EXHIBIT 99.8(b)
SPECIAL CUSTODY ACCOUNT AGREEMENT
(SHORT SALES)
AGREEMENT (the "Agreement") dated as of October 19, 1998, by and among
Custodial Trust Company, in its capacity as custodian hereunder (the "Bank"),
Xxxx Xxxxxxxxx Series Trust, on behalf of its Xxxx Xxxxxxxxx Select Sectors
Market Neutral Fund (the "Customer"), and Bear, Xxxxxxx Securities Corp. (the
"Broker").
WHEREAS, Broker is a securities broker-dealer and is a member of several
national securities exchanges; and
WHEREAS, Customer desires from time to time to execute various
securities transactions, including short sales (which are permitted by
Customer's investment policies), and in connection therewith has executed
Broker's Customer Agreement which provides for margin transactions; and
WHEREAS, to facilitate Customer's transactions in short sales of
securities, Customer and Broker desire to establish procedures for the
compliance by Broker with the provisions of Regulation T of the Board of
Governors of the Federal Reserve System and other applicable requirements
(the "Margin Rules"); and
WHEREAS, to assist Broker and Customer in complying with the Margin Rules,
Bank is prepared to act as custodian to hold Collateral as defined below.
NOW THEREFORE, be it agreed as follows:
1. DEFINITIONS
As used herein, the following terms have the following meanings:
(a) "Adequate Margin" in respect of short sales shall mean such collateral
as is adequate in Broker's reasonable judgment under the Margin Rules
and the internal policies of Broker, the latter of which shall be
subject to modification by Broker in its sole and absolute discretion
upon prior notice given orally to Customer and Bank.
(b) "Advice from Broker" or "Advice" means a written notice sent to
Customer and Bank or transmitted by a facsimile sending device, except
that Advice for initial or additional Collateral or with respect to
Broker's ability to effect a short sale for the Customer may be given
orally. With respect to any short sale or Closing Transaction, the
Advice from Broker shall mean a standard confirmation in use by Broker
and sent or transmitted to Customer and Bank. With respect to
substitutions or releases of Collateral, Advice from Broker means a
written notice signed by
Broker and sent or transmitted to Customer and Bank. An authorized
agent of Broker will certify to Customer and Bank the names and
signatures of those employees who are authorized to sign Advice from
Broker, which certification may be amended from time to time. When
used herein, the term "Advise" means the act of sending an Advice from
Broker.
(c) "Closing Transaction" is a transaction in which Customer purchases
securities which have been sold short.
(d) "Collateral" shall mean cash or U.S. Government securities or other
marginable securities acceptable to Broker.
(e) "Insolvency" means that (A) an order, judgment or decree has been
entered under the bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or
similar law (herein called the "Bankruptcy law") of any competent
jurisdiction adjudicating the Customer insolvent; or (B) the Customer
has petitioned or applied to any tribunal for, or consented to the
appointment of, or taking possession by, a trustee, receiver,
liquidator or similar official, of the Customer, or commenced a
voluntary case under the Bankruptcy Law of the United States or any
proceedings relating to the Customer under the Bankruptcy Law of any
other competent jurisdiction, whether now or hereinafter in effect;
or (C) any such petition or application has been filed, or any such
proceedings commenced, against the Customer and the Customer by any
act has indicated its approval thereof, consent thereto or
acquiescence therein, or an order for relief has been entered in an
involuntary case under the Bankruptcy Law of the United States, as
now or hereinafter constituted, or an order, judgment or decree has
been entered appointing any such trustee, receiver, liquidator or
similar official, or approving the petition in any such proceedings,
and such order, judgment or decree remains unstayed and in effect for
more than 60 days.
(f) "Instructions from Customer" or "Instructions" means a request,
direction or certification in writing signed by Customer and delivered
to Bank and Broker or transmitted by a facsimile sending device. An
officer of Customer will certify to Bank and Broker the names and
signatures of those persons authorized to sign the instructions, which
certification may be amended from time to time. When used herein, the
term "Instruct" shall mean the act of sending an Instruction from
Customer.
(g) "Receipt of Payment" means receipt by Bank, of (1) a certified or
official bank check or wire transfer to Bank; (2) a written or
telegraphic advice from a registered clearing agency that funds have
been or will be credited to the account of Bank; or (3) a transfer of
funds from any of Broker's accounts maintained at Bank.
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(h) "Receipt of Securities" means receipt by Bank, of (1) securities in
proper form for transfer; or (2) a written or telegraphic advice from
a registered clearing agency that securities have been credited to the
account of Bank for the Special Custody Account.
(i) "Special Custody Account" shall have the meaning assigned to that term
in Section 2 hereof.
2. SPECIAL CUSTODY ACCOUNT
(a) OPENING CUSTODY ACCOUNT. Bank shall open an account on its books
entitled "Special Custody Account for Bear, Xxxxxxx Securities Corp.
as Pledgee of Xxxx Xxxxxxxxx Series Trust, on behalf of its Xxxx
Xxxxxxxxx Select Sectors Market Neutral Fund" (the "Special Custody
Account") and shall hold therein all securities and similar property
as shall be received and accepted by it therein pursuant to this
Agreement. Customer agrees to instruct Bank in Instructions from
Customer as to cash and specific securities which Bank is to identify
on its books and records as pledged to Broker as Collateral in the
Special Custody Account. Customer agrees that the value of such cash
and securities shall be at least equal in value to what Broker shall
initially and from time to time Advise Customer in an Advice from
Broker is necessary to constitute Adequate Margin. Such Collateral
(i) will be held by Bank for Broker as agent of Broker, (ii) may be
released only in accordance with the terms of this Agreement, and
(iii) except as required to be released hereunder to Broker, shall
not be made available to Broker or any other person claiming through
Broker, including the creditors of the Broker. In the event Customer
wishes to add another series of Xxxx Xxxxxxxxx Series Trust to this
Agreement, the title of such account shall be appended to this
Agreement as a schedule.
(b) SECURITY INTEREST. Customer hereby grants a continuing security
interest to Broker in the Collateral in the Special Custody Account.
To perfect Broker's security interest, Bank will hold the Collateral
in the Special Custody Account, subject to the interest therein of
Broker as the pledgee and secured party thereof in accordance with
the terms of this Agreement. Such security interest will terminate
at such time as Collateral is released as provided herein. Bank
shall have no responsibility for the validity or enforceability of
such security interest.
(c) CONFIRMATION. Bank will confirm in writing to Broker and Customer all
pledges, releases or substitutions of Collateral and will supply
Broker and Customer with a monthly statement of Collateral and
transactions in the Special Custody Account for such month. Bank
will also advise Broker upon request of the kind and amount of
Collateral pledged to Broker.
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(d) EXCESS COLLATERAL. Upon the request of Customer, Broker shall Advise
Bank and Customer of any excess of Collateral in the Special Custody
Account. Such excess shall at Customer's request be transferred
therefrom upon Advice from Broker. Customer represents and warrants to
Broker that securities included at any time in the Collateral shall be
in good deliverable form (or bank shall have the unrestricted power to
put such securities into good deliverable form) in accordance with the
requirements of such exchanges as may be the primary market or markets
for such securities.
(e) ACCOUNTS AND RECORDS. Bank will maintain accounts and records for the
Collateral in the Special Custody Account as more fully described in
paragraph 5 hereof. The Collateral shall at all times remain the
property of the Customer subject only to the extent of the interest
and rights therein of Broker as the pledgee thereof.
3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES
(a) SHORT SALES. From time to time, Customer may place orders with Broker
for the short sale of securities. Prior to the acceptance of such
orders Broker will Advise Customer of Broker's ability to borrow such
securities or other properties and acceptance of short sale orders
will be contingent upon same.
(b) OPEN SHORT SALES BALANCE. Broker shall, based on the closing market
price on each business day, compute the aggregate net credit or debit
balance on Customer's open short sales and advise Customer and/or
Customer's designated agent by 11:00 A.M. New York time on the next
business day (the "Determination Day") of the amount of the net debit
or credit, as the case may be. If a net debit balance exists on the
Determination Day, Customer will cause an amount equal to such net
debit balance to be paid to Broker by the close of business on the
Determination Day. If a net credit balance exists on the
Determination Day, Broker will pay such credit balance to Customer by
the close of business on the Determination Day. As Customer's open
short positions are marked-to-market each business day, payments will
be made by or to Customer to reflect changes (if any) in the credit
or debit balances. Broker will charge interest on debit balances,
and Broker will pay interest on credit balances. Balances will be
appropriately adjusted when short sales are closed out.
4. PLACING ORDERS
It is understood and agreed that Customer, when placing with Broker any
order to sell short for Customer's account, will designate the order as such
and hereby authorizes Broker to xxxx such order as being "short", and when
placing with Broker any order to sell long for Customer's account, will
designate the order as such and hereby authorizes Broker to xxxx such order
as being "long".
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Any sell order which Customer shall designate as being for long account as
above provided is for securities then owned by Customer and, if such
securities are not then deliverable by Broker from any account of Customer,
the placing of such order shall constitute a representation by Customer that
it is impracticable for Customer then to deliver such securities to Broker
but that Customer shall deliver them by the settlement date or as soon as
possible thereafter.
5. RIGHTS AND DUTIES OF THE BANK
(a) GENERALLY. Except as set forth in sub-paragraph 2(d) hereof, the Bank
shall receive and hold in the Special Custody Account, as custodian
upon the terms of this Agreement, all Collateral deposited and
maintained pursuant to the terms of this Agreement and all monies and
other property paid, distributed or substituted in respect of such
Collateral or realized on the sale or other disposition of such
Collateral; provided, however, that the Bank shall have no duty to
require any money or securities to be delivered to it or to determine
that the amount and form of assets delivered to it comply with any
applicable requirements. Collateral held in the Special Custody
Account shall be released only in accordance with this Agreement or as
required by applicable law. The Customer warrants its authority to
deposit in such account any money, securities and other property
received by the Bank. The Bank may hold the securities in the Special
Custody Account in bearer, nominee, book entry, or other form and in a
depository or clearing corporation, with or without indicating that
the securities are held hereunder; provided, however, that all
securities held in the Special Custody Account shall be identified on
the Bank's records as subject to this Agreement and shall be in a
form that permits transfer without additional authorization or consent
of the Customer.
(b) DIVIDENDS AND INTEREST. Any interest, dividends or other
distributions paid with respect to the Collateral held in the Special
Custody Account shall be retained therein as additional Collateral.
(c) REPORTS. The Bank shall provide Broker and Customer with written
confirmation of each transfer into and out of the Special Custody
Account, in each case as promptly as practical, but in any event not
later than the next business day. The Bank also shall render to the
Broker and the Customer and/or Customer's designated agent a monthly
statement of the Collateral held in the Special Custody Account. In
addition, the Bank will advise the Broker and the Customer and/or
Customer's designated agent, upon request of the Broker or Customer,
at any time of the type and amount of Collateral held in the account;
provided, however, that the Bank shall have no responsibility for
making any determination as to the value of such Collateral.
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(d) LIMITATION OF BANK'S LIABILITY. The Bank's duties and
responsibilities under this Agreement are as set forth herein. The
Bank shall act only upon receipt of Advice from Broker regarding
release or substitution of Collateral. The Bank shall not be liable
or responsible for anything done, or omitted to be done by it in good
faith and in the absence of negligence and may rely and shall be
protected in acting upon any notice, instruction or other
communication which it reasonably believes to be genuine and
authorized. As between Customer and the Bank, the terms of the
Custodian Agreement entered into thereby shall apply with respect to
the responsibilities of the Bank and any losses or liabilities of
such parties arising out of matters covered by this Agreement. As
between the Bank and Broker, Broker shall indemnify and hold the Bank
harmless with regard to any losses or liabilities of the Bank
(including counsel fees) imposed on or incurred by the Bank arising
out of any action or omission of the Bank in accordance with any
Advice, notice or instruction of Broker under this Agreement. In
matters concerning or relating to this Agreement, the Bank shall not
be responsible for compliance with any statute or regulation
regarding the establishment or maintenance of margin credit, including
but not limited to Regulations T or X of the Board of Governors of
the Federal Reserve System, or with any rules or regulations of the
Office of the Controller of the Currency (or the Securities and
Exchange Commission). With respect to all securities, however
registered, it is understood that all voting rights and other rights
and powers shall be exercised exclusively by Customer. Bank's only
duty with respect thereto shall be to mail to Customer any documents
received, including proxy statements and offering circulars, with any
proxies for securities registered in a nominee name executed by such
nominee. The Bank shall not be liable to any party for any acts or
omissions of the other parties to this Agreement.
(e) COMPENSATION. Bank shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time
be agreed upon in writing between Customer and Bank.
6. DEFAULT
In the event of any failure by Customer to timely comply with any
obligation on Customer's part to be performed or observed under this
Agreement or the Customer Agreement, including, but not limited to, the
obligation to maintain Adequate Margin, or in the event of Customer's
Insolvency, Broker may effect a Closing Transaction or buy-in of any
securities of which Customer's account may be short, provided that Broker
shall first use reasonable efforts to (i) give notice to Customer specifying
such default (which notice may be by telegraph, facsimile transmission or
hand delivery) and (ii) hold a discussion with Customer regarding such
default and Broker's intended actions in response thereto. Notwithstanding
the foregoing, neither notice nor a discussion shall be required in the event
market conditions render same impracticable in the reasonable discretion of
Broker. In the event of any default
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as aforesaid, after making a reasonable attempt to give notice to and hold a
discussion with Customer (subject to market conditions as set forth above),
Broker shall also have the right to sell any and all Collateral in the
Special Custody Account and to give Advice to Bank to deliver such Collateral
free of payment to Broker, which Advice shall state that, pursuant to this
Agreement, the condition precedent to Broker's right to receive such
Collateral free of payment has occurred. The Bank will provide immediate
telephone notice to Customer of any receipt by Bank of Advice from Broker to
deliver Collateral free of payment, and shall promptly effect delivery of
Collateral to Broker. Subject to applicable requirements of the New York
Uniform Commercial Code, such sale or purchase may be made according to
Broker's judgement and may be made at Broker's discretion, on the principal
exchange or other market for such securities, or in the event such principal
market is closed, in a manner commercially reasonable for such securities.
7. LIMITATION OF BROKER LIABILITY
Broker shall not be liable for any losses, costs, damages, liabilities
or expenses suffered or incurred by Customer as a result of any transaction
executed hereunder, or any other action taken or not taken by Broker hereunder
for Customer's account at Customer's direction or otherwise, except to the
extent that such loss, cost, damage, liability or expense is the result of
Broker's own negligence, recklessness, willful misconduct or bad faith. With
respect to all securities in the Special Custody Account, it is understood that
all voting rights and other rights and powers shall be exercised exclusively
by Customer, and that Broker shall have no responsibilities in connection
therewith, whether pertaining to the delivery of proxy statements or offering
circulars or otherwise.
8. CUSTOMER REPRESENTATION
Customer represents and warrants that the Collateral will not be subject to
any other liens or encumbrances other than those granted to the Bank under the
Custodian Agreement.
9. TERMINATION
Any of the parties hereto may terminate this Agreement by 30 days' notice
in writing to the other parties hereto; provided, however, that the status of
any short sales, and of Collateral held at
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the time of such notice to margin such short sales shall not be affected by such
termination until the release of such Collateral pursuant to applicable law or
regulations or rules of any self regulatory organization to which the Broker is
subject. In the event of the release of Collateral, the Collateral shall be
transferred to Customer.
10. NOTICE
Written communications hereunder shall be telegraphed, sent by facsimile
transmission or hand delivered as required herein, when another method of
delivery is not specified, may be mailed first class postage prepaid, except
that written notice of termination shall be sent by certified mail, addressed:
(a) if to Bank, to:
Custodial Trust Company
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Vice President - Trust Operations
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to Customer, to:
Xxxx Xxxxxxxxx Series Trust
0 Xxxxxx Xxx, Xxxxxxxx X
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) if to Broker, to:
Bear, Xxxxxxx Securities Corp.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx, Treasurer
Telephone: 000-000-0000
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Facsimile: 000-000-0000
11. CONTROLLING LAW
The construction and enforcement of this Agreement shall be subject to and
governed by the laws of the State of New York.
12. LIMITATION OF LIABILITY
To the extent that the trustees of Xxxx Xxxxxxxxx Series Trust are
regarded as entering into this Agreement, they do so only as trustees thereof
and not individually. The obligations under this Agreement of Xxxx Xxxxxxxxx
Series Trust or Xxxx Xxxxxxxxx Select Sectors Market Neutral Fund shall not
be binding upon any trustee, officer or employee of Xxxx Xxxxxxxxx Series
Trust individually, or upon any holder of shares issued by Xxxx Xxxxxxxxx
Series Trust individually, but shall be binding only upon the assets and
property of Xxxx Xxxxxxxxx Select Sectors Market Neutral Fund. Such
trustees, officers, employees and holders, when acting in such capacities,
shall not be personally liable under this Agreement, and Broker and Bank
shall look solely to the assets and property of Xxxx Xxxxxxxxx Select Sectors
Market Neutral Fund for the performance of this Agreement thereby and for the
payment of any claim against Xxxx Xxxxxxxxx Select Sectors Market Neutral
Fund pertaining to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the day and year first above
written.
XXXX XXXXXXXXX SERIES TRUST,
ON BEHALF OF ITS
XXXX XXXXXXXXX SELECT
SECTORS MARKET NEUTRAL FUND
By:
------------------------------
Name:
Title:
CUSTODIAL TRUST COMPANY
By:
------------------------------
Name:
Title:
BEAR, XXXXXXX SECURITIES CORP.
By:
------------------------------
Name:
Title:
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EXHIBIT A
DATE NAME OF PORTFOLIO SIGNATURE, PRINTED NAME SIGNATURE, PRINTED NAME SIGNATURE, PRINTED NAME
AND TITLE OF AUTHORIZED AND TITLE OF AUTHORIZED AND TITLE OF AUTHORIZED
PERSON FOR BROKER PERSON FOR CUSTOMER PERSON FOR BANK
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DATE NAME OF PORTFOLIO SIGNATURE, PRINTED NAME SIGNATURE, PRINTED NAME SIGNATURE, PRINTED NAME
AND TITLE OF AUTHORIZED AND TITLE OF AUTHORIZED AND TITLE OF AUTHORIZED
PERSON FOR BROKER PERSON FOR CUSTOMER PERSON FOR BANK
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DATE NAME OF PORTFOLIO SIGNATURE, PRINTED NAME SIGNATURE, PRINTED NAME SIGNATURE, PRINTED NAME
AND TITLE OF AUTHORIZED AND TITLE OF AUTHORIZED AND TITLE OF AUTHORIZED
PERSON FOR BROKER PERSON FOR CUSTOMER PERSON FOR BANK
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