CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT (the "Agreement") is made as of April
29, 2002, by and between Prospero Capital Management, LLC, a Delaware Limited
Liability Corporation (the "Fund"), and Banc of America Securities LLC, a
Delaware Limited Liability Corporation (the "Custodian").
WHEREAS, the Fund is a non-diversified, management investment
company and a closed-end interval fund registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund desired to retain the Custodian to serve as
custodian of the Fund's assets in compliance with the requirements of the 1940
Act, and the Custodian is willing to so serve as custodian, on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It. (a)
The Fund hereby employs the Custodian as the custodian of all monies and
securities received or owned by the Fund, including securities to be held in
places within the United States ("Domestic Securities") and foreign securities,
as defined in Rule 17f-5 (c) (1) promulgated under the 1940 Act, to be held
outside the United States ("Foreign Securities").
(b) The Fund will deliver to the Custodian all securities and
monies received or owned by the Fund at any time. The Custodian shall
not be responsible for such securities or monies until it shall
actually receive them.
2. Duties of the Custodian with Respect to Assets Held in the
United States.
2.1. Holding Assets. (a) Except for Domestic Securities
deposited and maintained in a Securities System pursuant to paragraph (b) of
this Section 2.1, the Custodian shall hold all Domestic Securities physically
segregated at all times from those of any other person or persons and shall xxxx
such Securities in such manner as to clearly identify them as the property of
the Fund.
(b) The Custodian may deposit and maintain Domestic Securities
in a clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934 (the "Exchange Act"),
which acts as a securities depository, or in the book-entry system authorized by
the U.S. Department of the Treasury and the Board of Governors (the "Federal
Reserve Board") of the Federal Reserve System (collectively, the "Securities
System") in accordance with applicable rules and regulations of the Federal
Reserve Board and the Securities and Exchange Commission. The Domestic
Securities will be represented in an account of the Custodian ("Account") in the
Securities System, which shall include only those assets which the Custodian
shall hold in its capacity as a fiduciary or otherwise for customers, and the
Domestic Securities shall be identified by book-entry in the records of the
Custodian as belonging to the Fund. The Fund will provide to the Custodian, as
required by Rule 17f-4 (d) (5) promulgated under the 1940 Act, (i) prior to the
deposit of Domestic Securities in the Securities System, Proper Instructions (as
defined in Article 4 hereof) that the Individual Managing Members of the Fund
(as defined in the Fund's Limited Liability Agreement dated as of April 22, 2002
(the "LLC Agreement") have approved the initial use of a particular Securities
System, and (ii) annually, a certificate of an Individual Managing Member that
the Individual Managing Member has reviewed the use of the Fund of such
Securities System.
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(c) The Custodian shall upon receipt of Proper Instructions
establish and maintain a segregated account or accounts for and on behalf of the
Fund, into which account or accounts may be transferred cash or Domestic
Securities, including Domestic Securities maintained by the Custodian in an
Account with the Securities System (i) in accordance with the provisions of any
agreement between the Fund, the Custodian, any other broker-dealer registered
under the Exchange Act and a member of the National Association of Securities
Dealers, Inc. ("NASD") or any futures commission merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of The Options
Clearing Corporation, any registered national securities exchange, the Commodity
Futures Trading Commission, any registered contract market ("Contract Market"),
or of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options thereon or
forward currency contracts purchased or sold by the Fund, (iii) 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, and (iv) for other proper business purposes,
but only, in the case of this clause (iv), upon receipt of Proper Instructions
and a certified copy of a resolution or consent of the Individual Managing
Members signed by an Individual Managing Member setting forth the purpose or
purposes of such segregated account and declaring such purposes to be proper
business purposes.
(d) The Custodian shall open and maintain a separate bank
account or account in the United States in the name of the Fund, subject only to
draft or order by the Custodian acting pursuant to the terms of this Agreement,
and shall hold in such account or accounts, subject to the provisions hereof,
all monies received by it from or for the account of the Fund. Monies held by
the Custodian for the Fund may be deposited by it to its credit as Custodian in
such banks or trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each such bank or
trust company and the funds to be deposited with each such bank or trust company
shall be approved by the Individual Managing Members. Such monies shall be
deposited by the Custodian in its capacity as such and shall be withdrawable by
the Custodian only in such capacity. The Custodian shall, upon receipt of Proper
Instructions, invest monies received in and other instruments as may be set
forth in such Proper Instructions.
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2.2. Delivery of Securities. The Custodian shall release and
deliver Domestic Securities held by the Custodian or in a Securities System upon
receipt of Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, only in the following cases:
(i) upon the sale of such Securities for the account of the
Fund and (A) upon the receipt of payment registered form, in "street
name" or in other good delivery form therefor; (B) in the case of a
sale effected through a Securities System, upon (a) receipt of advice
from the Securities System that payment for such Securities has been
transferred to the Account and (b) the making of an entry on the
records of the Custodian to reflect such transfer and payment; or (C)
to a broker or its clearing agent, against receipt therefor, for
examination in accordance with "street delivery" custom;
(ii) upon the receipt of payment in connection with any
repurchase agreement related to such Securities entered into by the
Fund;
(iii) to a depository agent or other person in connection with
the reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of an issuer or the tender or other
similar offers for such Securities, and the Custodian shall obtain and
hold under the terms of this Agreement such certificates of deposit,
interim receipts or other instruments or documents as may be issued to
it to evidence such delivery.
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(iv) to the issuer thereof, or its agent, when such Securities
are called, redeemed, retired or otherwise become payable; provided,
however, that, in any such case, the cash or other consideration is to
be delivered to the Custodian;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee or nominee name of any
sub-custodian or agent appointed pursuant to Section 2.8 hereof, or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of such
Securities; provided, however, that, in any such case, the new
securities are to be delivered to the Custodian;
(vi) in exchange for other securities issued or cash paid in
connection with the merger, consolidation, recapitalization,
reorganization, refinancing or liquidation of the issuer of such
Securities, or the exercise of any conversion privilege or pursuant to
any deposit agreement;
(vii) in the case of warrants, rights or similar securities,
upon the surrender thereof in the exercise of such warrants, rights or
similar securities or, in the case of interim receipts or temporary
securities, the surrender thereof for definitive securities; provided,
however, that, in any such case, the new securities and cash, if any,
are to be delivered to the Custodian;
(viii) in connection with any loans of securities made by the
Fund, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund, which may be in the
form of cash or obligations, issued by the United States government,
its agencies or instrumentalities;
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(ix) as security in connection with any borrowings by the Fund
requiring a pledge of assets by the Fund, but only against receipt of
amounts borrowed;
(x) in accordance with the provisions of any agreement among
the Fund, the Custodian and/or any other broker/dealer registered under
the Exchange Act and a member of the NASD, relating to compliance with
the rules of The Options Clearing Corporation, of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Fund;
(xi) in accordance with the provisions of any agreement among
the Fund, the Custodian and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the rules
of the Commodity Futures Trading Commission, an Contract Market, or any
similar organization or organizations, regarding account deposits in
connection with transactions by the Fund;
(xii) upon receipt of instructions from the transfer agent for
the Fund (the "Transfer Agent"), for delivery to the Transfer Agent or
to the holders of units in the Fund in connection with distributions in
kind upon any repurchases of such units; and
(xiii) for any other proper business purpose, but only upon
receipt of Proper Instructions and a certified copy of a resolution or
consent of the Individual Managing Members signed by an Individual
Managing Member, specifying the Domestic Securities to be delivered,
setting forth the purposes for which such delivery is to be made,
declaring such purposes to be proper business purposes, and naming the
person or persons to whom delivery of such Securities shall be made.
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2.3. Registration of Securities. Domestic Securities held by
the Custodian (other than bearer securities) shall be registered in the name of
the Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund, unless the
Fund has authorized in writing the appointment of a nominee to be used in common
with other investment companies having the same investment adviser as the Fund,
or in the name or nominee name of any sub-custodian or agent appointed pursuant
to Section 2.8 hereof or in the name of a Securities System, or its successor.
All Domestic Securities accepted by the Custodian on behalf of the fund under
the terms of this Agreement shall be in registered form, in "street name" or in
other good delivery form.
2.4 Collection of Income. The Custodian shall collect on a
timely basis all income and other payments with respect to registered Domestic
Securities held hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a timely
basis all income and other payments with respect to bearer Domestic Securities
if, on the date of payment by the issuer, such Securities are held by the
Custodian or Agent thereof and shall credit such income or payments, as
collected, to the Fund's account. The Custodian shall present for payment all
Domestic Securities held hereunder which may mature or be called, redeemed or
retired or otherwise become payable, and shall detach and present for payment
all coupons and other income items requiring presentation as and when they
become due, and shall collect the amount payable on Domestic Securities held
hereunder.
2.5. Payment of Fund Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out monies of the Fund only in the
following cases:
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(i) upon the purchase of Domestic Securities, or futures
contracts, options on futures contracts or forward currency contracts
for the account of the Fund, but only (A) upon the delivery of such
Domestic Securities, or evidence of title to futures contracts, options
on futures or forward currency contracts, to the Custodian or a
sub-custodian or agent appointed pursuant to Section 2.8 hereof; (B) in
the case of a purchase effected through a Securities System, upon
receipt of advice from the Securities System that such Securities have
been transferred to the Account; or (C) in the case of repurchase
agreements entered into between the Fund and the Custodian, or a bank,
or any other broker-dealer which is a member of NASD, upon such
delivery of such Domestic Securities either in certificate form or
through an entry crediting the Custodian's account at the Federal
Reserve Bank of New York with such Securities or upon delivery of the
receipt evidencing purchase by this Fund of such Securities owned by
the Custodian along with written evidence of the agreement by the
Custodian to repurchase such Securities from the Fund;
(ii) in payment for repurchase of units issued by the Fund;
(iii) in payment of any expense or liability incurred by the
Fund, including, but not limited to, the following payments for the
account of the Fund: interest, taxes, management, accounting, transfer
agent and legal fees and other operating expenses of the Fund whether
or not such expenses are to be in while or part capitalized or treated
as deferred expenses;
(iv) in payment of any distributions to members or other
holders of interests or units in the Fund;
(v) in payment of the amount of dividends received in respect
of Domestic Securities sold short;
(vi) in connection with the dissolution and liquidation of the
Fund; or
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(vii) for any other proper purpose, but only upon receipt of
Proper Instructions setting forth the amount of such payment, the
purpose for which such payment is to be made and naming the person or
persons to whom such payment is to be made.
2.6. Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of Domestic
Securities for the account of the Fund is made by the Custodian in advance of
receipt of such Securities in the absence of specific written instructions from
the Fund to pay in advance, the Custodian shall be absolutely liable to the Fund
for such Securities to the same extent as if such Securities had been received
by the Custodian, except that, in the case of repurchase agreements entered into
by the Fund with a bank which is a member of the Federal Reserve System, the
Custodian may transfer funds to the account of such bank prior to the receipt of
written evidence that the Domestic Securities subject to such repurchase
agreement have been transferred by book-entry into a segregated non-proprietary
account of the Custodian maintained with the Federal Reserve Bank of New York or
of the safekeeping receipt, provided that such Securities have in fact been so
transferred by book-entry.
2.7. Restrictions on the Custodian. During the term of this
Agreement, the Custodian:
(i) shall not permit any other person or persons to, subject
any of the Domestic Securities or other investments it holds on behalf
of the Fund to any lien, encumbrance or charge of any kind in favor of
the Custodian or any person claiming through it, except to the extent
required by laws, rules and regulations applicable to the Custodian in
connection with extensions of credit to the Fund; or
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(ii) shall permit the Domestic Securities and other
investments it holds on behalf of the Fund to be subject, at all times,
to inspection by the Securities and Exchange Commission, through its
employees or agents.
2.8. Appointment of Agents and Sub-custodians. The Custodian
may at any time and from time to time appoint (and may at any time remove) any
banking institution located in the United States and qualified under the 1940
Act or Futures Commission Merchant to act (i) as a sub-custodian of Domestic
Securities and monies owned by the Fund, upon terms and conditions specified in
Proper Instructions, or (ii) as its agent to carry out such of the provisions of
this Article 2 as the Custodian of its responsibilities or liabilities hereunder
and the Custodian shall hold the Fund harmless from, and indemnify the Fund
against, any loss that occurs as a result of the failure of any such
sub-custodian or agent to exercise reasonable care with respect to the
safekeeping of the Domestic Securities and monies of the Fund.
2.9. Ownership Certificates for Tax Purposes. The Custodian
shall execute any necessary declarations or certificates of ownership under the
Federal income tax laws or regulations, or the laws or regulations of any other
taxing authority, in connection with receipt of income or other payments with
respect to Domestic Securities of the Fund held by the Custodian and in
connection with transfers of such Securities.
2.10. Proxies and Evidence of Authority. The Custodian shall,
without indication of the manner in which any proxies are to be voted or
authority is to be exercised, promptly execute and deliver, or cause to be
promptly executed and delivered by the registered holder of Domestic Securities
registered otherwise than in the name of the Fund or a nominee of the Fund, to
the Fund, or to such persons as may be designated in Proper Instructions, all
proxies, consents, authorizations and any other instruments whereby the
authority of the Fund to vote or consent as owner of such Securities may be
exercised.
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2.11. Communications Relating to Securities. The Custodian
shall transmit promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of Domestic Securities and
expirations of rights in connection therewith and notices of exercise of put and
call options written by the Fund and the maturity of futures or forward currency
contracts purchased or sold by the Fund) received by the Custodian from issuers
of the Domestic Securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund all written
information received by the Custodian from issuers of the Domestic Securities
whose tender or exchange is sought and from the party (or its agents) making the
tender or exchange offer. If the Fund shall desire to take action with respect
to any tender offer, exchange offer or any other similar transaction, the Fund
shall notify the Custodian at least two business days prior to the date on which
the Custodian is to take such action.
2.12. Inspection by Independent Public Accountants. The
Custodian shall permit an independent public accountant chosen by the Fund to
verify by actual examination, at the end of each fiscal year of the Fund, at the
end of the first six months of each such fiscal year, and at least one other
time during each such fiscal year as such accountant may choose, the Domestic
Securities, futures contracts, options on futures contracts, forward currency
contracts, and other investments of the Fund held by the Custodian, including
Domestic Securities deposited and maintained in the Securities System, and the
accounting system, internal accounting control and procedures for safeguarding
all such investments.
3. Duties of the Custodian with Respect to Assets Held Outside
of the United States.
3.1. Appointment of Foreign Sub-Custodians. Subject to the
1940 Act, the Custodian is authorized to employ, in accordance with Section 3.5
hereof, as sub-custodians ("Foreign Sub-Custodians") for the Foreign Securities
and other assets of the Fund maintained outside of the United States, the
foreign banking institutions and foreign securities depositories as may be
designated in Proper Instructions, each of which shall be an "Eligible Foreign
Custodian" (as defined in the 1940 Act). Upon the receipt of Proper
Instructions, the Custodian shall terminate the employment of any one or more of
such Sub-Custodians maintaining custody of the Fund's assets.
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3.2. Assets to be Held. The Custodian shall limit the
securities and other assets maintained in the custody of a Foreign Sub-Custodian
to (i) Foreign Securities, and (ii) cash and cash equivalents in such amounts as
the Custodian or the Fund may determine to be reasonably necessary to effect the
Fund's transactions in Foreign Securities.
3.3. Foreign Securities Depositories. Except as may otherwise
be agreed in writing by the Custodian and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as Foreign
Sub-Custodians pursuant to the terms hereof.
3.4. Segregation of Securities. The Custodian shall identify
on its books as belonging to the Fund the Foreign Securities of the Fund held by
each Foreign Sub-Custodian. Each agreement pursuant to which the Custodian
employs a foreign banking institution shall require that such institution
establish a custody account for the Custodian on behalf of the Fund and
physically segregate in that account Foreign Securities and other assets of the
Fund, and, in the event that such institution deposits Foreign Securities in a
foreign securities depository, that such institution shall identify on its books
as belonging to the Custodian, as agent for the Fund, the Foreign Securities so
deposited.
3.5. Agreements with Foreign Banking Institutions. Each
agreement with a Foreign Sub-Custodian shall provide that (a) the Fund's assets
will not be subject to any right, charge, security interest, lien of claim of
any kind in favor of the Foreign Sub-Custodian or its creditors, except a claim
of payment for their safe custody or administration; (b) beneficial ownership of
the Fund's assets will be freely transferable without the payment of money or
value other than for safe custody or administration; (c) adequate records will
be maintained identifying the assets belonging to the Fund; (d) officers of or
auditors employed by, or other representatives of, the Custodian including, to
the extent permitted under applicable law, the Fund's independent public
accountants, will be given access to the books and records of the Foreign
Sub-Custodian relating to its actions under its agreement with the Custodian;
(e) assets of the Fund held by the Foreign Sub-Custodian will be subject only to
the instructions of the Custodian or its agents; and (f) the Fund will receive
periodic reports with respect to the safekeeping of the Fund's assets,
including, without limitation, notification of any transfer to or from the
custodial account or accounts maintained by the Foreign Sub-Custodian for the
Custodian on behalf of the Fund.
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3.6. Access of Independent Accountants of the Fund. Upon
request of the Fund, the Custodian will use its best efforts to arrange for the
independent public accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a Foreign
Sub-Custodian to the extent that such books and records relate to the
performance of any such foreign banking institution under its agreements with
the Custodian.
3.7. Reports by Custodian. The Custodian will supply to the
Fund from time to time, as mutually agreed upon, statements in respect of the
Foreign Securities and other assets of the Fund held by Foreign Sub-Custodians,
including but not limited to an identification of entities having possession of
such Securities and other assets and notification of any transfers of such
Securities or assets to or from each custodial account maintained by a Foreign
Sub-Custodian for the Custodian on behalf of the Fund indicating, as to Foreign
Securities acquired for the Fund, the identity of the entity having physical
possession of such Securities.
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3.8. Transactions in Foreign Custody Accounts. (a) Upon
receipt of Proper Instructions, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall, or shall cause each Foreign
Sub-Custodian to, transfer, exchange or deliver Foreign Securities owned by the
Fund, but, except as otherwise provided herein, only as set forth in Section 2.2
hereof.
(b) Upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out or cause the Foreign Sub-Custodians to pay out monies of the Fund,
but, except as otherwise provided herein, only as set forth in Section 2.5
hereof.
(c) Foreign Securities maintained in the custody of a Foreign
Sub-Custodian may be maintained in the name of such entity's nominee to the same
extent as set forth in Section 2.3 hereof.
3.9. Liability of Foreign Sub-Custodians. Each agreement
pursuant to which the Custodian employs a Foreign Sub-Custodian shall require
such institution to exercise reasonable care in the performance of its duties
and (i) to indemnify and hold harmless the Custodian and the Fund from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations and (ii)
provide adequate insurance in the event of a loss of the Fund's assets. At the
election of the Fund, a Foreign Sub-Custodian shall be entitled to be subrogated
to the rights of the Custodian with respect to any claim against it as a
consequence of any such loss, damage, cost, expense, liability or claim, to the
extent that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
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3.10. Liability of Custodian. The Custodian shall be liable
for the acts or omissions of a Foreign Sub-Custodian to the same extent set
forth with respect to sub-custodians generally in Section 2.8 hereof and,
regardless of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by Section 3.12 hereof, the Custodian shall not be liable for any
loss, damage, cost, expense, liability or claim resulting from, or caused by,
the direction by the Fund to maintain custody of any Foreign Securities or cash
of the Fund in a particular foreign country including, but not limited to,
losses resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism.
3.11. Monitoring Responsibilities. The Custodian shall furnish
annually to the Fund, during the month of July, all information concerning any
Foreign Sub-Custodians employed by the Custodian required under the 1940 Act
and/or reasonably requested by the Fund. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian shall learn of a
material adverse change in the financial or other condition of a Foreign
Sub-Custodian or shall be notified by a foreign banking institution employed as
a Foreign Sub-Custodian that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted U.S.
accounting principals).
3.12. Branches of U.S. Banks. Except as otherwise set forth in
this Agreement, the provisions of this Article 3 shall not apply where the
custody of the Fund's assets shall be maintained in a foreign branch of a
"Qualified U.S. Bank" as defined in Rule 17g-5 (c) (3) promulgated under the
1940 Act. The appointment of any such branch as a sub-custodian shall be
governed by Section 2.8 hereof.
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4. Proper Instructions. Proper instructions as used herein
means a writing signed or initialed by one or more persons (which may include
the Fund's investment adviser and its members) whom the Individual Managing
Members shall have from time to time authorized by written formal resolution to
give such instructions. Each Proper Instruction shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian shall reasonably believe them to
have been given by a person authorized as set forth above to give such
instructions with respect to the transaction involved. The Fund shall cause all
oral instructions to be confirmed in writing. Upon receipt of a certificate of
an Individual Managing Member as to the authorization by the Individual,
Managing Members, accompanied by a detailed description of procedures approved
by the Individual Managing Members, Proper instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Individual Managing Members and the Custodian shall be
satisfied that such procedures afford adequate safeguards for the Fund's assets.
5. Actions Permitted without Express Authority. The Custodian
may in its discretion, without express authority from the Fund:
(i) make payments to others for minor expenses of handling
securities or other similar items relating to its duties under this
Agreement; provided, however, that all such payments shall be accounted
for to the Fund;
(ii) surrender securities in temporary form for securities in
definitive form;
(iii) endorse for collection, in the name of the Fund, checks,
drafts and other orders for the payment of money received by the
Custodian for the account of the Fund; and
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(iv) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer
and other dealings with the securities and property of the Fund, except
as otherwise directed by the Individual Managing Member.
6. Evidence of Authority. The Custodian shall be entitled to
rely upon any instructions, notice, request, consent, certificate or other
instrument in writing reasonably believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may receive and
accept a certified copy of resolutions or consents of the Individual Managing
Member as conclusive evidence of (i) the authority of any person to act in
accordance with such resolutions or consents or (ii) any determination or any
action by the Individual Managing Member pursuant to the Fund's Agreement of
Limited Liability Corporation, which determination of action shall be described
in such resolutions or consents, and such resolutions or consents may be
considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.
7. Duties of Custodian with Respect to the Books of Account.
The Custodian shall cooperate and supply necessary information to the entity or
entities appointed by the Fund to keep the books of account of the Fund.
8. Records. (a) The Custodian shall create and maintain all
records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations under this Agreement in such manner as will
meet the obligations of the Fund under the 1940 Act, including, without
limitation, Section 31 thereof and Rules 31a-1 and 31a-2 promulgated thereunder,
applicable Federal and state tax laws and any other law or administrative rules
or procedures which maybe applicable to the Fund. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund (including the Fund's investment adviser) and employees and
agents of the Securities and Exchange Commission.
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(b) The Custodian shall, at the Fund's request, supply the
fund with a tabulation of securities owned by the Fund and held by the Custodian
and shall, when requested to do so by the Fund, include certificate numbers in
such tabulations. Copies of all notifications from the Securities System of
transfers of securities for the account of the Fund shall be maintained by the
Custodian and be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written notice and shall furnish to the
Fund copies of daily transaction sheets reflecting each day's transactions in
the Securities System for the account of the Fund. The Custodian shall provide
the Fund with any report obtained by the Custodian on the Securities System's
accounting system, its internal accounting control and its procedures for
safeguarding Domestic Securities deposited in the Securities System.
9. Opinion of Fund's Independent Accountant. The Custodian
shall take all reasonable action, as the Fund may from time to time request, to
obtain from year to year favorable opinions from the Fund's independent
accountants with respect to its activities hereunder in connection with the
Fund's Form N-2 and Form N-SAR or other reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
10. Responsibility of Custodian. So long as and to the extent
that it shall exercise reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received by it or delivered by it pursuant to this Agreement and shall
be entitled to rely upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement and shall not
be liable for any loss or damage arising out of any action taken or omitted to
be taken by it without negligence. The Custodian shall be entitled to rely on
and may act upon advice of counsel on all matters, and shall not be liable for
any action reasonably taken or omitted to be taken pursuant to such advice.
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11. Effective Period, Termination and Amendment. This
Agreement shall become effective upon execution, shall continue in full force
and effect until the Fund shall dissolve in accordance with the LLC Agreement
(unless earlier terminated as herein provided), may be amended at any time by
mutual agreement of the parties hereto, as may be permitted by the 1940 Act, and
may be terminated, as set forth herein, by either party by an instrument in
writing delivered or mailed, postage prepaid, to the other party, such
termination to take effect not sooner than thirty (30) days after the date of
such delivery or mailing. The Fund may at any time terminate this Agreement and
substitute a bank or trust company qualified under the 1940 Act as a successor
custodian for the Custodian by giving notice as described above to the
Custodian. In addition, the Fund may (without giving the above-described notice)
terminate this Agreement immediately up the event of the appointment of a
conservator or receiver for the Custodian or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of competent
jurisdiction. Notwithstanding anything to the contrary contained herein, the
Custodian may terminate this Agreement upon its selection of a successor
custodian to provide the services required hereunder which is qualified under
the 1940 Act and is reasonably satisfactory to the Fund.
12. Successor Custodian. (a) If a successor custodian shall be
appointed pursuant to Section 12 hereof, the Custodian shall promptly deliver to
such successor custodian at the office of the Custodian, duly endorsed and in
the form for transfer, all securities then held by it hereunder, along with the
funds and other properties held by the Custodian on behalf of the Fund under
this Agreement, and shall transfer to an account of the successor custodian all
of the Fund's securities held in a Securities System.
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(b) If this Agreement shall terminate and/or no successor
custodian shall be appointed as provided herein, the Custodian shall, in like
manner, upon receipt of a certified copy of the resolutions or consents of the
Individual Managing Member, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such resolutions
or consents. In the event that no written order designating a successor
custodian or certified copy of resolutions or consents of the Individual
Managing Member shall have been delivered to the Custodian on or before the date
when the termination of this Agreement shall become effective, then the
Custodian shall have the right to deliver to a bank or trust company, which is a
"Bank" as defined in the 1940 Act, doing business in New York of its own
selection, having an aggregate capital, surplus, and undivided profits, as shown
by its last published report, of not less than $25,000,000, all securities,
funds, and other properties (and all instruments relating thereto) held by the
Custodian under this Agreement, and to transfer to an account of such bank or
trust company all of the Fund's securities held in any Securities System. Any
bank or trust company selected to be the successor of the Custodian under this
Agreement shall enter into an agreement with the Fund substantially identical in
substance hereto.
13. Arbitration. The parties shall determine and settle any
dispute or controversy which shall arise out of or relate to this Agreement by
arbitration in the City and State of New York pursuant to the rules and
procedures of the American Arbitration Association's Securities Arbitration
Rules.
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14. Limitation of Liability of the Members of the Fund. THE
FUND IS A LIMITED under the Delaware Limited Liability Company Act.
15. Prior Contracts, etc. This agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the matters
covered hereby and the relationship between the Fund and the Custodian (in its
capacity as custodian for the Fund). This Agreement shall inure to the benefit
of and be binding upon the Fund and the Custodian, and their respective
successors, legal representatives and permitted assigns.
16. Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to the
Custodian, shall be mailed, delivered, sent by facsimile or telegraphed and
confirmed to Banc of America Securities, 0 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxx X. Xxxxxx, Managing Director and if sent to the Fund,
shall be mailed, delivered, sent by facsimile or telegraphed and confirmed to
Prospero Capital Management, LLC, 0000 Xxxxxx Xxxxxx, Xxxxxxxx, XX 00000,
Attention: Xxx Xxxxxxxxx, with a copy to Paul, Weiss, Rifkind, Wharton, &
Ganison, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxx X.
Xxxxxx, Esq.
17. Transmission of Agreement. An executed copy of this
Agreement as approved pursuant to Rule 17f-1(a) promulgated under the 1940 Act
shall be transmitted to the Securities and Exchange Commission promptly after
the date hereof.
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IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and on its behalf by its duly authorized
representative as of the date first above written.
ATTEST Prospero Capital Management, LLC
Xxx Xxxxxxxxx, Managing Member
-------------------------------------- ------------------------------------
[Typed Name & Title]
ATTEST BANC OF AMERICA SECURITIES LLC
Xxxx X. Xxxxxx - Managing Director
-------------------------------------- ------------------------------------
[Typed Name & Title]
22
