1
Exhibit (g)(2)
PROCEDURAL AGREEMENT
AMONG XXXXXXX XXXXX FUTURES, INC.,
EMPIRE BUILDER TAX FREE BOND FUND,
INVESTORS FIDUCIARY TRUST COMPANY AND
UNITED MISSOURI BANK OF KANSAS CITY, N.A.
THIS AGREEMENT is made by and among Empire Builder Tax Free Bond Fund.
("Customer"), Xxxxxxx Xxxxx Futures, Inc. ("FCM"), Investors Fiduciary Trust
Company ("IFTC" or "Custodian"), a state chartered trust company with its trust
office and principal place of business at Kansas City, Missouri, acting as
custodian of Customer, and United Missouri Bank of Kansas City, N.A. ("Bank"), a
national banking association organized under the laws of the United States with
its principal place of business in Kansas City, Missouri acting as
sub-custodian.
WHEREAS the undersigned Customer has opened a trading account with the
undersigned FCM, a registered futures commission merchant, for the purpose of
trading futures contracts traded on duly registered boards of trade, including
options on such futures contracts ("Contracts") through said firm; and
WHEREAS, in connection with the opening of the trading account Customer
and FCM have entered into a Customer Agreement which requires Customer to
deposit as collateral the initial margin (including any additional original
margin requirements for Customer's short option positions) ("Initial Margin")
with respect to each Contract as required by the rules and regulations of the
Chicago Mercantile Exchange, the Chicago Board of Trade, the Commodity Exchange,
and such other exchanges on which FCM may effect or cause to be effected
transactions as broker for Customer; and
WHEREAS, Bank serves as IFTC's sub-custodian pursuant to a sub-custody
agreement between Bank and IFTC whereby the Bank holds certain monies and
securities owned by Customer (the "Sub-Custody Agreement"); and
WHEREAS, neither Custodian nor Bank is a fiduciary or an affiliate of
Customer or an affiliate of a fiduciary of Customer;
WHEREAS, Customer, FCM, and the undersigned IFTC and Bank have entered
into a Safekeeping Agreement establishing an account entitled "Xxxxxxx Xxxxx
Futures, Inc. Customer Funds for the benefit of Empire Builder Tax Free Bond
Fund (Customer Segregated Account)" (the "Safekeeping Account") pursuant to
which IFTC shall cause the Bank to maintain the Safekeeping Account for the
custody of the Initial Margin which Customer is required to deposit and
maintain, and
WHEREAS the Customer Agreement and the Safekeeping Agreement both
provide that the rights and duties of the parties thereto are subject to the
provisions of this Agreement;
2
NOW, THEREFORE, IT IS AGREED THAT:
1. The terms of the Custodian Agreement and Sub-Custody Agreement
are incorporated by reference into this Agreement. This
Agreement is intended to be an amendment to the Custodian
Agreement and Sub-Custody Agreement and this Agreement shall
govern in the event of any inconsistency involving this
Safekeeping Account.
2. Bank agrees to accept all instructions of IFTC (or FCM)
concerning transactions involving this Safekeeping Account.
IFCT shall cause the Bank to establish and maintain the
Safekeeping Account for the deposit and maintenance by
Customer of Initial Margin on financial futures contracts and
Initial Margin and maintenance margin on related option
contracts with respect to transactions effected by Customer
through FCM. The securities and monies at any time deposited
in the Safekeeping Account and all instructions, deliveries,
duties, rights and liabilities of Customer and Custodian with
respect to the Safekeeping Account shall be governed in all
respects by the Custodian Agreement, except as expressly
provided otherwise in this Agreement.
3. Customer shall deposit and maintain as collateral in the
Safekeeping Account such Initial Margin as shall be required
from time to time by the exchange on which transactions are
effected or caused to be effected by FCM as broker for
Customer. Customer may deposit amounts in excess of such
requirements. The designation "Customer Funds" in the account
title is intended to indicate the status of the account under
the Commodity Exchange Act and Commodity Futures Trading
Commission regulations; however, the provisions of this
agreement shall be controlling as to the rights of the parties
in the collateral deposited in the account.
4. The Initial Margin deposited and maintained in the Safekeeping
Account, created pursuant to the Safekeeping Agreement, shall
be in the form, as Customer elects, of cash or of U.S.
Government securities or other securities or instruments as
FCM in it's sole discretion may accept in respect of initial
margin (eligible securities) or of a combination thereof.
Customer may substitute eligible securities of equal or
greater value upon prior approval by FCM, which approval shall
not be unreasonably withheld. Upon receipt of such eligible
securities, FCM agrees to give instructions to Custodian and
Custodian shall cause Bank to release from the Safekeeping
Account cash or eligible U.S. Government securities of an
equal value, or such lesser amount as may be directed by
Customer. Any separate interest payments thereon shall be
automatically credited by Custodian in Federal funds to such
demand deposit accounts designated in instructions from
Customer on the date that such interest becomes due and
received unless notice has been provided to Custodian pursuant
to Paragraph 7(a) below, and such interest is required to meet
additional Variation Margin requirements in accordance with
the procedure provided in Paragraphs 7(a), (b), and (c).
Amounts due on the securities which mature or are redeemed
will be credited to the Safekeeping Account in Federal funds
on the date such amounts are received. Amounts due to
2
3
Customer as a result of the variation in value of Customer's
short option positions shall be credited to Customer by
reducing the amount of the collateral required to be
maintained in the Safekeeping Account.
5. With respect to the deposit of Initial Margin, Customer shall
direct Custodian who shall cause Bank to segregate specified
assets in the Safekeeping Account, and Custodian shall cause
Bank promptly to provide FCM and Customer with a written
confirmation of each transfer into or out of the Safekeeping
Account.
6. Withdrawals of Initial Margin from the Safekeeping Account
shall be effected upon receipt by the Custodian of Customer's
custodian order and FCM's prior written verification of such
withdrawal. FCM shall, upon request of the Customer, inform
Customer of the amount of any excess Initial Margin in the
Safekeeping Account.
7. FCM shall have access to the collateral only accordance with
the following, and only at such times as conditions set forth
hereafter are complied with:
a. If notice by FCM is given to Customer that additional
margin is required by FCM as broker for the Customer
due to variation in the value of one or more futures
contracts held in the trading account or otherwise
pursuant to the Customer Agreement ("Variation
Margin"), and such notice is given prior to 11:30
A.M. New York time on a day on which the Customer is
open for business, which Variation Margin shall first
have been satisfied from any amounts currently
credited to the Customer's trading account with FCM
in connection with which the Variation Margin is
required, the Customer shall transfer to FCM such
Variation Margin not later than 3:00 P.M. on the same
day. If Notice by FCM to the Customer is given of the
need for Variation Margin subsequent to 11:30 A.M.
but prior to 4:00 P.M. New York time on a day on
which the Customer is open for business, the Customer
shall provide such Variation Margin to FCM not later
than 10:30 A.M. New York time on the next succeeding
day on which the Customer is open for business.
Notice by FCM to the Customer of the receipt of
Variation Margin shall be given promptly.
b. If FCM has not received the requested Variation
Margin within the time period as provided in
Paragraph (7a), Notice by FCM to Customer of the
failure to receive the Variation Margin shall be
given immediately.
c. IF FCM does not receive the Variation Margin in
accordance with Paragraph 7(a), FCM may give (i)
Notice to Custodian and/or Bank of the Customer's
failure to provide Variation Margin and the amount of
Variation Margin required and Custodian shall notify
Bank; and (ii) Notice to the Customer that such
Notice has been given to Custodian and by Custodian
to Bank. Immediately upon receipt by Custodian of
such
3
4
Notice but without prejudice to any rights of FCM
hereunder, Custodian shall give Notice to the
Customer of its receipt of such Notice.
d. In the event Customer has failed to transfer the
required Variation Margin to FCM during the time
period as provided in Paragraph 7(a), FCM may give
Notice to Custodian of the Customer's failure to
provide Variation Margin and that all conditions
precedent to FCM's right to direct disposition
hereunder have been satisfied, and may give
instructions to Custodian which shall instruct Bank,
(i) to transfer eligible U.S. Government securities
to FCM, (ii) to sell at the prevailing market price
such of the collateral in the Safekeeping Account
relating to the trading account in which the
Variation Margin is required, in each case as
necessary to provide for payment to FCM of the amount
of Variation Margin that FCM shall have specified in
the Notice, or (iii) with respect to collateral in
the form of cash, FCM may give instructions to
Custodian who shall instruct Bank to immediately
transfer cash in the amount of the variation that FCM
shall have specified in the Notice from such
Safekeeping Account to the account of FCM. Custodian
shall immediately give Notice to Customer of its
receipt of such action. Subject to the notice
provisions of Paragraph 7 set forth above, Custodian
shall take instructions solely from FCM with respect
to the sale of securities and/or the transfer of cash
to FCM. In the event that FCM receives eligible U.S.
Government securities pursuant to this Paragraph
7(d), it shall have the right to sell or otherwise
dispose of such securities and shall remit to
Customer any proceeds of such sale or disposition in
excess of the amount of Variation Margin specified in
instructions from FCM to Custodian.
e. Custodian shall cause Bank to retain in the
Safekeeping Account any collateral in excess of the
amount of Variation Margin specified in instructions
from FCM to Custodian including any proceeds from the
sale of securities in excess of such amount.
Custodian shall cause Bank to give consideration to
any timely request by Customer with respect to
particular securities to be sold and shall sell any
securities in the principal market for such
securities or, in the event such principal market is
closed, sell them in a manner commercially reasonable
for such securities.
8. FCM shall promptly credit to the trading account of Customer
any Variation Margin resulting from the variation in value of
one or more Contracts purchased or sold by Customer in
accordance with the rules of any contract market, exchange or
board of trade on which contract transactions are effected by
FCM for Customer. At Customer's direction, FCM shall transfer
trading account balances to Customer in Federal funds to the
Custodian or such bank account in Customer's name as Customer
shall otherwise direct. Customer may give such directions to
FCM by telephone, confirmed thereafter in writing.
4
5
9. Custodian shall act or cause Bank to act only upon receipt of
instructions from FCM regarding release of collateral. FCM
shall not be responsible for any loss incurred by Customer by
reason of IFTC's or Bank's negligence or willful misconduct in
acting on those instructions; provided that the instructions
are given in a timely fashion and comply in all other respects
with the provisions of this Agreement. IFTC or Bank shall not
be responsible for any loss incurred by Customer or FCM by
reason of Customer or FCM's negligence or willful misconduct
including but not limited to instructions of FCM hereunder.
10. Unless otherwise provided, all notices or other communications
called for by this Agreement shall be given by the most
expeditious means possible and may be given by telephone. If a
notice is not given in writing, a written copy shall be
provided to appropriate parties within a reasonable time after
notice is given.
11. Any and all expenses of establishing, maintaining, or
terminating the Safekeeping Account, including without
limitation any and all expenses incurred by Custodian or Bank
in connection with the Safekeeping Account, shall be borne by
Customer.
12. Bank may resign upon thirty (30) days prior written notice to
Customer and FCM; provided that if a substitute or successor
to Bank is not available to hold the Safekeeping Account at
the end of such period, Bank shall continue to act as
custodian until Customer's open positions at FCM secured by
margin in the Safekeeping Account as of the proposed
termination date are closed out or transferred from FCM.
13. This Agreement shall be construed according to, and the rights
and liabilities of the parties hereto shall be governed by,
the laws of the State of New York.
14. Except as specifically provided herein, this Agreement does
not in any way affect any other agreements entered into among
the parties hereto and any actions taken or omitted by any
party hereunder shall not affect any rights of any other party
hereunder.
15. No amendment of this Agreement shall be effective unless in
writing and signed by persons thereunto duly authorized.
16. Written communications hereunder shall be, except as otherwise
required hereunder, hand-delivered or mailed first class
postage prepaid, except that written notice of termination
shall be sent by certified mail addressed:
5
6
(a) if to IFTC, to:
Investors Fiduciary Trust Company
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
(b) if to Bank, to:
United Missouri Bank of Kansas City, N.A.
000 Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
(c) if to Customer, to:
Empire Builder Tax Free Bond Fund
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Attention: Xxxxxx Xxxxxxxx
(d) if to Xxxxxxx Xxxxx Futures, Inc., to:
IDS Tower
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention:__________________________
17. This Agreement is executed on behalf of the Trustees of the
Customer as Trustees and not individually, and the obligations
of this Agreement are not binding upon any of the Trustees but
are binding only upon the assets and property of the Fund.
6
7
EMPIRE BUILDER TAX FREE BOND FUND
By: /s/ illegible
--------------
Date: 3/19/92 Title: Assistant Treasurer
-----------------
XXXXXXX XXXXX FUTURES, INC.
By: /s/ illegible
---------------
Date: 3/24/92 Title: Director - DMG
-----------------
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ Xxxxxx X. Xxxxxx, Xx.
-------------------------
Date: 3/18/92 Title: Senior Vice President
------------------
UNITED MISSOURI BANK OF KANSAS CITY, N.A.
By: /s/ Xxxxxxx X. Xxxxx
---------------------
Date: 3/27/92 Title: Senior Vice President
------------------
7
8
SAFEKEEPING AGREEMENT
Empire Builder Tax Free Bond Fund ("Depositor") and Xxxxxxx Xxxxx Futures, Inc.
("Merrill") have interests in the subject Safekeeping Account pursuant to a
certain Procedural Agreement among, Merrill, Depositor, Investors Fiduciary
Trust Company ("IFTC" or "Custodian") and United Missouri Bank of Kansas City,
N.A. ("Bank"), which Procedural Agreement governs over any inconsistent
provisions in this Safekeeping Agreement.
--------------------------------------------------------------------------------
Investors Fiduciary Trust Company
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
United Missouri Bank of Kansas City, N.A.
000 Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Gentlemen:
The Depositor hereby requests IFTC, acting as the Custodian of
Depositor, to open and maintain a Safekeeping Account, which shall be an account
under the Custodian Agreement between Depositor and IFTC, and pursuant to the
Sub-Custody Agreement between Bank and IFTC by which Bank serves as
sub-custodian of Custodian of certain monies and securities owned by Customer.
The Safekeeping Account will be opened and maintained in the name of "Xxxxxxx
Xxxxx Futures, Inc. Customer Funds for the benefit of Empire Builder Tax Free
Bond Fund (Customer Segregated Account)" for all monies and securities now or
hereafter deposited with and accepted by Custodian or on behalf of Custodian for
the initial margin in futures and option contracts transactions, including any
additional original margin requirements for Depositor's short option positions.
In such custodial capacity you are limited to holding the securities in
safekeeping for the Depositor and dealing with them as herein expressed unless
otherwise mutually agreed in writing.
You shall make purchases, sales, deliveries of securities only as the
Depositor may direct, and you are authorized and directed to:
1. Collect income and principal on bearer securities in the
account;
2. Dispose of the monies received from income collections,
maturity, redemption, sale, or other disposition of the
securities pursuant to said Procedural Agreement;
3. Send a daily confirmation of receipts and disbursements to the
Depositor and to Merrill;
4. Provide a monthly list of securities to the Depositor and to
Merrill;
5. On request, confirm to Merrill and Depositor all account
charges and positions.
8
9
The general conditions of the Safekeeping Agreement shall be those of
the Custodian Agreement between Depositor and IFTC.
The compensation of the Custodian for its services hereunder shall be
as the parties shall agree. No change in compensation shall be applicable to
this account except upon written notice to Depositor. The Custodian and Bank
will acknowledge for Merrill by letter, Attachment A hereto, that Custodian and
Bank are informed that the monies and securities on deposit belong to Depositor
and are being held by Custodian at Bank, in the name of Xxxxxxx Xxxxx Futures,
Inc. in accordance with the Commodity Exchange Act and the regulations
thereunder.
All communications from the Custodian shall be sent to the Depositor
pursuant to the Custodian Agreement, and to Merrill at the address shown below,
or at such other address as the Depositor or Merrill shall from time to time
direct.
The Depositor is not a foreign citizen; if this citizenship status
changes, the Depositor will promptly notify the Custodian in writing.
Either the Depositor or the Custodian, subject to the Procedural
Agreement, may close this account at any time.
Very truly yours,
Accepted:
INVESTORS FIDUCIARY TRUST COMPANY EMPIRE BUILDER TAX FREE BOND FUND
By: /s/ Xxxxxx X. Xxxxxx. Jr. By: /s/ illegible
Title: Senior Vice President Title: Assistant Treasurer
Accepted Acknowledged and Approved:
on behalf of:
UNITED MISSOURI BANK OF KANSAS CITY, X.X. XXXXXXX XXXXX FUTURES, INC.
By: /s/ Xxxxxxx X. Xxxxx By: /s/ illegible
Title: Senior Vice President Title: Director - DMG
9
10
ATTACHMENT A
Date:
Investors Fiduciary Trust Company
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
United Missouri Bank of Kansas City, N.A.
000 Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Gentlemen:
We refer to the account maintained by Investors Fiduciary Trust Company ("IFTC")
at United Missouri Bank of Kansas City, N.A. ("UMB") designated as "Xxxxxxx
Xxxxx Futures, Inc. ("Merrill") Customer Funds for the benefit of Empire Builder
Tax Free Bond Fund (Customer Segregated Account)" account number
__________________________ (the "Account"), opened pursuant to a Safekeeping
Agreement among Empire Builder Tax Free Bond Fund ("Depositor"), Xxxxxxx Xxxxx
Futures, Inc. ("Merrill"), IFTC, as Custodian, and UMB, as sub-custodian for
IFTC, dated ________________.
The Account is being maintained by us in compliance with the provisions of the
Commodity Exchange Act and as a segregated sub-account under the Custodian
Agreement between Depositor and IFTC. Depositor will from time to time deposit
with you in such Account monies or obligations of the United States, general
obligations of any state or of any political subdivision other of, or
obligations fully guaranteed as to principal and interest by the United States
(collectively referred to as "securities"). All such securities and monies will
be treated either as investments of our commodity and commodity option
customer's funds or as obligations belonging to such Customer. Under the
provisions of the Commodity Exchange Act and regulations promulgated thereunder,
these deposits are required to be segregated and treated as belonging to the
Customer. By signing and returning to us the enclosed copy of this letter, you
acknowledge that you understand the nature of the securities and monies
deposited in the account.
You further acknowledge that the funds and securities held in the above Account
are those of a commodity or commodity option customer and are being held by you
subject to the requirements of the Commodity Exchange Act and regulations
promulgated thereunder. Such fund and securities will not be treated by you as
the funds or securities of any person other than such Depositor customer of
Merrill, and will not be used by you in connection with the obligations of
10
11
any person other than Depositor, except as provided in the Safekeeping Agreement
and the Procedural Agreement.
You also acknowledge that the above Account is a special deposit, and you agree
that, in providing services to us or to any of our affiliates, including but not
limited to extending credit or granting accommodations or services relating to
uncollected, target, compensating or other balances to us or to any of our
affiliates, you acknowledge that you have no claim, and will seek no lien, right
of set off or any other claim or interest in the funds or securities held in
said Account, and that it will not use the funds and securities in the
above-described Account to margin, collateralize, secure or to extend credit to
Depositor, to any of its affiliates, to us, to any of our affiliates or to any
persons for such activities or otherwise. You hereby agree that the obligations
and records accounting for the monies and securities held in the Account may be
examined by an authorized employee of the Commodity Futures Trading Commission.
Sincerely,
AGREED AND ACKNOWLEDGED:
INVESTORS FIDUCIARY TRUST COMPANY XXXXXXX XXXXX FUTURES, INC.
By: /s/ Xxxxxx X. Xxxxxx, Xx. By: /s/ illegible
Title: Senior Vice President Title: Director - DMG
Date: March 18, 1992 Date: March 24, 1992
AGREED AND ACKNOWLEDGED:
EMPIRE BUILDER TAX FREE BOND FUND UNITED MISSOURI BANK OF KANSAS
CITY, N.A.
By: /s/ illegible By: /s/ Xxxxxxx X. Xxxxx
Title: Assistant Treasurer Title: Senior Vice President
Date: March 19, 1992 Date: March 27, 1992
11
