Exhibit J
[GRAPHIC OMITTED][GRAPHIC OMITTED]
_______________________________________________________
GLOBAL CUSTODY AGREEMENT
BETWEEN
FORTRESS PINNACLE INVESTMENT FUND LLC
AND
JPMORGAN CHASE BANK
October 9, 2002
GLOBAL CUSTODY AGREEMENT
TABLE OF CONTENTS
1. INTENTION OF THE PARTIES; DEFINITIONS-----------------------------------------------------------------------1
1.1 INTENTION OF THE PARTIES------------------------------------------------------------------------------1
1.2 DEFINITIONS-------------------------------------------------------------------------------------------1
2. WHAT BANK IS REQUIRED TO DO---------------------------------------------------------------------------------3
2.1 SET UP ACCOUNTS---------------------------------------------------------------------------------------3
2.2 CASH ACCOUNT------------------------------------------------------------------------------------------3
2.3 SEGREGATION OF ASSETS; NOMINEE NAME-------------------------------------------------------------------4
2.4 SETTLEMENT OF TRADES----------------------------------------------------------------------------------4
2.5 CONTRACTUAL SETTLEMENT DATE ACCOUNTING----------------------------------------------------------------5
2.6 ACTUAL SETTLEMENT DATE ACCOUNTING---------------------------------------------------------------------5
2.7 INCOME COLLECTION (AUTOCREDIT(R))---------------------------------------------------------------------6
2.8 CERTAIN MINISTERIAL ACTS------------------------------------------------------------------------------6
2.9 CORPORATE ACTIONS-------------------------------------------------------------------------------------6
2.10 PROXIES---------------------------------------------------------------------------------------------7
2.11 STATEMENTS------------------------------------------------------------------------------------------8
2.12 ACCESS TO BANK'S RECORDS----------------------------------------------------------------------------9
2.13 MAINTENANCE OF FINANCIAL ASSETS AT SUBCUSTODIAN LOCATIONS-------------------------------------------9
2.14 TAX RECLAIMS---------------------------------------------------------------------------------------10
2.15 FOREIGN EXCHANGE TRANSACTIONS----------------------------------------------------------------------10
3. INSTRUCTIONS-----------------------------------------------------------------------------------------------10
3.1 ACTING ON INSTRUCTIONS; UNCLEAR INSTRUCTIONS---------------------------------------------------------10
3.2 CONFIRMATION OF ORAL INSTRUCTIONS/SECURITY DEVICES---------------------------------------------------10
3.3 INSTRUCTIONS; CONTRARY TO LAW/MARKET PRACTICE--------------------------------------------------------11
3.4 CUT-OFF TIMES--------------------------------------------------------------------------------------11
4. FEES EXPENSES AND OTHER AMOUNTS OWING TO BANK--------------------------------------------------------------11
4.1 FEES AND EXPENSES------------------------------------------------------------------------------------11
4.2 OVERDRAFTS-------------------------------------------------------------------------------------------11
4.3 BANK'S RIGHT OVER SECURITIES; SET-OFF---------------------------------------------------------------12
5. SUBCUSTODIANS, SECURITIES DEPOSITORIES AND OTHER AGENTS----------------------------------------------------12
5.1 APPOINTMENT OF SUBCUSTODIANS-------------------------------------------------------------------------12
5.2 LIABILITY FOR SUBCUSTODIANS--------------------------------------------------------------------------13
5.3 USE OF AGENTS----------------------------------------------------------------------------------------14
6. ADDITIONAL PROVISIONS RELATING TO CUSTOMER-----------------------------------------------------------------14
6.1 REPRESENTATIONS OF CUSTOMER AND BANK-----------------------------------------------------------------14
6.2 CUSTOMER TO PROVIDE CERTAIN INFORMATION TO BANK------------------------------------------------------15
6.3 CUSTOMER IS LIABLE TO BANK EVEN IF IT IS ACTING FOR ANOTHER PERSON-----------------------------------15
7. WHEN BANK IS LIABLE TO CUSTOMER----------------------------------------------------------------------------15
7.1 STANDARD OF CARE; LIABILITY--------------------------------------------------------------------------15
7.2 FORCE MAJEURE----------------------------------------------------------------------------------------16
7.3 BANK CAN CONSULT WITH COUNSEL------------------------------------------------------------------------16
7.4 BANK PROVIDES DIVERSE FINANCIAL SERVICES AND MAY GENERATE PROFITS AS A RESULT------------------------16
8. TAXATION---------------------------------------------------------------------------------------------------17
8.1 TAX OBLIGATIONS--------------------------------------------------------------------------------------17
8.2 TAX RECLAIMS-----------------------------------------------------------------------------------------17
9. TERMINATION------------------------------------------------------------------------------------------------18
10. MISCELLANEOUS---------------------------------------------------------------------------------------------18
10.1 NOTICES--------------------------------------------------------------------------------------------18
10.2 SUCCESSORS AND ASSIGNS-----------------------------------------------------------------------------18
10.3 INTERPRETATION-------------------------------------------------------------------------------------19
10.4 ENTIRE AGREEMENT-----------------------------------------------------------------------------------19
10.5 INFORMATION CONCERNING DEPOSITS AT BANK'S LONDON BRANCH--------------------------------------------19
10.6 INSURANCE------------------------------------------------------------------------------------------19
10.7 GOVERNING LAW AND JURISDICTION---------------------------------------------------------------------19
10.8 SEVERABILITY; WAIVER; AND SURVIVAL-----------------------------------------------------------------20
10.9 COUNTERPARTS---------------------------------------------------------------------------------------20
10.10 NO THIRD PARTY BENEFICIARIES-----------------------------------------------------------------------21
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GLOBAL CUSTODY AGREEMENT
This Agreement, dated October 9, 2002, is between JPMORGAN CHASE BANK
("BANK"), with a place of business at 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000; and
FORTRESS PINNACLE INVESTMENT FUND LLC ("CUSTOMER") with a place of business at
FIG Advisors LLC, 0000 Xxxxxx xx xxx Xxxxxxxx, 00 Xxxxx, Xxx Xxxx, XX 00000.
1. INTENTION OF THE PARTIES; DEFINITIONS
1.1 INTENTION OF THE PARTIES.
(a) This Agreement sets out the terms governing custodial, settlement
and certain other associated services offered by Bank to Customer. Bank will
be responsible for the performance of only those Securities custody duties
that are set forth in this Agreement. Customer acknowledges that Bank is not
providing any legal, tax or investment advice in connection with the services
hereunder.
(b) Investing in foreign markets may be a risky enterprise. The
holding of Financial Assets and cash in foreign jurisdictions may involve
risks of loss or other special considerations. Bank will not be liable for any
loss that results from the general risks of investing or Country Risk.
1.2 DEFINITIONS.
(a) As used herein, the following terms have the meaning hereinafter
stated.
"ACCOUNT" has the meaning set forth in Section 2.1 of this Agreement.
"AFFILIATE" means an entity controlling, controlled by, or under
common control with, Bank.
"AFFILIATED SUBCUSTODIAN" means a Subcustodian that is an Affiliate.
"APPLICABLE LAW" means any statute, whether national, state or local,
applicable in the United States or any other country (including, without
limitation, the U.S. Investment Company Act of 1940 (the "1940 Act"), as
amended and the rules and regulations promulgated thereunder), the rules of
the treaty establishing the European Community, any other law, rule,
regulation or interpretation of any governmental entity, any applicable common
law, and any decree, injunction, judgment, order, ruling, or writ of any
governmental entity.
"AUTHORIZED PERSON" means any person who has been designated by
written notice from Customer (or by any agent designated by Customer,
including, without limitation, an investment manager) to act on behalf of
Customer hereunder. Such persons will continue to be Authorized Persons until
such time as Bank receives Instructions from Customer (or its agent) that any
such person is no longer an Authorized Person.
"BANK INDEMNITEES" means Bank, its Subcustodians, and their
respective nominees, directors, officers, employees and agents.
"BANK'S LONDON BRANCH" means the London branch office of JPMorgan
Chase Bank.
"CASH ACCOUNT" has the meaning set forth in Section 2.1(a)(ii).
"CORPORATE ACTION" means any subscription right, bonus issue, stock
repurchase plan, redemption, exchange, tender offer, or similar matter with
respect to a Financial Asset in the Securities Account that require
discretionary action by the holder, but does not include proxy solicitations.
"COUNTRY RISK" means the risk of investing or holding assets in a
particular country or market, including, but not limited to, risks arising
from nationalization, expropriation or other governmental actions; the
country's financial infrastructure, including prevailing custody and
settlement practices; laws applicable to the safekeeping and recovery of
Financial Assets and cash held in custody; the regulation of the banking and
securities industries, including changes in market rules; currency
restrictions, devaluations or fluctuations; and market conditions affecting
the orderly execution of securities transactions or the value of assets.
"ENTITLEMENT HOLDER" means the person named on the records of a
Securities Intermediary as the person having a Securities Entitlement against
the Securities Intermediary.
"FINANCIAL ASSET" means a Security and refers, as the context
requires, either to the asset itself or to the means by which a person's claim
to it is evidenced, including a Security, a security certificate, or a
Securities Entitlement. "FINANCIAL ASSET" does not include cash.
"INSTRUCTIONS" means instructions which: (i) contain all necessary
information required by Bank to enable Bank to carry out the Instructions;
(ii) are received by Bank in writing or via Bank's electronic instruction
system, SWIFT, telephone, tested telex, facsimile or such other methods as are
for the time being agreed by Customer (or an Authorized Person) and Bank; and
(iii) Bank believes in good faith have been given by an Authorized Person or
are transmitted with proper testing or authentication pursuant to terms and
conditions which Bank may specify.
"LIABILITIES" means any liabilities, losses, claims, costs, damages,
penalties, fines, obligations, or expenses of any kind whatsoever (including,
without limitation, reasonable attorneys', accountants', consultants' or
experts' fees and disbursements).
"SECURITIES" means stocks, bonds, rights, warrants and other
negotiable and non-negotiable instruments, whether issued in certificated or
uncertificated form, that are commonly traded or dealt in on securities
exchanges or financial markets. "SECURITIES" also means other obligations of
an issuer, or shares, participations and interests in an issuer recognized in
the country in which it is issued or dealt in as a medium for investment and
any other property as may be acceptable to Bank for the Securities Account.
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"SECURITIES ACCOUNT" means each Securities custody account on Bank's
records to which Financial Assets are or may be credited pursuant hereto.
"SECURITIES DEPOSITORY" has the meaning set forth in Section 5.1 of
this Agreement.
"SECURITIES ENTITLEMENT" means the rights and property interests of
an Entitlement Holder with respect to a Financial Asset as set forth in Part 5
of Article 8 of the Uniform Commercial Code of the State of New York, as the
same may be amended from time to time.
"SECURITIES INTERMEDIARY" means Bank, a Subcustodian, a Securities
Depository, and any other financial institution which in the ordinary course
of business maintains Securities custody accounts for others and acts in that
capacity.
"SUBCUSTODIAN" has the meaning set forth in Section 5.1 and includes
Affiliated Subcustodians.
(b) All terms in the singular will have the same meaning in the
plural unless the context otherwise provides and visa versa.
2. WHAT BANK IS REQUIRED TO DO
2.1 SET UP ACCOUNTS.
(a) Bank will establish and maintain the following accounts
("ACCOUNTS"):
(i) a Securities Account in the name of Customer for
Financial Assets, which may be received by or on
behalf of Bank or its Subcustodian for the account
of Customer, including as an Entitlement Holder;
and
(ii) an account in the name of Customer ("CASH ACCOUNT")
for any and all cash in any currency received by or
on behalf of Bank for the account of Customer.
Notwithstanding paragraph (ii), cash held in respect of those markets where
Customer is required to have a cash account in its own name held directly with
the relevant Subcustodian or a Securities Depository will be held in that
manner and will not be part of the Cash Account.
(b) At the request of Customer, additional Accounts may be opened in
the future, which will be subject to the terms of this Agreement.
2.2 CASH ACCOUNT.
Except as otherwise provided in Instructions acceptable to Bank, all
cash held in the Cash Account will be deposited during the period it is
credited to the Accounts in one or more deposit accounts at Bank or at Bank's
London Branch. Any cash so deposited with Bank's London Branch will be payable
exclusively by Bank's London Branch in the applicable currency, subject
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to
compliance with Applicable Law, including, without limitation, any
restrictions on transactions in the applicable currency imposed by the country
of the applicable currency.
2.3 SEGREGATION OF ASSETS; NOMINEE NAME.
(a) Bank will identify in its records that Financial Assets credited
to Customer's Securities Account belong to Customer (except as otherwise may
be agreed by Bank and Customer).
(b) To the extent permitted by Applicable Law or other market
practice, Bank will require each Subcustodian to identify in its own records
that Financial Assets held at such Subcustodian by Bank on behalf of its
customers belong to customers of Bank, such that it is readily apparent that
the Financial Assets do not belong to Bank or the Subcustodian.
(c) Bank is authorized, in its discretion:
(i) to hold in bearer form, such Financial Assets as
are customarily held in bearer form or are
delivered to Bank or its Subcustodian in bearer
form;
(ii) to hold Securities in or deposit Securities with
any Securities Depository, settlement system or
dematerialized book entry or similar systems in
compliance with applicable Federal Reserve Board
and Securities and Exchange Commission (the "SEC")
rules and regulations; and
(iii) to register in the name of Customer, Bank, a
Subcustodian, a Securities Depository, or their
respective nominees, such Financial Assets as are
customarily held in registered form..
(d) All Financial Assets of Customer held in physical form will be
physically segregated in a Securities Account solely for the benefit of
Customer.
(e) Bank is authorized, when directed to do so by Xxxxxxxx, to hold
Financial Assets at third parties and to register Financial Assets in broker
"street name" or in the name of other third parties (or their nominees).
Notwithstanding Section 7.1, Bank shall have no liability for any loss of
Financial Assets or other damages resulting from holding or registering
Financial Assets as so directed by Customer.
Customer authorizes Bank or its Subcustodian to hold Financial Assets in
omnibus accounts and will accept delivery of Financial Assets of the same
class and denomination as those with Bank or its Subcustodian.
2.4 SETTLEMENT OF TRADES.
When Bank receives an Instruction directing settlement of a
transaction in Financial Assets that includes all information required by
Bank, Bank will use reasonable care to effect such settlement as instructed.
Settlement of transactions in Financial Assets will be conducted in accordance
with prevailing standards of the market in which the transaction occurs;
provided
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that, wherever practicable, transactions will be settled on a
"delivery versus payment" basis. Without limiting the generality of the
foregoing, the risk of loss will be Customer's whenever Bank delivers
Financial Assets or payment in accordance with applicable market practice in
advance of receipt or settlement of the expected consideration. In the case of
the failure of Customer's counterparty (or other appropriate party) to deliver
the expected consideration as agreed, Bank will contact the counterparty to
seek settlement, but Bank will not be obligated to institute legal
proceedings, file a proof of claim in any insolvency proceeding, or take any
similar action.
2.5 CONTRACTUAL SETTLEMENT DATE ACCOUNTING.
(a) Bank will effect book entries on a "contractual settlement date
accounting" basis as described below with respect to the settlement of trades
in those markets where Bank generally offers contractual settlement date
accounting and will notify Customer of those markets from time to time.
(i) SALES: On the settlement date for a sale, Bank will
credit the Cash Account with the proceeds of the
sale and transfer the relevant Financial Assets to
an account at Bank pending settlement of the trade
where not already delivered.
(ii) PURCHASES: On the settlement date for the purchase
(or earlier, if market practice requires delivery
of the purchase price before the settlement date),
Bank will debit the Cash Account for the settlement
amount and credit a separate account at Bank. Bank
then will post the Securities Account as awaiting
receipt of the expected Financial Assets. Customer
will not be entitled to the Financial Assets that
are awaiting receipt until Bank or a Subcustodian
actually receives them.
Bank reserves the right to restrict in good faith the availability of
contractual settlement date accounting for credit or operational reasons.
(b) Bank may (in its absolute discretion) upon oral or written
notification to Customer reverse any debit or credit made pursuant to Section
2.5(a) prior to a transaction's actual settlement, and Customer will be
responsible for any costs or liabilities resulting from such reversal.
Customer acknowledges that the procedures described in this sub-section are of
an administrative nature, and Bank does not undertake to make loans and/or
Financial Assets available to Customer.
2.6 ACTUAL SETTLEMENT DATE ACCOUNTING.
With respect to any sale or purchase transaction that is not posted
to the Account on the contractual settlement date as referred to in Section
2.5, Bank will post the transaction on the date on which the cash or Financial
Assets received as consideration for the transaction is actually received by
Bank.
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2.7 INCOME COLLECTION (AUTOCREDIT(R)).
(a) Bank will credit the Cash Account with income and redemption
proceeds on Financial Assets in accordance with the times notified by Bank
from time to time on or after the anticipated payment date, net of any taxes
that are withheld by Bank or any third party. Where no time is specified for a
particular market, income and redemption proceeds from Financial Assets will
be credited only after actual receipt and reconciliation. Bank may reverse
such credits upon oral or written notification to Customer that Bank believes
that the corresponding payment will not be received by Bank within a
reasonable period or such credit was incorrect.
(b) Bank will make good faith efforts in its discretion to contact
appropriate parties to collect unpaid interest, dividends or redemption
proceeds, but neither Bank nor its Subcustodians will be obliged to file any
formal notice of default, institute legal proceedings, file a proof of claim
in any insolvency proceeding, or take any similar action.
2.8 CERTAIN MINISTERIAL ACTS.
(a) Until Bank receives Instructions to the contrary, Bank will:
(i) present all Financial Assets for which Bank has
received notice of a call for redemption or that
have otherwise matured, and all income and interest
coupons and other income items that call for
payment upon presentation;
(ii) execute in the name of Customer such certificates
as may be required to obtain payment in respect of
Financial Assets; and
(iii) exchange interim or temporary documents of title
held in the Securities Account for definitive
documents of title.
(b) Bank may provide information concerning the Accounts to
Subcustodians, Securities Depositories, counterparties, issuers of Financial
Assets, governmental entities, securities exchanges, self-regulatory entities,
and similar entities to the extent required by Applicable Law or as may be
required in the ordinary course by market practice or otherwise in order to
provide the services contemplated by this Agreement.
2.9 CORPORATE ACTIONS.
(a) Bank will promptly notify Customer of any Corporate Action of
which information is either (i) received by it or a Subcustodian to the extent
that Bank's central corporate actions department has actual knowledge of the
Corporate Action in time to notify its customers in a timely manner; or (ii)
published via a formal notice in publications and reporting services routinely
used by Bank for this purpose in time for Bank to notify its customers in a
timely manner. Bank also will use its reasonable efforts to promptly notify
Customer of any class action litigation for which information is actually
received by Bank's central corporate actions department but shall not be
liable for any Liabilities arising out of Bank's failure to identify
Customer's interest in any class action litigation. Bank does not commit,
however, to provide information concerning Corporate Actions or class action
litigation relating to Financial Assets
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being held at Customer's request in a name not subject to the control of
Bank or its Subcustodian.
(b) If an Authorized Person fails to provide Bank with timely
Instructions with respect to any Corporate Action or class action, neither
Bank nor its Subcustodians or their respective nominees will take any action
in relation to that Corporate Action or class action, except as otherwise
agreed in writing by Bank and Customer or as may be set forth by Bank as a
default action in the notification it provides under Section 2.9 (a) with
respect to that Corporate Action or class action.
(c) Bank may sell or otherwise dispose of fractional interests in
Financial Assets arising out of a Corporate Action or class action litigation
and, to the extent necessary to protect Customer's interest in that Corporate
Action or class action, credit the Cash Account with the proceeds of the sale
or disposition. If some, but not all, of an outstanding class of Financial
Asset is called for redemption, Bank may allot the amount redeemed among the
respective beneficial holders of such class of Financial Asset in any manner
Bank deems to be fair and equitable.
(d) Notices of Corporate Actions and class actions dispatched to
Customer may have been obtained from sources which Bank does not control and
may have been translated or summarized. Although Bank believes such sources to
be reliable, Bank has no duty to verify the information contained in such
notices nor the faithfulness of any translation or summary and therefore does
not guarantee its accuracy, completeness or timeliness, and shall not be
liable to Customer for any loss that may result from relying on such notice.
2.10 PROXIES.
(a) Subject to and upon the terms of this sub-section, Bank will
promptly provide Customer with information which it receives on matters to be
voted upon at meetings of holders of Financial Assets ("NOTIFICATIONS"), and
Bank will act in accordance with Customer's Instructions in relation to such
Notifications ("THE ACTIVE PROXY VOTING SERVICE"). If information is received
by Bank at its proxy voting department too late to permit timely voting by
Customer, Bank's only obligation will be to provide, so far as reasonably
practicable, a Notification (or summary information concerning a Notification)
on an "information only" basis.
(b) The active proxy voting service is available only in certain
markets, details of which are available from Bank on request. Provision of the
active proxy voting service is conditional upon receipt by Bank of a duly
completed enrollment form as well as additional documentation that may be
required for certain markets.
(c) Bank will act upon Instructions to vote on matters referred to in
a Notification, provided Instructions are received by Bank at its proxy voting
department by the deadline referred to in the relevant Notification. If
Instructions are not received in a timely manner, Bank will not be obligated
to provide further notice to Customer and shall not be obliged to vote. It is
Customer's obligation to monitor the agreed means of providing Notifications
to determine if new Notifications have been received.
(d) Bank reserves the right to provide Notifications or parts thereof
in the language
7
received. Bank will attempt in good faith to provide accurate
and complete Notifications, whether or not translated.
(e) Customer acknowledges that Notifications and other information
furnished pursuant to the active proxy voting service ("INFORMATION") are
proprietary to Bank and that Bank owns all intellectual property rights,
including copyrights and patents, embodied therein. Accordingly, Customer will
not make any use of such information except in connection with the active
proxy voting service.
(f) In markets where the active proxy voting service is not available
or where Bank has not received a duly completed enrollment form or other
relevant documentation, Bank will not provide Notifications to Customer but
will endeavor to act upon Instructions to vote on matters before meetings of
holders of Financial Assets where it is reasonably practicable for Bank (or
its Subcustodians or nominees as the case may be) to do so and where such
Instructions are received in time for Bank to take timely action (the "PASSIVE
PROXY VOTING SERVICE").
(g) Customer acknowledges that the provision of proxy voting services
(whether active or passive) may be precluded or restricted under a variety of
circumstances. These circumstances include, but are not limited to:
(i) the Financial Assets being on loan or out for
registration,
(ii) the pendency of conversion or another Corporate
Action;
(iii) Financial Assets being held at Customer's request
in a name not subject to the control of Bank or its
Subcustodian;
(iv) Financial Assets being held in a margin or
collateral account at Bank or another bank or
broker, or otherwise in a manner which affects
voting;
(v) local market regulations or practices, or
restrictions by the issuer; and
(vi) Bank may be required to vote all shares held for a
particular issue for all of Bank's customers on a
net basis (i.e. a net yes or no vote based on
voting instructions received from all its
customers). Where this is the case, Bank will
inform Customer by means of the Notification.
(h) Notwithstanding the fact that Bank may act in a fiduciary
capacity with respect to Customer under other agreements, in performing active
or passive proxy voting services Bank will be acting solely as the agent of
Customer, and will not exercise any discretion, with regard to such proxy
services or vote any proxy except when directed by an Authorized Person.
2.11 STATEMENTS AND INFORMATION AVAILABLE ON-LINE.
(a) Bank will send, or make available on-line, to Customer, at times
mutually agreed upon, a formal statement of account in Bank's standard format
for each Account maintained by Customer with Bank, identifying the Financial
Assets and cash held in each Account (each such
8
statement a "STATEMENT OF ACCOUNT"). Additionally, Bank will send (or make
available on-line to) Customer an advice or notification of any transfers of
cash or Financial Assets with respect to each Account. Bank will not be liable
with respect to any matter set forth in those portions of any Statement of
Account or any such advice (or reasonably implied therefrom) to which Customer
has not given Bank a written exception or objection within sixty (60) days of
receipt of the Statement of Account, provided such matter is not the result of
Bank's willful misconduct or bad faith. References in this Agreement to
Statements of Account include Statements of Account in electronic form.
(b) Prices and other information obtained from third parties which
may be contained in any Statement of Account or other statement sent to
Customer have been obtained from sources Bank believes to be reliable. Bank
does not, however, make any representation as to the accuracy of such
information or that the prices specified necessarily reflect the proceeds that
would be received on a disposal of the relevant Financial Assets.
(c) Customer acknowledges that, except for Statements of Account or
as otherwise expressly agreed by Bank, records and reports available to it
on-line may not be accurate due to mis-postings, delays in updating Account
records, and other causes. Bank will not be liable for any loss or damage
arising out of the inaccuracy of any such records or reports accessed on-line.
2.12 ACCESS TO BANK'S RECORDS.
Bank will allow Customer's independent public accountants such
reasonable access to the records of Bank relating to Financial Assets as is
required in connection with their examination of books and records pertaining
to Customer's affairs. Subject to restrictions under Applicable Law, Bank also
will obtain an undertaking to permit Customer's independent public
accountants, reasonable access to the records of any Subcustodian of
Securities held in the Securities Account as may be required in connection
with such examination.
2.13 MAINTENANCE OF FINANCIAL ASSETS AT SUBCUSTODIAN LOCATIONS.
(a) Unless Instructions require another location acceptable to Bank,
Financial Assets will be held in the country or jurisdiction in which their
principal trading market is located, where such Financial Assets may be
presented for payment, where such Financial Assets were acquired, or where
such Financial Assets are held. Bank reserves the right to refuse to accept
delivery of Financial Assets or cash in countries and jurisdictions other than
those referred to in Schedule 1 to this Agreement, as in effect from time to
time.
(b) Bank will not be obliged to follow an Instruction to hold
Financial Assets with, or have them registered or recorded in the name of, any
person not chosen by Bank. However, if Customer does instruct Bank to hold
Securities and/or cash with or register or record Securities in the name of a
person not chosen by Bank and Bank agrees to do so, the consequences of doing
so are at Customer's own risk and Bank (i) will not be liable therefor and
(ii) may not provide services under this Agreement with respect to Securities
or cash so held, including, without limitation, services provided under
Sections 2.8, 2.9, 2.10, and 8.2.
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2.14 TAX RELIEF SERVICES.
Bank will provide tax relief services as provided in Section 8.2.
2.15 FOREIGN EXCHANGE TRANSACTIONS.
To facilitate the administration of Customer's trading and investment
activity, Bank may, but will not be obliged to, enter into spot or forward
foreign exchange contracts with Customer, or an Authorized Person, and may
also provide foreign exchange contracts and facilities through its Affiliates
or Subcustodians. Instructions, including standing Instructions, may be issued
with respect to such contracts, but Bank may establish rules or limitations
concerning any foreign exchange facility made available. In all cases where
Bank, its Affiliates or Subcustodians enter into a master foreign exchange
contract that covers foreign exchange transactions for the Accounts, the terms
and conditions of that foreign exchange contract and, to the extent not
inconsistent, this Agreement, will apply to such transactions.
3. INSTRUCTIONS
3.1 ACTING ON INSTRUCTIONS; UNCLEAR INSTRUCTIONS.
(a) Customer authorizes Bank to accept and act upon any Instructions
received by it without inquiry. Customer will indemnify the Bank Indemnitees
against, and hold each of them harmless from, any Liabilities that may be
imposed on, incurred by, or asserted against the Bank Indemnitees as a result
of any action or omission taken in accordance with any Instructions or other
directions upon which Bank is authorized to rely under the terms of this
Agreement.
(b) Unless otherwise expressly provided, all Instructions will
continue in full force and effect until canceled or superseded.
(c) Bank may (in its sole discretion and without affecting any part
of this Section 3.1) seek clarification or confirmation of an Instruction from
an Authorized Person and may decline to act upon an Instruction if it does not
receive clarification or confirmation satisfactory to it. Bank will not be
liable for any loss arising from any delay while it seeks such clarification
or confirmation.
(d) In executing or paying a payment order Bank may rely upon the
identifying number (e.g. Fedwire routing number or account) of any party as
instructed in the payment order. Customer assumes full responsibility for any
inconsistency between the name and identifying number of any party in payment
orders issued to Bank in Customer's name.
3.2 CONFIRMATION OF ORAL INSTRUCTIONS/SECURITY DEVICES.
Any Instructions delivered to Bank by telephone will promptly
thereafter be confirmed in writing by an Authorized Person. Each confirmation
is to be clearly marked "Confirmation." Bank will not be liable for having
followed such Instructions notwithstanding the failure of an Authorized Person
to send such confirmation in writing or the failure of such confirmation to
10
conform to the telephone Instructions received. Either party may record any of
their telephonic communications. Customer will comply with any security
procedures reasonably required by Bank from time to time with respect to
verification of Instructions. Customer will be responsible for safeguarding
any test keys, identification codes or other security devices that Bank will
make available to Customer or any Authorized Person.
3.3 INSTRUCTIONS; CONTRARY TO LAW/MARKET PRACTICE.
Bank need not act upon Instructions which it reasonably believes to
be contrary to law, regulation or market practice, but Bank will be under no
duty to investigate whether any Instructions comply with Applicable Law or
market practice.
3.4 CUT-OFF TIMES.
Bank has established cut-off times for receipt of some categories of
Instruction, which will be made available to Customer. If Bank receives an
Instruction after its established cut-off time, Bank will attempt to act upon
the Instruction on the day requested if Bank deems it practicable to do so or
otherwise as soon as practicable on the next business day.
4. FEES, EXPENSES AND OTHER AMOUNTS OWING TO BANK
4.1 FEES AND EXPENSES.
Customer will pay Bank for its services hereunder the fees set forth
in Schedule A hereto or such other amounts as may be agreed upon in writing
from time to time, together with Bank's reasonable out-of-pocket or incidental
expenses, including, but not limited to, legal fees and tax or related fees
incidental to processing by governmental authorities, issuers, or their
agents. Customer authorizes Bank to deduct amounts owing to it from the Cash
Account, for any such fees or expenses from time to time in arrears. Bank may
increase such fees by not less than thirty days' notice in writing to
Customer. Without prejudice to Bank's other rights, Bank reserves the right to
charge interest on overdue amounts from the due date until actual payment at
such rate as Bank may reasonably determine.
4.2 OVERDRAFTS.
If a debit to any currency in the Cash Account results (or will
result) in a debit balance, then Bank may, in its discretion, (i) advance an
amount equal to the overdraft, (ii) refuse to settle in whole or in part the
transaction causing such debit balance, or (iii) if any such transaction is
posted to the Securities Account, reverse any such posting. If Bank elects to
make such an advance, the advance will be deemed a loan to Customer, payable
on demand, bearing interest at the applicable rate charged by Bank from time
to time, for such overdrafts, from the date of such advance to the date of
payment (both after as well as before judgment) and otherwise on the terms on
which Bank makes similar overdrafts available from time to time. No prior
action or course of dealing on Bank's part with respect to the settlement of
transactions on Customer's behalf will be asserted by Customer against Bank
for Bank's refusal to make advances to the Cash Account or to settle
11
any transaction for which Customer does not have sufficient available funds in
the applicable currency in the Cash Account.
4.3 BANK'S RIGHT OVER SECURITIES; SET-OFF.
(a) Customer grants Bank a security interest in and a lien on the
Financial Assets held in the Securities Account as security for any and all
amounts which are now or become owing to Bank under any provision of this
Agreement, whether or not matured or contingent ("INDEBTEDNESS").
(b) Without prejudice to Bank's rights under Applicable Law, Bank may
set off against any Indebtedness any amount in any currency standing to the
credit of any of Customer's accounts (whether deposit or otherwise) with any
Bank branch or office or with any Affiliate of Bank. For this purpose, Bank
shall be entitled to accelerate the maturity of any fixed term deposits and to
effect such currency conversions as may be necessary at its current rates for
the sale and purchase of the relevant currencies.
5. SUBCUSTODIANS, SECURITIES DEPOSITORIES, AND OTHER AGENTS
5.1 APPOINTMENT OF SUBCUSTODIANS; USE OF SECURITIES DEPOSITORIES.
(a) Bank is authorized under this Agreement to act through and hold
Customer's Financial Assets with subcustodians, being at the date of this
Agreement the entities listed in Schedule 1 and/or such other entities as Bank
may appoint as subcustodians ("SUBCUSTODIANS"), provided, however, that the
appointment of any agent or subcustodian shall not relieve the Bank of any of
its responsibilities or liabilities under this Agreement. Bank will use
reasonable care in the selection and continued appointment of such
Subcustodians. Any such Subcustodians shall be a bank or trust company
qualified to act as a custodian under the 1940 Act and the regulations
promulgated thereunder. In addition, Bank and each Subcustodian may deposit
Financial Assets with, and hold Financial Assets in, any securities
depository, settlement system, dematerialized book entry system or similar
system (together a "SECURITIES DEPOSITORY"), in compliance with any applicable
Federal Reserve Board and SEC rules and regulations (including Rule 17f-4
under the 1940 Act) and on such other terms as such systems customarily
operate and Customer will provide Bank with such documentation or
acknowledgements that Bank may require to hold the Financial Assets in such
systems. In connection with Customer's securities held in a Securities
Depository, for so long as it is required by Rule 17f-4, Bank shall:
(i) deposit Customer's securities in an account that
includes only assets held by Bank for its customers;
(ii) send Customer a confirmation of any transfers to or
from the account of Customer. Where securities are transferred to
Customer's account, Bank shall also, by book-entry or otherwise,
identify as belonging to Customer a quantity of securities in a
fungible bulk of securities: (a) registered in the name of Bank or
its nominee or (b) shown on Bank's account on the books of the
clearing agency, the book-entry system or Bank's agent. For these
purposes, "confirmation" means advice or notice of a transaction. It
is not
12
intended to require preparation by Bank of the confirmation
required of broker-dealers under the Securities Exchange Act of 1934;
(iii) Bank, or its agent which deposits the securities, will
promptly send to Customer reports it receives from the appropriate
Federal Reserve Bank or clearing agency on its respective system of
internal accounting control. Bank and all agents through which
securities are deposited will send to Customer such reports on their
own system of internal accounting control as Customer may reasonably
request.
(b) Any agreement Bank enters into with a Subcustodian for holding
Bank's customers' assets will provide that such assets will not be subject to
any right, charge, security interest, lien or claim of any kind in favor of
such Subcustodian or its creditors except a claim for payment for their safe
custody or administration, or, in the case of cash deposits, except for liens
or rights in favor of creditors of the Subcustodian arising under bankruptcy,
insolvency or similar law, and that the beneficial ownership thereof will be
freely transferable without the payment of money or value other than for safe
custody or administration. Where a Subcustodian deposits Securities with a
Securities Depository, Bank will cause the Subcustodian to identify on its
records as belonging to Bank, as agent, the Securities shown on the
Subcustodian's account at such Securities Depository. This Section 5.1(b) will
not apply to the extent of any special agreement or arrangement made by
Customer with any particular Subcustodian.
(c) Bank will not be liable for any act or omission by (or the
insolvency of) any Securities Depository. In the event Customer incurs a loss
due to the negligence, willful misconduct, or insolvency of a Securities
Depository, Bank will make good faith efforts, in its discretion, to seek
recovery from the Securities Depository, but Bank will not be obligated to
institute legal proceedings, file a proof of claim in any insolvency
proceeding, or take any similar action.
5.2 LIABILITY FOR SUBCUSTODIANS.
(a) Subject to Section 7.1(b), Bank will be liable for direct losses
incurred by Customer that result from:
(i) the failure by a Subcustodian to use reasonable
care in the provision of custodial services by it
in accordance with the standards prevailing in the
relevant market or from the fraud or willful
misconduct of such Subcustodian in the provision of
custodial services by it; or
(ii) the insolvency of any Affiliated Subcustodian.
(b) Subject to Section 5.1(a) and Bank's duty to use reasonable care
in the monitoring of a Subcustodian's financial condition as reflected in its
published financial statements and other publicly available financial
information concerning it customarily reviewed by Bank in its oversight
process, Bank will not be responsible for the insolvency of any Subcustodian
which is not a branch or an Affiliated Subcustodian.
13
(c) Bank reserves the right to add, replace or remove Subcustodians.
Bank will give prompt notice of any such action, which will be advance notice
if practicable. Upon request by Customer, Bank will identify the name, address
and principal place of business of any Subcustodian and the name and address
of the governmental agency or other regulatory authority that supervises or
regulates such Subcustodian.
5.3 USE OF AGENTS.
(a) Bank may provide certain services under this Agreement through
third parties, which may be Affiliates. Except to the extent provided in
Section 5.2 with respect to Subcustodians, Bank will not be responsible for
any loss as a result of a failure by any broker or any other third party that
it selects and retains using reasonable care to provide ancillary services
that it may not customarily provide itself, including, without limitation,
delivery services and providers of information regarding matters such as
pricing, proxy voting, Corporate Actions and class action litigation.
Nevertheless, Bank will be liable for the performance of any such broker
selected by Bank that is an Affiliate to the same extent as Bank would have
been liable if it performed such services itself.
(b) In the case of the sale under Section 2.9(c) of a fractional
interest (or in other cases where Customer has requested Bank to arrange for
execution of a trade) Bank will place trades with a broker which is an
Affiliate to the extent that Bank has established a program for such trading
with such Affiliate. An affiliated broker may charge its customary commission
(or retain its customary spread) with respect to any such transaction.
6. ADDITIONAL PROVISIONS RELATING TO CUSTOMER
6.1 REPRESENTATIONS OF CUSTOMER AND BANK.
(a) Customer represents and warrants that (i) it has full authority
and power, and has obtained all necessary authorizations and consents, to
deposit and control the Financial Assets and cash in the Accounts, to use Bank
as its custodian in accordance with the terms of this Agreement, to borrow
money or otherwise incur indebtedness as contemplated by this Agreement, to
pledge Financial Assets as contemplated by Section 4.3, and to enter into
foreign exchange transactions; (ii) assuming execution and delivery of this
Agreement by Bank, this Agreement is Customer's legal, valid and binding
obligation, enforceable in accordance with its terms and it has full power and
authority to enter into and has taken all necessary corporate action to
authorize the execution of this Agreement (iii) it has not relied on any oral
or written representation made by Bank or any person on its behalf, and
acknowledges that this Agreement sets out to the fullest extent the duties of
Bank; and (iv) it is a resident of the United States and shall notify Bank of
any changes in residency.
(b) Bank represents and warrants that (i) assuming execution and
delivery of this Agreement by Customer, this Agreement is Bank's legal, valid
and binding obligation, enforceable in accordance with its terms, (ii) it has
full power and authority to enter into and has taken all necessary corporate
action to authorize the execution of this Agreement and (iii) it is a "bank"
within the meaning of Section 26(a) of the 1940 Act, as amended.
14
Bank may rely upon the above or the certification of such other facts as may
be required to administer Bank's obligations hereunder. Customer shall
indemnify Bank against all losses, liability, claims or demands arising
directly or indirectly from any such certifications.
6.2 CUSTOMER TO PROVIDE CERTAIN INFORMATION TO BANK.
Upon request, Customer will promptly provide to Bank such information
about itself and its financial status as Bank may reasonably request,
including Customer's organizational documents and its current audited and
unaudited financial statements.
6.3 CUSTOMER IS LIABLE TO BANK EVEN IF IT IS ACTING FOR ANOTHER PERSON.
If Customer is acting as an agent for a disclosed or undisclosed
principal in respect of any transaction, cash, or Financial Asset, Bank
nevertheless will treat Customer as its principal for all purposes under this
Agreement. In this regard, Customer will be liable to Bank as a principal in
respect of any transactions relating to the Account. The foregoing will not
affect any rights Bank might have against Customer's principal.
7. WHEN BANK IS LIABLE TO CUSTOMER
7.1 STANDARD OF CARE; LIABILITY.
(a) Bank will use reasonable care in performing its obligations under
this Agreement. Bank will not be in violation of this Agreement with respect
to any matter as to which it has satisfied its obligation of reasonable care.
(b) Bank will be liable for Customer's direct damages to the extent
they result from Bank's negligence or willful misconduct in performing its
duties as set out in this Agreement and to the extent provided in Section
5.2(a). Nevertheless, under no circumstances will Bank be liable for any
indirect, incidental, consequential or special damages (including, without
limitation, lost profits) of any form incurred by any person or entity,
whether or not foreseeable and regardless of the type of action in which such
a claim may be brought, with respect to the Accounts, Xxxx's performance
hereunder, or Xxxx's role as custodian.
(c) Customer will indemnify the Bank Indemnitees against, and hold
them harmless from, any Liabilities that may be imposed on, incurred by or
asserted against any of the Bank Indemnitees in connection with or arising out
of (i) Bank's performance under this Agreement, provided the Bank Indemnitees
have not acted with negligence or engaged in fraud or willful misconduct in
connection with the Liabilities in question or (ii) any Bank Indemnitee's
status as a holder of record of Customer's Financial Assets. Nevertheless,
Customer will not be obligated to indemnify any Bank Indemnitee under the
preceding sentence with respect to any Liability for which Bank is liable
under Section 5.2 of this Agreement.
(d) Without limiting Subsections 7.1(a), (b) or (c), Bank will have
no duty or responsibility to: (i) question Instructions or make any
suggestions to Customer or an Authorized
15
Person regarding such Instructions; (ii) supervise or make recommendations
with respect to investments or the retention of Financial Assets; (iii) advise
Customer or an Authorized Person regarding any default in the payment of
principal or income of any security other than as provided in Section 2.7(b)
of this Agreement; (iv) evaluate or report to Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party to which
Bank is instructed to deliver Financial Assets or cash; or (v) review or
reconcile trade confirmations received from brokers (and Customer or its
Authorized Persons issuing Instructions will bear any responsibility to review
such confirmations against Instructions issued to and Statements of Account
issued by Bank).
7.2 FORCE MAJEURE.
Bank will maintain and update from time to time business continuation
and disaster recovery procedures with respect to its global custody business
that it determines from time to time meet reasonable commercial standards.
Bank will have no liability, however, for any damage, loss, expense or
liability of any nature that Customer may suffer or incur, caused by an act of
God, fire, flood, civil or labor disturbance, war, act of any governmental
authority or other act or threat of any authority (de jure or de facto), legal
constraint, fraud or forgery (except for fraud or forgery perpetuated by the
Bank or any employee of the Bank), malfunction of equipment or software
(except where such malfunction is primarily attributable to Bank's negligence
in maintaining the equipment or software), failure of or the effect of rules
or operations of any external funds transfer system, inability to obtain or
interruption of external communications facilities, or any cause beyond the
reasonable control of Bank (including without limitation, the non-availability
of appropriate foreign exchange).
7.3 BANK MAY CONSULT WITH COUNSEL.
Bank will be entitled to rely on, and may act upon the advice of
professional advisers in relation to matters of law, regulation or market
practice (which may be the professional advisers of Customer), and will not be
liable to Customer for any action taken or omitted pursuant to such advice,
provided, however, with respect to the performance of any action upon such
advice, the Custodian shall be required to conform to the Standard of Care.
7.4 BANK PROVIDES DIVERSE FINANCIAL SERVICES AND MAY GENERATE PROFITS
AS A RESULT.
Customer acknowledges that Bank or its Affiliates may have a material
interest in transactions entered into by Customer with respect to the Account
or that circumstances are such that Bank may have a potential conflict of duty
or interest. For example, Bank or its Affiliates may act as a market maker in
the Financial Assets to which Instructions relate, provide brokerage services
to other customers, act as financial adviser to the issuer of such Financial
Assets, act in the same transaction as agent for more than one customer, have
a material interest in the issue of the Financial Assets; or earn profits from
any of these activities. Customer further acknowledges that Bank or its
Affiliates may be in possession of information tending to show that the
Instructions received may not be in the best interests of Customer but that
Bank is not under any duty to disclose any such information.
16
8. TAXATION
8.1 TAX OBLIGATIONS.
(a) Customer confirms that Bank is authorized to deduct from any cash
received or credited to the Cash Account any taxes or levies required by any
revenue or governmental authority for whatever reason in respect of Customer's
Accounts.
(b) Customer will provide to Bank such certifications, documentation,
and information as it may require in connection with taxation, and warrants
that, when given, this information is true and correct in every respect, not
misleading in any way, and contains all material information. Customer
undertakes to notify Bank immediately if any information requires updating or
correcting. Bank shall not be liable for any taxes, penalties, interest or
additions to tax, payable or paid that result from (i) the inaccurate
completion of documents by Customer or any third party; (ii) the provision to
Bank or a third party of inaccurate or misleading information by Customer or
any third party; (iii) the withholding of material information by Customer or
any third party; or (iv) as a result of any delay by any revenue authority or
any other cause beyond Bank's control.
(c) If Bank does not receive appropriate certifications,
documentation and information then, as and when appropriate and required,
additional tax shall be deducted from all income received in respect of the
Financial Assets issued (including, but not limited to, United States
non-resident alien tax and/or backup withholding tax which shall be deducted
from United States source income).
(d) Customer will be responsible in all events for the timely payment
of all taxes relating to the Financial Assets in the Securities Account.
Customer will indemnify and hold Bank harmless from and against any and all
liabilities, penalties, interest or additions to tax with respect to or
resulting from, any delay in, or failure by, Bank (i) to pay, withhold or
report any U.S. federal, state or local taxes or foreign taxes imposed on, or
(ii) to report interest, dividend or other income paid or credited to the Cash
Account, regardless of the reason for such delay or failure, provided,
however, that Customer will not be liable to Bank for any penalty or additions
to tax due solely as a result of Bank's negligent acts or omissions with
respect to paying or withholding tax or reporting interest, dividend or other
income paid or credited to the Cash Account.
8.2 TAX RELIEF SERVICES.
(a) Subject to the provisions of this Section, Bank will apply for a
reduction of withholding tax and any refund of any tax paid or tax credits in
respect of income payments on Financial Assets credited to the Securities
Account that Bank believes may be available. To defray expenses pertaining to
nominal tax claims, Bank may from time-to-time set minimum thresholds as to a
de minimus value of tax reclaims or reduction of withholding which it will
pursue in respect of income payments under this section.
(b) The provision of a tax relief service by Bank is conditional upon
Bank receiving from Customer (i) a declaration of its identity and place of
residence and (ii) certain other
17
documentation (pro forma copies of which are available from Bank), prior to
the receipt of Financial Assets in the Account or the payment of income.
(c) Bank will perform tax relief services only with respect to
taxation levied by the revenue authorities of the countries advised to
Customer from time to time and Bank may, by notification in writing, in its
absolute discretion, supplement or amend the countries in which the tax relief
services are offered. Other than as expressly provided in this Section 8.2,
Bank will have no responsibility with regard to Customer's tax position or
status in any jurisdiction.
(d) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental entity in
relation to the processing of any tax relief claim.
9. TERMINATION
Either party may terminate this Agreement on sixty (60) days' written
notice to the other party. If Customer gives notice of termination, it must
provide full details of the persons to whom Bank must deliver Financial Assets
and cash. If Bank gives notice of termination, then Customer must, within
sixty days, notify Bank of details of its new custodian, failing which Bank
may elect (at any time after the sixty day notice period) either to retain the
Financial Assets and cash until such details are given, continuing to charge
fees due (in which case Bank's sole obligation will be for the safekeeping of
the Financial Assets and cash), or deliver the Financial Assets and cash to
Customer. Bank will in any event be entitled to deduct any amounts owing to it
prior to delivery of the Financial Assets and cash (and, accordingly, Bank
will be entitled to sell Financial Assets and apply the sale proceeds in
satisfaction of amounts owing to it). Customer will reimburse Bank promptly
for all out-of-pocket expenses it incurs in delivering Financial Assets upon
termination. Termination will not affect any of the liabilities either party
owes to the other arising under this Agreement prior to such termination.
10. MISCELLANEOUS
10.1 NOTICES.
Notices (other than Instructions) will be served by registered mail
or hand delivery to the address of the respective parties as set out on the
first page of this Agreement, unless notice of a new address is given to the
other party in writing. Notice will not be deemed to be given unless it has
been received.
10.2 SUCCESSORS AND ASSIGNS.
This Agreement will be binding on each of the parties' successors and
assigns, but the parties agree that neither party can assign its rights and
obligations under this Agreement without the prior written consent of the
other party, which consent will not be unreasonably withheld.
18
10.3 INTERPRETATION.
Headings are for convenience only and are not intended to affect
interpretation. References to sections are to sections of this Agreement and
references to sub-sections and paragraphs are to sub-sections of the sections
and paragraphs of the sub-sections in which they appear.
10.4 ENTIRE AGREEMENT.
(a) The following Rider(s) are incorporated into this Agreement:
___ Cash Trade Execution;
___ Cash Sweep;
___ Accounting Services;
___ Investment Company.
(b) This Agreement, including the Schedules, Exhibits, and Riders
(and any separate agreement which Bank and Customer may enter into with
respect to any Cash Account), sets out the entire Agreement between the
parties in connection with the subject matter, and this Agreement supersedes
any other agreement, statement, or representation relating to custody, whether
oral or written. Amendments must be in writing and signed by both parties.
10.5 INFORMATION CONCERNING DEPOSITS AT BANK'S LONDON BRANCH.
Under U.S federal law, deposit accounts that Customer maintains in
Bank's foreign branches (outside of the U.S.) are not insured by the Federal
Deposit Insurance Corporation ("FDIC"); in the event of Bank's liquidation,
foreign branch deposits have a lesser preference than U.S. deposits; and such
foreign deposits are subject to cross-border risks. However, Bank's London
Branch is a member of the United Kingdom Deposit Protection Scheme (the
"SCHEME") established under Banking Act 1987 (as amended). This Scheme
provides that in the event of Bank's insolvency payments may be made to
certain customers of Bank's London Branch. Payments under the Scheme are
limited to 90% of a depositor's total cash deposits subject to a maximum
payment to any one depositor of (pound)18,000 (or 20,000 euros if greater).
Most deposits denominated in sterling and other European Economic Area
Currencies and euro made with Bank within the United Kingdom are covered.
Further details of the Scheme are available on request.
10.6 INSURANCE.
Bank will not be required to maintain any insurance coverage for the
benefit of Customer.
10.7 GOVERNING LAW AND JURISDICTION.
This Agreement will be construed, regulated, and administered under
the laws of the United States or State of New York, as applicable, without
regard to New York's principles regarding conflict of laws. The United States
District Court for the Southern District of New
19
York will have the sole and exclusive jurisdiction over any lawsuit or other
judicial proceeding relating to or arising from this Agreement. If that court
lacks federal subject matter jurisdiction, the Supreme Court of the State of
New York, New York County will have sole and exclusive jurisdiction. Either of
these courts will have proper venue for any such lawsuit or judicial
proceeding, and the parties waive any objection to venue or their convenience
as a forum. The parties agree to submit to the jurisdiction of any of the
courts specified and to accept service of process to vest personal
jurisdiction over them in any of these courts. The parties further hereby
knowingly, voluntarily and intentionally waive, to the fullest extent
permitted by Applicable Law, any right to a trial by jury with respect to any
such lawsuit or judicial proceeding arising or relating to this Agreement or
the transactions contemplated hereby. To the extent that in any jurisdiction
Customer may now or hereafter be entitled to claim, for itself or its assets,
immunity from suit, execution, attachment (before or after judgment) or other
legal process, Customer shall not claim, and it hereby irrevocably waives,
such immunity.
10.8 SEVERABILITY; WAIVER; AND SURVIVAL.
(a) If one or more provisions of this Agreement are held invalid,
illegal or unenforceable in any respect on the basis of any particular
circumstances or in any jurisdiction, the validity, legality and
enforceability of such provision or provisions under other circumstances or in
other jurisdictions and of the remaining provisions will not in any way be
affected or impaired.
(b) Except as otherwise provided herein, no failure or delay on the
part of either party in exercising any power or right hereunder operates as a
waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision of this Agreement, or waiver of any breach
or default, is effective unless it is in writing and signed by the party
against whom the waiver is to be enforced.
(c) Bank's rights, protections, and remedies under this Agreement
shall survive its termination.
10.9 COUNTERPARTS.
This Agreement may be executed in several counterparts each of which
will be deemed to be an original and together will constitute one and the same
agreement.
20
10.10 NO THIRD PARTY BENEFICIARIES.
A person who is not a party to this Agreement shall have no right to
enforce any term of this Agreement.
FORTRESS PINNACLE INVESTMENT FUND LLC
By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------
Title: Chief Financial Officer
Date: October 9, 2002
JPMORGAN CHASE BANK
By: /s/ Xxxxx Xxxxx
--------------------------------
Title: Vice President
Date: October 9, 2002
21
Investment Company Rider to Global Custody Agreement
Between JPMorgan Chase Bank and
FORTRESS PINNACLE INVESTMENT FUND LLC
effective October 9, 2002
The following modifications are made to the Agreement:
"2.16. COMPLIANCE WITH SECURITIES AND EXCHANGE COMMISSION ("SEC")
RULE 17F-5 ("RULE 17F-5").
(a) Customer's board of directors (or equivalent body) (hereinafter
`Board') hereby delegates to Bank, and, except as to the country or
countries as to which Bank may, from time to time, advise Customer
that it does not accept such delegation, Bank hereby accepts the
delegation to it, of the obligation to perform as Customer's `Foreign
Custody Manager' (as that term is defined in rule 17f-5(a)(3) as
promulgated under the Investment Company Act of 1940, as amended
("1940 Act")), including for the purposes of: (i) selecting Eligible
Foreign Custodians (as that term is defined in rule 17f-5(a)(1), and
as the same may be amended from time to time, or that have otherwise
been exempted pursuant to an SEC exemptive order) to hold foreign
Financial Assets and Cash, (ii) evaluating the contractual
arrangements with such Eligible Foreign Custodians (as set forth in
rule 17f-5(c)(2)), (iii) monitoring such foreign custody arrangements
(as set forth in rule 17f-5(c)(3)).
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the
placement of Financial Assets and Cash with particular Eligible
Foreign Custodians and of any material change in the arrangements
with such Eligible Foreign Custodians, with such reports to be
provided to Customer's Board at such times as the Board deems
reasonable and appropriate based on the circumstances of Customer's
foreign custody arrangements (and until further notice from Customer
such reports shall be provided not less than quarterly with respect
to the placement of Financial Assets and Cash with particular
Eligible Foreign Custodians and with reasonable promptness upon the
occurrence of any material change in the arrangements with such
Eligible Foreign Custodians);
(ii) exercise such reasonable care, prudence and diligence in
performing as Customer's Foreign Custody Manager as a person having
responsibility for the safekeeping of foreign Financial Assets and
cash would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have
determined that foreign Financial Assets and cash placed and
maintained in the safekeeping of such Eligible Foreign Custodian
shall be subject to reasonable care, based on the standards
applicable to custodians in the relevant market, after having
considered all factors relevant to the
safekeeping of such foreign Financial Assets and cash, including,
without limitation, those factors set forth in rule
17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with an Eligible Foreign
Custodian requires that the Eligible Foreign Custodian shall provide
reasonable care for foreign Financial Assets and Cash based on the
standards applicable to custodians in the relevant market.
(v) have established a system to monitor the continued
appropriateness of maintaining foreign Financial Assets and cash with
particular Eligible Foreign Custodians and of the governing
contractual arrangements; it being understood, however, that in the
event that Bank shall have determined that the existing Eligible
Foreign Custodian in a given country would no longer afford foreign
Financial Assets and cash reasonable care and that no other Eligible
Foreign Custodian in that country would afford reasonable care, Bank
shall promptly so advise Customer and shall then act in accordance
with the Instructions of Customer with respect to the disposition of
the affected foreign Financial Assets and cash.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
foreign Financial Assets and cash on behalf of Customer with Eligible Foreign
Custodians pursuant to a written contract deemed appropriate by Bank.
(c) Except as expressly delegated to Bank or otherwise provided
herein, Customer shall be solely responsible to assure that the maintenance of
foreign Financial Assets and cash hereunder complies with the rules,
regulations, interpretations and exemptive orders as promulgated by or under
the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in
Rule 17f-5(a)(7). Customer represents to Bank that: (1) the foreign Financial
Assets and cash being placed and maintained in Bank's custody are subject to
the 1940 Act, as the same may be amended from time to time; (2) its Board: (i)
has determined that it is reasonable to rely on Bank to perform as Customer's
Foreign Custody Manager (ii) or its investment adviser shall have determined
that Customer may maintain foreign Financial Assets and cash in each country
in which Customer's Financial Assets and cash shall be held hereunder and
determined to accept Country Risk. Nothing contained herein shall require Bank
to make any selection or to engage in any monitoring on behalf of Customer
that would entail consideration of Country Risk.
(e) Bank shall provide to Customer such information relating to
Country Risk as is specified in Appendix 1 hereto. Customer hereby
acknowledges that: (i) such information is solely designed to inform Customer
of market conditions and procedures and is not intended as a recommendation to
invest or not invest in particular markets; and (ii) Bank has gathered the
information from sources it considers reliable, but that Bank shall have no
responsibility for inaccuracies or incomplete information.
B. Add a new Section 2.17 to the Agreement as follows:
2
2.17. COMPLIANCE WITH SEC RULE 17F-7 ("RULE 17F-7").
(a) Bank shall, for consideration by Customer, provide an analysis of
the custody risks associated with maintaining Customer's Foreign Assets with
each Eligible Securities Depository used by Bank as of the date hereof (or, in
the case of an Eligible Securities Depository not used by Bank as of the date
hereof, prior to the initial placement of Customer's foreign Assets at such
Depository) and at which any foreign Assets of Customer are held or are
expected to be held. The foregoing analysis will be provided to Customer at
Bank's Website. In connection with the foregoing, Customer shall notify Bank
of any Eligible Securities Depositories at which it does not choose to have
its Foreign Assets held. Bank shall monitor the custody risks associated with
maintaining Customer's foreign Assets at each such Eligible Securities
Depository on a continuing basis and shall promptly notify Customer or its
adviser of any material changes in such risks. The Bank shall provide the
Customer with any report obtained by the Bank on the Eligible Security
Depository's accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Eligible Securities Depository.
(b) Bank shall exercise reasonable care, prudence and diligence in
performing the requirements set forth in Section 2.17(a) above.
(c) Based on the information available to it in the exercise of
diligence, Bank shall determine the eligibility under rule 17f-7 of each
depository before including it on Schedule 3 hereto and shall promptly advise
Customer if any Eligible Securities Depository ceases to be eligible.
(Eligible Securities Depositories used by Bank as of the date hereof are set
forth in Schedule 3 hereto, and as the same may be amended on notice to
Customer from time to time.)
X. Xxx the following after the first sentence of Section 5.1(a) of
the Agreement: "At the request of Customer, Bank may, but need not, add to
Schedule 1 an Eligible Foreign Custodian where Bank has not acted as Foreign
Custody Manager with respect to the selection thereof. Bank shall notify
Customer in the event that it elects to add any such entity."
E. Add the following language as Sections 5.1(d) and (e) of the
Agreement:
" (d) The term Subcustodian as used herein shall mean the following:
(i) a `U.S. Bank,' which shall mean a U.S. bank as defined
in rule 17f5(a)(7);
(ii) an `Eligible Foreign Custodian,' which shall mean: (i)
a banking institution or trust company, incorporated or
organized under the laws of a country other than the United
States, that is regulated as such by that country's
government or an agency thereof, and (ii) a majority-owned
direct or indirect subsidiary of a U.S. bank or bank holding
company which subsidiary is incorporated or organized under
the laws of a country other than the United States. In
addition, an Eligible Foreign Custodian shall also mean any
other entity that shall have been so qualified by exemptive
order, rule or other appropriate action of the SEC.
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(iii) For purposes of clarity, it is agreed that as used in
Section 5.2(a), the term Subcustodian shall not include any
Eligible Foreign Custodian as to which Bank has not acted as
Foreign Custody Manager.
(e) The term `securities depository' as used herein when referring to
a securities depository located outside the U.S. shall mean:
an "Eligible Securities Depository" which, in turn, shall
have the same meaning as in rule 17f-7(b)(1)(i)-(vi) as the
same may be amended from time to time, or that has otherwise
been made exempt pursuant to an SEC exemptive order;
provided that, prior to the compliance date with rule 17f-7
for a particular securities depository the term "securities
depositories" shall be as defined in (a)(1)(ii)-(iii) of the
1997 amendments to rule 17f-5.
(f) The term "securities depository" as used herein when referring to
a securities depository located in the U.S. shall mean a "securities
depository" as defined in rule 17f-4(a).
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Appendix 1-A
Information Regarding Country Risk
1. To aid Customer in its determinations regarding Country Risk, Bank
shall furnish annually and upon the initial placing of Financial Assets and
cash into a country the following information (check items applicable):
A Opinions of local counsel concerning:
___ i. Whether applicable foreign law would restrict the access
afforded Customer's independent public accountants to books
and records kept by an eligible foreign custodian located in
that country.
___ ii. Whether applicable foreign law would restrict Customer's
ability to recover its Financial Assets and cash in the
event of the bankruptcy of an Eligible Foreign Custodian
located in that country.
___ iii. Whether applicable foreign law would restrict
Customer's ability to recover Financial Assets that are lost
while under the control of an Eligible Foreign Custodian
located in the country.
B. Written information concerning:
___ i. The foreseeability of expropriation, nationalization,
freezes, or confiscation of Customer's Financial Assets.
___ ii. Whether difficulties in converting Customer's cash and cash
equivalents to U.S. dollars are reasonably foreseeable.]
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) depositories (including
depository evaluation), if any.
2. To aid Customer in monitoring Country Risk, Bank shall furnish
board the following additional information:
Market flashes, including with respect to changes in the information
in market reports.
Schedule 2
ELIGIBLE SECURITIES DEPOSITORIES
