CUSTODIAN AGREEMENT
AGREEMENT made as of this 29th day of September, 2000, between LKCM FUNDS,
a business trust organized under the laws of the State of Delaware, on behalf of
its LKCM INTERNATIONAL FUND series (the "Fund"), and INVESTORS BANK & TRUST
COMPANY, a Massachusetts trust company (the "Bank").
The Fund, an open-end management investment company, desires to place and
maintain all of its Fund securities and cash in the custody of the Bank. The
Bank has at least the minimum qualifications required by Section 17(f)(1) of the
Investment Company Act of 1940 (the "1940 Act") to act as custodian of the Fund
securities and cash of the Fund, and has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as custodian
of its Fund securities and cash delivered to the Bank as hereinafter described
and the Bank agrees to act as such upon the terms and conditions hereinafter set
forth. For the services rendered pursuant to this Agreement the Fund agrees to
pay to the Bank the fees set forth on Appendix B hereto.
2. Definitions. Whenever used herein, the terms listed below will have the
following meaning:
2.1 Authorized Person. Authorized Person will mean any of the persons duly
authorized to give Proper Instructions or otherwise act on behalf of the Fund by
appropriate resolution of its Board, and set forth in a certificate as required
by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors or the Board of Trustees
of the Fund, as the case may be.
2.3 Security. The term security as used herein will have the same meaning
assigned to such term in the Securities Act of 1933, as amended, including,
without limitation, any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any profit sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 Fund Security. Fund Security will mean any security owned by the Fund.
2.5 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934 ("Exchange Act"), its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the 1940 Act, its successor or successors and its nominee or nominees,
specifically identified in a certified copy of a resolution of the Board.
2.8 Proper Instructions. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of Fund Securities, and payments and deliveries
in connection therewith, given by an Authorized Person, such instructions to be
given in such form and manner as the Bank and the Fund shall agree upon from
time to time, and (ii) instructions (which may be continuing instructions)
regarding other matters signed or initialed by an Authorized Person. Oral
instructions will be considered Proper Instructions if the Bank reasonably
believes them to have been given by an Authorized Person. The Fund shall cause
all oral instructions to be promptly confirmed in writing. The Bank shall act
upon and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-up or
confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to report
such discrepancy to the Fund. The Fund shall be responsible, at the Fund's
expense, for taking any action, including any reprocessing, necessary to correct
any such discrepancy or error, and to the extent such action requires the Bank
to act, the Fund shall give the Bank specific Proper Instructions as to the
action required. Upon receipt by the Bank of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Fund, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank agree in writing that such procedures afford adequate
safeguards for the Fund's assets.
3. Separate Accounts. The Bank will segregate the assets of each series to
which this Agreement relates into a separate account for each such series
containing the assets of such series (and all investment earnings thereon).
Unless the context otherwise requires, any reference in this Agreement to any
actions to be taken by the Fund shall be deemed to refer to the Fund acting on
behalf of one or more of its series, any reference in this Agreement to any
assets of the Fund, including, without limitation, any Fund securities and cash
and earnings thereon, shall be deemed to refer only to assets of the applicable
series, any duty or obligation of the Bank hereunder to the Fund shall be deemed
to refer to duties and obligations with respect to such individual series and
any obligation or liability of the Fund hereunder shall be binding only with
respect to such individual series, and shall be discharged only out of the
assets of such series.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
members of the Board, it being understood that upon the occurrence of any change
in the information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund will sign a new or amended certification setting forth the
change and the new, additional or omitted names or signatures. The Bank will be
entitled to rely and act upon any Officers' Certificate given to it by the Fund
which has been signed by Authorized Persons named in the most recent
certification received by the Bank.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, including borrowed funds,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Pursuant to the Bank's internal
policies regarding the management of cash accounts, the Bank may segregate
certain portions of the cash of the Fund into a separate savings deposit account
upon which the Bank reserves the right to require seven (7) days notice prior to
withdrawal of cash from such an account. Upon receipt by the Bank of Proper
Instructions (which may be continuing instructions) or in the case of payments
for redemptions and repurchases of outstanding shares of common stock of the
Fund, notification from the Fund's transfer agent as provided in Section 7,
requesting such payment, designating the payee or the account or accounts to
which the Bank will release funds for deposit, and stating that it is for a
purpose permitted under the terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the Fund,
against contemporaneous receipt of such securities by the Bank or against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the repurchase or
redemption of common shares of the Fund offered for repurchase or redemption in
accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the account of
the Fund of dividends or other distributions to shareholders as may from time to
time be declared by the Board, interest, taxes, management or supervisory fees,
distribution fees, fees of the Bank for its services hereunder and reimbursement
of the expenses and liabilities of the Bank as provided hereunder, fees of any
transfer agent or administrator, fees for legal, accounting, and auditing
services, or other operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection with the
conversion, exchange or surrender of Fund Securities or securities subscribed to
by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Fund, but, in
the case of final payment, only upon redelivery to the Bank of any Fund
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund for the
purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Fund Securities, but only upon redelivery to
the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
(a) For payments in connection with foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future
delivery (collectively, "Foreign Exchange Agreements") which may be entered
into by the Bank on behalf of the Fund upon the receipt of Proper
Instructions, such Proper Instructions to specify the currency broker or
banking institution (which may be the Bank, or any other subcustodian or
agent hereunder, acting as principal) with which the contract or option is
made, and the Bank shall have no duty with respect to the selection of such
currency brokers or banking institutions with which the Fund deals or for
their failure to comply with the terms of any contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to
Proper Instructions, the Fund agrees that the Bank shall have a continuing
lien and security interest, to the extent of any payment due under any
Foreign Exchange Agreement, in and to any property at any time held by the
Bank for the Fund's benefit or in which the Fund has an interest and which
is then in the Bank's possession or control (or in the possession or
control of any third party acting on the Bank's behalf). The Fund
authorizes the Bank, in the Bank's sole discretion, at any time to charge
any such payment due under any Foreign Exchange Agreement against any
balance of account standing to the credit of the Fund on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 Termination: Upon the termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 16 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided herein, and
except for securities to be delivered to any subcustodian appointed pursuant to
Sections 14.2 or 14.3 hereof, the Bank as custodian will receive and hold
pursuant to the provisions hereof, in a separate account or accounts and
physically segregated at all times from those of other persons, any and all Fund
Securities which may now or hereafter be delivered to it by or for the account
of the Fund. All such Fund Securities will be held or disposed of by the Bank
for, and subject at all times to, the instructions of the Fund pursuant to the
terms of this Agreement. Subject to the specific provisions herein relating to
Fund Securities that are not physically held by the Bank, the Bank will register
all Fund Securities (unless otherwise directed by Proper Instructions or an
Officers' Certificate), in the name of a registered nominee of the Bank as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, and will execute and deliver all such certificates
in connection therewith as may be required by such laws or regulations or under
the laws of any state.
The Fund will from time to time furnish to the Bank appropriate instruments
to enable it to hold or deliver in proper form for transfer, or to register in
the name of its registered nominee, any Fund Securities which may from time to
time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank will
vote any of the Fund Securities held hereunder, except in accordance with Proper
Instructions or an Officers' Certificate. The Bank will execute and deliver, or
cause to be executed and delivered, to the Fund all notices, proxies and proxy
soliciting materials delivered to the Bank with respect to such Securities, such
proxies to be executed by the registered holder of such Securities (if
registered otherwise than in the name of the Fund), but without indicating the
manner in which such proxies are to be voted.
6.3 Corporate Action. If at any time the Bank is notified that an issuer of
any Fund Security has taken or intends to take a corporate action (a "Corporate
Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Fund Security, including without limitation,
liquidation, consolidation, merger, recapitalization, reorganization,
reclassification, subdivision, combination, stock split or stock dividend, which
Corporate Action requires an affirmative response or action on the part of the
holder of such Fund Security (a "Response"), the Bank shall notify the Fund
promptly of the Corporate Action, the Response required in connection with the
Corporate Action and the Bank's deadline for receipt from the Fund of Proper
Instructions regarding the Response (the "Response Deadline"). The Bank shall
forward to the Fund via telecopier and/or overnight courier all notices,
information statements or other materials relating to the Corporate Action
promptly after receipt of such materials by the Bank.
(a) The Bank shall act upon a required Response only after receipt by
the Bank of Proper Instructions from the Fund no later than 5:00 p.m. on
the date specified as the Response Deadline and only if the Bank (or its
agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the
date specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required Response if
Proper Instructions relating to such Response and all necessary Securities,
consents and other materials are not received by and in the possession of
the Bank no later than 5:00 p.m. on the date specified as the Response
Deadline. Notwithstanding, the Bank may, in its sole discretion, use its
best efforts to act upon a Response for which Proper Instructions and/or
necessary Securities, consents or other materials are received by the Bank
after 5:00 p.m. on the date specified as the Response Deadline, it being
acknowledged and agreed by the parties that any undertaking by the Bank to
use its best efforts in such circumstances shall in no way create any duty
upon the Bank to complete such Response prior to its expiration.
(c) In the event that the Fund notifies the Bank of a Corporate Action
requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline shall be 48 hours prior to the
Response expiration time set by the depository processing such Corporate
Action.
(d) Section 14.3(e) of this Agreement shall govern any Corporate
Action involving Foreign Fund Securities held by a Selected Foreign
Sub-Custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a certified copy
of a resolution of the Board specifically approving deposits of Fund assets in
the Book-Entry System, and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may keep Fund Securities in the Book-Entry System
provided that such Fund Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not
include any assets of the Bank (or such agent) other than assets held as a
fiduciary, custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to the
Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry the Fund Securities which are included
with other securities deposited in the Account and shall at all times
during the regular business hours of the Bank (or such agent) be open for
inspection by duly authorized officers, employees or agents of the Fund.
Where securities are transferred to the Fund's account, the Bank shall
also, by book entry or otherwise, identify as belonging to the Fund a
quantity of securities in a fungible bulk of securities (i) registered in
the name of the Bank or its nominee, or (ii) shown on the Bank's account on
the books of the Federal Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased for the
account of the Fund or shall pay cash collateral against the return of Fund
Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the
Account, and (ii) the making of an entry on the records of the Bank (or its
agent) to reflect such payment and transfer for the account of the Fund.
The Bank (or its agent) shall transfer securities sold or loaned for the
account of the Fund upon
(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the
delivery of securities loaned by the Fund has been transferred to the
Account; and
(ii) the making of an entry on the records of the Bank (or its
agent) to reflect such transfer and payment for the account of the
Fund. Copies of all advices from the Book-Entry System of transfers of
securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Bank and shall be provided to the Fund
at its request. The Bank shall send the Fund a confirmation, as
defined by Rule 17f-4 of the 1940 Act, of any transfers to or from the
account of the Fund;
(d) The Bank will promptly provide the Fund with any report obtained
by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange, release,
lend, deliver and otherwise deal with Fund Securities including stock
dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Fund all income and other payments thereon and
to take all steps necessary and proper in connection with the collection
thereof;
(b) Registration of Fund Securities may be made in the name of any
nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Fund Securities,
payment will be made only upon delivery of the securities to or for the
account of the Fund and the Fund shall pay cash collateral against the
return of Fund Securities loaned by the Fund only upon delivery of the
Securities to or for the account of the Fund; and upon any sale of Fund
Securities, delivery of the Securities will be made only against payment
therefor or, in the event Fund Securities are loaned, delivery of
Securities will be made only against receipt of the initial cash collateral
to or for the account of the Fund; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any certificated Fund
Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned
to the Bank upon its request;
(ii) Proxy materials received by a Depository with respect to
Fund Securities deposited with such Depository are forwarded
immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository promptly forwards to the Bank confirmation
of any purchase or sale of Fund Securities and of the appropriate book
entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule
31(a) thereunder; and
(v) Such Depository delivers to the Bank all internal accounting
control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Fund may reasonably
request in order to verify the Fund Securities held by such
Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided (i) the Bank
has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-Entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining procedures for Book-Entry
Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the Fund in an
account of the Bank that includes only assets held by it for customers;
(b) The records of the Bank with respect to the Fund's purchase of
Book-Entry Paper through the Bank will identify, by book-entry, commercial
paper belonging to the Fund which is included in the Book-Entry System and
shall at all times during the regular business hours of the Bank be open
for inspection by duly authorized officers, employees or agents of the
Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the account
of the Fund upon contemporaneous (i) receipt of advice from the Issuer that
such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for
the account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment
for such Book-Entry Paper has been transferred to the Fund, and (ii) the
making of an entry on the records of the Bank to reflect such payment for
the account of the Fund; and
(e) The Bank will send to the Fund such reports on its system of
internal accounting control with respect to the Book-Entry Paper as the
Fund may reasonably request from time to time. . 6.7 Use of Immobilization
Programs. Provided (i) the Bank has received a certified copy of a
resolution of the Board specifically approving the maintenance of Fund
Securities in an immobilization program operated by a bank which meets the
requirements of Section 26(a)(1) of the 1940 Act, and (ii) for each year
following such approval the Board has reviewed and approved the arrangement
and has not delivered an Officer's Certificate to the Bank indicating that
the Board has withdrawn its approval, the Bank shall enter into such
immobilization program with such bank acting as a subcustodian hereunder.
6.8 Eurodollar CDs. Any Fund Securities which are Eurodollar CDs may be
physically held by the European branch of the U.S. banking institution that is
the issuer of such Eurodollar CD (a "European Branch"), provided that such Fund
Securities are identified on the books of the Bank as belonging to the Fund and
that the books of the Bank identify the European Branch holding such Fund
Securities. Notwithstanding any other provision of this Agreement to the
contrary, except as stated in the first sentence of this subsection 6.8, the
Bank shall be under no other duty with respect to such Eurodollar CDs belonging
to the Fund.
6.9 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
(i) The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Fund
regarding escrow or other arrangements (i) in accordance with the
provisions of any agreement entered into upon receipt of Proper
Instructions among the Bank, any broker-dealer registered with the
National Association of Securities Dealers, Inc. (the "NASD"), and, if
necessary, the Fund, relating to the compliance with the rules of the
Options Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations.
(ii) Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has
deposited or is maintaining adequate margin, if required, with any
broker in connection with any option, nor shall the Bank be under duty
or obligation to present such option to the broker for exercise unless
it receives Proper Instructions from the Fund. The Bank shall have no
responsibility for the legality of any put or call purchased or sold
on behalf of the Fund, the propriety of any such purchase or sale, or
the adequacy of any collateral delivered to a broker in connection
with an option or deposited to or withdrawn from a Segregated Account
(as defined in subsection 6.10 below). The Bank specifically, but not
by way of limitation, shall not be under any duty or obligation to:
(i) periodically check or notify the Fund that the amount of such
collateral held by a broker or held in a Segregated Account is
sufficient to protect such broker or the Fund against any loss; (ii)
effect the return of any collateral delivered to a broker; or (iii)
advise the Fund that any option it holds, has or is about to expire.
Such duties or obligations shall be the sole responsibility of the
Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with
the provisions of any agreement entered into upon the receipt of
Proper Instructions among the Fund, the Bank and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or
organizations, regarding account deposits in connection with
transactions by the Fund.
(ii) The responsibilities of the Bank as to futures, puts and
calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in
subparagraph (a)(ii) of this Section 6.9 as if such subparagraph
referred to Futures Commission Merchants rather than brokers, and
Futures and puts and calls thereon instead of options.
6.10 Segregated Account. The Bank shall upon receipt of Proper Instructions
establish and maintain a Segregated Account or Accounts for and on behalf of the
Fund.
(a) Cash and/or Fund Securities may be transferred into a Segregated
Account upon receipt of Proper Instructions in the following circumstances:
(i) in accordance with the provisions of any agreement among the
Fund, the Bank and a broker-dealer registered under the Exchange Act
and a member of the NASD or any Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Options Clearing Corporation and of any registered
national securities exchange or the Commodity Futures Trading
Commission or any registered Contract Market, or of any similar
organizations regarding escrow or other arrangements in connection
with transactions by the Fund;
(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity
futures purchased or written by the Fund;
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a
market value (marked to market on a daily basis) at all times equal to
not less than the aggregate purchase price due on the settlement dates
of all the Fund's then outstanding forward commitment or "when-issued"
agreements relating to the purchase of Fund Securities and all the
Fund's then outstanding commitments under reverse repurchase
agreements entered into with broker-dealer firms;
(iv) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or
any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of Segregated Accounts by
registered investment companies;
(v) for other proper corporate purposes, but only, in the case of
this clause (v), upon receipt of, in addition to Proper Instructions,
a certified copy of a resolution of the Board, or of the executive
committee of the Board signed by an officer of the Fund and certified
by the Secretary or an Assistant Secretary, setting forth the purpose
or purposes of such Segregated Account and declaring such purposes to
be proper corporate purposes.
(b) Cash and/or Fund Securities may be withdrawn from a Segregated
Account pursuant to Proper Instructions in the following circumstances:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii) or
(a)(iv) above, for sale or delivery to meet the Fund's obligations
under outstanding forward commitment or when-issued agreements for the
purchase of Fund Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward commitment
or when-issued agreements for the purchase of Fund securities or
reverse repurchase agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund other than
those in the Segregated Account;
(v) for delivery upon settlement of a forward commitment or
when-issued agreement for the sale of Fund Securities; or
(vi) with respect to assets deposited pursuant to (a)(v) above,
in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon receipt
of Proper Instructions relating to the purchase by the Fund of interest-bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Fund appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"), and
shall retain such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Fund Securities of the Fund and the responsibility of the Bank therefore shall
be the same as and no greater than the Bank's responsibility in respect of other
Fund Securities of the Fund.
6.12 Transfer of Securities. The Bank will transfer, exchange, deliver or
release Fund Securities held by it hereunder, insofar as such Securities are
available for such purpose, provided that before making any transfer, exchange,
delivery or release under this Section only upon receipt of Proper Instructions.
The Proper Instructions shall state that such transfer, exchange or delivery is
for a purpose permitted under the terms of this Section 6.12, and shall specify
the applicable subsection, or describe the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection. After receipt of such Proper Instructions, the Bank will transfer,
exchange, deliver or release Fund Securities only in the following
circumstances:
(a) Upon sales of Fund Securities for the account of the Fund, against
contemporaneous receipt by the Bank of payment therefor in full, or against
payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the
transaction occurs, each such payment to be in the amount of the sale price
shown in a broker's confirmation of sale received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the
Bank before such payment is made;
(b) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale
or other similar rights represented by such Fund Securities, or for the
purpose of tendering shares in the event of a tender offer therefor,
provided, however, that in the event of an offer of exchange, tender offer,
or other exercise of rights requiring the physical tender or delivery of
Fund Securities, the Bank shall have no liability for failure to so tender
in a timely manner unless such Proper Instructions are received by the Bank
at least two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has actual
possession of such Security at least two business days prior to the date of
tender;
(c) Upon conversion of Fund Securities pursuant to their terms into
other securities;
(d) For the purpose of redeeming in-kind shares of the Fund upon
authorization from the Fund;
(e) In the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) When such Fund Securities are called, redeemed or retired or
otherwise become payable;
(g) For the purpose of effectuating the pledge of Fund Securities held
by the Bank in order to collateralize loans made to the Fund by any bank,
including the Bank; provided, however, that such Fund Securities will be
released only upon payment to the Bank for the account of the Fund of the
moneys borrowed, provided further, however, that in cases where additional
collateral is required to secure a borrowing already made, and such fact is
made to appear in the Proper Instructions, Fund Securities may be released
for that purpose without any such payment. In the event that any pledged
Fund Securities are held by the Bank, they will be so held for the account
of the lender, and after notice to the Fund from the lender in accordance
with the normal procedures of the lender and any loan agreement between the
fund and the lender that an event of deficiency or default on the loan has
occurred, the Bank may deliver such pledged Fund Securities to or for the
account of the lender;
(h) for the purpose of releasing certificates representing Fund
Securities, against contemporaneous receipt by the Bank of the fair market
value of such security, as set forth in the Proper Instructions received by
the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund to a
bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral
as agreed upon from time to time by the Fund and the Bank, and upon receipt
of payment in connection with any repurchase agreement relating to such
securities entered into by the Fund;
(j) for other authorized transactions of the Fund or for other proper
corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by
an authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary,
specifying the Fund Securities to be delivered, setting forth the
transaction in or purpose for which such delivery is to be made, declaring
such transaction to be an authorized transaction of the Fund or such
purpose to be a proper corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to
the Bank.
7. Redemptions. In the case of payment of assets of the Fund held by the
Bank in connection with redemptions and repurchases by the Fund of outstanding
common shares, the Bank will rely on notification by the Fund's transfer agent
of receipt of a request for redemption and certificates, if issued, in proper
form for redemption before such payment is made. Payment shall be made in
accordance with the Declaration of Trust and By-laws of the Fund (the
"Declaration"), from assets available for said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Fund Securities held by it
under this Agreement and disburse cash only upon the order of the Fund set forth
in an Officers' Certificate, accompanied by a certified copy of a resolution of
the Board authorizing any of the foregoing transactions. Upon completion of such
delivery and disbursement and the payment of the fees through the end of the
then current term of this Agreement, and disbursements and expenses of the Bank,
this Agreement will terminate and the Bank shall be released from any and all
obligations hereunder.
9. Actions of Bank Without Prior Authorization. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of the
Fund all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the Fund
and hold for the account of the Fund all income, dividends, interest and other
payments or distributions of cash with respect to the Fund Securities held
thereunder;
9.2 Present for payment all coupons and other income items held by it for
the account of the Fund which call for payment upon presentation and hold the
cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities received as
a distribution on Fund Securities as a result of a stock dividend, share
split-up, reorganization, recapitalization, merger, consolidation, readjustment,
distribution of rights and similar securities issued with respect to any Fund
Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Fund
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Fund Securities which are called, redeemed,
retired or otherwise become payable, and hold cash received by it upon payment
for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use reasonable efforts to
collect any funds which may to its knowledge, in the exercise of reasonable
diligence, become collectible arising from Fund Securities, including dividends,
interest and other income, and to transmit to the Fund notice actually received
by it of any call for redemption, offer of exchange, right of subscription,
reorganization or other proceedings affecting such Securities. If Fund
Securities upon which such income is payable are in default or payment is
refused after due demand or presentation, the Bank will notify the Fund in
writing of any default or refusal to pay within two business days from the day
on which it receives knowledge of such default or refusal.
11. Maintenance of Records and Accounting Services. The Bank shall create
and maintain all records relating to its activities and obligations under this
Agreement in compliance with the 1940 Act, particularly Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder. All such records, including the records of the
Bank's independent accountants as specifically relate to the Fund, shall be the
property of the Fund and shall at all times during the regular business hours of
the Bank be open for inspection by duly authorized officers, employees or agents
of the Fund and employees and agents of the SEC upon reasonable advance written
notice. The Bank shall perform normal Fund accounting services and shall keep
the books of account and render statements or copies from time to time as
reasonably requested by duly authorized officers, employees, agents or auditors
of the Fund. The Bank shall, at the Fund's request supply the Fund with a
tabulation of securities owned by the Fund and held by the Bank [and shall, when
requested to do so by the Fund and for such compensation as agreed upon between
the Fund and the Bank, include certificate numbers in such tabulations.] The
Bank shall assist generally in the preparation of reports to shareholders and
others, audits of the account and ministerial matters of like nature.
12. Fund Evaluation and Yield Calculation
12.1 Fund Evaluation. The Bank shall compute and, unless otherwise directed
by the Board, determine as of the close of regular trading on the New York Stock
Exchange on each day on which said Exchange is open for unrestricted trading and
as of such other days, or hours, if any, as may be authorized by the Board, the
net asset value and the public offering price of a share of capital stock of the
Fund, such determination to be made in accordance with the provisions of the
Declaration and By-laws of the Fund and the Prospectus and Statement of
Additional Information relating to the Fund, as they may from time to time be
amended, and any applicable resolutions of the Board at the time in force and
applicable; and promptly to notify the Fund, the proper exchange and the NASD or
such other persons as the Fund may request of the results of such computation
and determination. In computing the net asset value hereunder, the Bank may rely
in good faith upon information furnished to it by any Authorized Person in
respect of (i) the manner of accrual of the liabilities of the Fund and in
respect of liabilities of the Fund not appearing on its books of account kept by
the Bank, (ii) reserves, if any, authorized by the Board or that no such
reserves have been authorized, (iii) the source of the quotations to be used in
computing the net asset value, (iv) the value to be assigned to any security for
which no price quotations are available, and (v) the method of computation of
the public offering price on the basis of the net asset value of the shares, and
the Bank shall not be responsible for any loss occasioned by such reliance,
absent negligence, misfeasance or bad faith by the Bank, or for any good faith
reliance on any quotations received from a source pursuant to (iii) above.
12.2. Yield Calculation. The Bank will compute the performance results of
the Fund (the "Yield Calculation") in accordance with the provisions of Release
No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the "Releases")
promulgated by the Securities and Exchange Commission, and any subsequent
amendments to, published interpretations of or general conventions accepted by
the staff of the Securities and Exchange Commission with respect to such
releases or the subject matter thereof ("Subsequent Staff Positions"), subject
to the terms set forth below:
(a) The Bank shall compute the Yield Calculation for the Fund for the
stated periods of time as shall be mutually agreed upon, and communicate in
a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will derive the
items of data necessary for the computation from the records it generates
and maintains for the Fund pursuant Section 11 hereof. The Bank shall have
no responsibility to review, confirm, or otherwise assume any duty or
liability with respect to the accuracy or correctness of any such data
supplied to it by the Fund, any of the Fund's designated agents or any of
the Fund's designated third party providers.
(c) At the request of the Bank, the Fund shall provide, and the Bank
shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods
set forth in the Releases or any Subsequent Staff Positions as they
specifically apply to the Fund. In the event that the computation methods
in the Releases or the Subsequent Staff Positions or the application to the
Fund of a standard or guideline is not free from doubt or in the event
there is any question of interpretation as to the characterization of a
particular security or any aspect of a security or a payment with respect
thereto (e.g., original issue discount, participating debt security, income
or return of capital, etc.) or otherwise or as to any other element of the
computation which is pertinent to the Fund, the Fund or its designated
agent shall have the full responsibility for making the determination of
how the security or payment is to be treated for purposes of the
computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item which is covered by
this Section, and shall not be responsible for its computations made in
accordance with such determinations so long as such computations are
mathematically correct.
(d) The Fund shall keep the Bank informed of all publicly available
information and of any non-public advice, or information obtained by the
Fund from its independent auditors or by its personnel or the personnel of
its investment adviser, or Subsequent Staff Positions related to the
computations to be undertaken by the Bank pursuant to this Agreement and
the Bank shall not be deemed to have knowledge of such information (except
as contained in the Releases) unless it has been furnished to the Bank in
writing.
13. Additional Services. The Bank shall perform the additional services for
the Fund as are set forth on Appendix C hereto. Appendix C may be amended from
time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund, at which time the fees set
forth in Appendix B may be amended upon agreement by the parties.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. In performing its duties
hereunder and any other duties listed on any Schedule hereto, if any, the Bank
will be entitled to receive and act upon the advice of independent counsel of
its own selection, which may be counsel for the Fund, and will be without
liability for any action taken or thing done or omitted to be done in accordance
with this Agreement in good faith in conformity with such advice so long as the
Bank notifies the Fund of such advice.
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Fund Securities purchased by or
for the Fund, the legality of the purchases thereof or the propriety of the
price incurred therefor;
(b) the legality of any sale of any Fund Securities by or for the Fund
or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the Fund
or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the Fund or
the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund or the
legality of the distribution of any Fund Securities as payment in kind of
such dividend; and
(f) any property or moneys of the Fund unless and until received by
it, and any such property or moneys delivered or paid by it pursuant to the
terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Fund Securities at any time delivered to or held by
it for the account of the Fund are such as may properly be held by the Fund
under the provisions of its Declaration, By-laws, any federal or state
statutes or any rule or regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to Property of the Fund Held in
the United States. The Bank may employ agents of its own selection in the
performance of its duties hereunder and shall be responsible for the acts and
omissions of such agents as if performed by the Bank hereunder. Without limiting
the foregoing, certain duties of the Bank hereunder may be performed by one or
more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Fund, provided that any such subcustodian
meets at least the minimum qualifications required by Section 17(f)(1) of the
1940 Act to act as a custodian of the Fund's assets with respect to property of
the Fund held in the United States. The Bank shall have no liability to the Fund
or any other person by reason of any act or omission of any such subcustodian
and the Fund shall indemnify the Bank and hold it harmless from and against any
and all actions, suits and claims, arising directly or indirectly out of the
performance of any subcustodian. Upon request of the Bank, the Fund shall assume
the entire defense of any action, suit, or claim subject to the foregoing
indemnity. The Fund shall pay all fees and expenses of any subcustodian.
14.3 Duties of the Bank with Respect to Property of the Fund Held Outside
of the United States.
(a) Appointment of Foreign Custody Manager.
(i) If the Fund has appointed the Bank Foreign Custody Manager
(as that term is defined in Rule 17f-5 under the 1940 Act), the Bank's
duties and obligations with respect to the Fund's Fund Securities and
other assets maintained outside the United States shall be, to the
extent not set forth herein, as set forth in the Delegation Agreement
between the Fund and the Bank (the "Delegation Agreement").
(ii) If the Fund has appointed any other person or entity Foreign
Custody Manager, the Bank shall act only upon Proper Instructions from
the Fund with regard to any of the Fund's Fund Securities or other
assets held or to be held outside of the United States, and the Bank
shall be without liability for any Claim (as that term is defined in
Section 15 hereof) arising out of maintenance of the Fund's Fund
Securities or other assets outside of the United States. The Fund also
agrees that it shall enter into a written agreement with such Foreign
Custody Manager that shall obligate such Foreign Custody Manager to
provide to the Bank in a timely manner all information required by the
Bank in order to complete its obligations hereunder. The Bank shall
not be liable for any Claim arising out of the failure of such Foreign
Custody Manager to provide such information to the Bank.
(b) Segregation of Securities. The Bank shall identify on its books as
belonging to the Fund the Foreign Fund Securities held by each foreign
sub-custodian (each an "Eligible Foreign Custodian") selected by the
Foreign Custody Manager, subject to receipt by the Bank of the necessary
information from such Eligible Foreign Custodian if the Foreign Custody
Manager is not the Bank.
(c) Access of Independent Accountants of the Fund. If the Bank is the
Fund's Foreign Custody Manager, upon request of the Fund, the Bank will use
its best efforts to arrange for the independent accountants of the Fund to
be afforded access to the books and records of any foreign banking
institution employed as an Eligible Foreign Custodian insofar as such books
and records relate to the performance of such foreign banking institution
with regard to the Fund's Fund Securities and other assets.
(d) Reports by Bank. If the Bank is the Fund's Foreign Custody
Manager, the Bank will supply to the Fund the reports required under the
Delegation Agreement.
(e) Transactions in Foreign Custody Account. Transactions with respect
to the assets of the Fund held by an Eligible Foreign Custodian shall be
effected pursuant to Proper Instructions from the Fund to the Bank and
shall be effected in accordance with the applicable agreement between the
Foreign Custody Manager and such Eligible Foreign Custodian. If at any time
any Foreign Fund Securities shall be registered in the name of the nominee
of the Eligible Foreign Custodian, the Fund agrees to hold any such nominee
harmless from any liability by reason of the registration of such
securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Fund Securities received for the account
of the Fund and delivery of Foreign Fund Securities maintained for the
account of the Fund may be effected in accordance with the customary
established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer.
In connection with any action to be taken with respect to the Foreign
Fund Securities held hereunder, including, without limitation, the exercise
of any voting rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any other action in
connection with any other right, interest or privilege with respect to such
Securities (collectively, the "Rights"), the Bank shall promptly transmit
to the Fund such information in connection therewith as is made available
to the Bank by the Eligible Foreign Custodian, and shall promptly forward
to the applicable Eligible Foreign Custodian any instructions, forms or
certifications with respect to such Rights, and any instructions relating
to the actions to be taken in connection therewith, as the Bank shall
receive from the Fund pursuant to Proper Instructions. Notwithstanding the
foregoing, the Bank shall have no further duty or obligation with respect
to such Rights, including, without limitation, the determination of whether
the Fund is entitled to participate in such Rights under applicable U.S.
and foreign laws, or the determination of whether any action proposed to be
taken with respect to such Rights by the Fund or by the applicable Eligible
Foreign Custodian will comply with all applicable terms and conditions of
any such Rights or any applicable laws or regulations, or market practices
within the market in which such action is to be taken or omitted.
(f) Tax Law. The Bank shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Bank as
custodian of the Fund by the tax laws of any jurisdiction, and it shall be
the responsibility of the Fund to notify the Bank of the obligations
imposed on the Fund or the Bank as the custodian of the Fund by the tax law
of any non-U.S. jurisdiction, including responsibility for withholding and
other taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Eligible Foreign
Custodian with regard to such tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such information.
14.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Fund Securities and cash of the Fund held by it as it uses in
respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
14.5. Fees and Expenses of the Bank. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Fund
Securities made hereunder, and for all necessary proper out-of-pocket
disbursements, expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed on any Schedule
hereto, if any) including any indemnities for any loss, liabilities or expense
to the Bank as provided above. For the services rendered by the Bank hereunder,
the Fund will pay to the Bank such compensation or fees at such rate and at such
times as shall be agreed upon in writing by the parties from time to time. The
Bank will also be entitled to reimbursement by the Fund for all reasonable
out-of-pocket expenses incurred in conjunction with termination of this
Agreement.
14.6 Advances by the Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any proper authorization required by this Agreement for such payments
by the Fund. Should such a payment or payments, with advanced funds, result in
an overdraft (due to insufficiencies of the Fund's account with the Bank, or for
any other reason) this Agreement deems any such overdraft or related
indebtedness a loan made by the Bank to the Fund payable on demand. Such
overdraft shall bear interest at the current rate charged by the Bank for such
loans unless the Fund shall provide the Bank with agreed upon compensating
balances. The Fund agrees that the Bank shall have a continuing lien and
security interest to the extent of any overdraft or indebtedness and to the
extent required by law, in and to any property at any time held by it for the
Fund's benefit or in which the Fund has an interest and which is then in the
Bank's possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, with notice (which may be after the fact) to the Fund setting forth
the basis and amount of the charge, at any time to charge any overdraft or
indebtedness, together with interest due thereon, against any balance of account
standing to the credit of the Fund on the Bank's books.
15. Limitation of Liability.
15.1 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Bank Indemnified Parties") be liable to the Fund or any
third party, and the Fund shall indemnify and hold the Bank and the Bank
Indemnified Parties harmless from and against any and all loss, damage,
liability, actions, suits, claims, costs and expenses, including legal fees, (a
"Claim") arising as a result of any act or omission of the Bank or any Bank
Indemnified Party under this Agreement, except for any Claim resulting from the
negligence, willful misfeasance or bad faith of the Bank or any Bank Indemnified
Party. Without limiting the foregoing, neither the Bank nor the Bank Indemnified
Parties shall be liable for, and the Bank and the Bank Indemnified Parties shall
be indemnified against, any Claim arising as a result of one or more of the
following to the extent not resulting from the negligence, wilful misfeasance or
bad faith of the Bank or any Bank Indemnified Party:
(a) Any act or omission by the Bank or any Bank Indemnified Party in
good faith reliance in accordance with the terms of this Agreement, any
Officer's Certificate, Proper Instructions, resolution of the Board,
telegram, telecopier, notice, request, certificate or other instrument
reasonably believed by the Bank to genuine;
(b) Any act or omission of any subcustodian selected by or at the
direction of the Fund;
(c) Any act or omission of any Foreign Custody Manager other than the
Bank or any act or ommission of any Eligible Foreign Custodian if the Bank
is not the Foreign Custody Manager;
(d) Any Corporate Action, distribution or other event related to Fund
Securities which, at the direction of the Fund, have not been registered in
the name of the Bank or its nominee;
(e) Any Corporate Action requiring a Response for which the
Bank has not received Proper Instructions or obtained actual possession of all
necessary Securities, consents or other materials by 5:00 p.m. Eastern Time on
the date specified as the Response Deadline; or
(f) Information relied on in good faith by the Bank and supplied by
any Authorized Person in connection with the calculation of (i) the net
asset value and public offering price of the shares of capital stock of the
Fund or (ii) the Yield Calculation; or
15.2 The Bank shall indemnify and hold harmless the Fund or any of its
officers, directors, employees or agents (collectively, the "Fund Indemnified
Parties") from and against any Claim to the extent arising from the negligence,
willful misfeasance or bad faith of the Bank or any Bank Indemnified Party.
15.3 Neither party shall be liable to the other for any Claim arising from
any acts of God, earthquakes, fires, floods, storms or other disturbances of
nature, epidemics, strikes, riots, nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, nuclear fusion,
fission or radiation, the interruption, loss or malfunction of utilities,
transportation or computers (hardware or software) and computer facilities, the
unavailability of energy sources and other similar happenings or events not
within the reasonable control of that party.
15.4 Notwithstanding anything to the contrary in this Agreement, in no
event shall either party be liable to the other party or any third party for
lost profits or lost revenues or any special, consequential, punitive or
incidental damages of any kind whatsoever in connection with this Agreement or
any activities hereunder.
15.5. In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which a party may be
required to indemnify the other, the party seeking the indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
seeking indemnification shall give the indemnifying party full and complete
authority, information and assistance to defend such claim or proceeding, and
the indemnifying party shall have, at its option, sole control of the defense of
such claim or proceeding and all negotiations for its compromise or settlement.
The party seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent, which consent shall not be
unreasonably withheld.
16. Termination.
16.1 The term of this Agreement shall be three years commencing upon the
date hereof (the "Initial Term"), or for so long as the Fund is invested in TT
U.S.A. Master Trust, whichever is shorter, unless earlier terminated as provided
herein. After the expiration of the Initial Term, the term of this Agreement
shall automatically renew for successive three-year terms (each a "Renewal
Term") unless notice of non-renewal is delivered by the non-renewing party to
the other party no later than ninety days prior to the expiration of the Initial
Term or any Renewal Term, as the case may be.
Either party hereto may terminate this Agreement prior to the expiration of
the Initial Term or any Renewal Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the violating
party does not cure such violation within 90 days of receipt of such notice.
16.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Fund Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection 16.3, deliver the Fund Securities and cash of the Fund
held by the Bank to a bank or trust company of the Bank's own selection which
meets the requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than $2,000,000, to
be held as the property of the Fund under terms similar to those on which they
were held by the Bank, whereupon such bank or trust company so selected by the
Bank will become the successor custodian of such assets of the Fund with the
same effect as though selected by the Board. Thereafter, the Bank shall be
released from any and all obligations under this Agreement.
16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Fund Securities and cash of the Fund
held by it, subject as aforesaid, in accordance with one of such alternatives
which may be approved by the requisite vote of shareholders, upon receipt by the
Bank of a copy of the minutes of the meeting of shareholders at which action was
taken, certified by the Fund's Secretary and an opinion of counsel to the Fund
in form and content satisfactory to the Bank. Thereafter, the Bank shall be
released from any and all obligations under this Agreement.
16.4 The Fund shall reimburse the Bank for any reasonable expenses incurred
by the Bank in connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Fund may,
upon written request, have reasonable access to the records of the Bank relating
to its performance of its duties as custodian.
17. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in addition
to all other remedies at law or in equity to an injunction or injunctions
without bond or other security to prevent breaches of this provision. Nothing
herein shall prevent the Fund from disclosing any information contained in the
Fund's records as provided by the Bank.
18. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
LKCM Funds
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Att: Xxxxxx Xxxxxxxxxx
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
000 Xxxxxxxxx Xxxxxx, X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxxxxxxx Xxxxx, Director - Client Management
With a copy to: Xxxx X. Xxxxx, General Counsel
or at such other place as such party may from time to time designate in
writing.
19. Amendments. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties.
20. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed to
be an assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. Entire Agreement. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. Limitation of Liability. This Agreement is executed and made by the
Trustees of the Fund not individually but as Trustees under the Declaration and
the obligations of this Agreement are not binding upon any of the Trustees or
shareholders of the Fund but binds only the trust estate of the Fund. The Bank
agrees that the obligations assumed by the Fund hereunder shall be limited in
all cases to the assets of the Fund and that the Bank shall not seek
satisfaction of any such obligation from the officers, agents, employees,
trustees, or shareholders of the Fund.
25. Existence and Authority Representation. Each party represents and
warrants as follows: (i) such party was duly organized, and legally exists,
under the laws of the jurisdiction in which it was formed; (ii) such party has
full power and authority to enter into, and to perform and observe the terms and
conditions of, this Agreement; (iii) such party has duly executed and delivered
this Agreement; (iv) this Agreement is the valid and binding obligation of such
party enforceable according to its terms, subject to standard exceptions
relating to equitable remedies and laws of bankruptcy and insolvency; (v) the
execution, delivery, and performance of this Agreement by such party will not
violate or conflict with, or result in a default under, any other agreement or
contract to which such party is a party or to which its assets are subject; and
(vi) such party is not required to make any governmental filings, or to obtain
any governmental or other third party consents or approvals, as a condition to
entering into, or performing and observing the terms of, this Agreement.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
LKCM FUNDS, on behalf of its LKCM
International Fund
By: /s/ Xxxxxx Xxxxxxxxxx
---------------------
Name: Xxxxxx Xxxxxxxxxx
Title: V.P., Secretary & Treasurer
Investors Bank & Trust Company
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Director
