship distributions shall be subject to the spousal consent requirements contained in Sections 411(a)(11) and 417 of the Code, to the same extent that those requirements apply to a Participant pursuant to Section 10.1. (d) A hardship distribution will be made to a Participant only upon satisfaction of the following conditions: (1) The Participant has obtained all nontaxable loans and all distributions other than hardship distributions available to him from all plans maintained by the Affiliated Employers; (2) The hardship distribution does not exceed the amount of the Participant's financial need as described in paragraph (b) plus any amounts necessary to pay federal, state and local income taxes and penalties reasonably anticipated to result from the distribution; (3) All plans maintained by the Affiliated Employers provide that the Participant's Elective Deferrals and voluntary after-tax contributions will be suspended for a period of 12 months following his receipt of a hardship distribution; and (4) All plans maintained by the Affiliated Employers provide that the amount of Elective Deferrals that the Participant may make in his taxable year immediately following the year of a hardship distribution will not exceed the applicable limit under Section 402(g) of the Code for the taxable year, reduced by the amount of Elective Deferrals made by the Participant in the taxable year of the hardship distribution. 48..15 Special Effective Dates. If the Plan is adopted as an amendment of an existing plan, the provisions of Sections 5.3 and Section 5.7 through 5.11 are effective as of the first day of the first Plan Year beginning after December 31, 1986. ARTICLE 49. LIMITATIONS ON ALLOCATIONS 49..1 No Additional Plan. If the Participant does not participate in and has never participated in another qualified plan, or a welfare benefit fund (as defined in Section 419(e) of the Code), or an individual medical account (as defined in Section 415(1)(2) of the Code) which provides an Annual Addition as defined in Section 6.5(a), maintained by an Affiliated Employer: (a) The amount of Annual Additions (as defined in Section 6.5(a)) which may be credited to the Participant's Accounts for any Limitation Year will not exceed the lesser of the Maximum Annual Additions or any other limitation contained in this Plan. If the Employer contribution that would otherwise be contributed or allocated to the Participant's Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Annual Additions, the amount contributed or allocated will be reduced so that the Annual Additions for the Limitation Year will equal the Maximum Annual Additions. (b) Before determining a Participant's actual Section 415 Compensation for a Limitation Year, the Employer may determine the Maximum Annual Additions for the Participant on the basis of a reasonable estimation of the Participant's Section 415 Compensation for the Limitation Year, uniformly determined for all Participants similarly situated. (c) As soon as is administratively feasible after the end of the Limitation Year, the Maximum Annual Additions for the Limitation Year will be determined on the basis of the Participant's actual Section 415 Compensation for the Limitation Year. (d) If pursuant to paragraph (c), or as a result of the reallocation of Forfeitures, or as a result of a reasonable error in determining the amount of Elective Deferrals that may be made by a Participant, the Annual Additions exceed the Maximum Annual Additions, the Excess Amount will be disposed of as follows: (1) Any nondeductible voluntary Participant contributions and Elective Deferrals, to the extent they would reduce the Excess Amount, will be returned to the Participant. (2) If after the application of (1) above an Excess Amount still exists, and the Participant is covered by the Plan at the end of the Limitation Year, the Excess Amount in the Participant's Accounts will be used to reduce Employer contributions (including any allocation of Forfeitures) for such Participant in the next Limitation Year, and each succeeding Limitation Year if necessary. (3) If after the application of (1) above an Excess Amount still exists, and the Participant is not covered by the Plan at the end of a Limitation Year, the Excess Amount will be held unallocated in a suspense account. The suspense account will be applied to reduce future Employer contributions (including allocation of any Forfeitures) for all remaining Participants in the next Limitation Year, and each succeeding Limitation Year if necessary. (4) If a suspense account is in existence at any time during a Limitation Year pursuant to this Section 6.1(d), it will participate in the allocation of the Trust's investment gains and losses. If a suspense account is in existence at any time during a particular Limitation Year, all amounts in the suspense account must be allocated and reallocated to Participants' Accounts before any Employer or any Employee contributions may be made to the Plan for that Limitation Year. Excess amounts may not be distributed to Participants or former Participants. 49..2 Additional Master or Prototype Plan. If in addition to this Plan a Participant is covered under another qualified Master or Prototype defined contribution plan or a welfare benefit fund (as defined in Section 419(e) of the Code), or an individual medical account (as defined in Section 415(1)(2) of the Code) which provides an Annual Addition as defined in Section 6.5(a), maintained by an Affiliated Employer during any Limitation Year: (a) The Annual Additions which may be credited to a Participant's Accounts under this Plan for any such Limitation Year will not exceed the Maximum Annual Additions reduced by the Annual Additions credited to a Participant's accounts under the other plans and welfare benefit funds for the same Limitation Year. If the Annual Additions with respect to the Participant under other defined contribution plans and welfare benefit funds maintained by an Affiliated Employer are less than the Maximum Annual Additions, and the Employer contribution that would otherwise be contributed or allocated to the Participant's Accounts under this Plan would cause the Annual Additions for the Limitation Year to exceed this limitation, the amount contributed or allocated will be reduced so that the Annual Additions under all such plans and funds for the Plan Year will equal the Maximum Annual Additions. If the Annual Additions with respect to the Participant under such other defined contribution plans and welfare benefit funds in the aggregate are equal to or greater than the Maximum Annual Additions, no amount will be contributed or allocated to the Participant's Accounts under this Plan for the Limitation Year. (b) Before determining a Participant's actual Section 415 Compensation for a Limitation Year, the Employer may determine the Maximum Annual Additions for the Participant in the manner described in Section 6.1(b). (c) As soon as is administratively feasible after the end of the Plan Year, the Maximum Annual Additions for the Plan Year will be determined on the basis of the Participant's actual Section 415 Compensation for the Plan Year. (d) If, pursuant to Section 6.2(c) or as a result of the allocation of Forfeitures, or of a reasonable error in determining the amount of Elective Deferrals that may be made by him, a Participant's Annual Additions under this Plan and such other plans would result in an Excess Amount for a Limitation Year, the Excess Amount will be deemed to consist of the Annual Additions last allocated under any qualified Master or Prototype defined contribution plan, except that Annual Additions to any welfare benefit fund or individual medical account will be deemed to have been allocated first regardless of the actual allocation date. (e) If an Excess Amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the Excess Amount attributed to this Plan will be the product of X and Y, where (X) is the total Excess Amount allocated as of such date, and (Y) is the ratio of: (1) the Annual Additions allocated to the Participant for the Limitation Year as of such date under this Plan to (2) the total Annual Additions allocated to the Participant for the Limitation Year as of such date under this and all the other qualified Master or Prototype defined contribution plans. (f) Any Excess Amount attributed to this Plan will be disposed of in the manner described in Section 6.1(d). 49..3 Additional Non-Master or Non-Prototype Plan. If the Participant is covered under another qualified defined contribution plan maintained by an Affiliated Employer which is not a Master or Prototype plan, Annual Additions which may be credited to the Participant's Accounts under this Plan for any Limitation Year will be limited in accordance with Section 6.2 as though the other plan were a Master or Prototype plan, unless the Employer provides other limitations in the Plan Agreement. 49..4 Additional Defined Benefit Plan. If an Affiliated Employer maintains, or at any time maintained, a qualified defined benefit plan covering any Participant in this Plan, the sum of the Participant's Defined Benefit Plan Fraction and Defined Contribution Plan Fraction will not exceed 1.0 in any Limitation Year. The Annual Additions which may be credited to the Participant's Accounts under this Plan for any Limitation Year will be limited in accordance with the Plan Agreement. 49..5 Definitions. (a) Annual Additions means the sum of the following amounts credited to a Participant's Accounts for the Limitation Year: (1) Employer contributions; (2) For any Limitation Year beginning after December 31, 1986, after-tax Employee contributions; (3) Forfeitures; (4) Amounts allocated after March 31, 1984, to any individual medical account, as defined in Section 415(1)(2) of the Code, which is part of a pension or annuity plan maintained by an Affiliated Employer; (5) Amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to postretirement medical benefits allocated to the separate account of a key Employee, as defined in Section 419A(d)(3) of the Code, under a welfare benefit fund as defined in Section 419(e) of the Code, maintained by an Affiliated Employer; and (6) In a Plan that includes a CODA, Excess Elective Deferrals, Excess Contributions (including recharacterized Elective Deferrals) and Excess Aggregate Contributions. For this purpose, any Excess Amount applied under Sections 6.1(d) or 6.2(e) in the Limitation Year to reduce Employer contributions will be considered Annual Additions for such Limitation Year. Any rollover contribution will not be considered an Annual Addition. (b) Section 415 Compensation means, for a self-employed person, his earned income; and for any other Participant, his "Form W-2 earnings" as defined in Section 2.8, if the Employer has elected in item 4 of the Plan Agreement a definition of Compensation based on "Form W-2 earnings"; or if the Employer has not so elected, his wages, salaries, and fees for professional services and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits and reimbursements or other expense allowances under a nonaccountable plan as described in Income Tax Regulations Section 1.62-2(c)), and excluding the following: (1) Employer contributions to a plan of deferred compensation which are not includible in the Participant's gross income for the taxable year in which contributed, or Employer contributions under a simplified Employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensations; (2) Amounts realized from the exercise of a non- qualified stock option, or when restricted stock (or property) held by the Participant either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (3) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Section 403(b) of the Code (whether or not the contributions are actually excludable from the gross income of the Participant). For purposes of applying the limitations of this Article 6, Section 415 Compensation for a Limitation Year is the Section 415 Compensation actually paid or made available during such Limitation Year. (c) Defined Benefit Fraction means a fraction, the numerator of which is the sum of the Participant's Projected Annual Benefits under all the defined benefit plans (whether or not terminated) maintained by the Affiliated Employers, and the denominator of which is the lesser of 125% of the dollar limitation in effect for the Limitation Year under Sections 415(b) and (d) of the Code, or 140% of the Participant's Highest Average Compensation including any adjustments under Section 415(b) of the Code. Notwithstanding the foregoing, if the Participant was a Participant as of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined benefit plans maintained by an Affiliated Employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125% of the sum of the annual benefits under such plans which the Participant had accrued as of the close of the last Limitation Year beginning before January 1, 1987, disregarding any change in the terms and conditions of the Plan after May 5, 1986. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Section 415 of the Code for all Limitation Years beginning before January 1, 1987. (d) Defined Contribution Dollar Limitation means $30,000 or if greater, one-fourth of the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code as in effect for the Limitation Year. (e) Defined Contribution Fraction means a fraction, the numerator of which is the sum of the Annual Additions to the Participant's accounts under all the defined contribution plans (whether or not terminated) maintained by Affiliated Employers for the current and all prior Limitation Years (including the Annual Additions attributable to the Participant's nondeductible Employee contributions to all defined benefit plans, whether or not terminated, maintained by the Affiliated Employers, and the Annual Additions attributable to all welfare benefit funds, as defined in Section 419(e) of the Code, and individual medical accounts, as defined in Section 415(l)(2) of the Code), and the denominator of which is the sum of the Maximum Annual Additions for the current and all prior Limitation Years of service with the Affiliated Employers (regardless of whether a defined contribution plan was maintained by any Affiliated Employer). The Maximum Annual Additions in any Plan Year is the lesser of 125% of the dollar limitation determined under Sections 415(b) and (d) of the Code in effect under Section 415(c)(1)(A) of the Code, or 35% of the Participant's Section 415 Compensation for such year. If the Employee was a Participant as of the end of the first day of the first Limitation Year beginning after December 31, 1986 in one or more defined contribution plans maintained by an Affiliated Employer which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to product of the excess of the sum of the fractions over 1.0, multiplied by the denominator of this fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987, and disregarding any changes in the terms and conditions of the Plan after May 5, 1986, but using the Section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987. The Annual Addition for any Limitation Year beginning before January 1, 1987, shall not be recomputed to treat 100% of nondeductible Employee contributions as Annual Additions. (f) Excess Amount means, with respect to any Participant, the amount by which Annual Additions exceed the Maximum Annual Additions. (g) Highest Average Compensation means the average compensation for the three consecutive Years of Service with the Employer that produces the highest average. A Year of Service with the Employer is the period of 12 consecutive months specified as the Limitation Year in the Plan Agreement. (h) Limitation Year means the period of 12 consecutive months specified in the Plan Agreement. All qualified plans maintained by the Employer must use the same Limitation Year. If the Limitation Year is amended to a different period of 12 consecutive months, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made. (i) Master or Prototype plan means a plan the form of which is the subject of a favorable opinion letter from the Internal Revenue Service. (j) Maximum Annual Additions, which is the maximum annual addition that may be contributed or allocated to a Participant's account under the plan for any Limitation Year, means an amount not exceeding the lesser of (a) the Defined Contribution Dollar Limitation or (b) 25% of the Participant's Section 415 Compensation for the Limitation Year. The compensation limitation referred to in (b) shall not apply to any contribution for medical benefits (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition under Section 415(l)(1) or Section 419A(d)(2) of the Code. If a short Limitation Year is created because of an amendment changing the Limitation Year to a different period of 12 consecutive months, the Maximum Annual Additions will not exceed the Defined Contribution Dollar Limitation multiplied by the following fraction: number of months in the short Limitation Year 12 (k) Projected Annual Benefit means the annual retirement benefit (adjusted to an actuarially equivalent straight life annuity if such benefit is expressed in a form other than a straight life annuity or Qualified Joint and Survivor Annuity) to which the Participant would be entitled under the terms of the Plan assuming: (1) The Participant will continue employment until normal retirement age under the Plan (or current age, if later), and (2) The Participant's Section 415 Compensation for the current Limitation Year and all other relevant factors used to determine benefits under the plan will remain constant for all future Limitation Years. ARTICLE 50. ELIGIBILITY FOR DISTRIBUTION OF BENEFITS 50..1 Retirement. After his Retirement, the amount credited to a Participant's Accounts will be distributed to him in accordance with Article 9. The termination of a Participant's employment with the Affiliated Employers after he has (i) attained the normal retirement age specified in the Plan Agreement, (ii) fulfilled the requirements for early retirement (if any) specified in the Plan Agreement, or (iii) become Disabled will constitute his Retirement. Upon a Participant's Retirement (or, if earlier, his attainment of the normal retirement age specified in the Plan Agreement or fulfillment of the requirements for early retirement, if any, specified in the Plan Agreement) the Participant's Accounts shall become fully vested, regardless of the vesting schedule specified by the Employer in the Plan Agreement. A Participant who separates from service with any vested balance in his Accounts, after satisfying the service requirements for early retirement (if any is specified in the Plan Agreement) but before satisfying the age requirement for early retirement (if any is specified in the Plan Agreement), shall be entitled to a fully vested early retirement benefit upon his satisfaction of such age requirement. 50..2 Death. If a Participant dies before the distribution of his Accounts has been completed, his Beneficiary will be entitled to distribution of benefits in accordance with Article 9. A Participant's Accounts will become fully vested upon his death before termination of his employment with the Affiliated Employers, regardless of the vesting schedule specified by the Employer in the Plan Agreement. A Participant may designate a Beneficiary by completing and returning to the Plan Administrator a form provided for this purpose. The form most recently completed and returned to the Plan Administrator before the Participant's death shall supersede any earlier form. If a Participant has not designated any Beneficiary before his death, or if no Beneficiary so designated survives the Participant, his Beneficiary shall be his surviving spouse, or if there is no surviving spouse, his estate. A married Participant may designate a Beneficiary other than his spouse only if his spouse consents in writing to the designation, and the spouse's consent acknowledges the effect of the consent and is witnessed by a notary public or a representative of the Plan. The beneficiary or beneficiaries named in the designation to which the spouse has so consented may not be changed without further written spousal consent unless the terms of the spouse's original written consent expressly permit such a change, and acknowledge that the spouse voluntarily relinquishes the right to limit the consent to a specific beneficiary. The marriage of a Participant shall nullify any designation of a beneficiary previously executed by the Participant. If it is established to the satisfaction of the Plan Administrator that the Participant has no spouse or that the spouse cannot be located, the requirement of spousal consent shall not apply. Any spousal consent, or establishment that spousal consent cannot be obtained, shall apply only to the particular spouse involved. 50..3 Other Termination of Employment. A Participant whose employment terminates for any reason other than his Retirement or death will be entitled to distribution, in accordance with Article 9, of benefits equal to the amount of the vested balance of his Accounts as determined under Article 8. ARTICLE 51. VESTING 51..1 Vested Balance. The vested balance of a Participant's Accounts will be determined as follows: (a) General Rule. A Participant's Participant Contribution Account and Rollover Account shall be fully vested at all times. The vested portion of his Employer Contribution Account shall be equal to the percentage that corresponds, in the vesting schedule specified in the Plan Agreement, to the number of Years of Service credited to the Participant as of the end of the Year of Service in which his employment terminates. The vesting schedule specified in the Plan Agreement applies to all benefits within the meaning of Section 411(a)(7) of the Code, except those attributable to Employee contributions. (b) Special Rules for CODA. In a Plan that includes a CODA, a Participant's Elective Deferral Account, Qualified Nonelective Account, and Qualified Matching Account shall be fully vested at all times. The vested portion of his Employer Matching Account shall be equal to the percentage that corresponds, in the vesting schedule specified in the Plan Agreement, to the number of Years of Service credited to the Participant as of the end of the Year of Service in which his employment terminates. (c) Retirement. All of a Participant's Accounts shall become fully vested upon his Retirement or his earlier attainment of early retirement age (if any) or the normal retirement age elected by the Employer in the Plan Agreement. For so long as a former Employee does not receive a distribution (or a deemed distribution) of the vested portion of his Accounts, the undistributed portion shall be held in a separate account which shall be invested pursuant to Section 13.3 and shall share in earnings and losses of the Trust Fund pursuant to Section 13.4 in the same manner as the Accounts of active Participants. 51..2 Vesting of Accounts of Returned Former Employees. The following rules apply in determining the vested portion of the Accounts of a Participant who incurs one or more consecutive One- Year Vesting Breaks and then returns to employment with an Affiliated Employer: (a) If the Participant incurred fewer than five consecutive One-Year Vesting Breaks, then all of his Years of Service will be taken into account in determining the vested portion of his Accounts, as soon as he has completed one Year of Service following his return to employment. (b) If the Participant incurred five or more consecutive One-Year Vesting Breaks, then: (1) No Year of Service completed after his return to employment will be taken into account in determining the vested portion of his Accounts as of any time before he incurred the first One-Year Vesting Break; (2) Years of Service completed before he incurred the first One-Year Vesting Break will not be taken into account in determining the vested portion of his Accounts as of any time after his return to employment (i) unless some portion of his Employer Contribution Account or Employer Matching Account had become vested before he incurred the first One-Year Vesting Break, and (ii) until he has completed one Year of Service following his return to employment; and (3) Separate sub-accounts will be maintained for the Participant's pre-break and post-break Employer Contribution Account and Employer Matching Account, until both sub-accounts become fully vested. Both sub-accounts will share in the earnings and losses of the Trust Fund. 51..3 Forfeiture of Non-Vested Amounts. The portion of a former Employee's Accounts that has not become vested under Section 8.1 shall become a Forfeiture in accordance with the following rules, and shall be reallocated in accordance with Section 4.2 or Article 5 (whichever applies) no later than the end of the Plan Year in which it becomes a Forfeiture. (a) If Distribution Is Made. If any or all of the vested portion of a Participant's Accounts is distributed in accordance with Section 9.1 or 9.2 before the Participant incurs five consecutive One-Year Vesting Breaks, the nonvested portion of his Accounts shall become a Forfeiture in the Plan Year in which the distribution occurs. For purposes of this Section 8.3, if the value of the vested portion of a Participant's Accounts is zero, he shall be deemed to have received a distribution of the entire vested balance of his Accounts on the day his employment terminates. If the Participant elects to have distributed less than the entire vested portion of his Employer Contribution Account or Employer Matching Accounts, the part of the nonvested portion that will become a Forfeiture is the total nonvested portion multiplied by a fraction, the numerator of which is the amount of the distribution and the denominator of which is the total value of the entire vested portion of such Accounts. (b) Right of Repayment. If a Participant who receives a distribution pursuant to paragraph (a) returns to employment with an Affiliated Employer, the balance of his Employer Contribution Account and Employer Matching Account will be restored to the amount of such balance on the date of distribution, if he repays to the Plan the full amount of the distribution, before the earlier of (i) the fifth anniversary of his return to employment or (ii) the date he incurs five consecutive One-Year Vesting Breaks following the date of distribution. If an Employee is deemed to receive a distribution pursuant to this Section 8.3, and he resumes employment covered under this Plan before the date he incurs five consecutive One-Year Vesting Breaks, upon his reemployment the Employer-derived account balance of the Employee will be restored to the amount on the date of such deemed distribution. Such restoration will be made, first, from the amount of any Forfeitures available for reallocation as of the last day of the Plan Year in which repayment is made, to the extent thereof; and to the extent that Forfeitures are not available or are insufficient to restore the balance, from contributions made by the Employer pursuant to Section 4.1(f). (c) If No Distribution Is Made. If no distribution (or deemed distribution) is made to a Participant before he incurs five consecutive One-Year Vesting Breaks, the nonvested portion of his Accounts shall become a Forfeiture at the end of the Plan Year that constitutes his fifth consecutive One- Year Vesting Break. (d) Adjustment of Accounts. Before a Forfeiture is incurred, a Participant's Accounts shall share in earnings and losses of the Trust Fund pursuant to Section 13.4 in the same manner as the Accounts of active Participants. (e) Accumulated Deductible Contributions. For Plan Years beginning before January 1, 1989, a Participant's vested Account balance shall not include accumulated deductible contributions within the meaning of Section 72(o)(5)(B) of the Code. 51..4 Special Rule in the Event of a Withdrawal. If a withdrawal pursuant to Section 12.2 or 12.3 is made from a Participant's Employer Contribution Account or Employer Matching Account before the Account is fully vested, and the Participant may increase the vested percentage in the Account, then a separate account will be established at the time of the withdrawal, and at any relevant time after the withdrawal the vested portion of the separate account will be equal to the amount "X" determined by the following formula: X = P(AB + D) - D For purposes of the formula, P is the Participant's vested percentage at the relevant time, AB is the account balance at the relevant time, and D is the amount of the withdrawal. 51..5 Vesting Election. If the Plan is amended to change any vesting schedule, or is amended in any way that directly or indirectly affects the computation of a Participant's vested percentage, each Participant who has completed not less than three Years of Service may elect, within a reasonable period after the adoption of the amendment or change, in a writing filed with the Employer to have his vested percentage computed under the Plan without regard to such amendment. For a Participant who is not credited with at least one Hour of Service in a Plan Year beginning after December 31, 1988, the preceding sentence shall be applied by substituting "five Years of Service" for "three Years of Service." The period during which the election may be made shall commence with the date the amendment is adopted, or deemed to be made, and shall end on the latest of (a) 60 days after the amendment is adopted; (b) 60 days after the amendment becomes effective; or (c) 60 days after the Participant is issued written notice of the amendment by the Employer. ARTICLE 52. PAYMENT OF BENEFITS 52..1 Distribution of Accounts. A Participant or Beneficiary who has become eligible for a distribution of benefits pursuant to Article 7 may elect to receive such benefits at any time, subject to the terms and conditions of this Article 9, Article 10 and Article 11. Unless a Participant or Beneficiary elects otherwise, distribution of benefits will begin no later than the 60th day after the end of the Plan Year in which the latest of the following events occurs: (a) The Participant attains age 65 (or if earlier, the normal retirement age specified by the Employer in the Plan Agreement); or (b) The tenth anniversary of the year in which the Participant commenced participation in the Plan; or (c) The Participant's employment with the Affiliated Employers terminates. A Beneficiary who is the surviving spouse of a Participant may elect to have distribution of benefits begin within the 90-day period following the Participant's death. For purposes of this Section 9.1, the failure of a Participant (and his spouse, if spousal consent is required pursuant to Article 10) to consent to a distribution while a benefit is "immediately distributable" within the meaning of Section 9.2 shall be considered an election to defer commencement of payment. If the Employer has so specified in the Plan Agreement, the vested portion of a Participant's Accounts will be distributed in a lump sum in cash no later than 60 days after the end of the Plan Year in which his employment terminates, if at the time the Participant first became entitled to a distribution the value of such vested portion derived from Employer and Employee contributions does not exceed $3,500. Commencement of distributions in any case shall be subject to Section 9.4. 52..2 Restriction on Immediate Distributions. A Participant's account balance is considered "immediately distributable" if any part of the account balance could be distributed to the Participant (or his surviving spouse) before the Participant attains, or would have attained if not deceased, the later of the normal retirement age specified in the Plan Agreement or age 62. (a) If the value of a Participant's vested account balance derived from Employer and Employee contributions exceeds (or at the time of any prior distribution exceeded) $3,500, and the account balance is immediately distributable, the Participant and his spouse (or where either the Participant or the spouse has died), the survivor must consent to any such distribution, unless an exception described in paragraph (b) applies. The consent of the Participant and his spouse shall be obtained in writing within the 90-day period ending on the annuity starting date, which is the first day of the first period for which an amount is paid as an annuity (or any other form). The Plan Administrator shall notify the Participant and the spouse, no less than 30 days and no more than 90 days before the annuity starting date, of the right to defer any distribution until the Participant's account balance is no longer immediately distributable. Such notification shall include a general description of the material features of the optional forms of benefit available under the Plan and an explanation of their relative values, in a manner that would satisfy the notice requirements of Section 417(a)(3) of the Code. If a distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the required notification is given, provided that: (1) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option); and (2) the Participant, after receiving the notice, affirmatively elects a distribution. (b) Notwithstanding paragraph (a), only the Participant need consent to the commencement of a distribution in the form of a Qualified Joint and Survivor Annuity while the account balance is immediately distributable. Furthermore, if payment in the form of a Qualified Joint and Survivor Annuity is not required with respect to the Participant pursuant to Section 10.1(b) of the Plan, only the Participant need consent to the distribution of an account balance that is immediately distributable. Neither the consent of the Participant nor the spouse shall be required to the extent that a distribution is required to satisfy Section 401(a)(9) or Section 415 of the Code. In addition, upon termination of the Plan, if the Plan does not offer an annuity option purchased from a commercial provider), and no Affiliated Employer maintains another defined contribution plan (other than an employee stock ownership plan as defined in Section 4975(e)(7) of the Code), a Participant's account balance shall be distributed to the Participant without his consent. If any Affiliated Employer maintains another defined contribution plan (other than an employee stock ownership plan as defined in Section 4975(e)(7) of the Code), a Participant's account balance shall be transferred to that defined contribution plan without his consent, unless he consents to an immediate distribution. For purposes of determining the applicability of the foregoing consent requirements to distributions made before the first day of the first Plan Year beginning after December 31, 1988, the Participant's vested account balance shall not include amounts attributable to accumulated deductible employee contributions within the meaning of Section 72(o)(5)(B) of the Code. 52..3 Optional Forms of Distribution. Provided that the Employer has so elected in the Plan Agreement, if at the time a Participant first becomes entitled to a distribution the value of his vested Account balance derived from Employer and Employee contributions does not exceed $3,500, distribution shall be made in a lump sum in cash. Subject to the preceding sentence and to the rules of Article 10 concerning joint and survivor annuities, a Participant or Beneficiary may elect to receive benefits in any of the following optional forms: (a) A lump sum payment in cash or in kind or in a combination of both; (b) A series of installments over a period certain that meets the requirements of Article 11; or (c) A nontransferable annuity contract, purchased from a commercial provider, with terms complying with the requirements of Article 11; provided, however, that an annuity for the life of any person shall be available as an optional form of distribution only if the Employer has so elected in the Plan Agreement. (d) In the event that the Plan is adopted as an amendment to an existing plan, each optional form of distribution available under the existing plan shall be made available under the Plan, and may be made available where necessary through the purchase of an appropriate annuity contract in accordance with paragraph (c). 52..4 Distribution Procedure. The Trustee shall make or commence distributions to or for the benefit of Participants only on receipt of an order from the Employer in writing or by such other means unable as shall be acceptable to the Trustee, certifying that a distribution of a Participant's benefits is payable pursuant to the Plan, and specifying the time and manner of payment. The amount to be distributed shall be determined as of the Valuation Date coincident with or next following the Employer's order. The Trustee shall be fully protected in acting upon the directions of the Employer in making benefit distributions, and shall have no duty to determine the rights or benefits of any person under the Plan or to inquire into the right or power of the Employer to direct any such distribution. The Trustee shall be entitled to assume conclusively that any determination by the Employer with respect to a distribution meets the requirements of the Plan. The Trustee shall not be required to make any payment hereunder in excess of the net realizable value of the assets of the Account in question at the time of such payment, nor to make any payment in cash unless the Employer has furnished instructions as to the assets to be converted to cash for the purposes of making payment. 52..5 Lost Distributee. In the event that the Plan Administrator is unable with reasonable effort to locate a person entitled to distribution under the Plan, the Accounts distributable to such a person shall become a Forfeiture at the end of the third Plan Year after the Plan Administrator's efforts to locate such person began; provided, however, that the amount of the Forfeiture shall be restored in the event that such person thereafter submits a claim for benefits under the Plan. Such restoration will be made, first, from the amount of Forfeitures available for reallocation as of the last day of the Plan Year in which the claim is made, to the extent thereof; and to the extent that Forfeitures are not available or are insufficient to restore the balance, from contributions made by the Employer pursuant to Section 4.1(f). A Forfeiture occurring under this Section 9.5 shall be reallocated as though it were an Employer contribution. 52..6 Direct Rollovers. This Section 9.6 applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Section, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. For purposes of this Section 9.6, the following definitions shall apply: (a) Eligible Rollover Distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributees and the distributee'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 (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) Eligible Retirement Plan. An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (c) Distributee. A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (d) Direct Rollover. A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. 52..7 Distributions Required by a Qualified Domestic Relations Order. To the extent required by a Qualified Domestic Relations Order, the Plan Administrator shall make distributions from a Participant's Accounts to any alternate payee named in such order in a manner consistent with the distribution options otherwise available under the Plan, regardless of whether the Participant is otherwise entitled to a distribution at such time under the Plan. ARTICLE 53. JOINT AND SURVIVOR ANNUITY REQUIREMENTS 53..1 Applicability. (a) Generally. The provisions of Sections 10.2 through 10.5 shall generally apply to a Participant who is credited with at least one Hour of Service on or after August 23, 1984, and such other Participants as provided in Section 10.6. (b) Exception for Certain Plans. The provisions of Sections 10.2 through 10.5 shall not apply to a Participant if: (i) the Participant does not or cannot elect payment of benefits in the form of a life annuity, and (ii) on the death of the Participant, his Vested Account Balance will be paid to his surviving spouse (unless there is no surviving spouse, or the surviving spouse has consented to the designation of another Beneficiary in a manner conforming to a Qualified Election) and the surviving spouse may elect to have distribution of the Vested Account Balance (adjusted in accordance with Section 13.4 for gains or losses occurring after the Participant's death) commence within the 90-day period following the date of the Participant's death. The Participant may waive the spousal death benefit described in this paragraph (b) at any time, provided that no such waiver shall be effective unless it satisfies the conditions applicable under Section 10.4(c) to a Participant's waiver of a Qualified Preretirement Survivor Annuity. The exception in this paragraph (b) shall not be operative with respect to a Participant in a profit sharing plan if the Plan: (1) Is a direct or indirect transferee of a defined benefit plan, money purchase pension plan, target benefit plan, stock bonus plan, or profit sharing plan which is subject to the survivor annuity requirements of Sections 401(a)(11) and 417 of the Code; or (2) Is adopted as an amendment of a plan that did not qualify for the exception in this paragraph (b) before the amendment was adopted. For purposes of this paragraph (b), Vested Account Balance shall have the meaning provided in Section 10.4(f). The provisions of Sections 10.2 through 10.6 set forth the survivor annuity requirements of Sections 401(a)(11) and 417 of the Code. (c) Exception for Certain Amounts. The provisions of Sections 10.2 through 10.5 shall not apply to any distribution made on or after the first day of the first Plan Year beginning after December 31, 1988, from or under a separate account attributable solely to accumulated deductible employee contributions as defined in Section 72(o)(5)(B) of the Code, and maintained on behalf of a Participant in a money purchase pension plan or a target benefit plan, provided that the exceptions applicable to certain profit sharing plans under paragraph (b) are applicable with respect to the separate account (for this purpose, Vested Account Balance means the Participant's separate account balance attributable solely to accumulated deductible employee contributions within the meaning of Section 72(o)(5)(B) of the Code). 53..2 Qualified Joint and Survivor Annuity. Unless an optional form of benefit is selected pursuant to a Qualified Election within the 90-day period ending on the Annuity Starting Date, a married Participant's Vested Account Balance will be paid in the form of a Qualified Joint and Survivor Annuity and an unmarried Participant's Vested Account Balance will be paid in the form of a life annuity. In either case, the Participant may elect to have such an annuity distributed upon his attainment of the Earliest Retirement Age under the Plan. 53..3 Qualified Preretirement Survivor Annuity. Unless an optional form of benefit has been selected within the Election Period pursuant to a Qualified Election, the Vested Account Balance of a Participant who dies before the Annuity Starting Date shall be applied toward the purchase of an annuity for the life of his surviving spouse (a "Qualified Preretirement Survivor Annuity"). The surviving spouse may elect to have such an annuity distributed within a reasonable period after the Participant's death. For purposes of this Article 10, the term "spouse" means the current spouse or surviving spouse of a Participant, except that a former spouse will be treated as the spouse or surviving spouse (and a current spouse will not be treated as the spouse or surviving spouse) to the extent provided under a qualified domestic relations order as described in Section 414(p) of the Code. 53..4 Definitions. The following definitions apply: (a) Election Period means the period beginning on the first day of the Plan Year in which a Participant attains age 35 and ending on the date of the Participant's death. If a Participant separates from service before the first day of the Plan Year in which he reaches age 35, the Election Period with respect to his account balance as of the date of separation shall begin on the date of separation. A Participant who will not attain age 35 as of the end of a Plan Year may make a special Qualified Election to waive the Qualified Preretirement Survivor Annuity for the period beginning on the date of such election and ending on the first day of the Plan Year in which the Participant will attain age 35. Such an election shall not be valid unless the Participant receives a written explanation of the Qualified Preretirement Survivor Annuity in such terms as are comparable to the explanation required under Section 10.5. Qualified Preretirement Survivor Annuity coverage will be automatically reinstated as of the first day of the Plan Year in which the Participant attains age 35. Any new waiver on or after that date shall be subject to the full requirements of this article. (b) Earliest Retirement Age means the earliest date on which the Participant could elect to receive Retirement benefits under the Plan. (c) Qualified Election means a waiver of a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity. Any such waiver shall not be effective unless: (1) the Participant's spouse consents in writing to the waiver; (2) the waiver designates a specific Beneficiary, including any class of beneficiaries or any contingent beneficiaries, which may not be changed without spousal consent (unless the spouse's consent expressly permits designations by the Participant without any further spousal consent); (3) the spouse's consent acknowledges the effect of the waiver; and (4) the spouse's consent is witnessed by a plan representative or notary public. Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity shall not be effective unless the waiver designates a form of benefit payment which may not be changed without spousal consent (unless the spouse's consent expressly permits designations by the Participant without any further spousal consent). If it is established to the satisfaction of a plan representative that there is no spouse or that the spouse cannot be located, a waiver will be deemed a Qualified Election. Any consent by a spouse obtained under these provisions (and any establishment that the consent of a spouse may not be obtained) shall be effective only with respect to the particular spouse involved. A consent that permits designations by the Participant without any requirement of further consent by the spouse must acknowledge that the spouse has the right to limit the consent to a specific Beneficiary and a specific form of benefit where applicable, and that the spouse voluntarily elects to relinquish either or both of those rights. A revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Participant has received notice as provided in Section 10.5. (d) Qualified Joint and Survivor Annuity means an immediate annuity for the life of a Participant, with a survivor annuity for the life of the spouse which is not less than 50% and not more than 100% of the amount of the annuity which is payable during the joint lives of the Participant and the spouse, and which is the amount of benefit that can be purchased with the Participant's Vested Account Balance. The percentage of the survivor annuity under the Plan shall be 50%. (e) Annuity Starting Date means the first day of the first period for which an amount is paid as an annuity (or any other form). (f) Vested Account Balance means the aggregate value of the Participant's vested account balance derived from Employer and Employee contributions (including rollovers), whether vested before or upon death, including the proceeds of insurance contracts, if any, on the Participant's life. The provisions of this Article 10 shall apply to a Participant who is vested in amounts attributable to Employer contributions, Employee contributions or both at the time of death or distribution. 53..5 Notice Requirements. In the case of a Qualified Joint and Survivor Annuity, no less than 30 days and no more than 90 days before a Participant's Annuity Starting Date the Plan Administrator shall provide to him a written explanation of (i) the terms and conditions of a Qualified Joint and Survivor Annuity, (ii) the Participant's right to make, and the effect of, an election to waive the Qualified Joint and Survivor Annuity form of benefit, (iii) the rights of the Participant's spouse, and (iv) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity. In the case of a Qualified Preretirement Survivor Annuity, within the applicable period for a Participant the Plan Administrator shall provide to him a written explanation of the Qualified Preretirement Survivor Annuity, in terms and manner comparable to the requirements applicable to the explanation of a Qualified Joint and Survivor Annuity as described in the preceding paragraph. The applicable period for a Participant is whichever of the following periods ends last: (i) the period beginning with the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35; (ii) a reasonable period ending after an individual becomes a Participant; (iii) a reasonable period ending after this Article 10 first applies to the Participant. Notwithstanding the foregoing, in the case of a Participant who separates from service before attaining age 35, notice must be provided within a reasonable period ending after his separation from service. For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in (ii) and (iii) is the end of the two-year period beginning one year before the date the applicable event occurs, and ending one year after that date. In the case of a Participant who separates from service before the Plan Year in which he reaches age 35, notice shall be provided within the two-year period beginning one year before the separation and ending one year after the separation. If such a Participant thereafter returns to employment with the Employer, the applicable period for the Participant shall be redetermined. 53..6 Transitional Rules. (a) Any living Participant not receiving benefits on August 23, 1984, who would otherwise not receive the benefits prescribed by the preceding Sections of this Article 10, must be given the opportunity to elect to have those Sections apply if the Participant is credited with at least one Hour of Service under the Plan or a predecessor plan in a Plan Year beginning on or after January 1, 1976, and the Participant had at least ten years of vesting service when he or she separated from service. (b) Any living Participant not receiving benefits on August 23, 1984, who was credited with at least one Hour of Service under the Plan or a predecessor plan on or after September 2, 1974, and who is not otherwise credited with any service in a Plan Year beginning on or after January 1, 1976, must be given the opportunity to have his benefits paid in accordance with paragraph (d) of this Section 10.6. (c) The respective opportunities to elect (as described in paragraphs (a) and (b) above) must be afforded to the appropriate Participants during the period commencing on August 23, 1984, and ending on the date benefits would otherwise commence to be paid to those Participants. (d) Any Participant who has so elected pursuant to paragraph (b) of this Section 10.6, and any Participant who does not elect under paragraph (a), or who meets the requirements of paragraph (a) except that he does not have at least ten years of vesting service when he separates from service, shall have his benefits distributed in accordance with all of the following requirements, if his benefits would otherwise have been payable in the form of a life annuity: (1) Automatic joint and survivor annuity. If benefits in the form of a life annuity become payable to a married Participant who: (i) begins to receive payments under the Plan on or after normal retirement age; or (ii) dies on or after normal retirement age while still working for the Employer; or (iii) begins to receive payments on or after the qualified early retirement age; or (iv) separates from service on or after attaining normal retirement age (or the qualified early retirement age) and after satisfying the eligibility requirements for the payment of benefits under the Plan and thereafter dies before beginning to receive such benefits; then such benefits will be received under the Plan in the form of a Qualified Joint and Survivor Annuity, unless the Participant has elected otherwise during the election period, which must begin at least six months before the Participant attains qualified early retirement age and end not more than 90 days before the commencement of benefits. Any election hereunder will be in writing and may be changed by the Participant at any time. (2) Election of early survivor annuity. A Participant who is employed after attaining the qualified early retirement age will be given the opportunity to elect during the election period to have a survivor annuity payable on death. If the Participant elects the survivor annuity, payments under such annuity must not be less than the payments which would have been made to the spouse under the Qualified Joint and Survivor Annuity if the Participant had retired on the day before his death. Any election under this provision will be in writing and may be changed by the Participant at any time. The election period begins on the later of (i) the 90th day before the Participant attains the qualified early retirement age, or (ii) the date on which participation begins, and ends on the date the Participant terminates employment. (3) For purposes of this Section 10.6, qualified early retirement age is the latest of the earliest date under the Plan on which the Participant may elect to receive Retirement benefits, the first day of the 120th month beginning before the Participant reaches normal retirement age, or the date the Participant begins participation. ARTICLE 54. MINIMUM DISTRIBUTION REQUIREMENTS 54..1 General Rules. Subject to Article 10, Joint and Survivor Annuity Requirements, the requirements of this Article 11 shall apply to any distribution of a Participant's interest and will take precedence over any inconsistent provisions of the Plan. Unless otherwise specified, the provisions of this Article 11 apply to calendar years beginning after December 31, 1984. All distributions required under this Article 11 shall be determined and made in accordance with the Income Tax Regulations issued under Section 401(a)(9) of the Code (including proposed regulations, until the adoption of final regulations), including the minimum distribution incidental benefit requirement of Section 1.401(a)(9)- 2 of the proposed regulations. 54..2 Required Beginning Date. The entire interest of a Participant must be distributed, or begin to be distributed, no later than the Participant's required beginning date, determined as follows. (a) General Rule. The required beginning date of a Participant is the first day of April of the calendar year following the calendar year in which the Participant attains age 70 1/2. (b) Transitional Rules. The required beginning date of a Participant who attains age 70 1/2 before January 1, 1988, shall be determined in accordance with (1) or (2) below: (1) Non-5% owners. The required beginning date of a Participant who is not a 5% owner is the first day of April of the calendar year following the calendar year in which the later of his Retirement or his attainment of age 70 1/2 occurs. (2) 5% owners. The required beginning date of a Participant who is a 5% owner during any year beginning after December 31, 1979, is the first day of April following the later of: (i) the calendar year in which the Participant attains age 70 1/2, or (ii) the earlier of the calendar year with or within which ends the Plan Year in which the Participant becomes a 5% owner, or the calendar year in which the Participant retires. The required beginning date of a Participant who is not a 5% owner, who attains age 70 1/2 during 1988 and who has not retired as of January 1, 1989, is April 1, 1990. (c) Rules for 5% Owners. A Participant is treated as a 5% owner for purposes of this Section 11.2 if he is a 5% owner as defined in Section 416(i) of the Code (determined in accordance with Section 416 but without regard to whether the Plan is top heavy) at any time during the Plan Year ending with or within the calendar year in which he attains age 66 1/2, or any subsequent Plan Year. Once distributions have begun to a 5% owner under this Section 11.2, they must continue, even if the Participant ceases to be a 5% owner in a subsequent year. 54..3 Limits on Distribution Periods. As of the first Distribution Calendar Year, distributions not made in a single sum may be made only over one or a combination of the following periods: (a) the life of the Participant, (b) the life of the Participant and his Designated Beneficiary, (c) a period certain not extending beyond the Life Expectancy of the Participant, or (d) a period certain not extending beyond the Joint and Last Survivor Expectancy of the Participant and his Designated Beneficiary. Designated Beneficiary means the individual who is designated as the Beneficiary under the Plan in accordance with Section 401(a)(9) of the Code and the regulations issued thereunder (including proposed regulations, until the adoption of final regulations) and Section 7.2. Distribution Calendar Year means a calendar year for which a minimum distribution is required under Section 401(a)(9) of the Code and this Section 11.3. For distributions beginning before the Participant's death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant's required beginning date. For distributions beginning after the Participant's death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin pursuant to Section 11.5. Life Expectancy and Joint and Last Survivor Expectancy are computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise elected by the Participant (or his spouse, in the case of distributions described in Section 11.5(b)) by the time distributions are required to begin, Life Expectancies shall be recalculated annually. Any such election shall be irrevocable as to the Participant (or spouse) and shall apply to all subsequent years. The Life Expectancy of a nonspouse beneficiary may not be recalculated. 54..4 Determination of Amount to Be Distributed Each Year. If the Participant's interest is to be distributed in other than a single sum, the following minimum distribution rules shall apply on or after the required beginning date. Paragraphs (a) through (d) apply to distributions in forms other than the purchase of an annuity contract. (a) If a Participant's Benefit is to be distributed over (1) a period not extending beyond the Life Expectancy of the Participant or the Joint Life and Last Survivor Expectancy of the Participant and his Designated Beneficiary, or (2) a period not extending beyond the Life Expectancy of the Designated Beneficiary, the amount required to be distributed for each calendar year, beginning with distributions for the first Distribution Calendar Year, must at least equal the quotient obtained by dividing the Participant's Benefit by the Applicable Life Expectancy. (b) For calendar years beginning before January 1, 1989, if the Participant's spouse is not the Designated Beneficiary, the method of distribution selected must assure that at least 50% of the present value of the amount available for distribution is paid within the Life Expectancy of the Participant. (c) For calendar years beginning after December 31, 1988, the amount to be distributed each year, beginning with distributions for the first Distribution Calendar Year, shall not be less than the quotient obtained by dividing the Participant's Benefit by the lesser of (1) the Applicable Life Expectancy or (2) if the Participant's spouse is not the Designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations. Distributions after the death of the Participant shall be distributed using the Applicable Life Expectancy in paragraph (a) above as the relevant divisor, without regard to Proposed Regulations Section 1.401(a)(9)-2. (d) The minimum distribution required for the Participant's first Distribution Calendar Year must be made on or before the Participant's required beginning date. The minimum distribution for other calendar years, including the minimum distribution for the Distribution Calendar Year in which the Employee's required beginning date occurs, must be made on or before December 31 of that Distribution Calendar Year. (e) If the Participant's Benefit is distributed in the form of an annuity contract purchased from an insurance company, distributions thereunder shall be made in accordance with the requirements of Section 401(a)(9) of the Code and the regulations issued thereunder (including proposed regulations, until the adoption of final regulations). Applicable Life Expectancy means the Life Expectancy (or Joint and Last Survivor Expectancy) calculated using the attained age of the Participant (or Designated Beneficiary) as of the Participant's (or Designated Beneficiary's) birthday in the applicable calendar year, reduced by one for each calendar year which has elapsed since the date Life Expectancy was first calculated. If Life Expectancy is being recalculated, the Applicable Life Expectancy shall be the Life Expectancy as so recalculated. The applicable calendar year shall be the first Distribution Calendar Year, and if Life Expectancy is being recalculated such succeeding calendar year. If annuity payments commence in accordance with Section 11.4(e) before the required beginning date, the applicable calendar year is the year such payments commence. If distribution is in the form of an immediate annuity purchased after the Participant's death with the Participant's remaining interest in the Plan, the applicable calendar year is the year of purchase. Participant's Benefit means the account balance as of the last valuation date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year), increased by the amount of any contributions or Forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. For purposes of the preceding sentence, if any portion of the minimum distribution for the first Distribution Calendar Year is made in the second Distribution Calendar Year on or before the required beginning date, the amount of the minimum distribution made in the second Distribution Calendar Year shall be treated as if it had been made in the immediately preceding Distribution Calendar Year. 54..5 Death Distribution Provisions. (a) Distribution Beginning before Death. If the Participant dies after distribution of his interest has begun, the remaining portion of his interest will continue to be distributed at least as rapidly as under the method of distribution being used before the Participant's death. (b) Distribution Beginning after Death. If the Participant dies before distribution of his interest begins, distribution of his entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death, except to the extent that an election is made to receive distributions in accordance with (1) or (2) below: (1) If any portion of the Participant's interest is payable to a Designated Beneficiary, distributions may be made over the Designated Beneficiary's life, or over a period certain not greater than the Life Expectancy of the Designated Beneficiary, commencing on or before December 31 of the calendar year immediately following the calendar year in which the Participant died; or (2) If the Designated Beneficiary is the Participant's surviving spouse, the date distributions are required to begin in accordance with (1) above shall not be earlier than the later of (i) December 31 of the calendar year immediately following the calendar year in which the Participant died, and (ii) December 31 of the calendar year in which the Participant would have attained age 70 1/2. If the Participant has not made an election pursuant to this Section 11.5 by the time of his death, the Participant's Designated Beneficiary must elect the method of distribution no later than the earlier of (i) December 31 of the calendar year in which distributions would be required to begin under this Section 11.5, or (ii) December 31 of the calendar year which contains the fifth anniversary of the date of death of the Participant. If the Participant has no Designated Beneficiary, or if the Designated Beneficiary does not elect a method of distribution, distribution of the Participant's entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. (c) For purposes of paragraph (b), if the surviving spouse dies after the Participant, but before payments to the spouse begin, the provisions of paragraph (b), with the exception of subparagraph (2) therein, shall be applied as if the surviving spouse were the Participant. (d) For purposes of this Section 11.5, any amount paid to a child of the Participant will be treated as if it had been paid to the surviving spouse of the Participant if the amount becomes payable to the surviving spouse when the child reaches the age of majority. (e) For the purposes of this Section 11.5, distribution of a Participant's interest is considered to begin on the Participant's required beginning date (or, if paragraph (c) above is applicable, the date distribution is required to begin to the surviving spouse pursuant to paragraph (b) above). If distribution in the form of an annuity contract described in Section 11.4(e) irrevocably commences to the Participant before the required beginning date, the date distribution is considered to begin is the date distribution actually commences. 54..6 Transitional Rule. Notwithstanding the other requirements of this Article 11, and subject to the requirements of Article 10, Joint and Survivor Annuity Requirements, distribution on behalf of any Participant, including a 5% owner, may be made in accordance with all of the following requirements (regardless of when such distribution commences): (a) The distribution is one which would not have disqualified the Trust under Section 401(a)(9) of the Internal Revenue Code of 1954 as in effect before its amendment by the Deficit Reduction Act of 1984. (b) The distribution is in accordance with a method of distribution designated by the Employee whose interest in the Trust is being distributed or, if the Employee is deceased, by a Beneficiary of the Employee. (c) The designation specified in paragraph (b) was in writing, was signed by the Employee or the Beneficiary, and was made before January 1, 1984. (d) The Employee had accrued a benefit under the Plan as of December 31, 1983. (e) The method of distribution designated by the Employee or the Beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and in the case of any distribution upon the Employee's death, the Beneficiaries of the Employee listed in order of priority. A distribution upon death will not be covered by this transitional rule unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the Employee. For any distribution which commences before January 1, 1984, but continues after December 31, 1983, the Employee or the Beneficiary to whom such distribution is being made will be presumed to have designated the method of distribution under which the distribution is being made, if the method of distribution was specified in writing and the distribution satisfies the requirements in paragraphs (a) and (e). If a designation is revoked, any subsequent distribution must satisfy the requirements of Section 401(a)(9) of the Code and the regulations thereunder. If a designation is revoked after the date distributions are required to begin, the Trust must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed which would have been required to have been distributed to satisfy Section 401(a)(9) of the Code and the regulations thereunder, but for the designation described in paragraphs (b) through (e). For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements in Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations. Any changes in the designation generally will be considered to be a revocation of the designation, but the mere substitution or addition of another beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as the substitution or addition does not alter the period over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life). In the case of an amount transferred or rolled over from one plan to another plan, the rules in Q&A J-2 and Q&A J-3 of Section 1.401(a)(9)-l of the Proposed Income Tax Regulations shall apply. ARTICLE 55. WITHDRAWALS AND LOANS 55..1 Withdrawals from Participant Contribution Accounts. Subject to the requirements of Article 10, a Participant may upon written notice to the Employer withdraw any amount from his Participant Contribution Account. A withdrawn amount may not be repaid to the Plan. No forfeiture will occur solely as a result of an Employee's withdrawal of Participant contributions. 55..2 Withdrawals on Account of Hardship. If the Employer has so elected in the Plan Agreement, upon a Participant's written request the Plan Administrator may permit a withdrawal of funds from the vested portion of the Participant's Accounts (excluding the amount credited to a Rollover Account) on account of the Participant's financial hardship, which must be demonstrated to the satisfaction of the Plan Administrator. In considering such requests, the Plan Administrator shall apply uniform standards that do not discriminate in favor of Highly Compensated Employees. In a Plan with a CODA, if hardship withdrawals are permitted from both the Employer Contribution Account and the Elective Deferral Account, they shall be made first from a Participant's Employer Contribution Account and thereafter from a Participant's Elective Deferral Account, subject to the additional requirements set forth in Section 5.14. The requirements of Section 5.14(b), (c), (d)(1) and (d)(2) shall also apply to hardship distributions from a Participant's Employer Contribution Account and Employer Matching Account. In a Plan with a CODA, if hardship withdrawals are permitted from more than one of the Elective Deferral Account, Employer Matching Account, and Employer Contribution Account, they shall be made first from a Participant's Employer Contribution Account, and thereafter from the Employer Matching Account, and finally from the Elective Deferral Account, subject to the additional requirements of Section 5.14. A withdrawn amount may not be repaid to the Plan. 55..3 Withdrawals After Reaching Age 59 1/2. If so specified by the Employer in the Plan Agreement, a Participant who has reached age 59 1/2 may upon written request to the Employer withdraw during his employment any amount not exceeding the vested balance of his Accounts. A withdrawn amount may not be repaid to the Plan. 55..4 Loans. If the Employer has so elected in the Plan Agreement, the Employer may direct the Trustee to make a loan to a Participant or Beneficiary from the vested portion of his Accounts, subject to the following terms and conditions and to such reasonable additional rules and regulations as the Plan Administrator may establish for the orderly operation of the program: (a) The Plan Administrator shall administer the loan program subject to the terms and conditions of this Section 12.4. (b) A Participant's or Beneficiary's request for a loan shall be submitted to the Plan Administrator by means of a written application on a form supplied by the Plan Administrator. Applications shall be approved or denied by the Plan Administrator on the basis of its assessment of the borrower's ability to collateralize and repay the loan, as revealed in the loan application. (c) Loans shall be made to all Participants and Beneficiaries on a reasonably equivalent basis. Loans shall not be made available to highly compensated Employees (as defined in Section 414(q) of the Code) in amounts greater than the amounts made available to other Employees (relative to the borrower's Account balance). (d) Loans must be evidenced by the Participant's promissory note for the amount of the loan payable to the order of the Trustee, and adequately secured by assignment of not more than fifty percent (50%) of the Participant's entire right, title and interest in and to the Trust Fund, exclusive of any asset as to which Putnam is not the Trustee. (e) Loans must bear a reasonable interest rate comparable to the rate charged by commercial lenders in the geographical area for similar loans. The Plan Administrator shall not discriminate among Participants in the matter of interest rates, but loans may bear different interest rates if, in the opinion of the Plan Administrator, the difference in rates is justified by conditions that would customarily be taken into account by a commercial lender in the Employer's geographical area. (f) The Period for repayment for any loan shall not exceed five years, except in the case of a loan used to acquire a dwelling unit which within a reasonable time is to be used as the principal residence of the Participant, in which case the repayment period shall not exceed ten years. The terms of a loan shall require that it be repaid in level payments of principal and interest not less frequently then quarterly throughout the repayment period, except that alternative arrangements for repayment may apply in the event that the borrower is on unpaid leave of absence for a period not to exceed one year. (g) To the extent that a Participant would be required under Article 10 to obtain he consent of his spouse to a distribution of an immediately distributable benefit other than a Qualified Joint and Survivor Annuity, the consent of the Participant's spouse shall be required for the use of his Account as security for a loan. The spouse's consent must be obtained no earlier than the beginning of the 90-day period that ends on the date on which the loan is to be so secured, and obtained in accordance with the requirements of Section 10.4(c) for a Qualified Election. Any such consent shall thereafter be binding on the consenting spouse and any subsequent spouse of the Participant. A new consent shall be required for use of the Account as security for any extension, renewal, renegotiation or revision of the original loan. (h) If valid spousal consent has been obtained in accordance with Section 12.4(g), then notwithstanding any other provision of the Plan the portion of the Participant's account balance used as a security interest held by the Plan by reason of a loan outstanding to the Participant shall be taken into account for purposes of determining the amount of the account balance payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than 100% of the Participant's vested account balance (determined without regard to the preceding sentence) is payable to the surviving spouse, then the account balance shall be adjusted by first reducing the vested account balance by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving spouse. (i) In the event of default on a loan by a Participant who is an active Employee, foreclosure on the Participant's Account as security will not occur until the Employer has reported to the Trustee the occurrence of an event permitting distribution from the Plan in accordance with Article 9 or Section 5.13. (j) No loan shall be made to an Owner-Employee or a Shareholder-Employee. (k) No loan to any Participant or Beneficiary can be made to the extent that the amount of the loan, when added to the outstanding balance of all other loans to the Participant or Beneficiary, would exceed the lesser of (a) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans during the one year period ending on the day before the loan is made, over the outstanding balance of loans from the Plan on the date the loan is made, or (b) one-half the value of the vested account balance of the Participant. For the purpose of the above limitation, all loans from all qualified plans of the Affiliated Employers are aggregated. (1) Loans shall be considered investments directed by a Participant pursuant to Section 13.3. The amount loaned shall be charged solely against the Accounts of the Participant, and repaid amounts and interest shall be credited solely thereto. 55..5 Procedure; Amount Available. Withdrawals and loans shall be made subject to the terms and conditions applicable to distributions pursuant to Section 9.4, except that the amount of any withdrawal or loan shall be determined by reference to the vested balance of the Participant's Account as of the most recent Valuation Date preceding the withdrawal or loan, and shall not exceed the amount of the vested account balance. ARTICLE 56. TRUST FUND AND INVESTMENTS 56..1 Establishment of Trust Fund. The Employer and the Trustee hereby agree to the establishment of a Trust Fund consisting of all amounts as shall be contributed or transferred from time to time to the Trustee pursuant to the Plan, and all earnings thereon. The Trustee shall hold the assets of the Trust Fund for the exclusive purpose of providing benefits to Participants and Beneficiaries and defraying the reasonable expenses of administering the Plan, and no such assets shall ever revert to the Employer, except that: (a) contributions made by the Employer by mistake of fact, as determined by the Employer, may be returned to the Employer within one (1) year of the date of payment, (b) contributions that are conditioned on their deductibility under Section 404 of the Code may be returned to the Employer, to the extent disallowed, within one (1) year of the disallowance of the deduction, (c) contributions that are conditioned on the initial qualification of the Plan under the Code, and all investment gains attributable to them, may be returned to the Employer within one (1) year after such qualification is denied by determination of the Internal Revenue Service, but only if an application for determination of such qualification is made within the time prescribed by law for filing the Employer's federal income tax return for its taxable year in which the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe, and (d) amounts held in a suspense account may be returned to the Employer on termination of the Plan, to the extent that they may not then be allocated to any Participant's Account in accordance with Article 6. All Employer contributions under the Plan other than those made pursuant to Section 4.1(f) are hereby expressly conditioned on the initial qualification of the Plan and their deductibility under the Code. Investment gains attributable to contributions returned pursuant to subSections (a) and (b) shall not be returned to the contributing Employer, and investment losses attributable to such contributions shall reduce the amount returned. 56..2 Management of Trust Fund. Except to the extent of any investment in Policies pursuant to Article 14, the assets of the Trust Fund shall be held in trust by the Trustee and accounted for in accordance with this Article 13, and shall be invested in accordance with Section 13.3 in the Investment Products specified by the Employer in the Plan Agreement and from time to time thereafter in writing. The Employer shall have the exclusive authority and discretion to select the Investment Products available under the Plan. In making that selection, the Employer shall use the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims. The Employer shall cause the available Investment Products to be diversified sufficiently to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. It is especially intended that the Trustee shall have no discretionary authority to determine the investment of Trust assets. Notwithstanding the foregoing, assets of the Trust Fund shall also be invested in Employer Stock if so elected by the Employer and agreed to by Putnam under the service agreement executed by the Employer and Putnam pursuant to the establishment of the Plan. 56..3 Investment Instructions. Except as Article 14 may apply, all amounts held in the Trust Fund under the Plan shall be invested in Investment Products. If the Employer has elected in the Plan Agreement to make investment decisions with respect to Employer contributions to the Plan, investment instructions as to Employer Contribution Accounts, Employer Matching Accounts, Qualified Matching Accounts and Qualified Nonelective Contribution Accounts shall be the fiduciary responsibility of the Employer, and each of such Accounts shall have a pro rata interest in all assets of the Trust (other than Policies under Article 14) to which the Employer's instructions apply. If the Employer has not elected to make investment decisions for the Plan, then assets of the Trust shall be invested solely in accordance with the instructions of the Participant to whose Accounts they are allocable, as delivered to Putnam in accordance with its service agreement with the Employer. Instructions shall apply to future contributions, past accumulations, or both, according to their terms, and shall be communicated by the Employer to Putnam in accordance with procedures prescribed in the service agreement between the Employer and Putnam. Instructions shall be effective prospectively, coincident with or within a reasonable time after their receipt in good order by Putnam. An instruction once received shall remain in effect until it is changed by the provision of a new instruction. New instructions shall be accepted by Putnam at the time and in the manner provided in the Plan Agreement. To the extent the assets of the Trust are to be invested solely in accordance with the instructions of the Participants, the Plan is intended to constitute a plan described in section 404(c) of ERISA and Title 29 of the Code of Federal Regulations section 2550.404c-1. In such case, the Employer shall be the Plan fiduciary responsible for providing the Participants with all information required to be given pursuant to ERISA section 404(c) and Title 29 of the Code of Federal Regulations section 2550.404c-1. In the event that the Employer adopts a Putnam prototype plan as an amendment to or restatement of an existing plan, the Employer shall specify one or more Investment Products to serve as the sole investments for all Participants' Accounts during the period in which existing records of the Plan are transferred to the Recordkeeper. During that period, new investment instructions as to existing assets of the Plan cannot be carried out, nor can distributions be made from the Plan except to the extent permitted under the terms of the service agreement between the Employer and Putnam. The Employer and the Recordkeeper shall use their best efforts to minimize the duration of the period to which the preceding sentence applies. To the extent specifically authorized and provided in the service agreement between the Employer and Putnam, the Employer may direct the Trustee to establish as an Investment Product a fund all of the assets of which shall be invested in shares of stock of the Employer that constitute "qualifying employer securities" within the meaning of section 407(d)(5) of ERISA ("Employer Stock"). The Plan Administrator as named fiduciary shall continually monitor the suitability of acquiring and holding Employer Stock under the fiduciary duty rules of section 404(a)(1) of ERISA (as modified by section 404(a)(2) of ERISA) and the requirements of section 404(c) of ERISA, and shall be responsible for ensuring that the procedures relating to the purchase, holding and sale of Employer Stock, and the exercise of any and all rights with respect to such Employer Stock shall be in accordance with section 404(c) of ERISA. The Trustee shall not be liable for any loss, or by reason of any breach, which arises from the direction of the Plan Administrator with respect to the acquisition and holding of Employer Stock. The Employer shall be responsible for determining whether, under the circumstances prevailing at a given time, its fiduciary duty to Plan Participants and Beneficiaries under the Plan and ERISA requires that the Employer follow the advice of independent counsel as to the voting and tender or retention of Employer Stock. Putnam shall be under no duty to question or review the investment directions given by the Employer or to make suggestions to the Employer in connection therewith. Putnam shall not be liable for any loss, or by reason of any breach, that arises from the Employer's exercise or non-exercise of rights under this Article 13, or from any direction of the Employer unless it is clear on the face of the direction that the actions to be taken under the direction are prohibited by the fiduciary duty rules of Section 404(a) of ERISA. All interest, dividends and other income received with respect to, and any proceeds received from the sale or other disposition of, securities or other property held in an investment fund shall be credited to and reinvested in such investment fund, and all expenses of the Trust that are properly allocated to a particular investment fund shall be so allocated and charged. The Employer may at any time direct Putnam to eliminate any investment fund or funds, and Putnam shall thereupon dispose of the assets of such investment fund and reinvest the proceeds thereof in accordance with the directions of the Employer. Neither the Employer nor the Trustee nor Putnam shall be responsible for questioning any instructions of a Participant or for reviewing the investments selected therein, or for any loss resulting from instructions of a Participant or from the failure of a Participant to provide or to change instructions. Neither Putnam nor the Trustee shall have any duty to question any instructions received from the Employer or a Participant or to review the investments selected thereby, nor shall Putnam or the Trustee be responsible for any loss resulting from instructions received from the Employer or a Participant or from the failure of the Employer or a Participant to provide or to change instructions. In the event that Putnam or the Trustee receives a contribution under the Plan as to which no instructions are delivered, or such instructions as are delivered are unclear to Putnam or the Trustee, such contribution shall be invested until clear instructions are received in the default investment option set forth in the service agreement between the Employer and Putnam, or if no such option is so set forth, in Putnam Daily Dividend Trust. Neither Putnam nor the Trustee shall have any discretionary authority or responsibility in the investment of the assets of the Trust Fund. 56..4 Valuation of the Trust Fund. As of each Valuation Date, the Trustee shall determine the fair market value of the Trust Fund, and the net earnings or losses and expenses of the Trust Fund for the period elapsed since the most recent previous Valuation Date shall be allocated among the Accounts of Participants. Earnings, losses and expenses which pertain to investments which are specifically held for a given Participant's Account shall be allocated solely to that Account. In the event that an investment is not specifically held for a given Participant's Account, the earnings, losses and expenses pertaining to that investment shall be allocated among all Participants' Accounts in the ratio that each such Account bears to the total of all Accounts of all Participants. Each Participant's Accounts shall be adjusted pursuant to this Section 13.4 until such time as they are either fully distributed or forfeited, regardless of whether the Participant continues to be an Employee. 56..5 Distributions on Investment Company Shares. Subject to Section 9.3, all dividends and capital gains or other distributions received on any Investment Company Shares credited to Participant's Account will (unless received in additional Investment Company Shares) be reinvested in full and fractional shares of the same Investment Company at the price determined as provided in the then current prospectus of the Investment Company. The shares so received or purchased upon such reinvestment will be credited to such accounts. If any dividends or capital gain or other distributions may be received on such Investment Company Shares at the election of the shareholder in additional shares or in cash or other property, the Trustee will elect to receive such dividends or distributions in additional Investment Company Shares. 56..6 Registration and Voting of Investment Company Shares. All Investment Company Shares shall be registered in the name of the Trustee or its nominee. Subject to any requirements of applicable law, the Trustee will transmit to the Employer copies of any notices of shareholders' meetings, proxies and proxy-soliciting materials, prospectuses and the annual or other reports to share holders, with respect to Investment Company Shares held in the Trust Fund. The Trustee shall act in accordance with directions received from Participants or the Employer, as the case may be, with respect to matters to be voted upon by the shareholders of the Investment Company. Such directions must be in writing on a form approved by the Trustee, signed by the addressee and delivered to the Trustee within the time prescribed by it. The Trustee will not vote Investment Company Shares as to which it receives no written directions. 56..7 Investment Manager. The Employer, with the consent of Putnam, may appoint an investment manager, as defined in Section 3(38) of the Employee Retirement Income Security Act of 1974, with respect to all or a portion of the assets of the Trust Fund. The Trustee shall have no liability in connection with any action or nonaction pursuant to directions of such an investment manager. 56..8 Employer Stock. (a) Voting Rights. Notwithstanding any other provision of the Plan, the provisions of this Section 13.8(a) shall govern the voting of Employer Stock held by Putnam as Trustee under the Plan. The Trustee shall vote Employer Stock in accordance with the directions of the Employer unless the Employer has elected in the Plan Agreement that Participants shall be appointed named fiduciaries as to the voting of Employer Stock and shall direct the Trustee as to the voting of Employer Stock in accordance with the provisions of this Section 13.8(a). In either case, the Employer shall be responsible for determining whether, under the circumstances prevailing at a given time, its fiduciary duty to Participants and Beneficiaries under the Plan and ERISA requires that the Employer follow the advice of independent counsel as to the voting of Employer Stock. The remainder of this Section 13.8(a) applies only if the Employer elects in the Plan Agreement that Participants shall direct the Trustee as to the voting of Employer Stock. When the issuer of Employer Stock files preliminary proxy solicitation materials with the Securities and Exchange Commission, the Employer shall cause a copy of all the materials to be simultaneously sent to the Trustee, and the Trustee shall prepare a voting instruction form based upon these materials. At the time of mailing of notice of each annual or special stockholders' meeting of the issuer of Employer Stock, the Employer shall cause a copy of the notice and all proxy solicitation materials to be sent to each Participant, together with the foregoing voting instruction form to be returned to the Trustee or its designee. The form shall show the number of full and fractional shares of Employer Stock credited to the Participant's accounts, whether or not vested. For purposes of this Section 13.8(a), the number of shares of Employer Stock deemed credited to a Participant's accounts shall be determined as of the last preceding Valuation Date for which an allocation has been completed and Employer Stock has actually been credited to Participant's accounts. The Employer shall provide the Trustee with a copy of any materials provided to Participants and shall certify to the Trustee that the materials have been mailed or otherwise sent to Participants. Each Participant shall have the right to direct the Trustee as to the manner in which to vote that number of shares of Employer Stock held under the Plan (whether or not vested) equal to a fraction, of which the numerator is the number of shares of Employer Stock credited to his account and the denominator is the number of shares of Employer Stock credited to all Participants' accounts. Such directions shall be communicated in writing or by facsimile or similar means and shall be held in confidence by the Trustee and not divulged to the Employer, or any officer or employee thereof, or any other persons. Upon its receipt of directions, the Trustee shall vote the shares of Employer Stock as directed by the Participant. The Trustee shall not vote those shares of Employer Stock credited to the accounts of Participants for which no voting directions are received. With respect to shares of Employer Stock held in the Trust which are not credited to a Participant's account, the Plan Administrator shall retain the status of named fiduciary and shall direct the voting of such Employer Stock. (b) Tendering Rights. Notwithstanding any other provision of the Plan, the provisions of this Section 13.8(b) shall govern the tendering of Employer Stock by Putnam as Trustee under the Plan. In the event of a tender offer, the Trustee shall tender Employer Stock in accordance with the directions of the Employer unless the Employer has elected in the Plan Agreement that Participants shall be appointed name fiduciaries as to the tendering of Employer Stock in accordance with the provisions of this Section 13.8(b). The remainder of this Section 13.8(b) applies only if the Employer elects in the Plan Agreement that Participants shall direct the Trustee as to the tendering of Employer stock. Upon commencement of a tender offer for any Employer Stock, the Employer shall notify each Plan Participant, and use its best efforts to distribute timely or cause to be distributed to Participants the same information that is distributed to shareholders of the issuer of Employer Stock in connection with the tender offer, and after consulting with the Trustee shall provide at the Employer's expense a means by which Participants may direct the Trustee whether or not to tender the Employer Stock credited to their accounts (whether or not vested). The Employer shall provide to the Trustee a copy of any material provided to Participants and shall certify to the Trustees that the materials have been mailed or otherwise sent to Participants. Each Participant shall have the right to direct the Trustee to tender or not to tender some or all of the shares of Employer Stock credited to his accounts. Directions from a Participant to the Trustee concerning the tender of Employer Stock shall be communicated in writing or by facsimile or such similar means as is agreed upon by the Trustees and the Employer. The Trustee shall tender or not tender shares of Employer Stock as directed by the Participant. A Participant who has directed the Trustee to tender some or all of the shares of Employer Stock credited to his accounts may, at any time before the tender offer withdrawal date, direct the Trustee to withdraw some or all of the tendered shares, and the Trustee shall withdraw the directed number of shares from the tender offer before the tender offer withdrawal deadline. A Participant shall not be limited as to the number of directions to tender or withdraw that he may give to the Trustee. The Trustee shall not tender shares of Employer Stock credited to a Participant's accounts for which it has received no directions from the Plan Participant. The Trustee shall tender that number of shares of Employer Stock not credited to Participants' accounts determined by multiplying the total number of such shares by a fraction, the numerator of which is the number of shares of Employer Stock credited to Participants' accounts for which the Trustee has received directions from Participants to tender (which directions have not been withdrawn as of the date of this determination), and the denominator of which is the total number of shares of Employer Stock credited to Participants' accounts. A direction by a Participant to the Trustee to tender shares of Employer Stock credited to his accounts shall not be considered a written election under the Plan by the Participant to withdraw or to have distributed to him any or all of such shares. The Trustee shall credit to each account of the Plan Participant from which the tendered shares were taken the proceeds received by the Trustee in exchange for the shares of Employer Stock tendered from that account. Pending receipt of directions through the Administrator from the Participant as to the investment of the proceeds of the tendered shares, the Trustee shall invest the proceeds as the Administrator shall direct. To the extent that any Participant gives no direction as to the tendering of Employer stock that he has the right to direct under this Section 13.8(a), the Trustee shall not tender such Employer Stock. (c) Other Rights. With respect to all rights in connection with Employer Stock other than the right to vote and the right to tender, Participants are hereby appointed named fiduciaries to the same extent (if any) as provided in the foregoing paragraphs of this Section 13.8 with regard to the right to vote, and the Trustee shall follow the directions of Participants and the Plan Administrator with regard to the exercise of such rights to the same extent as with regard to the right to vote. 56..9 Insurance Contracts. If so provided in the Plan Agreement, the Plan Administrator may direct the Trustee to receive and hold or apply assets of the Trust to the purchase of individual or group insurance or annuity contracts ("policies" or "contracts") issued by any insurance company and in a form approved by the Plan Administrator (including contracts under which the contract holder is granted options to purchase insurance or annuity benefits), or financial agreements which are backed by group insurance or annuity contracts ("financial agreements"). If such investments are to be made, the Plan Administrator shall direct the Trustee to execute and deliver such applications and other documents as are necessary to establish record ownership, to value such policies, contracts or financial agreements under the method of valuation selected by the Plan Administrator, and to record or report such values to the Plan Administrator or any investment manager selected by the Plan Administrator, in the form and manner agreed to by the Plan Administrator. The Plan Administrator may direct the Trustee to exercise or may exercise directly the powers of contract holder under any policy, contract or financial agreement, and the Trustee shall exercise such powers only upon direction of the Plan Administrator. The Trustee shall have no authority to act in its own discretion, with respect to the terms, acquisition, valuation, continued holding and/or disposition of any such policy, contract or financial agreement or any asset held thereunder. The Trustee shall be under no duty to question any direction of the Plan Administrator or to review the form of any such policy, contract or financial agreement or the selection of the issuer thereof, or to make recommendations to the Plan Administrator or to any issuer with respect to the form of any such policy, contract or financial agreement. The Trustee shall be fully protected in acting in accordance with written directions of the Plan Administrator, and shall be under no liability for any loss of any kind which may result by reason of any action taken or omitted by it in accordance with any direction of the Plan Administrator, or by reason of inaction in the absence of written directions from the Plan Administrator. In the event that the Plan Administrator directs that any monies or property be paid or delivered to the contract holder other than for the benefit of specific individual beneficiaries, the Trustee agrees to accept such monies or property as assets of the Trust subject to all the terms hereof. ARTICLE 57. INSURANCE POLICIES 57..1 Purchase of Insurance Products. At the time of establishment of the Plan, if elected by the Employer and agreed to by Putnam under the service agreement executed by the Employer and Putnam pursuant to the establishment of the Plan, the Employer shall purchase for each Participant such Policy or Policies, if any, as a Participant shall request and annually thereafter such additional Policies as a Participant shall request, subject to the limitations of Section 14.2. All Policies shall have the same day and month of issue, insofar as reasonably possible. The premiums on all Policies shall be paid at the same intervals (for example, annually, semi-annually, quarterly or monthly), but the interval may be changed with respect to all Policies from time to time. 57..2 Limitation on Premiums. The premiums paid for Policies in respect of any Participants shall be limited so that premiums paid on any ordinary insurance Policies (that is, Policies with both nonincreasing premiums and nondecreasing death benefits) on the life of the Participant shall be 49% or less of the Employer's total contributions for the Participant (and Forfeitures allocated and amounts reapplied to his Employer Contribution Account), and premiums paid on term insurance Policies on the life of the Participant shall be less than 25% of such amount; provided that if both ordinary life insurance Policies and term Policies are purchased for any Participant, the total premiums on term Policies plus one-half the premiums on ordinary life Policies shall be less than 25% of such amount. If at any time the total premiums to be paid by the Employer for a Participant shall equal or exceed the above limitations, then the life insurance coverage of that Participant shall be reduced so that the total premiums shall not equal or exceed the limitations. The required reduction shall be made by changing all or a portion of the life insurance on the Participant to paid-up life insurance or by cancelling all or a portion of any term life insurance. 57..3 Policy Options. At the election of the Participant covered hereunder, a Policy may contain a waiver of premium disability benefit provision or a provision for additional indemnity in the event of accidental death, or both, if available on the type of Policy selected and if permitted by the insurer. 57..4 Insurability. If any Participant who has elected that a Policy be purchased is found by the insurer not to be insurable at standard rates, the Employer shall, if permitted by the rules of the insurer, purchase a similar Policy which provides a lesser death benefit and which can be purchased for the same premium. 57..5 Dividends on Policies. Dividends and other credits payable on any Policy shall be applied to the purchase of additional benefits under the Policy unless the Participant requests that they be applied in reduction of premiums. 57..6 Trustee of Policy. Upon direction by the Plan Administrator, the Insurance Trustee shall apply for and be the owner of each Policy purchased under the terms of the Plan. Each Policy must provide that proceeds will be payable to the Insurance Trustee; however, the Insurance Trustee shall be required to pay over all such proceeds to the Participant's Designated Beneficiary in accordance with the distribution provisions of the Plan including, without limitation, Section 10.3. Under no circumstances shall the Trust retain any part of the proceeds. In the event of any conflict between the terms of the Plan and the terms of any Policy purchased hereunder, the Plan provisions shall control. The Insurance Trustee shall be fully protected in acting in accordance with written instructions of the Plan Administrator and shall be under no liability for any loss of any kind which may result by reason of any action taken or omitted by it in accordance with any direction of the Plan Administrator, or by reason of inaction in the absence of written directions from the Plan Administrator. 57..7 Obligations with Respect to Policies. Except as may be otherwise provided in any conditional or binding receipt issued by an insurer, there shall be no coverage and no death benefit payable under any Policy to be purchased from such insurer until such Policy shall have been delivered and the premium therefor shall have been paid. The Employer and the Insurance Trustee shall not have any responsibility as to the effectiveness of any Policy purchased from an insurer, nor shall either of them have any liability or obligation to pay any amount to any Participant or his beneficiary by reason of any failure or refusal by the insurer to make such payment. 57..8 Distribution of Proceeds on Participant's Death. In the event of the death of a Participant before the conversion provided for in Section 14.9, there shall be payable to the beneficiary named in any Policy on his life the benefits provided by the terms of such Policy. 57..9 Conversion of Policies. Except as provided in Section 19.3, if any Policies of a Participant (other than retirement income, endowment or annuity Policies) are held for his benefit at the time distribution is to commence, the Policies may be converted by the Insurance Trustee into cash, paid to the Trustee, credited to the Employer Contribution Account of the Participant, invested in accordance with the written instructions of the Employer (and if no such instructions have been given or if such instructions are not clear, invested in Investment Company Shares in the same proportion as the most recent contributions to the Participant's Accounts) and distributed pursuant to Article 9, subject to the terms and conditions of Article 10. Retirement income, endowment or annuity Policies will be distributed directly to the Participant at the time distribution is to commence. 57..10 Conflict with Policies. In the event of any conflict between the terms of the Plan and the terms of any Policies hereunder, the Plan provisions shall control. 57..11 Insurance Loans to Owner-Employees. If an Owner- Employee or Shareholder-Employee receives, either directly or indirectly, any amount from an Insurer as a loan under a Policy, the amount so received shall be considered a distribution under the Plan. Any assignment or pledge (or agreement to assign or pledge) by an Owner-Employee or Shareholder-Employee of any interest in the Plan shall be considered a distribution of such interest. ARTICLE 58. TOP-HEAVY PLANS 58..1 Superseding Effect. For any Plan Year beginning after December 31, 1983, in which Plan is determined to be a Top-Heavy Plan under Section 15.2(b), the provisions of this Article 15 will supersede any conflicting provisions in the Plan or the Plan Agreement. 58..2 Definitions. For purposes of this Article 15, the terms below shall be defined as follows: (a) Key Employee means any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the determination period was: (1) an officer of the Employer having annual compensation greater than 50% of the amount in effect under Section 415(b)(1)(A) of the Code; (2) an owner (or considered an owner under Section 318 of the Code) of one of the ten largest interests in the Employer having annual compensation exceeding the dollar limitation under Section 415(c)(1)(A) of the Code; (3) a 5% owner of the Employer; or (4) a 1% owner of the Employer having annual compensation of more than $150,000. Annual compensation means compensation satisfying the definition elected by the Employer in item 4 of the Plan Agreement, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code. The determination period is the Plan Year containing the Determination Date and the four preceding Plan Years. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the Regulations thereunder. (b) Top-Heavy: The Plan is Top-Heavy for any Plan Year beginning after December 31, 1983, if any of the following conditions exists: (1) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans. (2) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of plans exceeds 60%. (3) If this plan is part of a Required Aggregation Group and part of a Permissive Aggregation Group of Plans and the Top-Heavy Ratio for the Permissive Aggregation group exceeds 60%. (c) Top-Heavy Ratio means the following: (1) If the Employer maintains one or more qualified defined contribution plans (or any simplified employee pension plan) and the Employer has not maintained any qualified defined benefit plan which during the 5-year period ending on the Determination Date(s) has or has had accrued benefits, the Top-Heavy ratio for this Plan alone or for the Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the Determination Date(s) (including any part of any account distributed in the 5-year period ending on the Determination Date(s)), and the denominator of which is the sum of all account balances (including any part of any account balance distributed in the 5-year period ending on the Determination Date(s)), both computed in accordance with Section 416 of the Code and the regulations thereunder. Both the numerator and denominator of the Top-Heavy Ratio are increased to reflect any contribution not actually made as of the Determination Date, but which is required to be taken into account on that date under Section 416 of the Code and the regulations thereunder. (2) If the Employer maintains one or more qualified defined contribution plans (or any simplified employee pension plan) and the Employer maintains or has maintained one or more qualified defined benefit plans which during the 5-year period ending on the Determination Date(s) has or has had any accrued benefits, the Top-Heavy Ratio for any Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of account balances under the aggregated qualified defined contribution plan or plans for all Key Employees, determined in accordance with (1) above, and the Present Value of accrued benefits under the aggregated qualified defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the account balances under the aggregated qualified defined contributions plan or plans for all Participants, determined in accordance with (1) above, and the Present Value of accrued benefits under the qualified defined benefit plan or plans for all Participants as of the Determination Date(s), all determined in accordance with Section 416 of the Code and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are increased for any distribution of an accrued benefit made in the 5-year period ending on the Determination Date. (3) For purposes of (1) and (2) above, the value of account balances and the Present Value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12- month period ending on the Determination Date; except as provided in Section 416 of the Code and the regulations thereunder for the first and second Plan Years of a defined benefit plan. The account balances and accrued benefits of a Participant (A) who is not a Key Employee but who was a Key Employee in a prior Plan Year, or (B) who has not been credited with at least one Hour of Service for the Employer during the 5-year period ending on the Determination Date, will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers and transfers are taken into account will be made in accordance with Section 416 of the Code and the regulations thereunder. Deductible Employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. The accrued benefit of a Participant other than a Key Employee shall be determined under (a) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code. (d) Permissive Aggregation Group means the Required Aggregation Group of plans plus any other qualified plan or plans (or simplified employee pension plan) of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code. (e) Required Aggregation Group means (i) each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the determination period (regardless of whether the Plan has terminated) and (ii) any other qualified plan of the Employer which enables a plan described in (i) to meet the requirements of Section 401(a)(4) or 410 of the Code. (f) Determination Date means, for any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year of the Plan, the Determination Date is the last day of that Plan Year. (g) Valuation Date means the last day of the Plan Year. (h) Present Value means present value based only on the interest and mortality rates specified by the Employer in the Plan Agreement. 58..3 Minimum Allocation. (a) Except as otherwise provided in paragraphs (c) and (d) below, the Employer contributions and Forfeitures allocated on behalf of any Participant who is not a Key Employee shall not be less than the lesser of 3% of such Participant's Earnings, or in the case where the Employer has no defined benefit plan which designates this Plan to satisfy Section 401 of the Code, the largest percentage of Employer contributions and Forfeitures, as a percentage of the first $200,000 of the Key Employee's Earnings, allocated on behalf of any Key Employee for that year. The minimum allocation is determined without regard to any Social Security contribution. This minimum allocation shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation of the Employer's contributions and Forfeitures for the Plan Year because of (1) the Participant's failure to be credited with at least 1,000 Hours of Service, or (2) the Participant's failure to make mandatory Employee contributions to the Plan, or (3) the Participant's receiving Earnings less than a stated amount. Neither Elective Deferrals, Employer Matching Contributions nor Qualified Matching Contributions for non-Key Employees shall be taken into account for purposes of satisfying the requirement of this Section 15.3(a). (b) For purposes of computing the minimum allocation, Earnings will mean Section 415 Compensation as defined in Section 6.5(b) of the Plan. (c) The provision in paragraph (a) above shall not apply to any Participant who was not employed by the Employer on the last day of the Plan Year. (d) The provision in paragraph (a) above shall not apply to any Participant to the extent he is covered under any other plan or plans of the Employer, and the Employer has provided in the Plan Agreement that the minimum allocation requirement applicable to Top-Heavy Plans will be met in the other plan or plans. (e) The minimum allocation required (to the extent required to be nonforfeitable under Section 416(b) of the Code) may not be forfeited under Sections 411(a)(3)(B) or (D) of the Code. 58..4 Adjustment of Fractions. For any Plan Year in which the Plan is Top-Heavy, the Defined Benefit Fraction and the Defined Contribution Fraction in Article 6 shall each be computed using 100% of the dollar limitations specified in Sections 415(b)(1)(A) and 415(c)(1)(A) instead of 125%. The foregoing requirement shall not apply if the Top-Heavy Ratio does not exceed 90% and the Employer has elected in the Plan Agreement to provide increased minimum allocations or benefits satisfying Section 416(h)(2) of the Code. ARTICLE 59. ADMINISTRATION OF THE PLAN 59..1 Plan Administrator. The Plan shall be administered by the Employer, as Plan Administrator and Named Fiduciary within the meaning of ERISA, under rules of uniform application; provided, however, that the Plan Administrator's duties and responsibilities may be delegated to a person appointed by the Employer or a committee established by the Employer for that purpose, in which case the committee shall be the Plan Administrator and Named Fiduciary. The members of such a committee shall act by majority vote, and may by majority vote authorize any one or ones of their number to act for the committee. The person or committee (if any) initially appointed by the Employer may be named in the Plan Agreement, but the Employer may remove any such person or committee member by written notice to him, and any such person or committee may resign by written notice to the Employer, without the necessity of amending the Plan Agreement. To the extent permitted under applicable law, the Plan Administrator shall have the sole authority to enforce the terms hereof on behalf of any and all persons having or claiming any interest under the Plan, and shall be responsible for the operation of the Plan in accordance with its terms. The Plan Administrator shall have discretionary authority to determine all questions arising out of the administration, interpretation and application of the Plan, all of which determinations shall be conclusive and binding on all persons. The Plan Administrator, in carrying out its responsibilities under the Plan, may rely upon the written opinions of its counsel and on certificates of physicians. Subject to the provisions of the Plan and applicable law, the Plan Administrator shall have no liability to any person as a result of any action taken or omitted hereunder by the Plan Administrator. 59..2 Claims Procedure. Claims for participation in or distribution under the Plan shall be made in writing to the Plan Administrator, or an agent designated by the Plan Administrator whose name shall have been communicated to all Participants and other persons as required by law. If any claim so made is denied in whole or in part, the claimant shall be furnished promptly by the Plan Administrator with a written notice: (a) setting forth the reason for the denial, (b) making reference to pertinent Plan provisions, (c) describing any additional material or information from the claimant which is necessary and why, and (d) explaining the claim review procedure set forth herein. Within 60 days after denial of any claim for participation or distribution under the Plan, the claimant may request in writing a review of the denial by the Plan Administrator. Any claimant seeking review hereunder shall be entitled to examine all pertinent documents and to submit issues and comments in writing. The Plan Administrator shall render a decision on review hereunder; provided, that if the Plan Administrator determines that a hearing would be appropriate, its decision on review shall be rendered within 120 days after receipt of the request for review. The decision on review shall be in writing and shall state the reason for the decision, referring to the Plan provisions upon which it is based. 59..3 Employer's Responsibilities. The Employer shall be responsible for: (a) Keeping records of employment and other matters containing all relevant data pertaining to any person affected hereby and his eligibility to participate, allocations to his Accounts, and his other rights under the Plan; (b) Periodic, timely filing of all statements, reports and returns required to be filed by ERISA; (c) Timely preparation and distribution of disclosure materials required by ERISA; (d) Providing notice to interested parties as required by Section 7476 of the Code; (e) Retention of records for periods required by law; and (f) Seeing that all persons required to be bonded on account of handling assets of the Plan are bonded. 59..4 Recordkeeper. The Recordkeeper is hereby designated as agent of the Employer under the Plan to perform directly or through agents certain ministerial duties in connection with the Plan, in particular: (a) To keep and regularly furnish to the Employer a detailed statement of each Participant's Accounts, showing contributions thereto by the Employer and the Participant, Investment Products purchased therewith, earnings thereon and Investment Products purchased therewith, and each redemption or distribution made for any reason, including fees or benefits; and (b) To the extent agreed between the Employer and the Recordkeeper, to prepare for the Employer or to assist the Employer to prepare such returns, reports or forms as the Employer shall be required to furnish to Participants and Beneficiaries or other interested persons and to the Internal Revenue Service or the Department of Labor; all as may be more fully set forth in a service agreement executed by the Employer and the Recordkeeper. If the Employer does not appoint another person or entity as Recordkeeper, the Employer itself shall be the Recordkeeper. 59..5 Prototype Plan. Putnam is the sponsor of the Putnam Basic Plan Document, a prototype plan approved as to form by the Internal Revenue Service. Provided that an Employer's adoption of the Plan is made known to and accepted by Putnam in accordance with the Plan Agreement, Putnam will inform the Employer of amendments to the prototype plan and provide such other services in connection with the Plan as may be agreed between Putnam and the Employer. Putnam may impose for its services as sponsor of the prototype plan such fees as it may establish from time to time in a fee schedule addressed to the Employer. Such fees shall, unless paid by the Employer, be paid from the Trust Fund, and shall in that case be charged pro rata against the Accounts of all Participants. The Trustee is expressly authorized to cause Investment Products to be sold or redeemed for the purpose of paying such fees. ARTICLE 60. TRUSTEE AND INSURANCE TRUSTEE 60..1 Powers and Duties of the Trustee. The Trustee shall have the authority, in addition to any authority given by law, to exercise the following powers in the administration of the Trust: (a) To invest all or a part of the Trust Fund in Investment Products in accordance with the investment instructions delivered by the Employer pursuant to Section 13.3, without restriction to investments authorized for fiduciaries, including without limitation any common, collective or commingled trust fund maintained by the Trustee (or any other such fund, acceptable to Putnam and the Trustee, that qualifies for exemption from federal income tax pursuant to Revenue Ruling 81-100). Any investment in, and any terms and conditions of, any such common, collective or commingled trust fund available only to employee trusts which meet the requirements of the Code, or corresponding provisions of subsequent income tax laws of the United States, shall constitute an integral part of this Agreement; (b) If Putnam and the Trustee have consented thereto in writing, to invest without limit in stock of the Employer or any affiliated company; (c) To dispose of all or part of the investments, securities or other property which may from time to time or at any time constitute the Trust Fund in accordance with the written directions furnished by the Employer for the investment of Participants' separate Accounts or the payment of benefits or expenses of the Plan, and to make, execute and deliver to the purchasers thereof good and sufficient deeds of conveyance therefore, and all assignments, transfers and other legal instruments, either necessary or convenient for passing the title and ownership thereto, free and discharged of all trusts and without liability on the part of such purchasers to see to the application of the purchase money; (d) To hold cash uninvested to the extent necessary to pay benefits or expenses of the Plan; (e) To follow the directions of an investment manager appointed pursuant to Section 13.7; (f) To cause any investment of the Trust Fund to be registered in the name of the Trustee or the name of its nominee or nominees or to retain such investment unregistered or in a form permitting transfer by delivery; provided that the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund; (g) Upon written direction of or through the Employer, to vote in person or by proxy (in accordance with Section 13.6 and, in the case of stock of the Employer, at the direction of the Employer or Participants) with respect to all securities that are part of the Trust Fund; (h) To consult and employ any suitable agent to act on behalf of the Trustee and to contract for legal, accounting, clerical and other services deemed necessary by the Trustee to manage and administer the Trust Fund according to the terms of the Plan; (i) Upon the written direction of the Employer, to make loans from the Trust Fund to Participants in amounts and on terms approved by the Plan Administrator in accordance with the provisions of the Plan; provided that the Employer shall have the sole responsibility for computing and collecting all loan repayments required to be made under the Plan; and (j) To pay from the Trust Fund all taxes imposed or levied with respect to the Trust Fund or any part thereof under existing or future laws, and to contest the validity or amount of any tax assessment, claim or demand respecting the Trust Fund or any part thereof. 60..2 Limitation of Responsibilities. Except as may otherwise be required under applicable law, neither the Trustee nor the Insurance Trustee nor any of their respective agents shall have any responsibility for: (a) Determining the correctness of the amount of any contribution for the sole collection or payment of contributions, which shall be the sole responsibility of the Employer; (b) Loss or breach caused by any Participant's exercise of control over his Accounts, which shall be the sole responsibility of the Participant; (c) Loss or breach caused by the Employer's exercise of control over Accounts pursuant to Section 13.3, which shall be the sole responsibility of the Employer; (d) Sums paid to an insurer or the validity of any Policy or the accuracy of information provided by an insurer, which shall be the sole responsibility of the insurer; (e) Performance of any other responsibilities not specifically allocated to them under the Plan. 60..3 Fees and Expenses. The Trustee's fees for performing its duties hereunder shall be such reasonable amounts as shall be established by the Trustee from time to time in a fee schedule addressed to the Employer. Such fees, any taxes of any kind which may be levied or assessed upon or in respect of the Trust Fund and any and all expenses reasonably incurred by the Trustee shall, unless paid by the Employer, be paid from the Trust Fund and shall, unless allocable to the Accounts of specific Participants, be charged pro rata against the Accounts of all Participants. The Trustee is expressly authorized to cause Investment Products to be sold or redeemed for the purpose of paying such amounts. Charges and expenses incurred in connection with a specific Investment Product, unless allocable to the Accounts of specific Participants, shall be charged pro rata against the Accounts of all Participants for whose benefit amounts have been invested in the specific Investment Product. 60..4 Reliance on Employer. The Trustee and its agents (and the Insurance Trustee, if any) shall rely upon any decision of the Employer, or of any person authorized by the Employer, purporting to be made pursuant to the terms of the Plan, and upon any information or statements submitted by the Employer or such person (including those relating to the entitlement of any Participant to benefits under the Plan), and shall not inquire as to the basis of any such decision or information or statements, and shall incur no obligation or liability for any action taken or omitted in reliance thereon. The Trustee and its agents shall be entitled to rely on the latest written instructions received from the Employer as to the person or persons authorized to act for the Employer hereunder, and to sign on behalf of the Employer any directions or instructions, until receipt from the Employer of written notice that such authority has been revoked. 60..5 Action Without Instructions. If the Trustee receives no instructions from the Employer in response to communications sent by registered or certified mail to the Employer at its last known address as shown on the books of the Trustee, then the Trustee may make such determinations with respect to administrative matters arising under the Plan as it considers reasonable, notwithstanding any prior instructions or directions given by or on behalf of the Employer, but subject to any instruction or direction given by or on behalf of the Participants. To the extent permitted by applicable law, any determination so made will be binding on all persons having or claiming any interest under the Plan or Trust, and the Trustee will incur no obligation or responsibility for any such determination made in good faith or for any action taken pursuant thereto. In making any such determination the Trustee may require that it be furnished with such relevant documents as it reasonable considers necessary. 60..6 Advice of Counsel. The Trustee and the Insurance Trustee may each consult with legal counsel (who may, but need not be, counsel for the Employer) concerning any questions which may arise with respect to their respective rights and duties under the Plan, and the opinion of such counsel shall be full and complete protection to the extent permitted by applicable law in the respect of any action taken or omitted by the Trustee or the Insurance Trustee, as the case may be, hereunder in accordance with the opinion of such counsel. 60..7 Accounts. The Trustee shall keep full accounts of all receipts and disbursements which pertain to investments in Investment Products, and the Trustee and the Insurance Trustee shall each keep accounts of such other transactions as it is required to perform hereunder. Within a reasonable time following the close of each Plan Year, or upon its removal or resignation or upon termination of the Trust and at such other times as may be appropriate, each shall render to the Employer and any other persons as may be required by law an account of its administration of the Plan and Trust during the period since the last previous such accounting, including such information as may be required by law. The written approval of any account by the Employer and all other persons to whom an account is rendered shall be final and binding as to all matters and transactions stated or shown therein, upon the Employer and Participants and all persons who then are or thereafter become interested in the Trust. The failure of the Employer or any other person to whom an account is rendered to notify the party rendering the account within 60 days after the receipt of any account of his or its objection to the account shall be the equivalent of written approval. If the Employer or any other person to whom an account is rendered files any objections within such 60-day period with respect to any matters or transactions stated or shown in the account and the Employer or such other person and the party rendering the account cannot amicably settle the questions raised by such objections, the party rendering the account and the Employer or such person shall have the right to have such questions settled by judicial proceedings, although the Employer or such other person to whom an account is rendered shall have, to the extent permitted by applicable law, only 60 days from filing of written objection to the account to commence legal proceedings. Nothing herein contained shall be construed so as to deprive the Trustee or the Insurance Trustee of the right to have a judicial settlement of its accounts. In any proceeding for a judicial settlements of any account or for instructions, the only necessary parties shall be the Trustee, the Insurance Trustee, the Employer and persons to whom an account is required by law to be rendered. 60..8 Access to Records. The Trustee and the Insurance Trustee shall give access to their respective records with respect to the Plan at reasonable times and on reasonable notice to any person required by law to have access to such records. 60..9 Successors. Any corporation into which the Trustee may merge or with which it may consolidate or any corporation resulting from any such merger or consolidation shall be the successor of the Trustee without the execution or filing of any additional instrument or the performance of any further act. 60..10 Persons Dealing with Trustee or Insurance Trustee. No person dealing with the Trustee or the Insurance Trustee shall be bound to see to the application of any money or property paid or delivered to such party or to inquire into the validity or propriety of any transactions. 60..11 Resignation and Removal; Procedure. The Trustee or the Insurance Trustee may resign at any time by giving 60 days' written notice to the Employer and to Putnam. The Employer may remove the Trustee or the Insurance Trustee at any time by giving 60 days' written notice to the party removed and to Putnam. In any case of resignation or removal hereunder, the period of notice may be reduced to such shorter period as is satisfactory to the Trustee, the Insurance Trustee and the Employer. Notwithstanding anything to the contrary herein, any resignation hereunder shall take effect at the time notice thereof is given if the Employer may no longer participate in the prototype Plan and is deemed to have an individually designed plan at the time notice is given. 60..12 Action of Trustee Following Resignation or Removal. When the resignation or removal of the Trustee becomes effective, the Trustee shall perform all acts necessary to transfer the Trust Fund to its successor. However, the Trustee may reserve such portion of the Trust Fund as it may reasonably determine to be necessary for payment of its fees and any taxes and expenses, and any balance of such reserve remaining after payment of such fees, taxes and expenses shall be paid over to its successor. The Trustee shall have no responsibility for acts or omissions occurring after its resignation becomes effective. 60..13 Action of Insurance Trustee Following Resignation or Removal. When the Insurance Trustee's resignation or removal becomes effective, the Insurance Trustee shall perform all acts necessary to transfer ownership of the Policies to its successor. If no successor has accepted appointment, the Policies shall be held and owned by the Employer acting as Insurance Trustee until a successor is appointed. 60..14 Effect of Resignation or Removal. Resignation or removal of the Trustee or the Insurance Trustee shall not terminate the Trust. In the event of any vacancy in the position of Trustee (or, in a Plan having amounts invested in Policies, the position of Insurance Trustee), whether the vacancy occurs because of the resignation or removal of the Trustee (or the Insurance Trustee) the Employer shall appoint a successor to fill the vacant position. If the Employer does not appoint such a successor who accepts appointment by the later of 60 days after notice of resignation or removal is given or by such later date as the Trustee or the Insurance Trustee, as the case may be, and Employer may agree in writing to postpone the effective date of the Trustee's or the Insurance Trustee's resignation or removal, the Trustee or Insurance Trustee may apply to a court of competent jurisdiction for such appointment or cause the Trust to be terminated, effective as of the date specified by the Trustee or Insurance Trustee, as the case may be, in writing delivered to the Employer. Each successor Trustee so appointed and accepting a trusteeship hereunder shall have all of the rights and powers and all of the duties and obligations of the original Trustee or Insurance Trustee, as the case may be, under the provisions hereof, but shall have no responsibility for acts or omissions before he becomes a Trustee or Insurance Trustee. 60..15 Fiscal Year of Trust. The fiscal year of the Trust will coincide with the Plan Year. 60..16 Limitation of Liability. Except as may otherwise be required by law and other provisions of the Plan, no fiduciary of the Plan, within the meaning of Section 3(21) of ERISA, shall be liable for any losses incurred with respect to the management of the Plan, nor shall he or it be liable for any acts or omissions except those caused by his or its own negligence or bad faith in failing to carry out his or its duties under the terms contained in the Plan. 60..17 Indemnification. Subject to the limitations of applicable law, the Employer agrees to indemnify and hold harmless (i) all fiduciaries, within the meaning of ERISA Sections 3(21) and 404, and (ii) Putnam, for all liability occasioned by any act of such party or omission to act, in good faith and without gross negligence, and for all expenses incurred by any such party in determining its duty or liability under ERISA with respect to any question under the Plan. ARTICLE 61. AMENDMENT 61..1 General. The Employer reserves the power at any time or times to amend the provisions of the Plan and the Plan Agreement to any extent and in any manner that it may deem advisable. If, however, the Employer makes any amendment (including an amendment occasioned by a waiver of the minimum funding requirement under Section 412(d) of the Code) other than (a) a change in an election made in the Plan Agreement, (b) amendments stated in the Plan Agreement which allow the Plan to satisfy Section 415 and to avoid duplication of minimums under Section 416 of the Code because of the required aggregation of multiple plans, or (c) model amendments published by the Internal Revenue Service which specifically provide that their adoption will not cause the Plan to be treated as individually designed, the Employer shall cease to participate in this prototype Plan and will be considered to have an individually designed plan. In that event, Putnam shall have no further responsibility to provide to the Employer any amendments or other material incident to the prototype plan, and Putnam may resign immediately as Trustee and as Recordkeeper. Any amendment shall be made by delivery to the Trustee (and the Recordkeeper, if any) of a written instrument executed by the Employer providing for such amendment. Upon the delivery of such instrument to the Trustee, such instrument shall become effective in accordance with its terms as to all Participants and all persons having or claiming any interest hereunder, provided, that the Employer shall not have the power: (1) To amend the Plan in such a manner as would cause or permit any part of the assets of the Trust to be diverted to purposes other than the exclusive benefit of Participants or their Beneficiaries, or as would cause or permit any portion of such assets to revert to or become the property of the Employer. (2) To amend the Plan retroactively in such a manner as would have the effect of decreasing a Participant's accrued benefit, except that a Participant's Account balance may be reduced to the extent permitted under Section 412(c)(8) of the Code. For purposes of this paragraph (2), an amendment shall be treated as reducing a Participant's accrued benefit if it has the effect of reducing his Account balance, or of eliminating an optional form of benefit with respect to amounts attributable to contributions made performed before the adoption of the amendment; or (3) To amend the Plan so as to decrease the portion of a Participant's Account balance that has become vested, as compared to the portion that was vested, under the terms of the Plan without regard to the amendment, as of the later of the date the amendment is adopted or the date it becomes effective. (4) To amend the Plan in such a manner as would increase the duties or liabilities of the Trustee or the Recordkeeper unless the Trustee or the Recordkeeper consents thereto in writing. 61..2 Delegation of Amendment Power. The Employer and all sponsoring organizations of the Putnam Basic Plan Document delegate to Putnam Mutual Funds Corp., the power to amend the Plan (including the power to amend this Section 18.2 to name a successor to which such power of amendment shall be delegated), for the purpose of adopting amendments which are certified to Putnam Mutual Funds Corp., by counsel satisfactory to it, as necessary or appropriate under applicable law, including any regulation or ruling issued by the United States Treasury Department or any other federal or state department or agency; provided that Putnam Mutual Funds Corp., or such successor may amend the Plan only if it has mailed a copy of the proposed amendment to the Employer at its last known address as shown on its books by the date on which it delivers a written instrument providing for such amendment, and only if the same amendment is made on said date to all plans in this form as to which Putnam Mutual Funds Corp., or such successor has a similar power of amendment. If a sponsoring organization does not adopt any amendment made by Putnam Mutual Funds Corp., such sponsoring organization shall cease to participate in this prototype Plan and will be considered to have an individually designed plan. ARTICLE 62. TERMINATION OF THE PLAN AND TRUST 62..1 General. The Employer has established the Plan and the Trust with the bona fide intention and expectation that contributions will be continued indefinitely, but the Employer shall have no obligation or liability whatsoever to maintain the Plan for any given length of time and may discontinue contributions under the Plan or terminate the Plan at any time by written notice delivered to the Trustee and the Insurance Trustee, without any liability whatsoever for any such discontinuance or termination. 62..2 Events of Termination. The Plan will terminate upon the happening of any of the following events: (a) Death of the Employer, if a sole proprietor, or dissolution or termination of the Employer, unless within 60 days thereafter provision is made by the successor to the business with respect to which the Plan was established for the continuation of the Plan, and such continuation is approved by the Trustee; (b) Merger, consolidation or reorganization of the Employer into one or more corporations or organizations, unless the surviving corporations or organizations adopt the Plan by an instrument in writing delivered to the Trustee within 60 days after such a merger, consolidation and reorganization; (c) Sale of all or substantially all of the assets of the Employer, unless the purchaser adopts the Plan by an instrument in writing delivered to the Trustee within 60 days after the sale; (d) The institution of bankruptcy proceedings by or against the Employer, or a general assignment by the Employer to or for the benefit of its creditors; or (e) Delivery of notice as provided in Section 19.1. 62..3 Effect of Termination. Notwithstanding any other provisions of this Plan, other than Section 19.4, upon termination of the Plan or complete discontinuance of contributions thereunder, each Participant's Accounts will become fully vested and nonforfeitable, and upon partial termination of the Plan, the Accounts of each Participant affected by the partial termination will become fully vested and nonforfeitable. The Employer shall notify the Trustee and the Insurance Trustee in writing of such termination, partial termination or complete discontinuance of contributions. In the event of the complete termination of the Plan or discontinuance of contributions, the Trustee will, after payment of all expenses of the Trust Fund, make distribution of the Trust asses to the Participants or other persons entitled thereto, in such form as the Employer may direct pursuant to Article 10 or, in the absence of such direction, in a single payment in cash or in kind. Upon completion of such distributions under this Article, the Trust will terminate, the Trustee and the Insurance Trustee will be relieved from their obligations under the Trust, and no Participant or other person will have any further claim thereunder. 62..4 Approval of Plan. Notwithstanding any other provision of the Plan, if the Employer fails to obtain or to retain the approval by the Internal Revenue Service of the Plan as a qualified plan under Section 401(a) of the Code, then (i) the Employer shall promptly notify the Trustee, and (ii) the Employer may no longer participate in the Putnam prototype plan, but will be deemed to have an individually designed plan. If it is determined by the Internal Revenue Service that the Plan upon its initial adoption does not qualify under Section 401(a) of the Code, all assets then held under the Plan will be returned within one year of the denial of initial qualification to the Participants and the Employer to the extent attributable to their respective contributions and any income earned thereon, but only if the application for qualification is made by the time prescribed by law for filing the Employer's federal income tax return for the taxable year in which the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe. Upon such distribution, the Plan will be considered to be rescinded and to be of no force or effect. ARTICLE 63. TRANSFERS TO OR FROM OTHER QUALIFIED PLANS; MERGERS 63..1 General. Notwithstanding any other provision hereof, subject to the approval of the Trustee there may be transferred to the Trustee all or any of the assets held (whether by a trustee, custodian or otherwise) in respect of any other plan which satisfies the applicable requirements of Section 401(a) of the Code and which is maintained for the benefit of any Employee (provided, however, that the Employee is not a member of a class of Employees excluded from eligibility to participate in the Plan) except that insurance policies held in respect of such other plan shall be transferred to the Insurance Trustee as trustee if the Employer so determines. Any such assets so transferred shall be accompanied by written instructions from the Employer naming the persons for whose benefit such assets have been transferred and showing separately the respective contributions made by the Employer and by the Participants and the current value of the assets attributable thereto. Notwithstanding the foregoing, if a Participant's employment classification changes under Section 3.5 such that he begins participation in another plan of the Employer, his Account, if any, shall, upon the Administrator's direction, be transferred to the plan in which he has become eligible to participate, if such plan permits receipt of such Account. 63..2 Amounts Transferred. The Employer shall credit any assets transferred pursuant to Section 20.1 or Section 3.5 to the appropriate Accounts of the persons for whose benefit such assets have been transferred. Any amounts credited as contributions previously made by an employer or by such persons under such other plan shall be treated as contributions previously made under the Plan by the Employer or by such persons, as the case may be. 63..3 Merger or Consolidation. The Plan shall not be merged or consolidated with any other plan, nor shall any assets or liabilities of the Trust Fund be transferred to any other plan, unless each Participant would receive a benefit immediately after the transaction, if the Plan then terminated, which is equal to or greater than the benefit he would have been entitled to receive immediately before the transaction if the Plan had then terminated. ARTICLE 64. MISCELLANEOUS 64..1 Notice of Plan. The Plan shall be communicated to all Participants by the Employer on or before the last day on which such communication may be made under applicable law. 64..2 No Employment Rights. Neither the establishment of the Plan and the Trust, nor any amendment thereof, nor the creation of any fund or account, nor the purchase of Policies, nor the payment of any benefits shall be construed as giving to any Participant or any other person any legal or equitable right against the Employer, the Trustee, or the Insurance Trustee, except as provided herein or by ERISA; and in no event shall the terms of employment or service of any Participant be modified or in any way be affected hereby. 64..3 Distributions Exclusively From Plan. Participants and Beneficiaries shall look solely to the assets held in the Trust and any Policies purchased pursuant to the Plan for the payment of any benefits under the Plan. 64..4 No Alienation. 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 as provided in Section 12.4 or in accordance with a Qualified Domestic Relations Order. The Plan Administrator shall determine whether a domestic relations order is qualified in accordance with written procedures adopted by the Plan Administrator. Notwithstanding the foregoing, an order shall not fail to be a Qualified Domestic Relations Order merely because it requires a distribution to an alternate payee (or the segregation of accounts pending distribution to an alternate payee) before the Participant is otherwise entitled to a distribution under the Plan. 64..5 Provision of Information. The Employer, Trustee and Insurance Trustee shall furnish to each other such information relating to the Plan and Trust as may be required under the Code or ERISA and any regulations issued or forms adopted by the Treasury Department or the Labor Department or otherwise thereunder. 64..6 No Prohibited Transactions. The Employer, Trustee, and Insurance Trustee shall, to the extent of their respective powers and authority under the Plan, prevent the Plan from engaging in any transaction known by that person to constitute a transaction prohibited by Section 4975 of the Code and any rules or regulations with respect thereto. 64..7 Governing Law. The Plan shall be construed, administered, regulated and governed in all respects under and by the laws of the United States, and to the extent permitted by such laws, by the laws of the Commonwealth of Massachusetts 64..8 Gender. Whenever used herein, a pronoun in the masculine gender includes the feminine gender unless the context clearly indicates otherwise. PUTNAM BASIC PLAN DOCUMENT #05 TABLE OF CONTENTS PAGE ARTICLE 1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 2 2.1 Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 Affiliated Employer . . . . . . . . . . . . . . . . . . . . . . 2 2.3 Authorized Leave of Absence . . . . . . . . . . . . . . . . . . 2 2.4 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.5 CODA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.6 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.7 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.8 Date of Employment. . . . . . . . . . . . . . . . . . . . . . . 3 2.9 Disabled. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 Earned Income. . . . . . . . . . . . . . . . . . . . . . . . . 3 2.11 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.12 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 4 2.13 Eligibility Period . . . . . . . . . . . . . . . . . . . . . . 4 2.14 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.15 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.16 Employer Contribution Account. . . . . . . . . . . . . . . . . 5 2.17 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.18 Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.19 Hour of Service. . . . . . . . . . . . . . . . . . . . . . . . 5 2.20 Insurance Trustee. . . . . . . . . . . . . . . . . . . . . . . 7 2.21 Investment Company . . . . . . . . . . . . . . . . . . . . . . 7 2.22 Investment Company Shares. . . . . . . . . . . . . . . . . . . 7 2.23 Investment Products. . . . . . . . . . . . . . . . . . . . . . 7 2.24 Leased Employee. . . . . . . . . . . . . . . . . . . . . . . . 7 2.25 One-Year Eligibility Break . . . . . . . . . . . . . . . . . . 8 2.26 One-Year Vesting Break . . . . . . . . . . . . . . . . . . . . 8 2.27 Owner-Employee . . . . . . . . . . . . . . . . . . . . . . . . 8 2.28 Participant. . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.29 Participant Contribution Account. . . . . . . . . . . . . . . 8 2.30 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.31 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . 9 2.32 Plan Agreement . . . . . . . . . . . . . . . . . . . . . . . . 9 2.33 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.34 Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.35 Putnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.36 Qualified Participant. . . . . . . . . . . . . . . . . . . . . 9 2.37 Recordkeeper . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.38 Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.39 Rollover Account . . . . . . . . . . . . . . . . . . . . . . . 10 2.40 Self-Employed Individual . . . . . . . . . . . . . . . . . . . 10 2.41 Shareholder-Employee . . . . . . . . . . . . . . . . . . . . . 10 2.42 Trust and Trust Fund . . . . . . . . . . . . . . . . . . . . . 10 2.43 Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.44 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . 10 2.45 Year of Service. . . . . . . . . . . . . . . . . . . . . . . . 10 2.46 Deferral Agreement . . . . . . . . . . . . . . . . . . . . . . 11 2.47 Elective Deferral. . . . . . . . . . . . . . . . . . . . . . . 11 2.48 Elective Deferral Account. . . . . . . . . . . . . . . . . . . 11 2.49 Employer Matching Contribution . . . . . . . . . . . . . . . . 11 2.50 Employer Matching Account. . . . . . . . . . . . . . . . . . . 11 2.51 Highly Compensated Employee. . . . . . . . . . . . . . . . . . 11 2.52 Non-Highly Compensated Employee. . . . . . . . . . . . . . . . 13 2.53 Qualified Matching Contribution. . . . . . . . . . . . . . . . 13 2.54 Qualified Matching Account . . . . . . . . . . . . . . . . . . 13 2.55 Qualified Nonelective Contribution . . . . . . . . . . . . . . 13 2.56 Qualified Nonelective Contribution Account . . . . . . . . . . 13 ARTICLE 3. PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . 14 3.1 Initial Participation . . . . . . . . . . . . . . . . . . . . . 14 3.2 Special Participation Rule. . . . . . . . . . . . . . . . . . . 14 3.3 Resumed Participation . . . . . . . . . . . . . . . . . . . . . 15 3.4 Benefits for Owner-Employees. . . . . . . . . . . . . . . . . . 15 ARTICLE 4. CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . 16 4.1 Payment and Crediting of Employer Contributions . . . . . . . . 16 4.2 Amount and Allocation of Annual Contribution. . . . . . . . . . 17 4.3 Rollover Contributions. . . . . . . . . . . . . . . . . . . . . 18 4.4 No Deductible Employee Contributions. . . . . . . . . . . . . . 18 ARTICLE 5. CASH OR DEFERRED ARRANGEMENT UNDER SECTION 401(k) (CODA) . . . . . . . . . . . . . . . . . . . . 19 5.1 Applicability; Allocations. . . . . . . . . . . . . . . . . . . 19 5.2 CODA Participation. . . . . . . . . . . . . . . . . . . . . . . 19 5.3 Annual Limit on Elective Deferrals. . . . . . . . . . . . . . . 19 5.4 Distribution of Certain Elective Deferrals. . . . . . . . . . . 20 5.5 Satisfaction of ADP and ACP Tests . . . . . . . . . . . . . . . 21 5.6 Actual Deferral Percentage Test Limit . . . . . . . . . . . . . 21 5.7 Distribution of Excess Contributions. . . . . . . . . . . . . . 23 5.8 Matching Contributions. . . . . . . . . . . . . . . . . . . . . 24 5.9 Average Contribution Percentage Test Limit and Aggregate Limit . . . . . . . . . . . . . . . . . . . . . . . . 25 5.10 Distribution of Excess Aggregate Contributions . . . . . . . . 28 5.11 Restriction on Distributions . . . . . . . . . . . . . . . . . 29 5.12 Hardship Distributions . . . . . . . . . . . . . . . . . . . . 30 5.13 Special Effective Dates. . . . . . . . . . . . . . . . . . . . 32 ARTICLE 6. LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . . . . 33 6.1 No Additional Plan. . . . . . . . . . . . . . . . . . . . . . . 33 6.2 Additional Master or Prototype Plan . . . . . . . . . . . . . . 34 6.3 Additional Non-Master or Non-Prototype Plan . . . . . . . . . . 35 6.4 Additional Defined Benefit Plan . . . . . . . . . . . . . . . . 35 6.5 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE 7. ELIGIBILITY FOR DISTRIBUTION OF BENEFITS . . . . . . . . . . 41 7.1 Retirement. . . . . . . . . . . . . . . . . . . . . . . . . . . 41 7.2 Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 7.3 Other Termination of Employment . . . . . . . . . . . . . . . . 42 ARTICLE 8. VESTING. . . . . . . . . . . . . . . . . . . . . . . . . . . 43 8.1 Vested Balance. . . . . . . . . . . . . . . . . . . . . . . . . 43 8.2 Vesting of Accounts of Returned Former Employees. . . . . . . . 43 8.3 Forfeiture of Non-Vested Amounts. . . . . . . . . . . . . . . . 44 8.4 Special Rule in the Event of a Withdrawal. . . . . . . . . . . 45 8.5 Vesting Election. . . . . . . . . . . . . . . . . . . . . . . . 46 ARTICLE 9. PAYMENT OF BENEFITS. . . . . . . . . . . . . . . . . . . . . 47 9.1 Distribution of Accounts. . . . . . . . . . . . . . . . . . . . 47 9.2 Restriction on Immediate Distributions. . . . . . . . . . . . . 47 9.3 Optional Forms of Distribution. . . . . . . . . . . . . . . . . 49 9.4 Distribution Procedure. . . . . . . . . . . . . . . . . . . . . 49 9.5 Lost Distributee. . . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE 10. JOINT AND SURVIVOR ANNUITY REQUIREMENTS . . . . . . . . . . 51 10.1 Applicability. . . . . . . . . . . . . . . . . . . . . . . . . 51 10.2 Qualified Joint and Survivor Annuity . . . . . . . . . . . . . 52 10.3 Qualified Preretirement Survivor Annuity . . . . . . . . . . . 52 10.4 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 52 10.5 Notice Requirements. . . . . . . . . . . . . . . . . . . . . . 54 10.6 Transitional Rules . . . . . . . . . . . . . . . . . . . . . . 55 ARTICLE 11. MINIMUM DISTRIBUTION REQUIREMENTS . . . . . . . . . . . . . 58 11.1 General Rules. . . . . . . . . . . . . . . . . . . . . . . . . 58 11.2 Required Beginning Date. . . . . . . . . . . . . . . . . . . . 58 11.3 Limits on Distribution Periods . . . . . . . . . . . . . . . . 59 11.4 Determination of Amount to be Distributed Each Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 11.5 Death Distribution Provisions. . . . . . . . . . . . . . . . . 61 11.6 Transitional Rule. . . . . . . . . . . . . . . . . . . . . . . 63 ARTICLE 12. WITHDRAWALS AND LOANS . . . . . . . . . . . . . . . . . . . 65 12.1 Withdrawals from Participant Contribution Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 12.2 Withdrawals on Account of Hardship . . . . . . . . . . . . . . 65 12.3 Withdrawals After Reaching Age 59 1/2 . . . . . . . . . . . . . 65 12.4 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 12.5 Procedure; Amount Available. . . . . . . . . . . . . . . . . . 68 ARTICLE 13. TRUST FUND AND INVESTMENTS. . . . . . . . . . . . . . . . . 69 13.1 Establishment of Trust Fund. . . . . . . . . . . . . . . . . . 69 13.2 Management of Trust Fund . . . . . . . . . . . . . . . . . . . 69 13.3 Investment Instructions. . . . . . . . . . . . . . . . . . . . 70 13.4 Valuation of the Trust Fund. . . . . . . . . . . . . . . . . . 71 13.5 Distributions on Investment Company Shares . . . . . . . . . . 72 13.6 Registration and Voting of Investment Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 13.7 Investment Manager . . . . . . . . . . . . . . . . . . . . . . 72 13.8 Employer Stock . . . . . . . . . . . . . . . . . . . . . . . . 73 ARTICLE 14. INSURANCE POLICIES. . . . . . . . . . . . . . . . . . . . . 75 14.1 Purchase of Insurance Products . . . . . . . . . . . . . . . . 75 14.2 Limitation on Premiums . . . . . . . . . . . . . . . . . . . . 75 14.3 Policy Options . . . . . . . . . . . . . . . . . . . . . . . . 75 14.4 Insurability . . . . . . . . . . . . . . . . . . . . . . . . . 75 14.5 Dividends on Policies. . . . . . . . . . . . . . . . . . . . . 75 14.6 Trustee of Policy. . . . . . . . . . . . . . . . . . . . . . . 76 14.7 Obligations with Respect to Policies . . . . . . . . . . . . . 76 14.8 Distribution of Proceeds on Participant's Death. . . . . . . . 76 14.9 Conversion of Policies . . . . . . . . . . . . . . . . . . . . 76 14.10 Conflict with Policies. . . . . . . . . . . . . . . . . . . . 76 14.11 Insurance Loans to Owner-Employees. . . . . . . . . . . . . . 76 ARTICLE 15. TOP-HEAVY PLANS . . . . . . . . . . . . . . . . . . . . . . 78 15.1 Superseding Effect . . . . . . . . . . . . . . . . . . . . . . 78 15.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 78 15.3 Minimum Allocation . . . . . . . . . . . . . . . . . . . . . . 81 15.4 Adjustment of Fractions. . . . . . . . . . . . . . . . . . . . 82 ARTICLE 16. ADMINISTRATION OF THE PLAN. . . . . . . . . . . . . . . . . 83 16.1 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . 83 16.2 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . 83 16.3 Employer's Responsibilities. . . . . . . . . . . . . . . . . . 84 16.4 Recordkeeper . . . . . . . . . . . . . . . . . . . . . . . . . 84 16.5 Prototype Plan . . . . . . . . . . . . . . . . . . . . . . . . 85 ARTICLE 17. TRUSTEE AND INSURANCE TRUSTEE . . . . . . . . . . . . . . . 86 17.1 Powers and Duties of the Trustee . . . . . . . . . . . . . . . 86 17.2 Limitation of Responsibilities . . . . . . . . . . . . . . . . 87 17.3 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . 88 17.4 Reliance on Employer . . . . . . . . . . . . . . . . . . . . . 88 17.5 Action Without Instructions. . . . . . . . . . . . . . . . . . 88 17.6 Advice of Counsel. . . . . . . . . . . . . . . . . . . . . . . 89 17.7 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 17.8 Access to Records. . . . . . . . . . . . . . . . . . . . . . . 90 17.9 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . 90 17.10 Persons Dealing with Trustee or Insurance Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 17.11 Resignation and Removal; Procedure. . . . . . . . . . . . . . 90 17.12 Action of Trustee Following Resignation or Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 17.13 Action of Insurance Trustee Following Resignation or Removal. . . . . . . . . . . . . . . . . . . . 90 17.14 Effect of Resignation or Removal. . . . . . . . . . . . . . . 90 17.15 Fiscal Year of Trust. . . . . . . . . . . . . . . . . . . . . 91 17.16 Limitation of Liability . . . . . . . . . . . . . . . . . . . 91 17.17 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 91 ARTICLE 18. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . 92 18.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 18.2 Delegation of Amendment Power. . . . . . . . . . . . . . . . . 93 ARTICLE 19. TERMINATION OF THE PLAN AND TRUST . . . . . . . . . . . . . 94 19.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 19.2 Events of Termination. . . . . . . . . . . . . . . . . . . . . 94 19.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 94 19.4 Approval of Plan . . . . . . . . . . . . . . . . . . . . . . . 95 ARTICLE 20. TRANSFERS FROM OTHER QUALIFIED PLANS; MERGERS . . . . . . . 96 20.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 20.2 Amounts Transferred. . . . . . . . . . . . . . . . . . . . . . 96 20.3 Merger or Consolidation. . . . . . . . . . . . . . . . . . . . 96 ARTICLE 21. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 97 21.1 Notice of Plan . . . . . . . . . . . . . . . . . . . . . . . . 97 21.2 No Employment Rights . . . . . . . . . . . . . . . . . . . . . 97 21.3 Distributions Exclusively From Plan. . . . . . . . . . . . . . 97 21.4 No Alienation. . . . . . . . . . . . . . . . . . . . . . . . . 97 21.5 Provision of Information . . . . . . . . . . . . . . . . . . . 97 21.6 No Prohibited Transactions . . . . . . . . . . . . . . . . . . 97 21.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 97 21.8 Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 PUTNAM BASIC PLAN DOCUMENT #05 ARTICLE 65. INTRODUCTION By executing the Plan Agreement, the Employer has established a retirement plan (the "Plan") according to the terms and conditions of the Plan Agreement and this Putnam Basic Plan Document #05, for the purpose of providing a retirement fund for the benefit of Participants and Beneficiaries. The Plan is a profit sharing plan for purposes of section 401(a)(27) of the Code. ARTICLE 66. DEFINITIONS The terms defined in Sections 2.1 through 2.45 appear generally throughout the document. Sections 2.46 through 2.56 and Article 5 contain definitions of terms used only in a CODA and Section 10.4 contains additional definitions related to distributions from the Plan. Articles 6 and 11 contain additional definitions of terms used only in those Articles. 66..1 Account means any of, and Accounts means all of, a Participant's Employer Contribution Account, Participant Contribution Account, Rollover Account, and if the Plan contains a CODA, the accounts maintained for the Participant pursuant to Article 5. 66..2 Affiliated Employer, for purposes of the Plan other than Article 6, means the Employer and a trade or business, whether or not incorporated, which is any of the following: (a) A member of a group of controlled corporations (within the meaning of section 414(b) of the Code) which includes the Employer; or (b) A trade or business under common control (within the meaning of section 414(c) of the Code) with the Employer; or (c) A member of an affiliated service group (within the meaning of section 414(m) of the Code) which includes the Employer; or (d) An entity otherwise required to be aggregated with the Employer pursuant to section 414(o) of the Code. In determining an Employee's service for vesting and for eligibility to participate in the Plan, all employment with Affiliated Employers will be treated as employment by the Employer. For purposes of Article 6 only, the definitions in paragraphs (a) and (b) of this Section 2.2 shall be modified by adding at the conclusion of the parenthetical phrase in each such paragraph the words "as modified by section 415(h) of the Code." 66..3 Authorized Leave of Absence means a leave of absence from employment granted in writing by an Affiliated Employer. Authorized Leave of Absence shall be granted on account of military service for any period during which an Employee's right to re-employment is guaranteed by law, and for such other reasons and periods as an Affiliated Employer shall consider proper, provided that Employees in similar situations shall be similarly treated. 66..4 Beneficiary means a person entitled to receive benefits under the Plan upon the death of a Participant, in accordance with Section 7.2 and Articles 10 and 11. 66..5 CODA means a cash or deferred arrangement that meets the requirements of section 401(k) of the Code, adopted as part of a profit sharing plan. 66..6 Code means the Internal Revenue Code of 1986, as amended. 66..7 Compensation means all of an Employee's compensation determined in accordance with the definition elected by the Employer in the Plan Agreement. For purposes of that election, "Form W-2 earnings" means "wages" as defined in section 3401(a) of the Code in connection with income tax withholding at the source, and all other compensation paid to the Employee by the Employer in the course of its trade or business, for which the Employer is required to furnish the Employee with a written statement under sections 6041(d), 6051(a)(3) and 6052 of the Code, determined without regard to exclusions based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in section 3401(a)(2) of the Code). Compensation shall include only amounts actually paid to the Employee during the Plan Year, except that if the Employer so elects in the Plan Agreement, Compensation shall include any amount which is contributed to an employee benefit plan for the Employee by the Employer pursuant to a salary reduction agreement, and which is not includible in the gross income of the Employee under section 125, 402(a)(8), 402(h) or 403(b) of the Code. (For a self-employed person, the relevant term is Earned Income, as defined in Section 2.10.) 66..8 Date of Employment means the first date on which an Employee performs an Hour of Service; or, in the case of an Employee who has incurred one or more One-Year Eligibility Breaks and who is treated as a new Employee under the rules of Section 3.3, the first date on which he performs an Hour of Service after his return to employment. 66..9 Disabled means unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. The permanence and degree of such impairment shall be supported by medical evidence. 66..10 Earned Income means a Self-Employed individual's net earnings from self-employment in the trade or business with respect to which the Plan is established, excluding items not included in gross income and the deductions allocable to such items, and reduced by (i) contributions by the Employer to qualified plans, to the extent deductible under section 404 of the Code, and (ii) the deduction allowed to the taxpayer under section 164(f) of the Code for taxable years beginning after December 31, 1989. 66..11 Earnings, for determining all benefits provided under the Plan for all Plan Years beginning after December 31, 1988, means the first $200,000 (as adjusted by the Secretary of the Treasury at the same time and in the same manner as under section 415(d) of the Code, except that the dollar increase effective on any January 1 is effective for all Plan Years beginning in the calendar year in which that January 1 occurs, and the first such dollar increase is effective on January 1, 1990) of the sum of the Compensation and the Earned Income received by an Employee during a Plan Year. To calculate an allocation to a Participant's Account for any Plan Year shorter than 12 months, the dollar limit described in the preceding sentence must be multiplied by a fraction of which the denominator is 12 and the numerator is the number of months in the Plan Year. In determining the Earnings of a Participant, the rules of section 414(q)(6) of the Code shall apply, except that in applying those rules the term "family" shall include only the Participant's spouse and the Participant's lineal descendant who have not reached age 19 by the last day of the Plan Year. If as a result of the application of such rules the adjusted $200,000 limitation is exceeded, then the limitation shall be prorated among the affected individuals in proportion to each such individual's Earnings as determined under this section prior to the application of this limitation. 66..12 Effective Date means the date so designated in the Plan Agreement. If the Plan Agreement indicates that the Employer is adopting the Plan as an amendment of an existing plan, the provisions of the existing plan apply to all events preceding the Effective Date, except as to specific provisions of the Plan which set forth a retroactive effective date in accordance with Section 1140 of the Tax Reform Act of 1986. 66..13 Eligibility Period means a period of 12 consecutive months beginning on an Employee's most recent Date of Employment or any anniversary thereof, in which he is credited with at least 1,000 Hours of Service; provided that if the Employer has elected in the Plan Agreement to establish a number less than 1,000 as the requisite for crediting an Eligibility Period, that number shall be substituted for 1,000, and provided further that in the case of an Employee in a seasonal industry (as defined under regulations prescribed by the Secretary of Labor) in which the customary extent of employment during a calendar year is fewer than 1,000 Hours of Service, the number specified in any regulations prescribed by the Secretary of Labor dealing with years of service shall be substituted for 1,000. If the Employer so elects in the Plan Agreement, an Employee's most recent Date of Employment for purposes of this Section 2.13 shall be the first date on which he performed services for a business acquired by the Employer. 66..14 Employee means a common law Employee of an Affiliated Employer; in the case of an Affiliated Employer which is a sole proprietorship, the sole proprietor thereof; in the case of an Affiliated Employer which is a partnership, a partner thereof; and a Leased Employee of an Affiliated Employer. The term "Employee" includes an individual on Authorized Leave of Absence, a Self- Employed Individual and an Owner-Employee. 66..15 Employer means the Employer named in the Plan Agreement and any successor to all or the major portion of its assets or business which assumes the obligations of the Employer under the Plan Agreement. 66..16 Employer Contribution Account means an account maintained on the books of the Plan on behalf of a Participant, in which are recorded the amounts allocated for his benefit from contributions by the Employer (other than contributions pursuant to Article 5), Forfeitures by former Participants (if the Plan provides for reallocation of Forfeitures), amounts reapplied under Section 6.1(d), and the income, expenses, gains and losses incurred thereon. 66..17 ERISA means the Employee Retirement Income Security Act of 1974, as amended. 66..18 Forfeiture means a nonvested amount forfeited by a former Participant, pursuant to Section 8.3, or an amount forfeited by a former Participant or Beneficiary who cannot be located, pursuant to Section 9.5. 66..19 Hour of Service means each hour described in paragraphs (a), (b), (c), (d) or (e) below, subject to paragraphs (f) and (g) below. (a) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for an Affiliated Employer. These hours shall be credited to the Employee for the computation period or periods in which the duties are performed. (b) Each hour for which an Employee is paid, or entitled to payment, by an Affiliated Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service shall be credited under this paragraph for any single continuous period of absence (whether or not such period occurs in a single computation period) unless the Employee's absence is not an Authorized Leave of Absence. Hours under this paragraph shall be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations, which are incorporated herein by this reference. (c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by an Affiliated Employer. The same Hours of Service shall not be credited under both paragraph (a) or paragraph (b), as the case may be, and under this paragraph (c); and no more than 501 Hours of Service shall be credited under this paragraph (c) with respect yo payments of back pay, to the extent that such pay is agreed to or awarded for a period of time described in paragraph (b) during which the Employee did not perform or would not have performed any duties. These hours shall be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made. (d) Each hour during an Authorized Leave of Absence. Such hours shall be credited at the rate of a customary full work week for an Employee. (e) Solely for purposes of determining whether a OneYear Vesting Break or a One-Year Eligibility Break has occurred, each hour which otherwise would have been credited to an Employee but for an absence from work by reason of: the pregnancy of the Employee, the birth of a child of the Employee, the placement of a child with the Employee in connection with the adoption of the child by the Employee, or caring for a child for a period beginning immediately after its birth or placement. If the Plan Administrator cannot determine the hours which would normally have been credited during such an absence, the Employee shall be credited with eight Hours of Service for each day of absence. No more than 501 Hours of Service shall be credited under this paragraph by reason of any pregnancy or placement. Hours credited under this paragraph shall be treated as Hours of Service only in the PLan Year or Eligibility Period or both, as the case may be, in which the absence from work begins, if necessary to prevent the Participant's incurring a One-Year Vesting Break or One-Year Eligibility Break in that period, or, if not, in the period immediately following that in which the absence begins. The Employee must timely furnish to the Employer information reasonably required to establish (i) that an absence from work is for a reason specified above, and (ii) the number of days for which the absence continued. (f) Hours of Service shall be determined on the basis of actual hours for which an Employee is paid or entitled to payment, or as otherwise specified in the Plan Agreement. (g) If the Employer maintains the plan of a predecessor employer, service for the predecessor Employer shall be treated as service for the Employer. If the Employer does not maintain the plan of a predecessor employer, service for the predecessor employer shall be treated as service for the Employer only to the extent that the Employer so elects in the Plan Agreement. (h) Hours of Service shall be credited to a Leased Employee as though he were an Employee. 66..20 Insurance Trustee means the person named in the Plan Agreement as Insurance Trustee, and any successor thereto. 66..21 Investment Company means an open-end registered investment company for which Putnam Financial Services, Inc., or its affiliate acts as principal underwriter, or for which The Putnam Management Company, Inc., or its affiliate serves as an investment adviser; provided that its prospectus offers its shares under the Plan. 66..22 Investment Company Shares means shares issued by an Investment Company. 66..23 Investment Products means any of the investment products specified by the Employer in accordance with Section 13.2, from the group of those products sponsored, underwritten or managed by Putnam as shall be made available by Putnam under the Plan, and such other products as shall be expressly agreed to in writing by Putnam for availability under the Plan. The term "Investment Products" does not include any Policy selected pursuant to Article 14. 66..24 Leased Employee means any person (other than an Employee of the recipient) who pursuant to an agreement between the recipient and any other person ("leasing organization") has performed services for the recipient (or for the recipient and related persons determined in accordance with section 414(n)(6) of the Code) on a substantially full time basis for a period of at least one year, and such services are of a type historically performed by Employees in the business field of the recipient Employer. The compensation of a Leased Employee for purposes of the Plan means the Compensation (as defined in Section 2.7) of the Leased Employee attributable to services performed for the recipient Employer. Contributions or benefits provided to a leased Employee by the leasing organization which are attributable to services performed for the recipient Employer shall be treated as provided by the recipient Employer. Provided that leased Employees do not constitute more than 20% of the recipient's nonhighly compensate workforce, a leased Employee shall not be considered an Employee of the recipient if he is covered by a money purchase pension plan providing: (1) a nonintegrated Employer contribution rate of at least 10% of compensation (as defined in section 415(c)(3) of the Code, but including amounts contributed pursuant to a salary reduction agreement which are excludable from the Employee's gross income under section 125, section 402(a)(8), section 402(h) or section 403(b) of the Code), (2) immediate participation, and (3) full and immediate vesting. 66..25 One-Year Eligibility Break means an Eligibility Period during which an individual is not credited with more than 500 Hours of Service; provided, however, that in the case of an Employee in a seasonal industry, there shall be substituted for 500 the number of Hours of Service specified in any regulations of the Secretary of Labor dealing with breaks in service, and provided further that if the Employer has elected in the Plan Agreement to establish a number less than 500 as the requisite Hours of Service for crediting an Eligibility Period, that number shall be substituted for 500. 66..26 One-Year Vesting Break means a Year of Service measuring period, as elected by the Employer in the Plan Agreement, during which an individual is not credited with more than 500 Hours of Service; provided, however, that in the case of an Employee in a seasonal industry, there shall be substituted for 500 the number of Hours of Service specified in any regulations for the Secretary of Labor dealing with breaks in service, and provided further that if the Employer has elected in the Plan Agreement to establish a number less than 500 as the requisite Hours of Service for crediting a Year of Service, that number shall be substituted for 500. 66..27 Owner-Employee means the sole proprietor of an Affiliated Employer that is a sole proprietorship, or a partner owning more than 10% of either the capital or profits interest of an Affiliated Employer that is a partnership. The Plan Administrator shall be responsible for identifying Owner-Employees to the Recordkeeper. 66..28 Participant means each Employee who has met the requirement for participation in Article 3. An Employee is not a Participant for any period before the entry date applicable to him. 66..29 Participant Contribution Account means an account maintained on the books of the Plan, in which are recorded nondeductible contributions by a Participant pursuant to Section 4.2(d), and any income, expenses, gains or losses incurred thereon. 66..30 Plan means the form of defined contribution retirement plan and trust agreement adopted by the Employer, consisting of the Plan Agreement and the Putnam Basic Plan Document #05 as set forth herein, together with any and all amendments and supplements thereto. 66..31 Plan Administrator means the Employer or its appointee pursuant to Section 16.1. 66..32 Plan Agreement means the separate agreement entered into between the Employer and the Trustee (and the Insurance Trustee, if any) and accepted by Putnam, under which the Employer adopts the Plan and selects among its optional provisions. 66..33 Plan Year means the period of 12 consecutive months specified by the employer in the Plan Agreement; provided that if the Effective Date is not the first day of the Employer's taxable year, the initial Plan Year shall begin on the Effective Date and end on the last day of the Employer's taxable year. 66..34 Policy means an ordinary life insurance, term insurance, retirement income or endowment policy or an individual or group annuity contract issued by a life insurance company in connection with the Plan, or an interest therein. An ordinary life insurance policy within the meaning of this definition provides non-decreasing death benefits and non-increasing premiums. 66..35 Putnam means Putnam Financial Services, Inc., or a company affiliated with it which Putnam Financial Services, Inc. has designated as its agent to perform specified actions or procedures in connection with the prototype Plan. 66..36 Qualified Participant means any Participant who is an active Employee on the last day of the Plan Year in question or who is credited with more than 500 Hours of Service during the Plan Year in question or whose Retirement or death occurred during the Plan Year in question. If the Plan is not adopted to replace an existing plan, this Section 2.36 is effective on the Effective Date. If the Plan replaces an existing plan, this Section 2.36 is effective on the first day of the first Plan Year that begins after December 31, 1988, or if later, on the Effective Date, and the provision of the existing plan that this Section 2.36 replaces shall continue to apply until that time. 66..37 Recordkeeper means the person or entity designated by the Employer in the Plan Agreement to perform the duties described in Section 16.4, and any successor thereto. If Putnam is the Recordkeeper, the terms and conditions of its service will be as specified in a service agreement between the Employer and Putnam. 66..38 Retirement means ceasing to be an Employee in accordance with Section 7.1. 66..39 Rollover Account means an account established for an Employee who makes a rollover contribution to the Plan pursuant to Section 4.3. 66..40 Self-Employed Individual means an individual whose personal services are a material income-producing factor in the trade or business for which the Plan is established, and who has Earned Income for the taxable year from that trade or business, or would have Earned Income but for the fact that the trade or business had no net profits for the taxable year. 66..41 Shareholder-Employee means any officer or Employee of an electing small business corporation, within the meaning of section 1362 of the Code, who on any day during a taxable year of the Employer owns (or is considered as owning under section 318(a)(1) of the Code) more than 5% of the outstanding stock of the Employer. The Plan administrator shall be responsible for identifying Shareholder-Employees to the Recordkeeper. 66..42 Trust and Trust Fund mean the trust fund established under Section 13.1. 66..43 Trustee means the person, or the entity with trustee powers, named in the Plan Agreement as trustee, and any successor thereto. 66..44 Valuation Date means each day when the New York Stock Exchange is open, or such other date or dates as the Employer may designate by written agreement with the Recordkeeper. 66..45 Year of Service means a Plan Year or an Eligibility Period, as elected by the Employer in the Plan Agreement, in which an Employee is credited with at least 1,000 Hours of Service; provided, however, that if the Employer has elected in the Plan Agreement to establish a number less than 1,000 as the requisite for crediting a Year of Service, that number shall be substituted for 1,000, and provided further that in the case of an Employee in a seasonal industry (as defined under regulations prescribed by the Secretary of Labor) in which the customary extent of employment during a calendar year is fewer than 1,000 Hours of Service, the number specified in any regulations prescribed by the Secretary of Labor dealing with years of service shall be substituted for 1,000. An Employee's Years of Service shall include service credited prior to the Effective Date under any predecessor plan. If the initial Plan Year is shorter than 12 months, each Employee who is credited with at least 1,000 Hours of Service in the 12-month period ending on the last day of the initial Plan Year shall be credited with a Year of Service with respect to the initial Plan Year. If the Employer has so elected in the Plan Agreement, Years of Service for vesting shall not include: (a) Service in any Plan Year (or comparable period prior to the Effective Date) completed before the Employee reached age 18; (b) Service completed during a period in which the Employer did not maintain the Plan or any predecessor plan (as defined under regulations prescribed by the Secretary of the Treasury). If the Employer has so elected in the Plan Agreement, Years of Service for vesting shall include employment by a business acquired by the Employer, before the date of the acquisition. The following definitions apply only to cash or deferred arrangements under section 401(k) (CODA): 66..46 Deferral Agreement means an Employee's agreement to make one or more Elective Deferrals in accordance with Section 5.2. 66..47 Elective Deferral means any contribution made to the Plan by the Employer at the election of a Participant, in lieu of cash compensation, including contributions made pursuant to a Deferral Agreement or other deferral mechanism. 66..48 Elective Deferral Account means an account maintained on the books of the Plan, in which are recorded a Participant's Elective Deferrals and the income, expenses, gains and losses incurred thereon. 66..49 Employer Matching Contribution means a contribution made by the Employer (i) to the Plan pursuant to Section 5.8, or (ii) to another defined contribution plan on account of a Participant's "elective deferrals" or "employee contributions," as those terms are used in section 401(m) (4) of the Code. 66..50 Employer Matching Account means an account maintained on the books of the Plan, in which are recorded the Employer Matching Contributions made on behalf of a Participant and the income, expenses, gains and losses incurred thereon. 66..51 Highly Compensated Employee means any highly compensated active Employee or highly compensated former Employee, as defined in this Section 2.51. For this purpose, the "determination year" shall be the Plan Year, and the "look-back year" shall be the 12-month period immediately preceding the determination year; provided, however, that in a Plan for which the Plan Year is the calendar year, the current Plan Year shall be both the "determination year" and the "look-back year" if the Employer so elects in the Plan Agreement. A highly compensated active Employee includes any Employee who performs service for the Employer during the determination year and who during the look-back year: (i) received compensation from the Employer in excess of $75,000 (as adjusted pursuant to section 415(d) of the Code); (ii) received compensation from the Employer in excess of $50,000 (as adjusted pursuant to section 415(d) of the Code) and was a member of the top-paid group for such year; or (iii) was an officer of the Employer and received compensation during such year that is greater than 50% of the dollar limitation in effect under section 415(b)(1)(A) of the Code. The term also includes (i) Employees who are both described in the preceding sentence if the term "determination year" is substituted for the term "look-back year," and among the 100 Employees who received the most compensation from the Employer during the determination year; and (ii) Employees who are 5% owners at any time during the look-back year or determination year. If no officer has satisfied the compensation requirement of (iii) above during either a determination year or look-back year, the highest paid officer for such year shall be treated as a Highly Compensated Employee. A highly compensated former Employee includes any Employee who separated from service (or was deemed to have separated) before the determination year, performed no service for the Employer during the determination year, and was a highly compensated active Employee for either the year of separation from service or any determination year ending on or after the Employee's 55th birthday. If during a determination year or look-back year an Employee is a family member of either a 5% owner who is an active or former Employee, or a Highly Compensated Employee who is one of the 10 most highly paid Highly Compensated Employees ranked on the basis of compensation paid by the Employer during the year, then the family member and the 5% owner or top-ten Highly Compensate Employee shall be treated as a single Employee receiving compensation and plan contributions or benefits equal to the sum of the compensation and contributions or benefits of the family member and the 5% owner or top-ten highly compensated Employee. For purposes of this Section 2.51, family members include the spouse, lineal ascendants and descendants of the Employee or former Employee and the spouses of such lineal ascendants and descendants. The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of mployees in the top-paid group, the top 100 Employees, the number of Employees treated as officers and the compensation that is considered will be made in accordance with section 414(q) of the Code and the regulations thereunder. 66..52 Non-Highly Compensated Employee means an Employee who is not a Highly Compensated Employee. 66..53 Qualified Matching Contribution means a contribution made by the Employer that: (i) is allocated in proportion to a Participant's Elective Deferrals, (ii) is fully vested at all times and (iii) is distributable only in accordance with Section 5.11. 66..54 Qualified Matching Account means an account maintained on the books of the Plan, in which are recorded the Qualified Matching Contributions on behalf of a Participant and the income, expense, gain and loss attributable thereto. 66..55 Qualified Nonelective Contribution means a contribution (other than an Employer Matching Contribution or Qualified Matching Contribution) made by the Employer, that: (i) a Participant may not elect to receive in cash until it is distributed from the Plan; (ii) is fully vested at all times; and (iii) is distributable only in accordance with Section 5.11. 66..56 Qualified Nonelective Contribution Account means an account maintained on the books of the Plan, in which are recorded the Qualified Nonelective Contributions on behalf of a Participant and the income, expense, gain and loss attributable thereto. ARTICLE 67. PARTICIPATION 67..1 Initial Participation. An Employee shall begin participation in the Plan as of the entry date specified in the Plan Agreement, or as of the Effective Date, whichever is later; provided, however, that: (a) if the Plan is adopted as an amendment of a predecessor plan of the Employer, every Employee who was participating under the predecessor plan when it was so amended shall become a Participant in the Plan as of the Effective Date, whether or not he has satisfied the age and service requirements specified in the Plan Agreement; and (b) Unless the Employer specifies otherwise in the Plan Agreement, any individual who is (i) a nonresident alien receiving no earned income from an Affiliated Employer which constitutes income from sources within the United States, or (ii) included in a unit of Employees covered by a collective bargaining agreement between the Employer and Employee representatives (excluding from the term "Employee representatives" any organization of which more than half of the members are Employees who are owners, officers, or executives of an Affiliated Employer), if retirement benefits were the subject of good faith bargaining and no more than 2% of the Employees covered by the collective bargaining agreement are professionals as defined in Section 1.410(b)-9 of the Income Tax Regulations, shall not participate in the Plan until the later of the date on which he ceases to be described in clause (i) or (ii), whichever is applicable, or the entry date specified by the Employer in the Plan Agreement; and (c) If the Plan is not adopted as an amendment of a predecessor plan of the Employer, all Employees on the Effective Date shall begin participation on the Effective Date, if the Employer so elects in the Plan Agreement. (d) A Participant shall cease to participate in the Plan when he becomes a member of a class of Employees ineligible to participate in the Plan, and shall resume participation immediately upon his return to a class of Employees eligible to participate in the Plan. 67..2 Special Participation Rule. With respect to a Plan in which the Employer has specified full and immediate vesting in the Plan Agreement, an Employee who incurs a One-Year Eligibility Break before completing the number of Eligibility Periods required under Section 3.1 shall not thereafter be credited with any Eligibility Period completed before the One-Year Eligibility Break. 67..3 Resumed Participation. A former Employee who incurs a One-Year Eligibility Break after having become a Participant shall participate in the Plan as of the date on which he again becomes an Employee, if (i) his Employer Contribution Account or Employer Matching Account had become partially or fully vested before he incurred a One-Year Vesting Break, or (ii) he incurred fewer than five consecutive One-Year Eligibility Breaks. In any other case, when he again becomes an Employee he shall be treated as a new Employee under Section 3.1. 67..4 Benefits for Owner-Employees. If the Plan provides contributions or benefits for one or more Owner-Employees who control both the trade or business with respect to which the Plan is established and one or more other trades or businesses, the Plan and plans established with respect to such other trades or businesses must, when looked at as a single plan, satisfy sections 401(a) and (d) of the Code with respect to the Employees of this and all such other trades or businesses. If the Plan provides contributions or benefits for one or more Owner Employees who control one or more other trades or businesses, the Employees of each such other trade or business must be included in a plan which satisfies sections 401(a) and (d) of the Code and which provides contributions and benefits not less favorable than those provided for such Owner-Employees under the Plan. If an individual is covered as an Owner-Employee under the plans of two or more trades or businesses which he does not control and such individual controls a trade or business, then the contributions or benefits of the Employees under the plan of the trade or business which he does control must be as favorable as those provided for him under the most favorable plan of the trade or business which he does not control. For purposes of this Section 3.4, an Owner-Employee, or two or more Owner-Employees, shall be considered to control a trade or business if such Owner-Employee, or such two or more Owner- Employees together: (a) own the entire interest in an unincorporated trade or business, or (b) in the case of a partnership, own more than 50% of either the capital interest or the profits interest in such partnership. For purposes of the preceding sentence, an Owner-Employee or two or more Owner-Employees shall be treated as owning any interest in a partnership which is owned, directly or indirectly, by a partnership which such Owner-Employee or such two or more Owner-- Employees are considered to control within the meaning of the preceding sentence. ARTICLE 68. CONTRIBUTIONS 68..1 Payment and Crediting of Employer Contributions. The Employer shall pay to the order of the Trustee the aggregate contribution to the Trust Fund (other than the premium payments on any Policy) for each Plan Year. Each contribution shall be accompanied by written instructions from the Employer, in the manner prescribed by Putnam. Neither the Trustee nor Putnam shall be under any duty to inquire into the correctness of the amount or the timing of any contribution, or to collect any amount if the Employer fails to make a contribution as provided in the Plan. (a) Responsibility for Premium Payments. Contributions to be applied to the payment of the premiums on any Policy shall be paid by the Employer directly to the insurer in cash. In determining the amount of any premium due under any Policy with respect to any Participant, the Employer and the Insurance Trustee may rely conclusively upon information furnished by the provider of the Policy. For purposes of Section 4.2 and Article 5, all Employer contributions used to pay premiums on Policies shall be treated as contributions made to the appropriate Participant's Employer Contribution Account. If the employer omits any premium payment or makes any mistake concerning a premium payment, neither the Employer nor the Insurance Trustee shall have any liability in excess of the premium to be paid. (b) Time for Payment. The aggregate of all contributions with respect to a Plan Year shall be transferred to the Trustee or the insurer no later than the due date (including extensions) for filing the Employer's federal income tax return for that Plan Year. (c) Limitations on Allocations. All allocations shall be subject to the limitations in Article 6. (d) Establishment of Accounts. The Employer will establish and maintain (or cause to be established and maintained) for each Participant individual accounts adequate to disclose his interest in the Trust Fund, including such of the following separate accounts as shall apply to the Participant: Employer Contribution Account, Participant Contribution Account, and Rollover Account; and in a Plan with a CODA, Elective Deferral Account, Qualified Nonelective Account, Qualified Matching Account and Employer Matching Account. The maintenance of such accounts shall be only for recordkeeping purposes, and the assets of separate accounts shall not be required to be segregated for purposes of investment. (e) Restoration of Accounts. Notwithstanding any other provision od the Plan, for any Plan Year in which it is necessary to restore any portion of a Participant's Account pursuant to Section 8.3(b) or 9.5, to the extent that the amount of Forfeitures available is insufficient to accomplish such restoration, the Employer shall contribute the amount necessary to eliminate the insufficiency, regardless of whether the contribution is currently deductible by the Employer under section 404 of the Code. Forfeitures shall be considered available for allocation pursuant to Sections 4.2 and 5.8 in a Plan Year only after all necessary restoration of Accounts has been accomplished. 68..2 Amount and Allocation of Annual Contribution. The Employer will contribute for each Plan Year an amount determined in accordance with the formula specified by the Employer in the Plan Agreement, less any amounts reapplied for the Plan Year under Section 6.1(d), not to exceed the amount deductible under section 404 of the Code. If the Employer so elects in the Plan Agreement, the amount of Forfeitures occurring in a Plan Year shall be applied to reduce the Employer's contribution by a like amount, and such Forfeitures shall be treated as a portion of the Employer contribution for purposes of paragraphs (a) and (b). (a) Allocation of Contributions: General Rule. As of the last day of each Plan Year, the Employer's contribution (and any amounts reapplied under Section 6.1(d)) for the Plan Year shall be allocated among the Employer Contribution Accounts of Qualified Participants in proportion to their Earnings, unless the Employer elects in the Plan Agreement to allocate contributions in a uniform dollar amount to the Account of each Qualified Participant. This rule does not apply to allocations in a CODA. (b) Per Capita Allocation. An Employer may elect in the Plan Agreement to allocate Employer Contributions and any amounts reapplied under Section 6.1(d) (but not allocations in a CODA) in a uniform dollar amount to the Account of each Qualified Participant. (c) Allocation of Forfeitures. Forfeitures shall be allocated among the Employer Contribution Accounts of all Qualified Participants in accordance with paragraph (a) or (b), whichever applies to Employer Contributions. (d) Participant Contributions. The Plan will accept no nondeductible Participant contributions for any Plan Year beginning after the Plan Year in which the Employer adopts this Plan. Nevertheless, a Participant Contribution Account shall be maintained in any Plan that accepted nondeductible Participant contributions for any Plan Year, and such contributions, together with any matching contributions (as defined in section 401(m)(4) of the Code), shall be limited so as to meet the nondiscrimination test of section 401(m) of the Code, as set forth in Section 5.9 of the Plan. All Participant Contribution Accounts will be fully vested at all times. 68..3 Rollover Contributions. An Employee in an eligible class may contribute at any time cash or other property (which is not a collectible within the meaning of section 408(m) of the Code) acceptable to the Trustee representing qualified rollover amounts under sections 402, 403, or 408 of the Code. Amounts so contributed shall be credited to a Rollover Account for the Participant. 68..4 No Deductible Employee Contributions. The Plan Administrator shall not accept deductible employee contributions. ARTICLE 69. CASH OR DEFERRED ARRANGEMENT UNDER SECTION 401(k) (CODA) 69..1 Applicability; Allocations. This Article 5 applies to any plan for which the Employer has elected in the Plan Agreement to include a CODA. The Employer may specify in the Plan Agreement that contributions will be made to the Plan only under the CODA, or that contributions may be made under Section 4.2 as well as under the CODA. Allocations to Participants' Accounts of contributions made pursuant to this Article 5 shall be made as soon as administratively feasible after their receipt by the Trustee, but in any case no later than as of the last day of the Plan Year for which the contributions were made. 69..2 CODA Participation. Each Employee who has met the eligibility requirements of Article 3 may make Elective Deferrals to the Plan by completing and returning to the Plan Administrator a Deferral Agreement form which provides that the Participant's cash compensation from the Employer will be reduced by the amount indicated in the Deferral Agreement, and that the Employer will contribute an equivalent amount to the Trust on behalf of the Participant. The following rules will govern Elective Deferrals: (a) Subject to the limits specified in the Plan Agreement and set forth in Section 5.3, a Deferral Agreement may apply to any amount or percentage of either or both of the Earnings payable to a Participant in each regular payroll period of the Employer, or one or more bonuses payable to a Participant from time to time as specified by the Employer. (b) In accordance with such reasonable rules as the Plan Administrator shall specify, a Deferral Agreement will become effective as soon as is administratively feasible after the Deferral Agreement is returned to the Plan Administrator, and will remain effective until it is modified or terminated. No Deferral Agreement may become effective retroactively. (c) A Participant may modify his Deferral Agreement by completing and returning to the Plan Administrator a new Deferral Agreement form as of any of the dates specified in the Plan Agreement, and any such modification will become effective as described in paragraph (b). (d) A Participant may terminate his Deferral Agreement at any time upon advance written notice to the Plan Administrator, and any such Termination will become effective as described in paragraph (b). 69..3 Annual Limit on Elective Deferrals. During any taxable year of a Participant, his Elective Deferrals under the Plan and any other qualified plan of an Affiliated Employer shall not exceed the dollar limit contained in section 402(g) of the Code in effect at the beginning of the taxable year. With respect to any taxable year, a Participant's Elective Deferrals for purposes of this Section 5.3 include all Employer contributions made on his behalf pursuant to an election to defer under any qualified CODA as described in section 401(k) of the Code, any simplified employee pension cash or deferred arrangement (SARSEP) as described in section 402(h)(1)(B) of the Code, any eligible deferred compensation plan under section 457 of the Code, any plan described under section 501(c)(18) of the Code, and any Employer contributions made on behalf of the Participant for the purchase of an annuity contract under section 403(b) of the Code pursuant to a salary reduction agreement. The amount of Elective Deferrals of a Participant who receives a hardship distribution pursuant to Section 5.14 shall be reduced, for the taxable year next following the distribution, by the amount of Elective Deferrals made in the taxable year of the hardship distribution. 69..4 Distribution of Certain Elective Deferrals. "Excess Elective Deferrals" means those Elective Deferrals described in Section 5.3 that are includible in a Participant's gross income under section 402(g) of the Code, to the extent that the Participant's aggregate elective deferrals for a taxable year exceed the dollar limitation under that Code section. Excess Elective Deferrals shall be treated as Annual Additions under the Plan, whether or not they are distributed under this Section 5.4. A Participant may designate to the Plan any Excess Elective Deferrals made during his taxable year by notifying the Employer on or before the following March 15 of the amount of the Excess Elective Deferrals to be so designated. A Participant who has Excess Elective Deferrals for a taxable year, taking into account only his Elective Deferrals under the Plan and any other plans of the Affiliated Employers, shall be deemed to have designated the entire amount of such Excess Elective Deferrals. Notwithstanding any other provision of the Plan, Excess Elective Deferrals, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose Account Excess Elective Deferrals were so designated or deemed designated for the preceding year. The income or loss allocable to Excess Elective Deferrals is the income or loss allocable to the Participant's Elective Deferral Account for the taxable year multiplied by a fraction, the numerator of which is the Participant's Excess Elective Deferrals for the year and the denominator of which is the Participant's Account balance attributable to Elective Deferrals without regard to any income or loss occurring during the year. To the extent that the return to a Participant of his Elective Deferrals would reduce an Excess Amount (as defined in Section 6.5(f)), such Excess Deferrals shall be distributed to the Participant in accordance with Article 6. 69..5 Satisfaction of ADP and ACP Tests. In each Plan Year, the Plan must satisfy the ADP test described in Section 5.6 and the ACP test described in Section 5.9. The Employer may cause the Plan to satisfy the ADP or ACP test or both tests for a Plan Year by any of the following methods or by any combination of them: (a) By the distribution of Excess Contributions in accordance with Section 5.7, or the distribution of Excess Aggregate Contributions in accordance with Section 5.10, or both; or (b) If the Employer has so elected in the Plan Agreement, by making Qualified Nonelective Contributions or Qualified Matching Contributions or both, in accordance with the Plan Agreement and this Section 5.5. 69..6 Actual Deferral Percentage Test Limit. The Actual Deferral Percentage (hereinafter "ADP") for Participants who are Highly Compensated Employees for each Plan Year and the ADP for Participants who are Non-Highly Compensated Employees for the same Plan Year must satisfy one of the following tests: (a) The ADP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Participants who are Non-Highly Compensated Employees for the same Plan Year multiplied by 1.25; or (b) The ADP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Participants who are Non-Highly Compensated Employees for the same Plan Year multiplied by 2.0, provided that the ADP for Participants who are Highly Compensated Employees does not exceed the ADP for Participants who are Non-Highly Compensated Employees by more than two percentage points. The following special rules shall apply to the computation of the ADP: (c) "Actual Deferral Percentage" means, for a specified group of Participants for a Plan Year, the average of the ratios (calculated separately for each Participant in the group) of (1) the amount of Employer contributions actually paid over to the Trust on behalf of the Participant for the Plan Year to (2) the Participant's Earnings for the Plan Year (or, provided that the Employer applies this method to all Employees for a Plan Year, the Participant's Earnings for that portion of the Plan Year during which he was eligible to participate in the Plan). Employer contributions on behalf of any Participant shall include: (i) his Elective Deferrals, including Excess Elective Deferrals of Highly Compensated Employees, but excluding (A) Excess Elective Deferrals of Non- Highly Compensated Employees that arise solely from Elective Deferrals made under the Plan or another plan maintained by an Affiliated Employer, and (B) Elective Deferrals that are taken into account in the Average Contribution Percentage test described in Section 5.11 (provided the ADP test is satisfied both with and without exclusion of these Elective Deferrals), and excluding Elective Deferrals returned to a Participant to reduce an Excess Amount as defined in Section 6.5(f); and (ii) if the Employer has elected to make Qualified Nonelective Contributions, such amount of Qualified Nonelective Contributions, if any, as shall be necessary to enable the Plan to satisfy the ADP test; and (iii) if the Employer has elected to make Qualified Matching Contributions, such amount of Qualified Matching Contributions, if any, as shall be necessary to enable the Plan to satisfy the ADP test. For purposes of computing Actual Deferral Percentages, an Employee who would be a Participant but for his failure to make Elective Deferrals shall be treated as a Participant on whose behalf no Elective Deferrals are made. (d) In the event that the Plan satisfies the requirements of sections 401(k), 401(a)(4), or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such sections of the Code only if aggregated with the Plan, then this Section 5.6 shall be applied by determining the ADP of Employees as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated in order to satisfy section 401(k) of the Code only if they have the same Plan Year. (e) The ADP for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Elective Deferrals (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if these are treated as Elective Deferrals for purposes of the ADP test) allocated to his Accounts under two or more CODAS described in section 401(k) of the Code that are maintained by the Affiliated Employers shall be determined as if such Elective Deferrals (and, if applicable, such Qualified Nonelective Contributions or Qualified Matching Contributions, or both) were made under a single CODA. If a Highly Compensated Employee participates in two or more CODAs that have different Plan Years, all CODAs ending with or within the same calendar year shall be treated as a single CODA, except that CODAs to which mandatory disaggregation applies in accordance with regulations issued under section 401(k) of the Code shall be treated as separate CODAS. (f) For purposes of determining the ADP of a Participant who is a 5% owner or one of the 10 most highly-paid Highly Compensated Employees, the Elective Deferrals (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if these are treated as Elective Deferrals for purposes of the ADP test) and the Compensation of such a Participant shall include the Elective Deferrals (and, if applicable, Qualified Nonelective contributions and Qualified Matching Contributions, or both) and Compensation for the Plan Year of his Family Members (as defined in section 414(q)(6) of the Code). Family Members of such Highly Compensated Employees shall be disregarded as separate employees in determining the ADP both for Participants who are Non-Highly Compensated Employees and for Participants who are Highly Compensated Employees. (g) For purposes of the ADP test, Elective Deferrals, Qualified Nonelective Contributions and Qualified Matching Contributions must be made before the last day of the 12-month period immediately following the Plan Year to which those contributions relate. (h) The Employer shall maintain records sufficient to demonstrate satisfaction of the ADP test and the amount of Qualified Nonelective Contributions or Qualified Matching Contributions, or both, used in satisfying the test. (i) The determination and treatment of the ADP amounts of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 69..7 Distribution of Excess Contributions. "Excess Contributions" means, with respect to any Plan Year, the excess of: (a) The aggregate amount of Employer contributions actually taken into account in computing the ADP of Highly Compensated Employees for the Plan Year, over (b) The maximum amount of Employer contributions permitted by the ADP test, determined by reducing contributions made on behalf of Highly Compensated Employees in order of their ADPs, beginning with the highest of such percentages. Notwithstanding any other provision of the Plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of each Plan Year to Participants to whose Accounts Excess Contributions were allocated for the preceding Plan Year. The income or loss allocable to Excess Contributions is the income or loss allocable to the Participant's Elective Deferral Account (and, if applicable, his Qualified Nonelective Account or Qualified Matching Account or both) for the Plan Year multiplied by a fraction, the numerator of which is the Participant's Excess Contributions for the year and the denominator is the Participant's account balance attributable to Elective Deferrals (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if any of these are included in the ADP test) without regard to any income or loss occurring during the Plan Year. if such excess amounts are distributed more than 2 1/2 months after the last day of the Plan Year in which the excess amounts arose, an excise tax equal to 10% of the excess amounts will be imposed on the Employer maintaining the Plan. Such distributions shall be made to Highly Compensated Employees on the basis of the respective portions of the Excess Contributions attributable to each of them. Excess Contributions shall be allocated to a Participant who is a family member subject to the family member aggregation rules of section 414(q)(6) of the Code in the proportion that the Participant's Elective Deferrals (and other amounts treated as his Elective Deferrals) bear to the combined Elective Deferrals (and other amounts treated as Elective Deferrals) of all of the Participants aggregated to determine his family members' combined ADP. Excess Contributions shall be treated as Annual Additions under the Plan. Excess Contributions shall be distributed from the Participant's Elective Deferral Account and Qualified Matching Account (if applicable) in proportion to the Participant's Elective Deferrals and Qualified Matching Contributions (to the extent used in the ADP test) for the Plan Year. Excess Contributions shall be distributed from the Participant's Qualified Nonelective Account only to the extent that such Excess Contributions exceed the balance in the Participant's Elective Deferral Account and Qualified Matching Account. 69..8 Matching Contributions. If so specified in the Plan Agreement, the Employer will make Matching Contributions to the Plan in accordance with the Plan Agreement, but no Matching Contribution shall be made with respect to an Elective Deferral that is returned to a Participant because it represents an Excess Elective Deferral, an Excess Contribution or an Excess Amount (as defined in Section 6.5(f)); and if a Matching Contribution has nevertheless been made with respect to such an Elective Deferral, the Matching Contribution shall be forfeited, notwithstanding any other provision of the Plan. (a) Employer Matching Contributions. Employer Matching Contributions will be allocated among the Employer Matching Accounts of Participants in proportion to their Elective Deferrals. Employer Matching Accounts shall become vested according to the vesting schedule specified in the Plan Agreement, but regardless of that schedule shall be full vested upon the Participant's Retirement (or, if earlier, his fulfillment of the requirements for early retirement, if any, or attainment of the normal retirement age specified in the Plan Agreement), his death during employment with an Affiliated Employer, and in accordance with Section 19.3. Forfeitures of Employer Matching Contributions, other than Excess Aggregate Contributions, shall be made in accordance with Section 8.3. Forfeitures of Employer Matching Accounts for a Plan Year shall be applied to reduce the total Employer Matching Contribution for the Plan Year, or allocated among the Employer Matching Accounts of Participants in addition to the Employer Matching Contribution for the Plan Year, as elected by the Employer in the Plan Agreement. (b) Qualified Matching Contributions. Qualified Matching Contributions will be allocated among the Qualified Matching Contribution Accounts of Participants as specified by the Employer in the Plan Agreement. 69..9 Average Contribution Percentage Test Limit and Aggregate Limit. The Average Contribution Percentage (hereinafter "ACP") for Participants who are Highly Compensated Employees for each Plan Year and the ACP for Participants who are Non-Highly Compensated Employees for the same Plan Year must satisfy one of the following tests: (a) The ACP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Participants who are Non-Highly Compensated Employees for the same Plan Year multiplied by 1.25; or (b) The ACP for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Participants who are Non-Highly Compensated Employees for the same Plan Year multiplied by two (2), provided that the ACP for Participants who are Highly Compensated Employees does not exceed the ACP for Participants who are Non-Highly Compensated Employees by more than two percentage points. The following rules shall apply to the computation of the ACP: (c) Average Contribution Percentage means the average of the Contribution Percentages of the Eligible Participants in a group. (d) Contribution Percentage means the ratio (expressed as a percentage) of a Participant's Contribution Percentage Amounts to the Participant's Earnings for the Plan Year (or, provided that the Employer applies this method to all Employees for a Plan Year, the Participant's Earnings for that portion of the Plan Year during which he was eligible to participate in the Plan). (e) Contribution Percentage Amounts means the sum of the Participant Contributions, Employer Matching Contributions, and Qualified Matching Contributions (to the extent not taken into account for purposes of the ADP test) made under the Plan on behalf of the Participant for the Plan Year. Such Contribution Percentage Amounts shall include Forfeitures of Excess Aggregate Contributions or Employer Matching Contributions allocated to the Participant's Account, taken into account in the year in which the allocation is made. If the Employer has elected in the Plan Agreement to make Qualified Nonelective Contributions, such amount of Qualified Nonelective Contributions, if any, as shall be necessary to enable the Plan to satisfy the ACP test shall be in the Contribution Percentage Amounts. Elective Deferrals shall also be included in the Contribution Percentage Amounts to the extent, if any, needed to enable the Plan to satisfy the ACP test, so long as the ADP test is met before the Elective Deferrals are used in the ACP test, and continues to be met following the exclusion of those Elective Deferrals that are used to meet the ACP test. (f) Eligible Participant means any Employee who is eligible to make an Elective Deferral, if Elective Deferrals are taken into account in the calculation of the Contribution Percentage, or to receive an Employer Matching Contribution (or a Forfeiture thereof) or a Qualified Matching Contribution. (g) Aggregate Limit means the sum of (i) 125% of the greater of the ADP of the Non-Highly Compensated Employees for the Plan Year, or the ACP of Non-Highly Compensated Employees under the Plan subject to Code section 401(m) for the Plan Year beginning with or within the Plan Year of the CODA, and (ii) the lesser of 200% of, or two plus, the lesser of the ADP or ACP. "Lesser" is substituted for "greater" in clause (i) of the preceding sentence, and "greater" is substituted for "lesser" after the phrase "two plus the" in clause (ii) of the preceding sentence, if that formulation will result in a larger Aggregate Limit. (h) If one or more Highly Compensated Employees participate in both a CODA and a plan subject to the ACP test maintained by an Affiliated Employer, and the sum of the ADP and ACP of those Highly Compensated Employees subject to either or both tests exceeds the Aggregate Limit, then the ACP of those Highly Compensated Employees who also participate in a CODA will be reduced (beginning with the Highly Compensated Employee whose ACP is the highest) so that the Aggregate Limit is not exceeded. The amount by which each Highly Compensated Employee's Contribution Percentage Amount is reduced shall be treated as an Excess Aggregate Contribution. In determining the Aggregate Limit, the ADP and ACP of Highly Compensated Employees are determined after any corrections required to meet the ADP and ACP tests. The Aggregate Limit will be considered satisfied if both the ADP and ACP of the Highly Compensated Employees does not exceed 1.25 multiplied by the ADP and ACP of the Non-Highly Compensated Employees. (i) For purposes of this section, the Contribution Percentage for any Participant who is a Highly Compensated Employee and who is eligible to have Contribution Percentage Amounts allocated to his account under two or more plans described in section 401(a) of the Code, or CODAs described in section 401(k) of the Code, that are maintained by an Affiliated Employer, shall be determined as if the total of such Contribution Percentage Amounts was made under each plan. If a Highly Compensated Employee participates in two or more CODAs that have different plan years, all CODAs ending with or within the same calendar year shall be treated as a single CODA, except that CODAs to which mandatory disaggregation applies in accordance with regulations issued under section 401(k) of the Code shall be treated as separate CODAs. (j) In the event that the Plan satisfies the requirements of sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such sections of the Code only if aggregated with the Plan, then this section 5.9 shall be applied by determining the Contribution Percentage of Employees as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated in order to satisfy section 401(m) of the Code only if they have the same Plan Year. (k) For purposes of determining the Contribution Percentage of a Participant who is a 5% owner or one of the 10 most highly-paid Highly Compensated Employers, the Contribution Percentage Amounts and Compensation of the Participant shall include the Contribution Percentage Amounts and Compensation for the Plan Year of Family Members (as defined in section 414(q)(6) of the Code). Family members of such highly Compensated Employees shall be disregarded as separate employees in determining the Contribution Percentage both for Participants who are Non-Highly Compensated Employees and for Participants who are Highly Compensated Employees. (l) For purposes of the ACP test, Matching Contributions and Qualified Nonelective Contributions will be considered made for a Plan Year if made no later than the end of the 12-month period beginning on the day after the close of the Plan Year. (m) The Employer shall maintain records sufficient to demonstrate satisfaction of the ACP test and the amount of Qualified Nonelective Contributions or Qualified Matching Contributions, or both, used in the ACP test. (n) The determination and treatment of the Contribution Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 69..10 Distribution of Excess Aggregate Contributions. Notwithstanding any other provision of the Plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be forfeited if forfeitable, or if not forfeitable, distributed no later than the last day of each Plan Year to Participants to whose accounts such Excess Aggregate Contributions were allocated for the preceding Plan Year. The income or loss allocable to Excess Aggregate Contributions is the income or loss allocable to the Participant's Employer Matching Contribution Account, Qualified Matching Contribution Account (if any, and if all amounts therein are not used in the ADP test) and, if applicable, Qualified Nonelective Account and Elective Deferral Account for the Plan Year, multiplied by a fraction, the numerator of which is the Participant's Excess Aggregate Contributions for the year and the denominator of which is the Participant's account balance(s) attributable to Contribution Percentage Amounts without regard to any income or loss occurring during the Plan Year. Excess Aggregate Contributions shall be allocated to a Participant who is subject to the family member aggregation rules of section 414(q)(6) of the Code in the proportion that the Participant's Employer Matching Contributions (and other amounts treated as his Employer Matching Contributions) bear to the combined Employer Matching Contributions (and other amounts treated as Employer Matching Contributions) of all of the Participants aggregated to determine its family members' combined ACP. If excess amounts attributable to Excess Aggregate Contributions are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess amounts arose, an excise tax equal to 10% of the excess amounts will be imposed on the Employer maintaining the Plan. Excess Aggregate Contributions shall be treated as Annual Additions under the Plan. Forfeitures of Excess Aggregate Contributions that are Employer Matching Contributions shall either be reallocated to the accounts of Non-Highly Compensated Employees or applied to reduce Employer Contributions, as elected by the Employer in the Plan Agreement. Other forfeitures of Excess Aggregate Contributions shall be applied to reduce Employer contributions. Excess Aggregate Contributions shall be forfeited if forfeitable, or distributed on a pro-rata basis from the Participant's Participant Contribution Account, Employer Matching Account, and Qualified Matching Account (and, if applicable, the Participant's Qualified Nonelective Account or Elective Deferral Account, or, both). Excess Aggregate Contributions means, with respect to any Plan Year, the Excess of: (a) The aggregate Contribution Percentage Amounts taken into account in computing the numerator of the Contribution Percentage and actually made on behalf of Highly Compensated Employees for the Plan Year, over (b) The maximum Contribution Percentage Amounts permitted by the ACP test and the Aggregate Limit (determined by reducing contributions made on behalf of Highly Compensated Employees in order of their Contribution Percentages, beginning with the highest of such percentages). Such determination shall be made after first determining Excess Elective Deferrals pursuant to Section 5.4, and then determining Excess Contributions pursuant to Section 5.7. 69..11 Restriction on Distributions. No distribution may be made from a Participant's Elective Deferral Account, Qualified Nonelective Account or Qualified Matching Account until the occurrence of one of the following events: (a) The Participant's Disability, death or termination of employment with the Affiliated Employers; (b) Termination of the Plan without the establishment of another defined contribution plan other than an employee stock ownership plan as defined in section 4975(e) or section 409 of the Code, or a simplified employee pension plan as defined in section 408(k) of the Code; (c) The Participant's attainment of age 59 1/2 (if the Employer has elected in the Plan Agreement to permit such distributions); or (d) In the case of an Employer that is a corporation, the disposition by the Employer to an unrelated entity of (i) substantially all of the assets (within the meaning of section 409(d)(2) of the Code) used in a trade or business of the Employer, if the Employer continues to maintain the Plan after the disposition, but only with respect to Employees who continue employment with the entity acquiring such assets; or (ii) he Employer's interest in a subsidiary (within the meaning of section 409(d)(3) of the Code), if the Employer continues to maintain the Plan after the disposition, but only with respect to Employees who continue employment with such subsidiary. In addition, if the Employer has elected in the Plan Agreement to permit such distributions, a distribution may be made from a Participant's Elective Deferral Account in the event of his financial hardship as described in Section 5.12. All distributions upon any of the events listed above are subject to the conditions of Article 10, Joint and Survivor Annuity Requirements. In addition, distributions made after March 31, 1988, on account of an event described in subsection (b) or (d) above must be made in a lump sum. 69..12 Hardship Distributions. If the Employer has so elected in the Plan Agreement, upon a Participant's written request the Employer may permit a distribution from his Elective Deferral Account and from his Employer Matching Account. The terms and conditions of Section 12.2 and the special vesting rule contained in Section 8.4 shall apply to hardship distributions from an Employer Contribution Account or an Employer Matching Account. The further terms of this Section 5.12 shall apply to hardship distributions from an Elective Deferral Account. No hardship distribution shall be made from a Qualified Nonelective Account or a Qualified Matching Account. (a) The maximum amount that may be distributed on account of hardship from an Elective Deferral Account after December 31, 1988, shall not exceed the sum of (1) the amount credited to the Account as of December 31, 1988, and (2) the aggregate amount of the Elective Deferrals made by the Participant after December 31, 1988, and before the hardship distribution. (b) Hardship distributions shall be permitted only on account of the following financial needs: (1) Expenses for medical care described in section 213(d) of the Code for the Participant, his spouse, children and dependents, or necessary for these persons to obtain such care; (2) Purchase of the principal residence of the Participant (excluding regular mortgage payments); (3) Payment of tuition and related educational fees for the upcoming 12 months of post-secondary education for the Participant, his spouse, children or dependents; or (4) Payments necessary to prevent the Participant's eviction from, or the foreclosure of a mortgage on, his principal residence. (c) Hardship distributions shall be subject to the spousal consent requirements contained in sections 411(a)(11) and 117 of the Code, to the same extent that those requirements apply to a Participant pursuant to Section 10.1. (d) A hardship distribution will be made to a Participant only upon satisfaction of the following conditions: (1) The Participant has obtained all nontaxable loans and all distributions other than hardship distributions available to him from all plans maintained by the Affiliated Employers; (2) The hardship distribution does not exceed the amount of the Participant's financial need as described in paragraph (b) plus any amounts necessary to pay federal, state and local income taxes and penalties reasonably anticipated to result from the distribution; (3) All plans maintained by the Affiliated Employers provide that the Participant's Elective Deferrals and voluntary after-tax contributions will be suspended for a period of 12 months following his receipt of a hardship distribution; and (4) All plans maintained by the Affiliated Employers provide that the amount of Elective Deferrals that the Participant may make in his taxable year immediately following the year of a hardship distribution will not exceed the applicable limit under section 402(g) of the Code for the taxable year, reduced by the amount of Elective Deferrals made by the Participant in the taxable year of the hardship distribution. 69..13 Special Effective Dates. If the Plan is adopted as an amendment of an existing plan, the provisions of Sections 5.3 and Section 5.7 through 5.9 are effective as of the first day of the first Plan Year beginning after December 31, 1986. ARTICLE 70. LIMITATIONS ON ALLOCATIONS 70..1 No Additional Plan. If the Participant does not participate in and has never participated in another qualified plan, or a welfare benefit fund, (as defined in section 419(e) of the Code), or an individual medical account (as defined in section 415(1)(2) of the Code) which provides an Annual Addition as defined in Section 6.5(a), maintained by an Affiliated Employer: (a) The amount of Annual Additions which may be credited to the Participant's accounts for any Limitation Year will not exceed the lesser of the Maximum Annual Additions or any other limitation contained in this Plan. If the Employer contribution that would otherwise be contributed or allocated to the Participant's Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Annual Additions, the amount contributed or allocated will be reduced so that the Annual Additions for the Limitation Year will equal the Maximum Annual Additions. (b) Before determining a Participant's actual Section 415 Compensation for a Limitation Year, the Employer may determine the Maximum Annual Additions for the Participant on the basis of a reasonable estimation of the Participant's Section 415 Compensation for the Limitation Year, uniformly determined for all Participants similarly situated. (c) As soon as is administratively feasible after the end of the Limitation Year, the Maximum Annual Additions for the Limitation Year will be determined on the basis of the Participant's actual Section 415 Compensation for the Limitation Year. (d) If pursuant to paragraph (c), or as a result of the reallocation of Forfeitures, or as a result of a reasonable error in determining the amount of Elective Deferrals that may be made by a Participant, the Annual Additions exceed the Maximum Annual Additions, the Excess Amount will be disposed of as follows: (1) Any nondeductible voluntary Participant contributions and Elective Deferrals, to the extent they would reduce the Excess Amount, will be returned to the Participant. (2) If after the application of (1) above an Excess Amount still exists, and the Participant is covered by the Plan at the end of the Limitation Year, the Excess Amount in the Participant's Accounts will be used to reduce Employer contributions (including any allocation of Forfeitures) for such Participant in the next Limitation Year, and each succeeding Limitation Year if necessary. (3) If after the application of (1) above an Excess Amount still exists, and the Participant is not covered by the Plan at the end of a Limitation Year, the Excess Amount will be held unallocated in a suspense account. The suspense account will be applied to reduce future Employer contributions (including allocation of any Forfeitures) for all remaining Participants in the next Limitation Year, and each succeeding Limitation Year if necessary. (4) If a suspense account is in existence at any time during a Limitation Year pursuant to this Section 6.1(d), it will participate in the allocation of the Trust's investment gains and losses. If a suspense account is in existence at any time during a particular Limitation Year, all amounts in the suspense account must be allocated and reallocated to Participants' Accounts before any Employer or any Employee contributions may be made to the Plan for that Limitation Year. Excess amounts may not be distributed to Participants or former Participants. 70..2 Additional Master or Prototype Plan. If in addition to this Plan a Participant is covered under another qualified Master or Prototype defined contribution plan or a welfare benefit fund (as defined in section 419(e) of the Code), or an individual medical account (as defined in section 415(1)(2) of the Code) which provides an Annual Addition as defined in Section 6.5(a), maintained by an Affiliated Employer during any Limitation Year: (a) The Annual Additions which may be credited to a Participant's Accounts under this Plan for any such Limitation Year will not exceed the Maximum Annual Additions reduced by the Annual Additions credited to a Participant's accounts under the other plans and welfare benefit funds for the same Limitation Year. If the Annual Additions with respect to the Participant under other defined contribution plans and welfare benefit funds maintained by an Affiliated Employer are less than the Maximum Annual Additions, and the Employer contribution that would otherwise be contributed or allocated to the Participant's Accounts under this Plan would cause the Annual Additions for the Limitation Year to exceed this limitation, the amount contributed or allocated will be reduced so that the Annual Additions under all such plans and funds for the Plan Year will equal the Maximum Annual Additions. If the Annual Additions with respect to the Participant under such other defined contribution plans and welfare benefit funds in the aggregate are equal to or greater than the Maximum Annual Additions, no amount will be contributed or allocated to the Participant's Accounts under this Plan for the Limitation Year. (b) Before determining a Participant's actual Section 415 Compensation for a Limitation Year, the Employer may determine the Maximum Annual Additions for the Participant in the manner described in Section 6.1(b). (c) As soon as is administratively feasible after the end of the Plan Year, the Maximum Annual Additions for the Plan Year will be determined on the basis of the Participant's actual Section 415 Compensation for the Plan Year. (d) If, pursuant to Section 6.2(c) or as a result of the allocation of Forfeitures, or of a reasonable error in determining the amount of Elective Deferrals that may be made by him, a Participant's Annual Additions under this Plan and such other plans would result in an Excess Amount for a Limitation Year, the Excess Amount will be deemed to consist of the Annual Additions last allocated under any qualified Master or Prototype defined contribution plan, except that Annual Additions to any welfare benefit fund or individual medical account will be deemed to have been allocated first regardless of the actual allocation date. (e) If an Excess Amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the Excess Amount attributed to this Plan will be the product of X and Y, where (X) is the total Excess Amount allocated as of such date, and (Y) is the ratio of: (1) the Annual Additions allocated to the Participant for the Limitation Year as of such date under this Plan to (2) the total Annual Additions allocated to the Participant for the Limitation Year as of such date under this and all the other qualified Master or Prototype defined contribution plans. (f) Any Excess Amount attributed to this Plan will be disposed of in the manner described in Section 6.1(d). 70..3 Additional Non-Master or Non-Prototype Plan. If the Participant is covered under another qualified defined contribution plan maintained by an Affiliated Employer which is not a Master or Prototype plan, Annual Additions which may be credited to the Participant's Accounts under this Plan for any Limitation Year will be limited in accordance with Section 6.2 as though the other plan were a Master or Prototype plan, unless the Employer provides other limitations in the Plan Agreement. 70..4 Additional Defined Benefit Plan. If an Affiliated Employer maintains, or at any time maintained, a qualified defined benefit plan covering any Participant in this Plan, the sum of the Participant's Defined Benefit Plan Fraction and Defined Contribution Plan Fraction will not exceed 1.0 in any Limitation Year. The Annual Additions which may be credited to the Participant's Accounts under this Plan for any Limitation Year will be limited in accordance with the Plan Agreement. 70..5 Definitions. (a) Annual Additions means the sum of the following amounts credited to a Participant's Accounts for the Limitation Year: (1) Employer contributions; (2) For any Limitation Year beginning after December 31, 1986, after-tax Employee contributions; (3) Forfeitures; (4) Amounts allocated after March 31, 1984, to any individual medical account, as defined in section 415(1)(2) of the Code, which is part of a pension or annuity plan maintained by an Affiliated Employer; (5) Amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to postretirement medical benefits allocated to the separate account of a Key Employee, as defined in section 419A(d)(3) of the Code, under a welfare benefit fund as defined in section 419(e) of the Code, maintained by an Affiliated Employer; and (6) In a Plan that includes a CODA, Excess Elective Deferrals, Excess Contributions (including recharacterized Elective Deferrals) and Excess Aggregate Contributions. For this purpose, any Excess Amount applied under Sections 6.1(d) or 6.2(e) in the Limitation Year to reduce Employer contributions will be considered Annual Additions for such Limitation Year. Any rollover contribution will not be considered an Annual Addition. (b) Section 415 Compensation means, for a self-employed person, his earned income; and for any other Participant, his "Form W-2 earnings" as defined in Section 2.7, if the Employer has elected in item 4 of the Plan Agreement a definition of Compensation based on "Form W-2 earnings"; or if the Employer has not so elected, his wages, salaries, and fees for professional services and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the Plan (including, but not limited, to commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits and reimbursements or other expense allowances under a nonaccountable plan as described in Income Tax Regulations Section 1.62-2(c)), and excluding the following: (1) Employer contributions to a plan of deferred compensation which are not includible in the Participant's gross income for the taxable year in which contributed, or Employer contributions under a Simplified Employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensations; (2) Amounts realized from the exercise of a non- qualified stock option, or when restricted stock (or property) held by the Participant either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (3) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (4) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in section 403(b) of the Code (whether or not the contributions are actually excludable from the gross income of the Participant). For purposes of applying the limitations of this Article 6, Section 415 Compensation for a Limitation Year is the Section 415 Compensation actually paid or made available during such Limitation Year. (c) Defined Benefit Fraction means a fraction, the numerator of which is the sum of the Participant's Projected Annual Benefits under all the defined benefit plans (whether or not terminated) maintained by the Affiliated Employers, and the denominator of which is the lesser of 125% of the dollar limitation in effect for the Limitation Year under sections 415(b) and (d) of the Code, or 140% of the Participant's Highest Average Compensation including any adjustments under section 415(b) of the Code. Notwithstanding the foregoing, if the Participant was a Participant as of the first day of the first Limitation Year beginning after December 31, 1986, in one or more defined benefit plans maintained by an Affiliated Employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125% of the sum of the annual benefits under such plans which the Participant had accrued as of the close of the last Limitation Year beginning before January 1, 1987, disregarding any change in the terms and conditions of the Plan after May 5, 1986. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of section 415 of the Code for all Limitation Years beginning before January 1, 1987. (d) Defined Contribution Dollar Limitation means $30,000 or if greater, one-fourth of the defined benefit dollar limitation set forth in section 415(b)(1) of the Code as in effect for the Limitation Year. (e) Defined Contribution Fraction means a fraction, the numerator of which is the sum of the Annual Additions to the Participant's accounts under all the defined contribution plans (whether or not terminated) maintained by Affiliated Employers for the current and all prior Limitation Years including the Annual Additions attributable to the Participant's nondeductible Employee contributions to all definEd benefit plans, whether or not terminated, maintained by the Affiliated Employers, and the Annual Additions attributable to all welfare benefit funds, as defined in section 419(e) of the Code, and individual medical accounts, as defined in section 415(l)(2) of the Code), and the denominator of which is the sum of the maximum Annual Additions for the current and all prior Limitation Years of service with the Affiliated Employers (regardless of whether a defined contribution plan was maintained by any Affiliated Employer). The Maximum Annual Additions in any Plan Year is the lesser of 125% of the dollar limitation determined under sections 415(b) and (d) of the Code in effect under section 415(c)(1)(A) of the Code, or 35% of the Participant's Section 415 Compensation for such year. If the Employee was a Participant as of the end of the first day of the first Limitation Year beginning after December 31, 1986 in one or more defined contribution plans maintained by an Affiliated Employer which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to product of the excess of the sum of the factions over 1.0, multiplied by the denominator of this fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987, and disregarding any changes in the terms and conditions of the Plan after May 5, 1986, but using the Section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987. The Annual Addition for any Limitation Year beginning before January 1, 1987, shall not be recomputed to treat 100% of nondeductible Employee contributions as Annual Additions. (f) Excess Amount means, with respect to any Participant, the amount by which Annual Additions exceed the Maximum Annual Additions. (g) Highest Average Compensation means the average compensation for the three consecutive Years of Service with the Employer that produces the highest average. A Year of Service with the Employer is the period of 12 consecutive months specified as the Limitation Year in the Plan Agreement. (h) Limitation Year means the period of 12 consecutive months specified in the Plan Agreement. All qualified plans maintained by the Employer must use the same Limitation Year. If the Limitation Year is amended to a different period of 12 consecutive months, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made. (i) Master or Prototype plan means a plan the form of which is the subject of a favorable opinion letter from the Internal Revenue Service. (j) Maximum Annual Additions, which is the maximum annual addition that may be contributed or allocated to a Participant's account under the plan for any Limitation Year, means an amount not exceeding the lesser of (a) the Defined Contribution Dollar Limitation or (b) 25% of the Participant's Section 415 Compensation for the Limitation Year. The compensation limitation referred to in (b) shall not apply to any contribution for medical benefits (within the meaning of section 401(h) or section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition under section 415(l)(1) or section 419A(d)(2) of the Code. If a short Limitation Year is created because of an amendment changing the Limitation Year to a different period of 12 consecutive months, the Maximum Annual Additions will not exceed the Defined Contribution Dollar Limitation multiplied by the following fraction: number of months in the short Limitation Year 12 (k) Projected Annual Benefit means the annual retirement benefit (adjusted to an actuarially equivalent straight life annuity if such benefit is expressed in a form other than a straight life annuity or Qualified Joint and Survivor Annuity) to which the Participant would be entitled under the terms of the plan assuming: (1) the Participant will continue employment until normal retirement age under the Plan (or current age, if later), and (2) the Participant's Section 415 Compensation for the current Limitation Year and all other relevant factors used to determine benefits under the plan will remain constant for all future Limitation Years. ARTICLE 71. ELIGIBILITY FOR DISTRIBUTION OF BENEFITS 71..1 Retirement. After his Retirement, the amount credited to a Participant's Accounts will be distributed to him in accordance with Article 9. The termination of a Participant's employment with the Affiliated Employers after he has (i) attained the normal retirement age specified in the Plan Agreement, (ii) fulfilled the requirements for early retirement (if any) specified in the Plan Agreement, or (iii) become Disabled, will constitute his Retirement. Upon a Participant's Retirement (or, if earlier, his attainment of the normal retirement age specified in the Plan Agreement or fulfillment of the requirements for early retirement, if any, specified in the Plan Agreement) the Participant's Accounts shall become fully vested, regardless of the vesting schedule specified by the Employer in the Plan Agreement. A Participant who separates from service with any vested balance in his Accounts, after satisfying the service requirements for early retirement (if any is specified in the Plan Agreement) but before satisfying the age requirement for early retirement (if any is specified in the Plan Agreement), shall be entitled to a fully vested early retirement benefit upon his satisfaction of such age requirement. 71..2 Death. if a Participant dies before the distribution of his Accounts has been completed, his Beneficiary will be entitled to distribution of benefits in accordance with Article 9. A Participant's Accounts will become fully vested upon his death before termination of his employment with the Affiliated Employers, regardless of the vesting schedule specified by the Employer in the Plan Agreement. A Participant may designate a Beneficiary by completing and returning to the Plan Administrator a form provided for this purpose. The form most recently completed and returned to the Plan Administrator before the Participant's death shall supersede any earlier form. If a Participant has not designated any Beneficiary before his death, or if no Beneficiary so designated survives the Participant, his Beneficiary shall be his surviving spouse, or if there is no surviving spouse, his estate. A married Participant may designate a Beneficiary other than his spouse only if his spouse consents in writing to the designation, and the spouse's consent acknowledges the effect of the consent and is witnessed by a notary public or a representative of the Plan. The beneficiary or beneficiaries named in the designation to which the spouse has so consented may not be changed without further written spousal consent unless the terms of the spouse's original written consent expressly permit such a change, and acknowledge that the spouse voluntarily relinquishes the right to limit the consent to a specific beneficiary. The marriage of a Participant shall nullify any designation of a beneficiary previously executed by the Participant. If it is established to the satisfaction of the Plan Administrator that the Participant has no spouse or that the spouse cannot be located, the requirement of spousal consent shall not apply. Any spousal consent, or establishment that spousal consent cannot be obtained, shall apply only to the particular spouse involved. 71..3 Other Termination of Employment. A Participant whose employment terminates for any reason other than his Retirement or death will be entitled to distribution, in accordance with Article 9, of benefits equal to the amount of the vested balance of his Accounts as determined under Article 8. ARTICLE 72. VESTING 72..1 Vested Balance. The vested balance of a Participant's Accounts will be determined as follows: (a) General Rule. A Participant's Participant Contribution Account and Rollover Account shall be fully vested at all times. The vested portion of his Employer Contribution Account shall be equal to the percentage that corresponds, in the vesting schedule specified in the Plan Agreement, to the number of Years of Service credited to the Participant as of the end of the Year of Service in which his employment terminates. The vesting schedule specified in the Plan Agreement applies to all benefits within the meaning of section 411(a)(7) of the Code, except those attributable to Employee contributions. (b) Special Rules for CODA. In a Plan that includes a CODA, a Participant's Elective Deferral Account, Qualified Nonelective Account, and Qualified Matching Account shall be fully vested at all times. The vested portion of his Employer Matching Account shall be equal to the percentage that corresponds, in the vesting schedule specified in the Plan Agreement, to the number of Years of Service credited to the Participant as of the end of the Year of Service in which his employment terminates. (c) Retirement. All of a Participant's Accounts shall become fully vested upon his Retirement or his earlier attainment of early retirement age (if any) or the normal retirement age elected by the Employer in the Plan Agreement. For so long as a former Employee does not receive a distribution (or a deemed distribution) of the vested portion of his Accounts, the undistributed portion shall be held in a separate account witch shall be invested pursuant to Section 13.3 and shall share in earnings and losses of the Trust Fund pursuant to Section 13.4 in tile same manner as the Accounts of active Participants. 72..2 Vesting of Accounts of Returned Former Employees. The following rules apply in determining the vested portion of the Accounts of a Participant who incurs one or more consecutive One- Year Vesting Breaks and then returns to employment with an Affiliated Employer: (a) If the Participant incurred fewer than five consecutive One-Year Vesting Breaks, then all of his Years of Service will be taken into account in determining the vested portion of his Accounts, as soon as he has completed one Year of Service following his return to employment. (b) If the Participant incurred five or more consecutive One-Year Vesting Breaks, then: (1) No Year of Service completed after his return to employment will be taken into account in determining the vested portion of his Accounts as of any time before he incurred the first One-Year Vesting Break; (2) Years of Service completed before he incurred the first One-Year Vesting Break will not be taken into account in determining the vested portion of his Accounts as of any time after his return to employment (i) unless some portion of his Employer Contribution Account or Employer Matching Account had become vested before he incurred the first One-Year Vesting Break, and (ii) until he has completed one Year of Service following his return to employment; and (3) Separate sub-accounts will be maintained for the Participant's prebreak and post-break Employer Contribution Account and Employer Matching Account, until both sub-accounts become fully vested. Both sub-accounts will share in the earnings and losses of the Trust Fund. 72..3 Forfeiture of Non-Vested Amounts. The portion of a former Employee's Accounts that has not become vested under Section 8.1 shall become a Forfeiture in accordance with the following rules, and shall be reallocated in accordance with Section 4.2 or Article 5 (whichever applies) no later than the end of the Plan Year in which it becomes a Forfeiture. (a) If Distribution Is Made. If any or all of the vested portion of a Participant's Accounts is distributed in accordance with Section 9.1 or 9.2 before the Participant incurs five consecutive One-Year Vesting Breaks, the nonvested portion of his Accounts shall become a Forfeiture in the Plan Year in which the distribution occurs. For purposes of this Section 8.3, if the value of the vested portion of a Participant's Accounts is zero, he shall be deemed to have received a distribution of the entire vested balance of his Accounts on the day his employment terminates. If the Participant elects to have distributed less than the entire vested portion of his Employer Contribution Account or Employer Matching Accounts, the part of the nonvested portion that will become a Forfeiture is the total nonvested portion multiplied by a fraction, the numerator of which is the amount of the distribution and the denominator of which is the total value of the entire vested portion of such Accounts. (b) Right of Repayment. If a Participant who receives a distribution pursuant to paragraph (a) returns to employment with an Affiliated Employer, the balance of his Employer Contribution Account and Employer Matching Account will be restored to the amount of such balance on the date of distribution, if he repays to the Plan the full amount of the distribution, before the earlier of (i) the fifth anniversary of his return to employment or (ii) the date he incurs five consecutive One-Year Vesting Breaks following the date of distribution. If an Employee is deemed to receive a distribution pursuant to this Section 8.3, and he resumes employment covered under this Plan before the date he incurs 5 consecutive One-Year Vesting Breaks, upon his reemployment the Employer-derived account balance of the Employee will be restored to the amount on the date of such deemed distribution. Such restoration will be made, first, from the amount of any Forfeitures available for reallocation as the last day of the Plan Year in which repayment is made, to the extent thereof; and to the extent that Forfeitures are not available or are insufficient to restore the balance, from contributions made by the Employer pursuant to Section 4.1(e). (c) If No Distribution Is Made. If no distribution (or deemed distribution) is made to a Participant before he incurs five consecutive One-Year Vesting Breaks, the nonvested portion of his Accounts shall become a Forfeiture at the end of the Plan Year that constitutes his fifth consecutive One- Year Vesting Break. (d) Adjustment of Accounts. Before a Forfeiture is incurred, a Participant's Accounts shall share in earnings and losses of the Trust Fund pursuant to Section 13.4 in the same manner as the Accounts of active Participants. (e) Accumulated Deductible Contributions. For Plan Years beginning before January 1, 1989, a Participant's vested Account balance shall not include accumulated deductible contributions within the meaning of section 72(o)(5)(B) of the Code. 72..4 Special Rule in the Event of a Withdrawal. If a withdrawal pursuant to Section 12.2 or 12.3 is made from a Participant's Employer Contribution Account or Employer Matching Account before the Account is fully vested, and the Participant may increase the vested percentage in the Account, then a separate account will be established at the time of the withdrawal, and at any relevant time after the withdrawal the vested portion of the separate account will be equal to the amount "X" determined by the following formula: X = P(AB + D) - D For purposes of the formula, P is the Participant's vested percentage at the relevant time, AB is the account balance at the relevant time, and D is the amount of the withdrawal. 72..5 Vesting Election. If the Plan is amended to change any vesting schedule, or is amended in any way that directly or indirectly affects the computation of a Participant's vested percentage, each Participant who has completed not less than three Years of Service may elect, within a reasonable period after the adoption of the amendment or change, in a writing filed with the Employer to have his vested percentage computed under the Plan without regard to such amendment. For a Participant who is not credited with at least one Hour of Service in a Plan Year beginning after December 31, 1988, the preceding sentence shall be applied by substituting "five Years of Service" for "three Years of Service." The period during which the election may be made shall commence with the date the amendment is adopted, or deemed to be made, and shall end on the latest of (a) 60 days after the amendment is adopted; (b) 60 days after the amendment becomes effective; or (c) 60 days after the Participant is issued written notice of the amendment by the Employer. ARTICLE 73. PAYMENT OF BENEFITS 73..1 Distribution of Accounts. A Participant or Beneficiary who has become eligible for a distribution of benefits pursuant to Article 7 may elect to receive such benefits at any time, subject to the terms and conditions of this Article 9, Article 10 and Article 11. Unless a Participant or Beneficiary elects otherwise, distribution of benefits will begin no later than the 60th day after the end of the Plan Year in which the latest of the following events occurs: (a) The Participant attains age 65 (or if earlier, the normal retirement age specified by the Employer in the Plan Agreement); or (b) The tenth anniversary of the year in which the Participant commenced participation in the Plan; or (c) The Participant's employment with the Affiliated Employers terminates. A Beneficiary who is the surviving spouse of a Participant may elect to have distribution of benefits begin within the 90-day period following the Participant's death. For purposes of this Section 9.1, the failure of a Participant (and his spouse, if spousal consent is required pursuant to Article 10) to consent to a distribution while a benefit is "immediately distributable" within the meaning of Section 9.2 shall be considered an election to defer commencement of payment. If the Employer has so specified in the Plan Agreement, the vested portion of a Participant's Accounts will be distributed in a lump sum in cash no later than 60 days after the end of the Plan Year in which his employment terminates, if at the time the Participant first became entitled to a distribution the value of such vested portion, derived from Employer and Employee contributions, does not exceed $3,500. Commencement of distributions in any case shall be subject to Section 9.4. 73..2 Restriction on Immediate Distributions. A Participant's account balance is considered "immediately distributable" if any part of the account balance could be distributed to the Participant (or his surviving spouse) before the Participant attains, or would have attained if not deceased, the later of the normal retirement age specified in the Plan Agreement or age 62. (a) If the value of a Participant's vested account balance derived from Employer and Employee contributions exceeds (or at the time of any prior distribution exceeded) $3,500, and the account balance is immediately distributable, the Participant and his spouse (or where either the Participant or the spouse has died), the survivor must consent to any such distribution, unless an exception described in paragraph (b) applies. The consent of the Participant and his spouse shall be obtained in writing within the 90-day period ending on the annuity starting date, which is the first day of the first period for which an amount is paid as an annuity (or any other form). The Plan Administrator shall notify the Participant and the spouse, no less than 30 days and no more than 90 days before the annuity starting date, of the right to defer any distribution until the Participant's account balance is no longer immediately distributable. Such notification shall include a general description of the material features of the optional forms of benefit available under the Plan and an explanation of their relative values, in a manner that would satisfy the notice requirements of section 417(a)(3) of the Code. (b) Notwithstanding paragraph (a), only the Participant need consent to the commencement of a distribution in the form of a Qualified Joint and Survivor Annuity while the account balance is immediately distributable. Furthermore, if payment in the form of a Qualified Joint and Survivor Annuity is not required with respect to the Participant pursuant to Section 10.1(b) of the Plan, only the Participant need consent to the distribution of an account balance that is immediately distributable. Neither the consent of the Participant nor the spouse shall be required to the extent that a distribution is required to satisfy section 401(a)(9) or section 415 of the Code. In addition, upon termination of the Plan, if the Plan does not offer an annuity option (purchased from a commercial provider, and no Affiliated Employer maintains another defined contribution plan (other than an employee stock ownership plan as defined in section 4975(e)(7) of the Code), a Participant's account balance shall be distributed to the Participant without his consent. If any Affiliated Employer maintains another defined contribution plan (other than an employee stock ownership plan as defined in section 4975(e)(7) of the Code), a Participant's account balance shall be transferred to that defined contribution plan without his consent, unless he consents to an immediate distribution. For purposes of determining the applicability of the foregoing consent requirements to distributions made before the first day of the first Plan Year beginning after December 31, 1988, the Participant's vested account balance shall not include amounts attributable to accumulated deductible employee contributions within the meaning of section 72(o)(5)(B) of the Code. 73..3 Optional Forms of Distribution. Provided that the Employer has so elected in the Plan Agreement, if at the time a Participant first becomes entitled to a distribution the value of his vested Account balance derived from Employer and Employee contributions does not exceed $3,500, distribution shall be made in a lump sun in cash. Subject to the preceding sentence and to the rules of Article 10 concerning joint and survivor annuities, a Participant or Beneficiary may elect to receive benefits in any of the following optional forms: (a) A lump sum payment in cash or in kind or in a combination of both; (b) A series of installments over a period certain that meets the requirements of Article 11; or (c) A nontransferable annuity contract, purchased from a commercial provider, with terms complying with the requirements of Article 11; provided, however, that an annuity for the life of any person shall be available as an optional form of distribution only if the Employer has so elected in the Plan Agreement. (d) In the event that the Plan is adopted as an amendment to an existing plan, each optional form of distribution available under the existing plan shall be made available under the Plan, and may be made available where necessary through the purchase of an appropriate annuity contract in accordance with paragraph (c). 73..4 Distribution Procedure. The Trustee shall make or commence distributions to or for the benefit of Participants only on receipt of an order from the Employer in writing or by such other means; as shall be acceptable to the Trustee, certifying that a distribution of a Participant's benefits is payable pursuant to the Plan, and specifying the time and manner of payment. The amount to be distributed shall be determined as of the Valuation Date coincident with or next following the Employer's order. The Trustee shall be fully protected in acting upon the directions of the Employer in making benefit distributions, and shall have no duty to determine the rights or benefits of any person under the Plan or to inquire into the right or power of the Employer to direct any such distribution. The Trustee shall be entitled to assume conclusively that any determination by the Employer with respect to a distribution meets the requirements of the Plan. The Trustee shall not be required to make any payment hereunder in excess of the net realizable value of the assets of the Account in question at the time of such payment, nor to make any payment in cash unless the Employer has furnished instructions as to the assets to be converted to cash for the purposes of making payment. 73..5 Lost Distributee. In the event that the Plan Administrator is unable with reasonable effort to locate a person entitled to distribution under the Plan, the Accounts distributable to such a person shall become a Forfeiture at the end of the third Plan Year after the Plan Administrator's efforts to locate such person began; provided, however, that the amount of the Forfeiture shall be restored in the event that such person thereafter submits a claim for benefits under the Plan. Such restoration will be made, first, from the amount of Forfeitures available for reallocation as of the last day of the Plan Year in which the claim is made, to the extent thereof; and to the extent that Forfeitures are not available or are insufficient to restore the balance, from contributions made by the Employer pursuant to Section 4.1(e). A Forfeiture occurring under this Section 9.5 shall be reallocated as though it were an Employer contribution. ARTICLE 74. JOINT AND SURVIVOR ANNUITY REQUIREMENTS 74..1 Applicability. (a) Generally. The provisions of Sections 10.2 through 10.5 shall generally apply to a Participant who is credited with at least one Hour of Service on or after August 23, 1984, and such other Participants as provided in Section 10.6. (b) Exception for Certain Plans. The provisions of Sections 10.2 through 10.5 shall not apply to a Participant if: (i) the Participant does not or cannot elect payment of benefits in the form of a life annuity, and (ii) on the death of the Participant, his Vested Account Balance will be paid to his surviving spouse (unless there is no surviving spouse, or the surviving spouse has consented to the designation of another Beneficiary in a manner conforming to a Qualified Election) and the surviving spouse may elect to have distribution of the Vested Account Balance (adjusted in accordance with Section 13.4 for gains or losses occurring after the Participant's death) commence within the 90-day period following the date of the Participant's death. The Participant may waive the spousal death benefit described in this paragraph (b) at any time, provided that no such waiver shall be effective unless it satisfies the conditions applicable under Section 10.4(c) to a Participant's waiver of a Qualified Preretirement Survivor Annuity. The exception in this paragraph (b) shall not be operative with respect to a Participant in a profit sharing plan if the Plan: (1) is a direct or indirect transferee of a defined benefit plan, money purchase pension plan, target benefit plan, stock bonus plan, or profit sharing plan which is subject to the survivor annuity requirements of Sections 401(a)(11) and 417 of the Code; or (2) is adopted as an amendment of a plan that did not qualify for the exception in this paragraph (b) before the amendment was adopted. For purposes of this paragraph (b), Vested Account Balance shall have the meaning provided in Section 10.4(f). The provisions of Sections 10.2 through 10.6 set forth the survivor annuity requirements of sections 401(a)(11) and 417 of the Code. (c) Exception for Certain Amounts. The provisions of Sections 10.2 through 10.5 shall not apply to any distribution made on or after the first day of the first Plan Year beginning after December 31, 1988, from or under a separate account attributable solely to accumulated deductible employee contributions as defined in section 72(o)(5)(B) of the Code, and maintained on behalf of a Participant in a money purchase pension plan or a target benefit plan, provided that the exceptions applicable to certain profit sharing plans under paragraph (b) are applicable with respect to the separate account (for this purpose, Vested Account Balance means the Participant's separate account balance attributable solely to accumulated deductible employee contributions within the meaning of section 72(o)(5)(B) of the Code). 74..2 Qualified Joint and Survivor Annuity. Unless an optional form of benefit is selected pursuant to a Qualified Election within the 90-day period ending on the Annuity Starting Date, a married Participant's Vested Account Balance will be paid in the form of a Qualified Joint and Survivor Annuity and an unmarried Participant's Vested Account Balance will be paid in the form of a life annuity. In either case, the Participant may elect to have such an annuity distributed upon his attainment of the Earliest Retirement Age under the Plan. 74..3 Qualified Preretirement Survivor Annuity. Unless an optional form of benefit has been selected within the Election Period pursuant to a Qualified Election, the Vested Account Balance of a Participant who dies before the Annuity Starting Date shall be applied toward the purchase of an annuity for the life of his surviving spouse (a "Qualified Preretirement Survivor Annuity"). The surviving spouse may elect to have such an annuity distributed within a reasonable period after the Participant's death. For purposes of this Article 10, the term "spouse" means the current spouse or surviving spouse of a Participant, except that a former spouse will be treated as the spouse or surviving spouse (and a current spouse will not be treated as the spouse or surviving spouse) to the extent provided under a qualified domestic relations order as described in section 414(p) of the Code. 74..4 Definitions. The following definitions apply: (a) Election Period means the period beginning on the first day of the year in which a Participant attains age 35 and ending on the date of the Participant's death. If a Participant separates from service before the first day of the Plan Year which he reaches age 35, the Election Period with respect to his account balance as of the date of separation shall begin on the date of separation. A Participant who will not attain age 35 as of the end of a Plan Year may make a special Qualified Election to waive the Qualified Preretirement Survivor Annuity for the period beginning on the date of such election and ending on the first day of the Plan Year in which the Participant will attain age 35. Such an election shall not be valid unless the Participant receives a written explanation of the Qualified Preretirement Survivor Annuity in such terms as are comparable to the explanation required under Section 10.5. Qualified Preretirement Survivor Annuity coverage will be automatically reinstated as of the first day of the Plan Year in which the Participant attains age 35. Any new waiver on or after that date shall be subject to the full requirements of this article. (b) Earliest Retirement Age means the earliest date on which the Participant could elect to receive Retirement benefits under the Plan. (c) Qualified Election means a waiver of a Qualified Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity. Any such waiver shall not be effective unless: (1) the Participant's spouse consents in writing to the waiver; (2) the waiver designates a specific Beneficiary, including any class of beneficiaries or any contingent beneficiaries, which may not be changed without spousal consent (unless the spouse's consent expressly permits designations by the Participant without any further spousal consent); (3) the spouse's consent acknowledges the effect of the waiver; and (4) the spouse's consent is witnessed by a plan representative or notary public. Additionally, a Participant's waiver of the Qualified Joint and Survivor Annuity shall not be effective unless the waiver designates a form of benefit payment which may not be changed without spousal consent (unless the spouse's consent expressly permits designations by the Participant without any further spousal consent). If it is established to the satisfaction of a plan representative that there is no spouse or that the spouse cannot be located, a waiver will be deemed a Qualified Election. Any consent by a spouse obtained under these provisions (and any establishment that the consent of a spouse may not be obtained) shall be effective only with respect to the particular spouse involved. A consent that permits designations by the Participant without any requirement of further consent by the spouse must acknowledge that the spouse has the right to limit the consent to a specific Beneficiary and a specific form of benefit where applicable, and that the spouse voluntarily elects to relinquish either or both of those rights. A revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the commencement of benefits. The number of revocations shall not be limited. No consent obtained under this provision shall be valid unless the Participant has received notice as provided in Section 10.5. (d) Qualified Joint and Survivor Annuity means an immediate annuity for the life of a Participant, with a survivor annuity for the life of the spouse which is not less than 50% and not more than 100% of the amount of the annuity which is payable during the joint lives of the Participant and the spouse, and which is the amount of benefit that can be purchased with the Participant's Vested Account Balance. The percentage of the survivor annuity under the Plan shall be 50%. (e) Annuity Starting Date means the first day of the first period for which an amount is paid as an annuity (or any other form). (f) Vested Account Balance means the aggregate value of the Participant's vested account balance derived from Employer and Employee contributions (including rollovers), whether vested before or upon death, including the proceeds of insurance contracts, if any, on the Participant's life. The provisions of this Article 10 shall apply to a Participant who is vested in amounts attributable to Employer contributions, Employee contributions or both at the time of death or distribution. 74..5 Notice Requirements. In the case of a Qualified Joint and Survivor Annuity, no less than 30 days and no more than 90 days before a Participant's Annuity Starting Date the Plan Administrator shall provide to him a written explanation of (i) the terms and conditions of a Qualified Joint and Survivor Annuity, (ii) the Participant's right to make, and the effect of, an election to waive the Qualified Joint and Survivor Annuity form of benefit, (iii) the rights of the Participant's spouse, and (iv) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity. In the case of a Qualified Preretirement Survivor Annuity, within the applicable period for a Participant the Plan Administrator shall provide to him a written explanation of the Qualified Preretirement Survivor Annuity, in terms and manner comparable to the requirements applicable to the explanation of a Qualified Joint and Survivor Annuity as described in the preceding paragraph. The applicable period for a Participant is whichever of the following periods ends last: (i) the period beginning with the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35; (ii) a reasonable period ending after an individual becomes a Participant; (iii) a reasonable period ending after this Article 10 first applies to the Participant. Notwithstanding the foregoing, in the case of a Participant who separates from service before attaining age 35, notice must be provided within a reasonable period ending after his separation from service. For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in (ii) and (iii) is the end of the two-year period beginning one year before the date the applicable event occurs, and ending one year after that date. In the case of a Participant who separates from service before the Plan Year in which he reaches age 35, notice shall be provided within the two-year period beginning one year before the separation and ending one year after the separation. If such a Participant thereafter returns to employment with the Employer, the applicable period for the Participant shall be redetermined. 74..6 Transitional Rules. (a) Any living Participant not receiving benefits on August 23, 1984, who would otherwise not receive the benefits prescribed by the preceding sections of this Article 10, must be given the opportunity to elect to have those sections apply if the Participant is credited with at least one Hour of Service under the Plan or a predecessor plan in a Plan Year beginning on or after January 1, 1976, and the Participant had at least ten years of vesting service when he or she separated from service. (b) Any living Participant not receiving benefits on August 23, 1984, who was credited with at least one Hour of Service under the Plan or a predecessor plan on or after September 2, 1974, and who is not otherwise credited with any service in a Plan Year beginning on or after January 1, 1976, must be given the opportunity to have his benefits paid in accordance with paragraph (d) of this Section 10.6. (c) The respective opportunities to elect (as described in paragraphs (a) and (b) above) must be afforded to the appropriate Participants during the period commencing on August 23, 1984, and ending on the date benefits would otherwise commence to be paid to those Participants. (d) Any Participant who has so elected pursuant to paragraph (b) of this Section 10.6, and any Participant who does not elect under paragraph (a), or who meets the requirements of paragraph (a) except that he does not have at least ten years of vesting service when he separates from service, shall have his benefits distributed in accordance with all of the following requirements, if his benefits would otherwise have been payable in the form of a life annuity: (1) Automatic joint and survivor annuity. if benefits in the form of a life annuity become payable to a married Participant who: (i) begins to receive payments under the Plan on or after normal retirement age; or (ii) dies on or after normal retirement age while still working for the Employer; or (iii) begins to receive payments on or after the qualified early retirement age; or (iv) separates from service on or after attaining normal retirement age (or the qualified early retirement age) and after satisfying the eligibility requirements for the payment of benefits under the Plan and thereafter dies before beginning to receive such benefits; then such benefits will be received under the Plan in the form of a Qualified Joint and Survivor Annuity, unless the Participant has elected otherwise during the election period, which must begin at least six months before the Participant attains qualified early retirement age and end not more than 90 days before the commencement of benefits. Any election hereunder will be in writing and may be changed by the Participant at any time. (2) Election of early survivor annuity. A Participant who is employed after attaining the qualified early retirement age will be given the opportunity to elect during the election period to have a survivor annuity payable on death. If the Participant elects the survivor annuity, payments under such annuity must not be less than the payments which would have been made to the spouse under the Qualified Joint and Survivor Annuity if the Participant had retired on the day before his death. Any election under this provision will be in writing and may be changed by the Participant at any time. The election period begins on the later of (i) the 90th day before the Participant attains the qualified early retirement age, or (ii) the date on which participation begins, and ends on the date the Participant terminates employment. (3) For purposes of this Section 10.6, qualified early retirement age is the latest of the earliest date under the Plan on which the Participant may elect to receive Retirement benefits, the first day of the 120th month beginning before the Participant reaches normal retirement age, or the date the Participant begins participation. ARTICLE 75. MINIMUM DISTRIBUTION REQUIREMENTS 75..1 General Rules. Subject to Article 10, Joint and Survivor Annuity Requirements, the requirements of this Article 11 shall apply to any distribution of a Participant's interest and will take precedence over any inconsistent provisions of the Plan. Unless otherwise specified, the provisions of this Article 11 apply to calendar years beginning after December 31, 1984. All distributions required under this Article 11 shall be determined and made in accordance with the Income Tax Regulations issued under section 401(a)(9) of the Code (including proposed regulations, until the adoption of final regulations), including the minimum distribution incidental benefit requirement of section 1.401(a)(9)- 2 of the proposed regulations. 75..2 Required Beginning Date. The entire interest of a Participant must be distributed, or begin to be distributed, no later than the Participant's required beginning date, determined as follows. (a) General Rule. The required beginning date of a Participant is the first day of April of the calendar year following the calendar year in which the Participant attains age 70 1/2. (b) Transitional Rules. The required beginning date of a Participant who attains age 70 1/2 before January 1, 1988, shall be determined in accordance with (1) or (2) below: (1) Non-5% owners. The required beginning date of a Participant who is not a 5% owner is the first day of April of the calendar year following the calendar year in which the later of his Retirement or his attainment of age 70 1/2 occurs. (2) 5% owners. The required beginning date of a Participant who is a 5% owner during any year beginning after December 31, 1979, is the first day of April following the later of: (i) the calendar year in which the Participant attains age 70 1/2, or (ii) the earlier of the calendar year with or within which ends the Plan Year in which the Participant becomes a 5% owner, or the calendar year in which the Participant retires. The required beginning date of a Participant who is not a 5% owner, who attains age 70 1/2 during 1988 and who has not retired as of January 1, 1989, is April 1, 1990. (c) Rules for 5% Owners. A Participant is treated as a 5% owner for purposes of this Section 11.2 if he is a 5% owner as defined in section 416(i) of the Code (determined in accordance with section 416 but without regard to whether the Plan is top heavy) at any time during the Plan Year ending with or within the calendar year in which he attains age 66 1/2, or any subsequent Plan Year. Once distributions have begun to a 5% owner under this Section 11.2, they must continue, even if the Participant ceases to be a 5% owner in a subsequent year. 75..3 Limits on Distribution Periods. As of the first Distribution Calendar Year, distributions not made in a single sum may be made only over one or a combination of the following periods: (a) the life of the Participant, (b) the life of the Participant and his Designated beneficiary, (c) a period certain not extending beyond the Life Expectancy of the Participant, or (d) a period certain not extending beyond the Joint and Last Survivor Expectancy of the Participant and his Designated Beneficiary. Designated Beneficiary means the individual who is designated as the Beneficiary under the Plan in accordance with section 401(a)(9) of the Code and the regulations issued thereunder (including proposed regulations, until the adoption of final regulations) and Section 7.2. Distribution Calendar Year means a calendar year for which a minimum distribution is required under section 401(a)(9) of the Code and this Section 11.3. For distributions beginning before the Participant's death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant's required beginning date. For distributions beginning after the Participant's death, the first Distribution Calendar year is the calendar year in which distributions are required to begin pursuant to Section 11.5. Life Expectancy and Joint and Last Survivor Expectancy are computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise elected by the Participant (or his spouse, in the case of distributions described in Section 11.5(b)) by the time distributions are required to begin, Life Expectancies shall be recalculated annually. Any such election shall be irrevocable as to the Participant (or spouse) and shall apply to all subsequent years. The Life Expectancy of a nonspouse beneficiary may not be recalculated. 75..4 Determination of Amount to be Distributed Each Year. If the Participant's interest is to be distributed in other than a single sum, the following minimum distribution rules shall apply on or after the required beginning date. Paragraphs (a) through (d) apply to distributions in forms other than the purchase of an annuity contract. (a) If a Participant's Benefit is to be distributed over (1) a period not extending beyond the Life Expectancy of the Participant or the Joint Life and Last Survivor Expectancy of the Participant and his Designated Beneficiary, or (2) a period not extending beyond the Life Expectancy of the Designated Beneficiary, the amount required to be distributed for each calendar year, beginning with distributions for the first Distribution Calendar Year, must at least equal the quotient obtained by dividing the Participant's Benefit by the Applicable Life Expectancy. (b) For calendar years beginning before January 1, 1989, if the Participant's spouse is not the Designated Beneficiary, the method of distribution selected must assure that at least 50% of the present value of the amount available for distribution is paid within the Life Expectancy of the Participant. (c) For calendar years beginning after December 31, 1988, the amount to be distributed each year, beginning with distributions for the first Distribution Calendar Year, shall not be less than the quotient obtained by dividing the Participant's Benefit by the lesser of (1) the Applicable Life Expectancy or (2) if the Participant's spouse is not the Designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations. Distributions after the death of the Participant shall be distributed using the Applicable Life Expectancy in paragraph (a) above as the relevant divisor, without regard to Proposed Regulations Section 1.401(a)(9)-2. (d) The minimum distribution required for the Participant's first Distribution Calendar Year must be made on or before the Participant's required beginning date. The minimum distribution for other calendar years, including the minimum distribution for the Distribution Calendar Year in which the Employee's required beginning date occurs, must be made on or before December 31 of that Distribution Calendar Year. (e) If the Participant's Benefit is distributed in the form of an annuity contract purchased from an insurance company, distributions thereunder shall be made in accordance with the requirements of section 401(a)(9) of the Code and the regulations issued thereunder (including proposed regulations, until the adoption of final regulations). Applicable Life Expectancy means the Life Expectancy (or Joint and Last Survivor Expectancy) calculated using the attained age of the Participant (or Designated Beneficiary) as of the Participant's (or Designated Beneficiary's) birthday in the applicable calendar year, reduced by one for each calendar year which has elapsed since the date Life Expectancy was first calculated. if Life Expectancy is being recalculated, the Applicable Life Expectancy shall be the Life Expectancy as so recalculated. The applicable calendar year shall be the first Distribution Calendar Year, and if Life Expectancy is being recalculated such succeeding calendar year. If annuity payments commence in accordance with Section 11.4(e) before the required beginning date, the applicable calendar year is the year such payments commence. If distribution is in the form of an immediate annuity purchased after the Participant's death with the Participant's remaining interest in the Plan, the applicable calendar year is the year of purchase. Participant's Benefit means the account balance as of the last valuation date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year), increased by the amount of any contributions or Forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. For purposes of the preceding sentence, if any portion of the minimum distribution for the first Distribution Calendar Year is made in the second Distribution Calendar Year on or before the required beginning date, the amount of the minimum distribution made in the second Distribution Calendar Year shall be treated as if it had been made in the immediately preceding Distribution Calendar Year. 75..5 Death Distribution Provisions. (a) Distribution Beginning Before Death. If the Participant dies after distribution of his interest has begun, the remaining portion of his interest will continue to be distributed at least as rapidly as under the method of distribution being used before the Participant's death. (b) Distribution Beginning after Death. If the Participant dies before distribution of his interest begins, distribution of his entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death, except to the extent that an election is made to receive distributions in accordance with (1) or (2) below: (1) If any portion of the Participant's interest is payable to a Designated Beneficiary, distributions may be made over the Designated Beneficiary's life, or over a period certain not greater than the Life Expectancy of the Designated Beneficiary, commencing on or before December 31 of the calendar year immediately following the calendar year in which the Participant died; or (2) If the Designated Beneficiary is the Participant's surviving spouse, the date distributions are required to begin in accordance with (1) above shall not be earlier than the later of (i) December 31 of the calendar year immediately following the calendar year in which the Participant died, and (ii) December 31 of the calendar year in which the Participant would have attained age 70 1`/2. If the Participant has not made an election pursuant to this Section 11.5 by the time of his death, the Participant's Designated Beneficiary must elect the method of distribution no later than the earlier of (i) December 31 of the Calendar year in which distributions would be required to begin under this Section 11.5, or (ii) December 31 of the calendar year which contains the fifth anniversary of the date of death of the Participant. If the Participant has no Designated Beneficiary, or if the Designated Beneficiary does not elect a method of distribution, distribution of the Participant's entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. (c) For purposes of paragraph (b), if the surviving spouse dies after the Participant, but before payments to the spouse begin, the provisions of paragraph (b), with the exception of subparagraph (2) therein, shall be applied as if the surviving spouse were the Participant. (d) For purposes of this Section 11.5, any amount paid to a child of the Participant will be treated as if it had been paid to the surviving spouse of the Participant if the amount becomes payable to the surviving spouse when the child reaches the age of majority. (e) For the purposes of this Section 11.5, distribution of a Participant's interest is considered to begin on the Participant's required beginning date (or, if paragraph (c) above is applicable, the date distribution is required to begin to the surviving spouse pursuant to paragraph (b) above). If distribution in the form of an annuity contract described in Section 11.4(e) irrevocably commences to the Participant before the required beginning date, the date distribution is considered to begin is the date distribution actually commences. 75..6 Transitional Rule. Notwithstanding the other requirements of this Article 11, and subject to the requirements of Article 10, Joint and Survivor Annuity Requirements, distribution on behalf of any Participant, including a 5% owner, may be made in accordance with all of the following requirements (regardless of when such distribution commences): (a) The distribution is one which would not have disqualified the Trust under section 401(a)(9) of the Internal Revenue Code of 1954 as in effect before its amendment by the Deficit Reduction Act of 1984. (b) The distribution is in accordance with a method of distribution designated by the Employee whose interest in the Trust is being distributed or, if the Employee is deceased, by a Beneficiary of the Employee. (c) The designation specified in paragraph (b) was in writing, was signed by the Employee or the Beneficiary, and was made before January 1, 1984. (d) The Employee had accrued a benefit under the plan as of December 31, 1983. (e) The method of distribution designated by the Employee or the Beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and in the case of any distribution upon the Employee's death, the Beneficiaries of the Employee listed in order of priority. A distribution upon death will not be covered by this transitional rule unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the Employee. For any distribution which commences before January 1, 1984, but continues after December 31, 1983, the Employee or the Beneficiary to whom such distribution is being made will be presumed to have designated the method of distribution under which the distribution is being made, if the method of distribution was specified in writing and the distribution satisfies the requirements in paragraphs (a) and (e). If a designation is revoked, any subsequent distribution must satisfy the requirements of section 401(a)(9) of the Code and the regulations thereunder. If a designation is revoked after the date distributions are required to begin, the Trust must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed which would have been required to have been distributed to satisfy section 401(a)(9) of the Code and the regulations thereunder, but for the designation described in paragraphs (b) through (e). For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements in Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations. Any changes in the designation generally will be considered to be a revocation of the designation, but the mere substitution or addition of another beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as the substitution or addition does not alter the period over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life). In the case of an amount transferred or rolled over from one plan to another plan, the rules in Q&A J-2 and Q&A J-3 of Section 1.401(a)(9)-l of the Proposed Income Tax Regulations shall apply. ARTICLE 76. WITHDRAWALS AND LOANS 76..1 Withdrawals from Participant Contribution Accounts. Subject to the requirements of Article 10, a Participant may upon written notice to the Employer withdraw any amount from his Participant Contribution Account. A withdrawn amount may not be repaid to the Plan. No forfeiture will occur solely as a result of an Employee's withdrawal of Participant contributions. 76..2 Withdrawals on Account of Hardship. If the Employer has so elected in the Plan Agreement, upon a Participant's written request the Plan Administrator may permit a withdrawal of funds from the vested portion of the Participant's Accounts (excluding the amount credited to a Rollover Account) on account of the Participant's financial hardship, which must be demonstrated to the satisfaction of the Plan Administrator. In considering such requests, the Plan Administrator shall apply uniform standards that do not discriminate in favor of Highly Compensated Employees. In a Plan with a CODA, if hardship withdrawals are permitted from both the Employer Contribution Account and the Elective Deferral Account, they shall be made first from a Participant's Employer Contribution Account and thereafter from a Participant's Elective Deferral Account, subject to the additional requirements set forth in Section 5.12. The requirements of Section 5.12(b), (c), (d)(1) and (d)(2) shall also apply to hardship distributions from a Participant's Employer Contribution Account and Employer Matching Account. In a Plan with a CODA, if hardship withdrawals are permitted from more than one of the Elective Deferral Account, Employer Matching Account, and Employer Contribution Account, they shall be made first from a Participant's Employer Contribution Account, and thereafter from the Employer Matching Account, and finally from the Elective Deferral Account, subject to the additional requirements of Section 5.12. A withdrawn amount may not be repaid to the Plan. 76..3 Withdrawals After Reaching Age 59 1/2. If so specified by the Employer in the Plan Agreement, a Participant who has reached age 59 1/2 may upon written request to the Employer withdraw during his employment any amount not exceeding the vested balance of his Accounts. A withdrawn amount may not be repaid to the Plan. 76..4 Loans. If the Employer has so elected in the Plan Agreement, the Employer may direct the Trustee to make a loan to a Participant or Beneficiary from the vested portion of his Accounts, subject to the following terms and conditions and to such reasonable additional rules and regulations as the Plan Administrator may establish for the orderly operation of the program: (a) The Plan Administrator shall administer the loan program subject to the terms and conditions of this Section 12.4. (b) A Participant's or Beneficiary's request for a loan shall be submitted to the Plan Administrator by means of a written application on a form supplied by the Plan Administrator. Applications shall be approved or denied by the Plan Administrator on the basis of its assessment of the borrower's ability to collateralize and repay the loan, as revealed in the loan application. (c) Loans shall be made to all Participants and Beneficiaries on a reasonably equivalent basis. Loans shall not be made available to highly compensated Employees (as defined in section 414(q) of the Code) in amounts greater than the amounts made available to other Employees (relative to the borrower's Account balance). (d) Loans must be evidenced by the Participant's promissory note for the amount of the loan payable to the order of the Trustee, and adequately secured by assignment of not more than 50% of the Participant's entire right, title and interest in and to the Trust Fund, exclusive of any asset as to which Putnam is not the Trustee. (e) Loans must bear a reasonable interest rate comparable to the rate charged by commercial lenders in the geographical area for similar loans. The Plan Administrator shall not discriminate among Participants in the matter of interest rates, but loans may bear different interest rates if, in the opinion of the Plan Administrator, the difference in rates is justified by conditions that would customarily be taken into account by a commercial lender in the Employer's geographical area. (f) The Period for repayment for any loan shall not exceed five years, except in the case of a loan used to acquire a dwelling unit which within a reasonable time is to be used as the principal residence of the Participant, in which case the repayment period shall not exceed ten years. The terms of a loan shall require that it be repaid in level payments of principal and interest not less frequently then quarterly throughout the repayment period, except that alternative arrangements for repayment may apply in the event that the borrower is on unpaid leave of absence for a period not to exceed one year. (g) To the extent that a Participant would be required under Article 10 to obtain he consent of his spouse to a distribution of an immediately distributable benefit other than a Qualified Joint and Survivor Annuity, the consent of the Participant's spouse shall be required for the use of his Account as security for a loan. The spouse's consent must be obtained no earlier than the beginning of the 90-day period that ends on the date on which the loan is to be so secured, and obtained in accordance with the requirements of Section 10.4(c) for a Qualified Election. Any such consent shall thereafter be binding on the consenting spouse and any subsequent spouse of the Participant. A new consent shall be required for use of the Account as security for any extension, renewal, renegotiation or revision of the original loan. (h) If valid spousal consent has been obtained in accordance with Section 12.4(g), then notwithstanding any other provision of the Plan the portion of the Participant's account balance used as a security interest held by the Plan by reason of a loan outstanding to the Participant shall be taken into account for purposes of determining the amount of the account balance payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than 100% of the Participant's vested account balance (determined without regard to the preceding sentence) is payable to the surviving spouse, then the account balance shall be adjusted by first reducing the vested account balance by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving spouse. (i) In the event of default on a loan by a Participant who is an active Employee, foreclosure on the Participant's Account as security will not occur until the Employer has reported to the Trustee the occurrence of an event permitting distribution from the Plan in accordance with Article 9 or Section 5.11. (j) No loan shall be made to an Owner-Employee or a Shareholder-Employee. (k) No loan to any Participant or Beneficiary can be made to the extent that the amount of the loan, when added to the outstanding balance of all other loans to the Participant or Beneficiary, would exceed the lesser of (a) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans during the one year period ending on the day before the loan is made, over the outstanding balance of loans from the Plan on the date the loan is made, or (b) one-half the value of the vested account balance of the Participant. For the purpose of the above limitation, all loans from all qualified plans of the Affiliated Employers are aggregated. (1) Loans shall be considered investments directed by a Participant pursuant to Section 13.3. The amount loaned shall be charged solely against the Accounts of the Participant, and repaid amounts and interest shall be credited solely thereto. 76..5 Procedure; Amount Available. Withdrawals and loans shall be made subject to the terms and conditions applicable to distributions pursuant to Section 9.4, except that the amount of any withdrawal or loan shall be determined by reference to the vested balance of the Participant's Account as of the most recent Valuation Date preceding the withdrawal or loan, and shall not exceed the amount of the vested account balance. ARTICLE 77. TRUST FUND AND INVESTMENTS 77..1 Establishment of Trust Fund. The Employer and the Trustee hereby agree to the establishment of a Trust Fund consisting of all amounts as shall be contributed or transferred from time to time to the Trustee pursuant to the Plan, and all earnings thereon. The Trustee shall hold the assets of the Trust Fund for the exclusive purpose of providing benefits to Participants and Beneficiaries and defraying the reasonable expenses of administering the Plan, and no such assets shall ever revert to the Employer, except that: (a) contributions made by the Employer by mistake of fact, as determined by the Employer, may be returned to the Employer within one (1) year of the date of payment, (b) contributions that are conditioned on their deductibility under section 404 of the Code may be returned to the Employer, to the extent disallowed, within one (1) year of the disallowance of the deduction, (c) contributions that are conditioned on the initial qualification of the Plan under the Code, and all investment gains attributable to them, may be returned to the Employer within one (1) year after such qualification is denied by determination of the internal Revenue Service, but only if an application for determination of such qualification is made within the time prescribed by law for filing the Employer's federal income tax return for its taxable year in which the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe, and (d) amounts held in a suspense account may be returned to the Employer on termination of the Plan, to the extent that they may not then be allocated to any Participant's Account, in accordance with Article 6. All Employer contributions under the Plan other than those made pursuant to Section 4.1(e) are hereby expressly conditioned on the initial qualification of the Plan and their deductibility under the Code. Investment gains attributable to contributions returned pursuant to subsections (a) and (b) shall not be returned to the contributing Employer, and investment losses attributable to such contributions shall reduce the amount returned. 77..2 Management of Trust Fund. Except to the extent of any investment in Policies pursuant to Article 14, the assets of the Trust Fund shall be held in trust by the Trustee and accounted for in accordance with this Article 13, and shall be invested in accordance with Section 13.3 in the Investment Products specified by the Employer in the Plan Agreement and from time to time thereafter in writing. The Employer shall have the exclusive authority and discretion to select the Investment Products available under the Plan. In making that selection, the Employer shall use the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims. The Employer shall cause the available Investment Products to be diversified sufficiently to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. It is especially intended that the Trustee shall have no discretionary authority to determine the investment of Trust assets. 77..3 Investment Instructions. Except as Article 14 may apply, all amounts held in the Trust Fund under the Plan shall be invested in Investment Products. If the Employer has elected in the Plan Agreement to make investment decisions for the Plan, investment instructions as to Employer Contribution Accounts, Employer Matching Accounts, Qualified Matching Accounts and Qualified Nonelective Contribution Accounts shall be the fiduciary responsibility of the Employer, and each of such Accounts shall have a pro rata interest in all assets of the Trust (other than Policies under Article 14) to which the Employer's instructions apply. If the Employer has not elected to make investment decisions for the Plan, then assets of the Trust shall be invested solely in accordance with the instructions of the Participant to whose Accounts they are allocable, as delivered to Putnam in accordance with its service agreement with the Employer. Instructions shall apply to future contributions, past accumulations, or both, according to their terms, and shall be communicated by the Employer to Putnam in accordance with procedures prescribed in the service agreement between the Employer and Putnam. Instructions shall be effective prospectively, coincident with or within a reasonable time after their receipt in good order by Putnam. An instruction once received shall remain in effect until it is changed by the provision of a new instruction. New instructions shall be accented by Putnam at any Valuation Date. In the event that the Employer adopts a Putnam prototype plan as an amendment to or restatement of an existing plan, the Employer shall specify one or more investment Products to serve as the sole investments for all Participants' Accounts during the period in which existing records of the Plan are transferred to the Recordkeeper. During that period, new investment instructions as to existing assets of the Plan cannot be carried out, nor can distributions be made from the Plan except to the extent permitted under the terms of the service agreement between the Employer and Putnam. The Employer and the Recordkeeper shall use their best efforts to minimize the duration of the period to which the preceding sentence applies. To the extent specifically authorized and provided in the service agreement between the Employer and Putnam, the Employer may direct the Trustee to establish as an Investment Product a fund all of the assets of which shall be invested in shares of stock of the Employer that constitute "qualifying employer securities" within the meaning of Section 407(d)(5) of ERISA ("Employer Stock"). Putnam shall be under no duty to question or review the investment directions given by the Employer or to make suggestions to the Employer in connection therewith. Putnam shall not be liable for any loss, or by reason of any breach, that arises from the Employer's exercise or non-exercise of rights under this Article 13, or from any direction of the Employer unless it is clear on the face of the direction that the actions to be taken under the direction are prohibited by the fiduciary duty rules of Section 404(a) of ERISA. All interest, dividends and other income received with respect to, and any proceeds received from the sale or other disposition of, securities or other property held in an investment fund shall be credited to and reinvested in such investment fund, and all expenses of the Trust that are properly allocated to a particular investment fund shall be so allocated and charged. The Employer may at any time direct Putnam to eliminate any investment fund or funds, and Putnam shall thereupon dispose of the assets of such investment fund and reinvest the proceeds thereof in accordance with the directions of the Employer. Neither the Employer nor the Trustee nor Putnam shall be responsible for questioning any instructions of a Participant or for reviewing the investments selected therein, or for any loss resulting from instructions of a Participant or from the failure of a Participant to provide or to change instructions. Neither Putnam nor the Trustee shall have any duty to question any instructions received from the Employer or a Participant or to review the investments selected thereby, nor shall Putnam or the Trustee be responsible for any loss resulting from instructions received from the Employer or a Participant or from the failure of the Employer or a Participant to provide or to change instructions. In the event that Putnam or the Trustee receives a contribution under the Plan as to which no instructions are delivered, or such instructions as are delivered are unclear to Putnam or the Trustee, such contribution shall be invested until clear instructions are received in the default investment option set forth in the service agreement between the Employer and Putnam, or if no such option is so set forth, in Putnam Daily Dividend Trust. Neither Putnam nor the Trustee shall have any discretionary authority or responsibility in the investment of the assets of the Trust Fund. 77..4 Valuation of the Trust Fund. As of each Valuation Date, the Trustee shall determine the fair market value of the Trust Fund, and the net earnings or losses and expenses of the Trust Fund for the period elapsed since the most recent previous Valuation Date shall be allocated among the Accounts of Participants. Earnings, losses and expenses which pertain to investments which are specifically held for a given Participant's Account shall be allocated solely to that Account. In the event that an investment is not specifically held for a given Participant's Account, the earnings, losses and expenses pertaining to that investment shall be allocated among all Participants' Accounts in the ratio that each such Account bears to the total of all Accounts of all Participants. Each Participant's Accounts shall be adjusted pursuant to this Section 13.4 until such time as they are either fully distributed or forfeited, regardless of whether the Participant continues to be an Employee. 77..5 Distributions on Investment Company Shares. Subject to Section 9.3, all dividends and capital gains or other distributions received on any Investment Company Shares credited to Participant's Account will (unless received in additional Investment Company Shares) be reinvested in full and fractional shares of the same Investment Company at the price determined as provided in the then current prospectus of the Investment Company. The shares so received or purchased upon such reinvestment will be credited to such accounts. If any dividends or capital gain or other distributions may be received on such Investment Company Shares at the election of the shareholder in additional shares or in cash or other property, the Trustee will elect to receive such dividends or distributions in additional Investment Company Shares. 77..6 Registration and Voting of Investment Company Shares. All Investment Company Shares shall be registered in the name of the Trustee or its nominee. Subject to any requirements of applicable law, the Trustee will transmit to the Employer copies of any notices of shareholders' meetings, proxies and proxy-soliciting materials, prospectuses and the annual or other reports to share holders, with respect to Investment Company Shares held in the Trust Fund. The Trustee shall act in accordance with directions received from Participants or the Employer, as the case may be, with respect to matters to be voted upon by the shareholders of the Investment Company. Such directions must be in writing on a form approved by the Trustee, signed by the addressee and delivered to the Trustee within the time prescribed by it. The Trustee will not vote Investment Company Shares as to which it receives no written directions. 77..7 Investment Manager. The Employer, with the consent of Putnam, may appoint an investment manager, as defined in Section 3(38) of the Employee Retirement Income Security Act of 1974, with respect to all or a portion of the assets of the Trust Fund. The Trustee shall have no liability in connection with any action or nonaction pursuant to directions of such an investment manager. 77..8 Employer Stock. Notwithstanding any other provision of the Plan, the provisions of this Section 13.8 shall govern the voting of Employer Stock held by Putnam as Trustee under the Plan. The Trustee shall vote Employer Stock in accordance with the directions of the Employer unless the Employer has elected in the Plan Agremeent that Participants shall be appointed Named Fiduciaries as to the voting of Employer Stock and shall direct the Trustee as to the voting of Employer Stock in accordance with the provisions of the second, third and fourth paragraphs of this Section 13.8. In either case, the Employer shall be responsible for determining whether, under the circumstances prevailing at a given time, its fiduciary duty to Participants nd Beneficiaries under the Plan and ERISA requires that the Employer follow the advice of independent counsel as to the voting of Employer Stock. The remainder of this Section 13.8 applies only if the Employer elects in the plan Agreement that Participants shall direct the Trustee as to the voting of Employer Stock. When the issuer of Employer Stock files preliminary proxy solicitation materials with the Securities and Exchange Commission, the Employer shall cause a copy of all the materials to be simultaneously sent to the Trustee, and the Trustee shall prepare a voting instruction form based upon these materials. At the time of mailing of notice of each annual or special stockholders' meeting of the issuer of Employer Stock, the Employer shall cause a copy of the notice and all proxy solicitation materials to be sent to each Participant, together with the foregoing voting instruction form to be returned to the Trustee or its designee. The form shall show the number of full and fractional shares of Employer Stock credited to the Participant's accounts, whether or not vested. For purposes of this Section 13.8, the number of shares of Employer Stock deemed credited to a Participant's accounts shall be determined as of the last preceding Valuation Date for which an allocation has been completed and Employer Stock has actually been credited to Participant's accounts. The Employer shall provide the Trustee with a copy of any materials provided to Participants and shall certify to the Trustee that the materials have been mailed or otherwise sent to Participants. Each Participant shall have the right to direct the Trustee as to the manner in which to vote that number of shares of Employer Stock held under the Plan equal to a fraction, of which the numerator is the number of shares of Employer Stock credited to his account and the denominator is the number of shares of Employer Stock credited to all Participants' accounts. Such directions shall be communicated in writing or by facsimile or similar means and shall be held in confidence by the Trustee and not divulged to the Employer, or any officer or employee thereof, or any other persons. Upon its receipt of directions, the Trustee shall vote the shares of Employer Stock as directed by the Participant. To the extent that any Participant gives no direction as to the voting of Employer Stock that he has the right to direct under this Section 13.8, the Plan Administrator shall retain the status of Named Fiduciary and shall direct the voting of such Employer Stock. With respect to all rights in connection with Employer Stock other than the right to vote, Participants are hereby appointed Named Fiduciaries to the same extent (if any) as provided in the foregoing paragraphs of this Section 13.8 with regard to the right to vote, and the Trustee shall follow the directions of Participants and the Plan Administrator with regard to the exercise of such rights to the same extent as with regard to the right to vote. ARTICLE 78. INSURANCE POLICIES 78..1 Purchase of Insurance Products. At the time of establishment of the Plan, the Employer shall purchase for each Participant such Policy or Policies, if any, as a Participant shall request and annually thereafter such additional Policies as a Participant shall request, subject to the limitations of Section 14.2. All Policies shall have the same day and month of issue, insofar as reasonably possible. The premiums on all Policies shall be paid at the same intervals (for example, annually, semi- annually, quarterly or monthly), but the interval may be changed with respect to all Policies from time to time. 78..2 Limitation on Premiums. The premiums paid for Policies in respect of any Participants shall be limited so that premiums paid on any ordinary insurance Policies (that is, Policies with both nonincreasing premiums and nondecreasing death benefits) on the life of the Participant shall be 49% or less of the Employer's total contributions for the Participant (and Forfeitures allocated and amounts reapplied to his Employer Contribution Account), and premiums paid on term insurance Policies on the life of the Participant shall be less than 25% of such amount; provided that if both ordinary life insurance Policies and term Policies are purchased for any Participant, the total premiums on term Policies plus one-half the premiums on ordinary life Policies shall be less than 25% of such amount. If at any time the total premiums to be paid by the Employer for a Participant shall equal or exceed the above limitations, then the life insurance coverage of that Participant shall be reduced so that the total premiums shall not equal or exceed the limitations. The required reduction shall be made by changing all or a portion of the life insurance on the Participant to paid-up life insurance or by cancelling all or a portion of any term life insurance. 78..3 Policy Options. At the election of the Participant covered hereunder, a Policy may contain a waiver of premium disability benefit provision or a provision for additional indemnity in the event of accidental death, or both, if available on the type of Policy selected and if permitted by the insurer. 78..4 Insurability. If any Participant who has elected that a Policy be purchased is found by the insurer not to be insurable at standard rates, the Employer shall, if permitted by the rules of the insurer, purchase a similar Policy which provides a lesser death benefit and which can be purchased for the same premium. 78..5 Dividends on Policies. Dividends and other credits payable on any Policy shall be applied to the purchase of additional benefits under the Policy unless the Participant requests that they be applied in reduction of premiums. 78..6 Trustee of Policy. The Insurance Trustee shall apply for and be the owner of each Policy purchased under the terms of the Plan. Each Policy must provide that proceeds will be payable to the Insurance Trustee; however, the Insurance Trustee shall be required to pay over all such proceeds to the Participant's Designated Beneficiary in accordance with the distribution provisions of the Plan including, without limitation, Section 10.3. Under no circumstances shall the Trust retain any part of the proceeds. In the event of any conflict between the terms of the Plan and the terms of any Policy purchased hereunder, the Plan provisions shall control. 78..7 Obligations with Respect to Policies. Except as may be otherwise provided in any conditional or binding receipt issued by an insurer, there shall be no coverage and no death benefit payable under any Policy to be purchased from such insurer until such Policy shall have been delivered and the premium therefor shall have been paid. The Employer and the Insurance Trustee shall not have any responsibility as to the effectiveness of any Policy purchased from an insurer, nor shall either of them have any liability or obligation to pay any amount to any Participant or his beneficiary by reason of any failure or refusal by the insurer to make such payment. 78..8 Distribution of Proceeds on Participant's Death. In the event of the death of a Participant before the conversion provided for in Section 14.9, there shall be payable to the beneficiary named in any Policy on his life the benefits provided by the terms of such Policy. 78..9 Conversion of Policies. Except as provided in Section 19.3, if any Policies of a Participant (other than retirement income, endowment or annuity Policies) are held for his benefit at the time distribution is to commence, the Policies may be converted by the Insurance Trustee into cash, paid to the Trustee, credited to the Employer Contribution Account of the Participant, invested in accordance with the written instructions of the Employer (and if no such instructions have been given or if such instructions are not clear, invested in Investment Company Shares in the same proportion as the most recent contributions to the Participant's Account) and distributed pursuant to Article 9, subject to the terms and conditions of Article 10. Retirement income, endowment or annuity Policies will be distributed directly to the Participant at the time distribution is to commence. 78..10 Conflict with Policies. In the event of any conflict between the terms of the Plan and the terms of any Policies hereunder, the Plan provisions shall control. 78..11 Insurance Loans to Owner-Employees. If an Owner- Employee or Shareholder-Employee receives, either directly or indirectly, any amount from an Insurer as a loan under a Policy, the amount so received shall be considered a distribution under the Plan. Any assignment or pledge (or agreement to assign or pledge) by an Owner-Employee or Shareholder-Employee of any interest in the Plan shall be considered a distribution of such interest. ARTICLE 79. TOP-HEAVY PLANS 79..1 Superseding Effect. For any Plan Year beginning after December 31, 1983, in which Plan is determined to be a Top-Heavy Plan under Section 15.2(b), the provisions of this Article 15 will supersede any conflicting provisions in the Plan or the Plan Agreement. 79..2 Definitions. For purposes of this Article 15, the terms below shall be defined as follows: (a) Key Employee means any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the determination period was: (1) an officer of the Employer having annual compensation greater than 50% of the amount in effect under section 415(b)(1)(A) of the Code; (2) an owner (or considered an owner under section 318 of the Code) of one of the ten largest interests in the Employer having annual compensation exceeding the dollar limitation under Section 415(c)(1)(A) of the Code; (3) a 5% owner of the Employer; or (4) a 1% owner of the Employer having annual compensation of more than $150,000. Annual compensation means compensation satisfying the definition elected by the Employer in item 4 of the Plan Agreement, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludible from the Employee's gross income under section 125, section 402(a)(8), section 402(h) or section 403(b) of the Code. The determination period is the Plan Year containing the Determination Date and the four preceding Plan Years. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the regulations thereunder. (b) Top-Heavy: the Plan is Top-Heavy for any Plan Year beginning after December 31, 1983, if any of the following conditions exists: (1) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans. (2) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of plans exceeds 60%. (3) If this plan is part of a Required Aggregation Group and part of a Permissive Aggregation Group of Plans and the Top-Heavy Ratio for the Permissive Aggregation group exceeds 60%. (c) Top-Heavy Ratio means the following: (1) If the Employer maintains one or more qualified defined contribution plans (or any simplified employee pension plan) and the Employer has not maintained any qualified defined benefit plan which during the 5-year period ending on the Determination Date(s) has or has had accrued benefits, the op-Heavy ratio for this Plan alone or for the Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the Determination Date(s) (including any part of any account distributed in the 5-year period ending on the Determination Date(s)), and the denominator of which is the sum of all account balances (including any part of any account balances distributed in the 5-year period ending on the Determination Date(s)), both computed in accordance with section 416 of the Code and the regulations thereunder. Both the numerator and denominator of the Top-Heavy Ratio are increased to reflect any contribution not actually made as of the Determination Date, but which is required to be taken into account on that date under section 416 of the Code and the regulations thereunder. (2) If the Employer maintains one or more qualified defined contribution plans (or any simplified employee pension plan) and the Employer maintains or has maintained one or more qualified defined benefit plans which during the 5-year period ending on the Determination Date(s) has or has had any accrued benefits, the Top-Heavy Ratio for any Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of account balances under the aggregated qualified defined contribution plan or plans for all Key Employees, determined in accordance with (1) above, and the Present Value of accrued benefits under the aggregated qualified defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the account balances under the aggregated qualified defined contributions plan or plans for all Participants, determined in accordance with (1) above, and the Present Value of accrued benefits under the qualified defined benefit plan or plans for all Participants as of the Determination Date(s), all determined in accordance with section 416 of the Code and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are increased for any distribution of an accrued benefit made in the 5-year period ending on the Determination Date. (3) For purposes of (1) and (2) above, the value of account balances and the Present Value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12- month period ending on the Determination Date; except as provided in section 416 of the Code and the regulations thereunder for the first and second Plan Years of a defined benefit plan. The account balances and accrued benefits of a Participant (A) who is not a Key Employee but who was a Key Employee in a prior Plan Year, or (B) who has not been credited with at least one Hour of Service for the Employer during the 5-year period ending on the Determination Date, will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers and transfers are taken into account will be made in accordance with Section 416 of the Code and the regulations thereunder. Deductible Employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. The accrued benefit of a Participant other than a Key Employee shall be determined under (a) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of section 411(b)(1)(C) of the Code. (d) Permissive Aggregation Group means the Required Aggregation Group of plans plus any other qualified plan or plans (or simplified employee pension plan) of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of sections 401(a)(4) and 410 of the Code. (e) Required Aggregation Group means (i) each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the determination period (regardless of whether the Plan has terminated) and (ii) any other qualified plan of the Employer which enables a plan described in (i) to meet the requirements of section 401(a)(4) or 410 of the Code. (f) Determination Date means, for any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year of the Plan, the Determination Date is the last day of that Plan Year. (g) Valuation Date means the last day of the Plan Year. (h) Present Value means present value based only on the interest and mortality rates specified by the Employer in the Plan Agreement. 79..3 Minimum Allocation. (a) Except as otherwise provided in paragraphs (c) and (d) below, the Employer contributions and Forfeitures allocated on behalf of any Participant who is not a Key Employee shall not be less than the lesser of 3% of such Participant's Earnings, or in the case where the Employer has no defined benefit plan which designates this Plan to satisfy section 401 of the Code, the largest percentage of Employer contributions and Forfeitures, as a percentage of the first $200,000 of the Key Employee's Earnings, allocated on behalf of any Key Employee for that year. The minimum allocation is determined without regard to any Social Security contribution. This minimum allocation shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation of the Employer's contributions and Forfeitures for the Plan Year because of (1) the Participant's failure to be credited with at least 1,000 Hours of Service, or (2) the Participant's failure to make mandatory Employee contributions to the Plan, or (3) the Participant's receiving Earnings less than a stated amount. Neither Elective Deferrals, Employer Matching Contributions nor Qualified Matching Contributions for non-Key Employees shall be taken into account for purposes of satisfying the requirement of this Section 15.3(a). (b) For purposes of computing the minimum allocation, Earnings will mean Section 415 Compensation as defined in Section 6.5(b) of the Plan. (c) The provision in paragraph (a) above shall not apply to any Participant who was not employed by the Employer on the last day of the Plan Year. (d) The provision in paragraph (a) above shall not apply to any Participant to the extent he is covered under any other plan or plans of the Employer, and the Employer has provided in the Plan Agreement that the minimum allocation requirement applicable to Top-Heavy Plans will be met in the other plan or plans. (e) The minimum allocation required (to the extent required to be nonforfeitable under section 416(b) of the Code) may not be forfeited under sections 411(a)(3)(B) or (D) of the Code. 79..4 Adjustment of Fractions. For any Plan Year in which the Plan is Top-Heavy, the Defined Benefit Fraction and the Defined Contribution Fraction in Article 6 shall each be computed using 100% of the dollar limitations specified in sections 415(b)(1)(A) and 415(c)(1)(A) instead of 125%. The foregoing requirement shall not apply if the Top-Heavy Ratio does not exceed 90% and the Employer has elected in the Plan Agreement to provide increased minimum allocations or benefits satisfying section 416(h)(2) of the Code. ARTICLE 80. ADMINISTRATION OF THE PLAN 80..1 Plan Administrator. The Plan shall be administered by the Employer, as Plan Administrator and Named Fiduciary within the meaning of ERISA, under rules of uniform application; provided, however, that the Plan Administrator's duties and responsibilities may be delegated to a person appointed by the Employer or a committee established by the Employer for that purpose, in which case the committee shall be the Plan Administrator and Named Fiduciary. The member os such a committee shall act by majority vote, and may by majority vote authorize any one or ones of their number to act for the committee. The person or committee (if any) initially appointed by the Employer may be named in the Plan Agreement, but the Employer may remove any such person or committee member by written notice to him, and any such person or committee may resign by written notice to the Employer, without the necessity of amending the Plan Agreement. To the extent permitted under applicable law, the Plan Administrator shall have the sole authority to enforce the terms hereof on behalf of any and all persons having or claiming any interest under the Plan, and shall be responsible for the operation of the Plan in accordance with its terms. The Plan Administrator shall have discretionary authority to determine all questions arising out of the administration, interpretation and application of the Plan, all of which determinations shall be conclusive and binding on all persons. The Plan Administrator, in carrying out its responsibilities under the Plan, may rely upon the written opinions of its counsel and on certificates of physicians. Subject to the provisions of the Plan and applicable law, the Plan Administrator shall have no liability to any person as a result of any action taken or omitted hereunder by the Plan Administrator. 80..2 Claims Procedure. Claims for participation in or distribution under the Plan shall be made in writing to the Plan Administrator, or an agent designated by the Plan Administrator whose name shall have been communicated to all Participants and other persons as required by law. If any claim so made is denied in whole or in part, the claimant shall be furnished promptly by the Plan Administrator with a written notice: (a) setting forth the reason for the denial, (b) making reference to pertinent Plan provisions, (c) describing any additional material or information from the claimant which is necessary and why, and (d) explaining the claim review procedure set forth herein. Within 60 days after denial of any claim for participation or distribution under the Plan, the claimant may request in writing a review of the denial by the Plan Administrator. Any claimant seeking review hereunder shall be entitled to examine all pertinent documents and to submit issues and comments in writing. The Plan Administrator shall render a decision on review hereunder; provided, that if the Plan Administrator determines that a hearing would be appropriate, its decision on review shall be rendered within 120 days after receipt of the request for review. The decision on review shall be in writing and shall state the reason for the decision, referring to the Plan provisions upon which it is based. 80..3 Employer's Responsibilities. The Employer shall be responsible for: (a) Keeping records of employment and other matters containing all relevant data pertaining to any person affected hereby and his eligibility to participate, allocations to his Accounts, and his other rights under the Plan; (b) Periodic, timely filing of all statements, reports and returns required to be filed by ERISA; (c) Timely preparation and distribution of disclosure materials required by ERISA; (d) Providing notice to interested parties as required by section 7476 of the Code; (e) Retention of records for periods required by law; and (f) Seeing that all persons required to be bonded on account of handling assets of the Plan are bonded. 80..4 Recordkeeper. The Recordkeeper is hereby designated as agent of the Employer under the Plan to perform directly or through agents certain ministerial duties in connection with the Plan, in particular: (a) To keep and regularly furnish to the Employer a detailed statement of each Participant's Accounts, showing contributions thereto by the Employer and the Participant, Investment Products purchased therewith, earnings thereon and Investment Products purchased therewith, and each redemption or distribution made for any reason, including fees or benefits; and (b) To the extent agreed between the Employer and the Recordkeeper, to prepare for the Employer or to assist the Employer shall be required to furnish to Participants and Beneficiaries or other interested persons and to the Internal Revenue Service or the Department of Labor; all as may be more fully set forth in a service agreement executed by the Employer and the Recordkeeper. If the Employer does not appoint another person or entity as Recordkeeper, the Employer itself shall be the Recordkeeper. 80..5 Prototype Plan. Putnam is the sponsor of the Putnam Basic Plan Document, a prototype plan approved as to form by the Internal Revenue Service. Provided that an Employer's adoption of the Plan is made known to and accepted by Putnam in accordance with the Plan Agreement, Putnam will inform the Employer of amendments to the prototype plan and provide such other services in connection with the Plan as may be agreed between Putnam and the Employer. Putnam may impose for its services as sponsor of the prototype plan such fees as it may establish from time to time in a fee schedule addressed to the Employer. Such fees shall, unless paid by the Employer, be paid from the Trust Fund, and shall in that case be charged pro rata against the Accounts of all Participants. The Trustee is expressly authorized to cause Investment Products to be sold or redeemed for the purpose of paying such fees. ARTICLE 81. TRUSTEE AND INSURANCE TRUSTEE 81..1 Powers and Duties of the Trustee. The Trustee shall have the authority, in addition to any authority given by law, to exercise the following powers in the administration of the Trust: (a) To invest all or a part of the Trust Fund in Investment Products in accordance with the investment instructions delivered by the Employer pursuant to Section 13.3, without restriction to investments authorized for fiduciaries, including without limitation any common, collective or commingled trust fund maintained by the Trustee (or any other such fund, acceptable to Putnam and the Trustee, that qualifies for exemption from federal income tax pursuant to Revenue Ruling 81-100). Any investment in, and any terms and conditions of, any such common, collective or commingled trust fund available only to employee trusts which meet the requirements of the Code, or corresponding provisions of subsequent income tax laws of the United States, shall constitute an integral part of this Agreement; (b) If Putnam and the Trustee have consented thereto in writing, to invest without limit in stock of the Employer or any affiliated company; (c) To dispose of all or part of the investments, securities or other property which may from time to time or at any time constitute the Trust Fund in accordance with the written directions furnished by the Employer for the investment of Participants' separate Accounts or the payment of benefits or expenses of the Plan, and to make, execute and deliver to the purchasers thereof good and sufficient deeds of conveyance therefore, and all assignments, transfers and other legal instruments, either necessary or convenient for passing the title and ownership thereto, free and discharged of all trusts and without liability on the part of such purchasers to see to the application of the purchase money; (d) To hold cash uninvested to the extent necessary to pay benefits or expenses of the Plan; (e) To follow the directions of an investment manager appointed pursuant to Section 13.7 (f) To cause any investment of the Trust Fund to be registered in the name of the Trustee or the name of its nominee or nominees or to retain such investment unregistered or in a form permitting transfer by delivery; provided that the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund; (g) Upon written direction of or through the Employer, to vote in person or by proxy (in accordance with Section 13.6 and, in the case of stock of the Employer, at the direction of the Employer or Participants) with respect to all securities that are part of the Trust Fund; (h) To consult and employ any suitable agent to act on behalf of the Trustee and to contract for legal, accounting, clerical and other services deemed necessary by the Trustee to manage and administer the Trust Fund according to the terms of the plan' (i) Upon the written direction of the Employer, to make loans from the Trust Fund to Participants in amounts and on terms approved by the Plan Administrator in accordance with the provisions of the Plan; provided that the Employer shall have the sole responsibility for computing and collecting all loan repayments required to be made under the Plan; and (j) To pay from the Trust Fund all taxes imposed or levied with respect to the Trust Fund or any part thereof under existing or future laws, and to contest the validity or amount of any tax assessment, claim or demand respecting the Trust Fund or any part thereof. 81..2 Limitation of Responsibilities. Except as may otherwise be required under applicable law, neither the Trustee nor the Insurance Trustee nor any of their respective agents shall have any responsibility for: (a) Determining the correctness of the amount of any contribution for the sole collection or payment of contributions, which shall be the sole responsibility of the Employer; (b) Loss or breach caused by any Participant's exercise of control over his Accounts, which shall be the sole responsibility of the Participant; (c) Loss or breach caused by the Employer's exercise of control over Accounts pursuant to Section 13.3, which shall be the sole responsibility of the Employer; (d) Sums paid to an insurer or the validity of any Policy or the accuracy of information provided by an insurer, which shall be the sole responsibility of the insurer; (e) Performance of any other responsibilities not specifically allocated to them under the Plan. 81..3 Fees and Expenses. The Trustee's fees for performing its duties hereunder shall be such reasonable amounts as shall be established by the Trustee from time to time in a fee schedule addressed to the Employer. Such fees, any taxes of any kind which may be levied or assessed upon or in respect of the Trust Fund and any and all expenses reasonably incurred by the Trustee shall, unless paid by the Employer, be paid from the Trust Fund and shall, unless allocable to the Accounts of specific Participants, be charged pro rata against the Accounts of all Participants. The Trustee is expressly authorized to cause Investment Products to be sold or redeemed for the purpose of paying such amounts. Charges and expenses incurred in connection with a specific Investment Product, unless allocable to the Accounts of specific Participants, shall be charged pro rata against the Accounts of all Participants for whose benefit amounts have been invested in the specific Investment Product. 81..4 Reliance on Employer. The Trustee and its agents (and the Insurance Trustee, if any) shall rely upon any decision of the Employer, or of any person authorized by the Employer, purporting to be made pursuant to the terms of the Plan, and upon any information or statements submitted by the Employer or such person (including those relating to the entitlement of any Participant to benefits under the Plan), and shall not inquire as to the basis of any such decision or information or statements, and shall incur no obligation or liability for any action taken or omitted in reliance thereon. The Trustee and its agents shall be entitled to rely on the latest written instructions received from the Employer as to the person or persons authorized to act for the Employer hereunder, and to sign on behalf of the Employer any directions or instructions, until receipt from the Employer of written notice that such authority has been revoked. 81..5 Action Without Instructions. If the Trustee receives no instructions from the Employer in response to communications sent by registered or certified mail to the Employer at its last known address as shown on the books of the Trustee, then the Trustee may make such determinations with respect to administrative matters arising under the Plan as it considers reasonable, notwithstanding any prior instructions or directions given by or on behalf of the Employer, but subject to any instruction or direction given by or on behalf of the Participants. To the extent permitted by applicable law, any determination so made will be binding on all persons having or claiming any interest under the Plan or Trust, and the Trustee will incur no obligation or responsibility for any such determination made in good faith or for any action taken pursuant thereto. In making any such determination the Trustee may require that it be furnished with such relevant documents as it reasonable considers necessary. 81..6 Advice of Counsel. The Trustee and the Insurance Trustee may each consult with legal counsel (who may, but need not be, counsel for the Employer) concerning any questions which may arise with respect to their respective rights and duties under the Plan, and the opinion of such counsel shall be full and complete protection to the extent permitted by applicable law in the respect of any action taken or omitted by the Trustee or the Insurance Trustee, as the case may be, hereunder in accordance with the opinion of such counsel. 81..7 Accounts. The Trustee shall keep full accounts of all receipts and disbursements which pertain to investments in Investment Products, and the Trustee and the Insurance Trustee shall each keep accounts of such other transactions as it is required to perform hereunder. Within a reasonable time following the cost of each Plan Year, or upon its removal or resignation or upon termination of the Trust and at such other times as may be appropriate, each shall render to the Employer and any other persons as may be required by law an account of its administration of the Plan and Trust during the period since the last previous such accounting, including such information as may be required by law. The written approval of any account by the Employer and all other persons to whom an account is rendered shall be final and binding as to all matters and transactions stated or shown therein, upon the Employer and Participants and all persons who then are or thereafter become interested in the Trust. The failure of the Employer or any other person to whom an account is rendered to notify the party rendering the account within 60 days after the receipt of any account of his or its objection to the account shall be the equivalent of written approval. If the Employer or any other person to whom an account is rendered files any objections within such 60-day period with respect to any matters or transactions stated or shown in the account and the Employer or such other person and the party rendering the account cannot amicably settle the questions raised by such objections, the party rendering the account and the Employer or such person shall have the right to have such questions settled by judicial proceedings, although the Employer or such other person to whom an account is rendered shall have, to the extent permitted by applicable law, only 60 days from filing of written objection to the account to commence legal proceedings. Nothing herein contained shall be construed so as to deprive the Trustee or the Insurance Trustee of the right to have a judicial settlement of its accounts. In any proceeding for a judicial settlements of any account or for instructions, the only necessary parties shall be the Trustee, the Insurance Trustee, the Employer and persons to whom an account is required by law to be rendered. 81..8 Access to Records. The Trustee and the Insurance Trustee shall give access to their respective records with respect to the Plan at reasonable times and on reasonable notice to any person required by law to have access to such records. 81..9 Successors. Any corporation into which the Trustee may merge or with which it may consolidate or any corporation resulting from any such merger or consolidation shall be the successor of the Trustee without the execution or filing of any additional instrument or the performance of any further act. 81..10 Persons Dealing with Trustee or Insurance Trustee. No person dealing with the Trustee or the Insurance Trustee shall be bound to see to the application of any money or property paid or delivered to such party or to inquire into the validity or propriety of any transactions. 81..11 Resignation and Removal; Procedure. The Trustee or the Insurance Trustee may resign at any time by giving 60 days' written notice to the Employer and to Putnam. The Employer may remove the Trustee or the Insurance Trustee at any time by giving 60 days' written notice to the party removed and to Putnam. In any case of resignation or removal hereunder, the period of notice may be reduced to such shorter period as is satisfactory to the Trustee, the Insurance Trustee and the Employer. Notwithstanding anything to the contrary herein, any resignation hereunder shall take effect at the time notice thereof is given if the Employer may no longer participate in the prototype Plan and is deemed to have an individually designed plan at the time notice is given. 81..12 Action of Trustee Following Resignation or Removal. When the resignation or removal of the Trustee becomes effective, the Trustee shall perform all acts necessary to transfer the Trust Fund to its successor. However, the Trustee may reserve such portion of the Trust Fund as it may reasonably determine to be necessary for payment of its fees and any taxes and expenses, and any balance of such reserve remaining after payment of such fees, taxes and expenses shall be paid over to its successor. The Trustee shall have no responsibility for acts or omissions occurring after its resignation becomes effective. 81..13 Action of Insurance Trustee Following Resignation or Removal. When the Insurance Trustee's resignation or removal becomes effective, the Insurance Trustee shall perform all acts necessary to transfer ownership of the Policies to its successor. If no successor has accepted appointment, the Policies shall be held and owned by the Employer acting as Insurance Trustee until a successor is appointed. 81..14 Effect of Resignation or Removal. Resignation or removal of the Trustee or the Insurance Trustee shall not terminate the Trust. In the event of any vacancy in the position of Trustee (or, in a Plan having amounts invested in Policies, the position of Insurance Trustee), whether the vacancy occurs because of the resignation or removal of the Trustee (or the Insurance Trustee) the Employer shall appoint a successor to fill the vacant position. If the Employer does not appoint such a successor who accepts appointment by the later of 60 days after notice of resignation or removal is given or by such later date as the Trustee or the Insurance Trustee, as the case may be, and Employer may agree in writing to postpone the effective date of the Trustee or the Insurance Trustee's resignation or removal, the Trustee or Insurance Trustee may apply to a court of competent jurisdiction for such appointment of cause the Trust to be terminated, effective as of the date specified by the Trustee or Insurance Trustee, as the case may be, in writing delivered to the Employer. Each successor Trustee so appointed and accepting a trusteeship hereunder shall have all of the rights and powers and all of the duties and obligations of the original Trustee or Insurance Trustee, as the case may be, under the provisions hereof, but shall have no responsibility for acts or omissions before he becomes a Trustee or Insurance Trustee. 81..15 Fiscal Year of Trust. The fiscal year of the Trust will coincide with the Plan Year. 81..16 Limitation of Liability. Except as may otherwise be required by law and other provisions of the Plan, no fiduciary of the Plan, within the meaning of Section 3(21) of ERISA, shall be liable for any losses incurred with respect to the management of the Plan, nor shall he or it be liable for any acts or omissions except those caused by his or its own negligence or bad faith in failing to carry out his or its duties under the terms contained in the Plan. 81..17 Indemnification. Subject to the limitations of applicable law, the Employer agrees to indemnify and hold harmless (i) all fiduciaries, within the meaning of ERISA Sections 3(21) and 404, and (ii) Putnam, for all liability occasioned by any act of such party or omission to act, in good faith and without gross negligence, and for all expenses incurred by any such party in determining its duty or liability under ERISA with respect to any question under the Plan. ARTICLE 82. AMENDMENT 82..1 General. The Employer reserves the power at any time or times to amend the provisions of the Plan and the Plan Agreement to any extent and in any manner that it may deem advisable. If, however, the Employer makes any amendment (including an amendment occasioned by a waiver of the minimum funding requirement under section 412(d) of the Code) other than (a) a change in an election made in the Plan Agreement, (b) amendments stated in the Plan Agreement which allow the Plan to satisfy section 415 and to avoid duplication of minimums under section 416 of the Code because of the required aggregation of multiple plans, or (c) model amendments published by the Internal Revenue Service which specifically provide that their adoption will not cause the Plan to be treated as individually designed, the Employer shall cease to participate in this prototype Plan and will be considered to have an individually designed plan. In that event, Putnam shall have no further responsibility to provide to the Employer any amendments or other material incident to the prototype plan, and Putnam may resign immediately as Trustee and as Recordkeeper. Any amendment shall be made by delivery to the Trustee (and the Recordkeeper, if any) of a written instrument executed by the Employer providing for such amendment. Upon the delivery of such instrument to the Trustee, such instrument shall become effective in accordance with its terms as to all Participants and all persons having or claiming any interest hereunder, provided, that the Employer shall not have the power: (1) To amend the Plan in such a manner as would cause or permit any part of the assets of the Trust to be diverted to purposes other than the exclusive benefit of Participants or their Beneficiaries, or as would cause or permit any portion of such assets to revert to or become the property of the Employer. (2) To amend the Plan retroactively in such a manner as would have the effect of decreasing a Participant's accrued benefit, except that a Participant's Account balance may be reduced to the extent permitted under section 412(c)(8) of the Code. For purposes of this paragraph (2), an amendment shall be treated as reducing a Participant's accrued benefit if it has the effect of reducing his Account balance, or of eliminating an optional form of benefit with respect to amounts attributable to contributions made performed before the adoption of the amendment; or (3) To amend the Plan so as to decrease the portion of a Participant's Account balance that has become vested, as compared to the portion that was vested, under the terms of the Plan without regard to the amendment, as of the later of the date the amendment is adopted or the date it becomes effective. (4) To amend the Plan in such a manner as would increase the duties or liabilities of the Trustee or the Recordkeeper unless the Trustee or the Recordkeeper consents thereto in writing. 82..2 Delegation of Amendment Power. The Employer and all sponsoring organizations of the Putnam Basic Plan Document delegate to Putnam Financial Services, Inc., the power to amend the Plan (including the power to amend this Section 18.2 to name a successor to which such power of amendment shall be delegated), for the purpose of adopting amendments which are certified to Putnam Financial Services, Inc., by counsel satisfactory to it, as necessary or appropriate under applicable law, including any regulation or ruling issued by the United States Treasury Department or any other federal or state department or agency; provided that Putnam Financial Services, Inc., or such successor may amend the Plan only if it has mailed a copy of the proposed amendment to the Employer at its last known address as shown on its books by the date on which it delivers a written instrument providing for such amendment, and only if the same amendment is made on said date to all plans in this form as to which Putnam Financial Services, Inc., or such successor has a similar power of amendment. If a sponsoring organization does not adopt any amendment made by Putnam Financial Services, Inc., such sponsoring organization shall cease to participate in this prototype Plan and will be considered to have an individually designed plan. ARTICLE 83. TERMINATION OF THE PLAN AND TRUST 83..1 General. The Employer has established the Plan and the Trust with the bona fide intention and expectation that contributions will be continued indefinitely, but the Employer shall have no obligation or liability whatsoever to maintain the Plan for any given length of time and may discontinue contributions under the Plan or terminate the Plan at any time by written notice delivered to the Trustee and the Insurance Trustee, without any liability whatsoever for any such discontinuance or termination. 83..2 Events of Termination. The Plan will terminate upon the happening of any of the following events: (a) Death of the Employer, if a sole proprietor, or dissolution or termination of the Employer, unless within 60 days thereafter provision is made by the successor to the business with respect to which the Plan was established for the continuation of the Plan, and such continuation is approved by the Trustee; (b) Merger, consolidation or reorganization of the Employer into one or more corporations or organizations, unless the surviving corporations or organizations adopt the Plan by an instrument in writing delivered to the Trustee within 60 days after such a merger, consolidation and reorganization; (c) Sale of all or substantially all of the assets of the Employer, unless the purchaser adopts the Plan by an instrument in writing delivered to the Trustee within 60 days after the sale; (d) The institution of bankruptcy proceedings by or against the Employer, or a general assignment by the Employer to or for the benefit of its creditors; or (e) Delivery of notice as provided in Section 19.1. 83..3 Effect of Termination. Notwithstanding any other provisions of this Plan, other than Section 19.4, upon termination of the Plan or complete discontinuance of contributions thereunder, each Participant's Accounts will become fully vested and nonforfeitable, and upon partial termination of the Plan, the Accounts of each Participant affected by the partial termination will become fully vested and nonforfeitable. The Employer shall notify the Trustee and the Insurance Trustee in writing of such termination, partial termination or complete discontinuance of contributions. In the event of the complete termination of the Plan or discontinuance of contributions, the Trustee will, after payment of all expenses of the Trust Fund, make distribution of the Trust asses to the Participants or other persons entitled thereto, in such form as the Employer may direct pursuant to Article 10 or, in the absence of such direction, in a single payment in cash or in kind. Upon completion of such distributions under this Article, the Trust will terminate, the Trustee and the Insurance Trustee will be relieved from their obligations under the Trust, and no Participant or other person will have any further claim thereunder. 83..4 Approval of Plan. Notwithstanding any other provision of the Plan, if the Employer fails to obtain or to retain the approval by the Internal Revenue Service of the Plan as a qualified plan under section 401(a) of the Code, then (i) the Employer shall promptly notify the Trustee, and (ii) the Employer may no longer participate in the Putnam prototype plan, but will be deemed to have an individually designed plan. If it is determined by the Internal Revenue Service that the Plan upon its initial adoption does not qualify under section 401(a) of the Code, all assets then held under the Plan will be returned within one year of the denial of initial qualification to the Participants and the Employer to the extent attributable to their respective contributions and any income earned thereon, but only if the application for qualification is made by the time prescribed by law for filing the Employer's federal income tax return for the taxable year in which the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe. Upon such distribution, the Plan will be considered to be rescinded and to be of no force or effect. ARTICLE 84. TRANSFERS FROM OTHER QUALIFIED PLANS; MERGERS 84..1 General. Notwithstanding any other provision hereof, subject to the approval of the Trustee there may be transferred to the Trustee all or any of the assets held (whether by a trustee, custodian or otherwise) in respect of any other plan which satisfies the applicable requirements of section 401(a) of the Code and which is maintained for the benefit of any Employee (provided, however, that the Employee is not a member of a class of Employees excluded from eligibility to participate in the Plan) except that insurance policies held in respect of such other plan shall be transferred to the Insurance Trustee as trustee if the Employer so determines. Any such assets so transferred shall be accompanied by written instructions from the Employer naming the persons for whose benefit such assets have been transferred and showing separately the respective contributions made by the Employer and by the Participants and the current value of the assets attributable thereto. 84..2 Amounts Transferred. The Employer shall credit any assets transferred pursuant to Section 20.1 to the appropriate Accounts of the persons for whose benefit such assets have been transferred. Any amounts credited as contributions previously made by an employer or by such persons under such other plan shall be treated as contributions previously made under the Plan by the Employer or by such persons, as the case may be. 84..3 Merger or Consolidation. The Plan shall not be merged or consolidated with any other plan, nor shall any assets or liabilities of the Trust Fund be transferred to any other plan, unless each Participant would receive a benefit immediately after the transaction, if the Plan then terminated, which is equal to or greater than the benefit he would have been entitled to receive immediately before the transaction if the Plan had then terminated. ARTICLE 85. MISCELLANEOUS 85..1 Notice of Plan. The Plan shall be communicated to all Participants by the Employer on or before the last day on which such communication may be made under applicable law. 85..2 No Employment Rights. Neither the establishment of the Plan and the Trust, nor any amendment thereof, nor the creation of any fund or account, nor the purchase of Policies, nor the payment of any benefits shall be construed as giving to any Participant or any other person any legal or equitable right against the Employer, the Trustee, or the Insurance Trustee, except as provided herein or by ERISA; and in no event shall the terms of employment or service of any Participant be modified or in any way be affected hereby. 85..3 Distributions Exclusively From Plan. Participants and Beneficiaries shall look solely to the assets held in the Trust and any Policies purchased pursuant to the Plan for the payment of any benefits under the Plan. 85..4 No Alienation. 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 as provided in Section 12.4 or in accordance with a qualified domestic relations order within the meaning of section 414(p) of the Code. The Plan Administrator shall determine whether a domestic relations order is qualified in accordance with written procedures adopted by the Plan Administrator. 85..5 Provision of Information. The Employer, Trustee and Insurance Trustee shall furnish to each other such information relating to the Plan and Trust as may be required under the Code or ERISA and any regulations issued or forms adopted by the Treasury Department or the Labor Department or otherwise thereunder. 85..6 No Prohibited Transactions. The Employer, Trustee, and Insurance Trustee shall, to the extent of their respective powers and authority under the Plan, prevent the Plan from engaging in any transaction known by that person to constitute a transaction prohibited by section 4975 of the Code and any rules or regulations with respect thereto. 85..7 Governing Law. The Plan shall be construed, administered, regulated and governed in all respects under and by the laws of the United States, and to the extent permitted by such laws, by the laws of the Commonwealth of Massachusetts 85..8 Gender. Whenever used herein, a pronoun in the masculine gender includes the feminine gender unless the context clearly indicates otherwise. EX-99.B16 6 PERF QUOT SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: The George Putnam Fund of Boston -- Class A Shares Fiscal period ending: July 31, 1996 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 $1,000 $1,000 ERV = Ending Redeemable Value $1,081 $1,627 $2,766 T = Average Annual Total Return 8.15% 10.23% 10.71%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $6,594,203 Expenses $1,210,673 Reimbursement $0 Average shares 95,342,185 NAV $15.82 Sales Charge 5.75% POP $16.79 Yield at POP 4.08% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: The George Putnam Fund of Boston -- Class B Shares Fiscal period ending: July 31, 1996 Inception date (if less than 10 years of performance): 4/27/92 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 N/A $1,000 ERV = Ending Redeemable Value $1,089 N/A $1,526 T = Average Annual Total Return 8.90% N/A 10.43%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $1,864,524 Expenses $605,004 Reimbursement $0 Average shares 27,098,583 NAV $15.73 Maximum Contingent Deferred Sales Charge 5.0% Yield at NAV 3.58% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: The George Putnam Fund of Boston -- Class M Shares Fiscal period ending: July 31, 1996 Inception date (if less than 10 years of performance): 12.1.94 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 N/A $1,000 ERV = Ending Redeemable Value $1,102 N/A $1,307 T = Average Annual Total Return 10.24% N/A 17.39%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $207,235 Expenses $58,229 Reimbursement $0 Average shares 3,017,499 NAV $15.74 Sales Charge 3.50% POP $16.31 Yield at POP 3.67% SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS Fund name: The George Putnam Fund of Boston -- Class Y Shares Fiscal period ending: July 31, 1996 Inception date (if less than 10 years of performance): 4/1/94 TOTAL RETURN Formula -- Average Annual Total Return: ERV = P(1+T)^n n = Number of Time Periods 1 Year 5 Years 10 Years* P = Initial Investment $1,000 N/A $1,000 ERV = Ending Redeemable Value $1,151 N/A $1,408 T = Average Annual Total Return 15.09% N/A 15.73%* *Life of fund, if less than 10 years YIELD Formula: Interest + Dividends - Expenses 2 (-------------------------------------------------- +1)(6) -1 POP x Average shares Interest and Dividends $903,757 Expenses $126,449 Reimbursement $0 Average shares 13,045,576 NAV $15.84 Yield at NAV 4.56% EX-27.CLASSA 7 FINANCIAL DATA SCHEDULE-CLASS A WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM The George Putnam Fund of Boston Class A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JUL-31-1996 JUL-31-1996 2,039,520,422 2,192,982,094 28,619,989 2,257,109 0 2,223,859,192 8,833,506 0 7,437,964 16,271,470 0 1,941,502,467 95,751,649 69,584,268 15,363,543 0 97,653,721 0 153,067,991 2,207,587,722 36,769,422 53,497,207 0 18,610,440 71,656,189 135,274,116 15,062,707 221,993,012 0 (45,601,237) (45,185,859) 0 34,625,208 (13,576,096) 5,118,269 784,987,282 5,193,372 26,024,192 0 0 6,565,587 0 19,377,103 1,278,938,854 14.90 .63 1.50 0 (1.21) 0 15.82 .95 0 0
EX-27.CLASSB 8 FINANCIAL DATA SCHEDULE-CLASS B WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM The George Putnam Fund of Boston Class B AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JUL-31-1996 JUL-31-1996 2,039,520,42 2,192,982,094 28,619,989 2,257,109 0 2,223,859,192 8,833,506 0 7,437,964 16,271,470 0 1,941,502,467 27,660,741 15,116,495 15,363,543 0 97,653,721 0 153,067,991 2,207,587,722 36,769,422 53,497,207 0 18,610,440 71,656,189 135,274,116 15,062,707 221,993,012 0 (9,159,784) (10,868,927) 0 14,194,836 (2,872,681) 1,222,091 784,987,282 5,193,372 26,024,192 0 0 6,565,587 0 19,377,103 321,033,662 14.83 .51 1.50 0 (1.10) 0 15.74 1.71 0 0
EX-27.CLASSM 9 FINANCIAL DATA SCHEDULE-CLASS M WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM The George Putnam Fund of Boston Class M AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JUL-31-1996 JUL-31-1996 2,039,520,422 2,192,982,094 28,619,989 2,257,109 0 2,223,859,192 8,833,506 0 7,437,964 16,271,470 0 1,941,502,467 3,147,719 550,004 15,363,543 0 97,653,721 0 153,067,991 2,207,587,722 36,769,422 53,497,207 0 18,610,440 71,656,189 135,274,116 15,062,707 221,993,012 0 (712,551) (596,616) 0 2,783,402 (267,504) 81,817 784,987,282 5,193,372 26,024,192 0 0 6,565,587 0 19,377,103 24,930,471 14.84 .55 1.50 0 (1.15) 0 15.74 1.50 0 0
EX-27.CLASSY 10 FINANCIAL DATA SCHEDULE-CLASS Y WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM The George Putnam Fund of Boston Class Y AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JUL-31-1996 JUL-31-1996 2,039,520,422 2,192,982,094 28,619,989 2,257,109 0 2,223,859,192 8,833,506 0 7,437,964 16,271,470 0 1,941,502,467 13,095,592 10,297,928 15,363,543 0 97,653,721 0 153,067,991 2,207,587,722 36,769,422 53,497,207 0 18,610,440 71,656,189 135,274,116 15,062,707 221,993,012 0 (7,086,721) (6,792,626) 0 4,154,040 (2,265,107) 908,731 784,987,282 5,193,372 26,024,192 0 0 6,565,587 0 19,377,103 186,209,009 14.92 .68 1.50 0 (1.25) 0 15.85 .70 0 0
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